In Re Copley Pharmaceutical, Inc., "Albuterol" Products Liability Litigation. James Burns and Vickie Burns, Personally and as Parents and Guardians of Jimmy Burns v. Copley Pharmaceutical, Inc., and National Pharmacies, Inc.

Citations: 132 F.3d 42; 1997 U.S. App. LEXIS 40043; 1997 WL 767763Docket: 96-8054

Court: Court of Appeals for the Tenth Circuit; December 10, 1997; Federal Appellate Court

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Citation of unpublished opinions is discouraged but permitted if the opinion has persuasive value on a material issue and is properly attached or provided to the court and parties. The case involves James and Vickie Burns, who appealed a district court's denial of their late motion to opt out of a multidistrict class action against Copley Pharmaceutical, Inc., related to the prescription drug albuterol sulfate inhalation solution. The Burnses' individual lawsuit, claiming liability for their child's death, was filed in South Carolina state court on November 1, 1995. Copley was already facing multiple lawsuits following a voluntary recall of contaminated albuterol, and a multidistrict action had been established. The class action was certified on October 28, 1994, with a March 15, 1995, opt-out deadline. After learning of the class action from a physician, the Burnses sought to opt out on October 20, 1995, but their request was denied on May 3, 1996, leading them to appeal. The court is tasked with determining jurisdiction over the appeal, focusing on whether the district court's decision was final under 28 U.S.C. § 1291, given the lack of a dismissal order and ongoing administration of the settlement. The appellate panel reversed the district court's decision and remanded for further proceedings.

A decision is deemed "final" under 28 U.S.C. § 1291 not only when it is the last order made in a case but also when it fits a narrow category of decisions that resolve significant, independent issues separate from the main action, as per Cohen v. Beneficial Industrial Loan Corp. To qualify under the collateral order doctrine, an order must definitively resolve a disputed issue, address an important matter distinct from the case's merits, and be unreviewable following a final judgment. In this case, the denial of the Burnses' motion to opt out meets all these criteria: it conclusively determines the status of their separate lawsuit, addresses their claims regarding notice adequacy independent of the class action's merits, and is not subject to appeal post-final judgment, thus constituting a final decision warranting jurisdiction under § 1291.

The standard of review for denying an opt-out motion is for abuse of discretion, which occurs if the court makes an erroneous legal conclusion or lacks a rational basis for its ruling. In the underlying action, the plaintiff class was certified as a Rule 23(b)(3) class, meaning that all members not opting out are included in the judgment. Rule 23 mandates the best practicable notice to class members about their opt-out rights, including individual notice where feasible, as established in Amchem Prods. Inc. v. Windsor. Actual receipt of notice is not required, provided reasonable efforts to notify were made. The district court has discretion in determining the notice method and handling untimely opt-out requests, which encompasses authority under Rules 6(b)(2), 23, and 60(b) to extend opt-out deadlines.

In a late opt-out motion, a district court evaluates (1) whether the movant's neglect is excusable, and (2) if either party would suffer substantial prejudice from the court's decision. The Ninth Circuit outlines factors for the court's discretion, including compliance with notice procedures, timing of notice receipt, causes of delays, the promptness of the opt-out request, the number of class members wishing to opt out, and the potential impact on the settlement or judgment finality. 

The Burnses filed their opt-out motion one month after receiving notice and one month before the settlement's final approval, raising concerns regarding these factors. However, the district court ruled that the class notice procedures were sufficient under Federal Rule of Civil Procedure 23 and due process, and denied the Burnses' motion without specific findings. 

This lack of detailed reasoning hindered meaningful appellate review, leading to a reversal and remand for the district court to properly consider the relevant factors and exercise discretion regarding the Burnses' opt-out request. The ruling emphasized that the order is not a binding precedent except under specific doctrines, and addressed the adequacy of notice to class members without requiring additional notifications from class counsel. Copley's argument about waiver of notice adequacy was rejected, as the issue was inherently tied to the opt-out motion.

The ruling addressed all pending untimely motions for exclusion in a multi-district litigation, including the Burnses' motion. The United States Court of Appeals for the Tenth Circuit reviewed the district court's denial of James and Vickie Burns’ late request to opt out of a class action against Copley Pharmaceutical, Inc., the manufacturer of a prescription drug involved in their child's death. The Burnses had initiated their lawsuit in South Carolina state court on November 1, 1995, against Copley and National Pharmacies, Inc., following a voluntary recall of contaminated albuterol. 

