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In re Nutraquest

January 20, 2006; as amended March 13, 2006

IN RE: NUTRAQUEST, INC., DEBTOR
LINDA WILL; GEORGE WHEELER, JR., AS INDEPENDENT CO-ADMINISTRATORS OF THE ESTATE OF RASHIDI WHEELER, DECEASED
v.
NORTHWESTERN UNIVERSITY; CHARLES TAYLOR; RANDALL WALKER; JERRY BROWN; TERRENCE AGGELER, LARRY LILJA; THOMAS CHRISTIAN; JUSTIN CHABOT; MICHAEL ROSE; MARK GARDNER, M.D.
v.
*NEXT PROTEINS, INC., F/K/A NEXT NUTRITION, INC., D/B/A NEXT PROTEINS INTERNATIONAL ; THE ULTIMATE ORANGE ENERGY CO. LLC; ULTIMATE ENERGY CO.; PHOENIX LABORATORIES, INC.; GENERAL NUTRITION CORPORATION, D/B/A GENERAL NUTRITION COMPANIES, INC., A WHOLLY OWNED SUBSIDIARY OF ROYALO NUMICO NV, CYTODYNE TECHNOLOGIES, INC., N/K/A NUTRAQUEST, INC., THIRD PARTY DEFENDANTS ADVERSARY PROCEEDING NO. 04-CV-01275 NORTHWESTERN UNIVERSITY, CHARLES TAYLOR, RANDOLPH WALKER, JERRY BROWN, TERENCE AGGELER, LARRY LIJLA, THOMAS CHRISTIAN, JUSTIN CHABOT AND MICHAEL ROSE, APPELLANTS *(AMENDED PER THE CLERK'S ORDER DATED 6/24/05)



Appeal from the United States District Court for the District of New Jersey (D.C. Civil Action No. 03-cv-05869) District Judge: Honorable Garrett E. Brown, Jr.

The opinion of the court was delivered by: Ambro, Circuit Judge

PRECEDENTIAL

Submitted Under Third Circuit LAR 34.1(a)

November 15, 2005

Before: BARRY, and AMBRO, Circuit Judges POLLAK*fn1, District Judge.

OPINION OF THE COURT

Rashidi Wheeler, a football player at Northwestern University, died during a team practice. His estate*fn2 sued Northwestern. Because Wheeler had ingested ephedra-containing products on the day he died, Northwestern sued the makers of those products for contribution. Nutraquest, Inc., one of these third-party defendants (all of whom were ultimately sued by Wheeler as well as by Northwestern), filed for bankruptcy and settled with Wheeler (as did some of the other third-party defendants). The District Court approved the settlement, finding that it met the requirements of Bankruptcy Rule 9019 and the Illinois Joint Tortfeasor Contribution Act, and barred Northwestern's contribution claims against the settling third-party defendants. We hold that the Court properly applied our Court's factors in approving the settlement under bankruptcy law and that it did not abuse its discretion in finding the settlement was made in good faith under Illinois law. We therefore affirm.

I. Factual Background and Procedural History

Wheeler was a starting safety at Northwestern. During a 2001 team conditioning test, he collapsed and died. Emergency medical personnel did not arrive until almost 40 minutes after Wheeler's collapse. The Cook County Medical Examiner concluded that he had died from bronchial asthma.

Earlier that day, Wheeler had taken two supplements containing ephedra and caffeine. One supplement was made by a company called Next Proteins, Inc. The other-Xenadrine RFA-1-was made by Phoenix Laboratories, Inc. at the direction of Nutraquest (formerly Cytodyne Technologies, Inc.). These supplements were purchased at a store owned by General Nutrition Corporation (GNC). (Ephedra was banned by the Food and Drug Administration in 2004 because of the risk of heart arrhythmia and stroke associated with it.)

In August 2001 Wheeler (through his parents and co-administrators, Linda Will and George Wheeler, Jr.) sued Northwestern and its personnel in Illinois state court, claiming that he died from an acute asthma attack to which the defendants failed to respond appropriately. Northwestern, believing that Wheeler's death was related to his ingesting the ephedra-containing products, filed a third-party complaint seeking contribution from Nutraquest, Phoenix Labs, Next Proteins, and GNC. Wheeler did not initially sue any of these third-party defendants.

In July 2003-just before the statute of limitations expired-Wheeler amended his complaint to add claims against the third-party defendants. In October 2003 Nutraquest filed a voluntary bankruptcy petition under Chapter 11 in the United States Bankruptcy Court for the District of New Jersey. Five days later, Wheeler voluntarily dismissed his claims against the third-party defendants, including Nutraquest.

After Nutraquest's Chapter 11 filing, 52 pending wrongful-death and personal-injury actions were transferred to the District of New Jersey on the ground that they were related to the bankruptcy filing in that District. Wheeler moved for a remand back to Illinois state court, but the District Court denied his motion. The Court and the bankruptcy parties began resolving the tort claims in an organized way: Nutraquest retained litigation counsel, steering committees were created, and test cases were designated and set for trial in early 2005.

In September 2004 Wheeler entered into a tentative settlement agreement with Nutraquest, Phoenix Labs, and GNC. The settlement was for $75,000 in cash ($25,000 from each of the settling defendants) and an allowed general unsecured $25,000 claim against Nutraquest's bankruptcy estate. Northwestern contrasts this comparatively small sum with the millions of dollars Wheeler sought from it. Nutraquest's insurer is paying Nutraquest's and GNC's shares of the cash settlement. (GNC was shielded from direct liability by Nutraquest's insurer because Nutraquest had agreed to indemnify GNC for any liability arising from Nutraquest's products.) When the settlement agreement was executed tentatively (pending Court approval), Wheeler was still within the one-year period allowed by Illinois law to reassert his claims against the settling defendants. But by the time the settlement became effective after receiving the required approval, Wheeler's time for reasserting claims against the settling defendants had expired.

The settlement was conditioned on the District Court's (1) finding that it complied with the requirements for approval under Bankruptcy Rule 9019(a),*fn3 (2) making a determination that the settlement was entered into with good faith under the Illinois Joint Tortfeasor Contribution Act, 740 Ill. Comp. Stat. 100/1 et seq., and (3) barring Northwestern's contribution claims against the settling defendants. Northwestern objected to the settlement, but the District Court approved it in November 2004, barred and dismissed all third-party claims under the Illinois Contribution Act,*fn4 and remanded the case to Illinois state court. Northwestern appeals the approval of the settlement.

II. Jurisdiction

The District Court had jurisdiction over the claims against Nutraquest under 28 U.S.C. ยงยง 1334(b) and 157(b)(5). Because the Court's order approving the settlement agreement is a final order, we have appellate jurisdiction under 28 U.S.C. ...


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