On October 28, 1994, the District Court for Wyoming had certified the multi-district class action, covering all individuals in the U.S. affected by albuterol. Class counsel was tasked with notifying potential class members, with an opt-out deadline set for March 15, 1995. A settlement was reached on August 22, 1995, and the Burnses learned of the class action only after the deadline, prompting them to file an opt-out motion on October 20, 1995. Their case was subsequently removed to federal court and included in the class action. 

The district court approved the class settlement on November 15, 1995, but did not issue a final dismissal order, retaining jurisdiction for settlement administration. On May 3, 1996, the court denied the Burnses' opt-out motion and instructed them to file a proof of claim. Instead of pursuing their claim within the class action framework, the Burnses appealed the decision, prompting the appellate court to evaluate its jurisdiction over the appeal considering the absence of a dismissal order and the district court's ongoing settlement administration. The appellate court ultimately reversed the district court's decision and remanded the case for further findings.

Jurisdiction under 28 U.S.C. § 1291 is limited to final district court decisions, defined as those that require no further action except to execute the judgment. A decision can be considered final even if it is not the last possible order in a case, as long as it falls within the narrow category of decisions that determine significant rights that are independent of the main action and warrant immediate review. According to the Cohen collateral order doctrine, an order must conclusively resolve a disputed issue, be separate from the merits of the case, and be effectively unreviewable after a final judgment. 

In this case, the denial of the motion to opt out satisfies all three criteria: it conclusively determines the status of the Burnses' separate lawsuit, addresses their concerns about notice adequacy independently from the class action's settlement merits, and is unreviewable post-judgment since it binds the Burnses to the settlement terms. Thus, this order is deemed a final decision, allowing for jurisdiction under § 1291.

The standard of review for the denial of an opt-out motion is for abuse of discretion. An abuse occurs when a district court's decision is based on an incorrect legal conclusion or lacks a rational basis in evidence. A district court also abuses its discretion if it fails to exercise discretion or provides no reasoning for its decision.

In the underlying class action, certified as a Rule 23(b)(3) class, all members are included in the judgment unless they opt out. Rule 23 mandates that the court provide the best practicable notice to class members, including individual notice where feasible. While actual receipt of notice is not required, the notice must be as effective as possible. The district court has discretion in determining the notice method, but this discretion is guided by the need to ensure class members are adequately informed.

Discretion exists under various Federal Rules of Civil Procedure (Rules 6(b), 23, and 60(b)) for district courts to consider late motions to opt out of class actions. In assessing such motions, the court must evaluate if the neglect causing the delay was excusable and whether either party would suffer substantial prejudice. The Ninth Circuit has identified factors to guide this discretion, including adherence to notice procedures, timing and reasons for any delays, promptness of the opt-out request, the number of class members wishing to opt out, and potential impacts on the settlement or judgment finality.

In the case involving the Burnses, their opt-out motion was filed about a month after they received notice of the class action, raising concerns that necessitated consideration of these factors. However, the district court ruled summarily, stating that the notice procedures complied with the necessary legal standards and denied the Burnses' motion without detailed findings. This lack of explanation hindered meaningful appellate review. Consequently, the appellate court reversed the district court's decision and remanded the case for a proper evaluation of the Burnses' motion and the relevant considerations. The order is not binding precedent except under specific legal doctrines, and citation is generally disfavored but permissible under specific rules.

Copley was mandated to provide contact information for all potential class members, drawing from various sources such as customer complaints, recall notices, claims services, and lists from pharmacists or distributors. The district court denied Copley's request for class counsel to notify pharmacists, despite the pharmacist notifications during the recall process, without specific evidence-based findings. The court previously indicated that notice procedures should be straightforward, given that Albuterol was distributed via prescriptions and Copley had reached out to distributors during the recall. Additionally, the settlement agreement requires a court order to dismiss the class action with prejudice and the associated multidistrict litigation cases. Copley's argument that the Burnses waived their right to challenge the adequacy of individual notice was rejected, as such concerns are inherently part of an opt-out motion based on non-receipt. The ruling effectively addressed all pending untimely exclusion motions, with the Burnses' motion being among several considered, acknowledging the district court's significant efforts in managing the multidistrict litigation.