Burns v. Copley

F I L E D
United States Court of Appeals
Tenth Circuit
UNITED STATES COURT OF APPEALS
DEC 11 1997
FOR THE TENTH CIRCUIT
PATRICK FISHER
Clerk

In re: COPLEY
PHARMACEUTICAL, INC.,
“Albuterol” Products Liability
Litigation.
No. 96-8054
______________________________ (D.C. No. 94-MDL-1013
&
JAMES BURNS and VICKIE BURNS, 96-1601-MDL)
personally and as parents and (D. Wyo.)
guardians of Jimmy Burns,

Plaintiffs-Appellants,

v.

COPLEY PHARMACEUTICAL,
INC.,

Defendant-Appellee,

and

NATIONAL PHARMACIES, INC.,

Defendant.

ORDER AND JUDGMENT *

*
This order and judgment is not binding precedent, except under the
doctrines of law of the case, res judicata, and collateral estoppel. The court
generally disfavors the citation of orders and judgments; nevertheless, an order
and judgment may be cited under the terms and conditions of 10th Cir. R. 36.3.
Before PORFILIO and LUCERO, Circuit Judges, and MARTEN, ** District Judge.

After examining the briefs and appellate record, this panel has determined

unanimously to grant the parties’ request for a decision on the briefs without oral

argument. See Fed. R. App. P. 34(f) and 10th Cir. R. 34.1.9. The case is

therefore ordered submitted without oral argument.

Plaintiffs-appellants James and Vickie Burns (the Burnses) seek review of

an order of the district court denying their untimely motion to opt out of a

multidistrict class action against defendant-appellee Copley Pharmaceutical, Inc.,

the manufacturer of a prescription drug, albuterol sulfate inhalation solution

(albuterol). The Burnses had filed an individual lawsuit, alleging that Copley and

National Pharmacies, Inc., a seller of albuterol, are liable for the death of their

child. We reverse and remand for additional findings.

BACKGROUND

The Burnses filed their action on November 1, 1995, in South Carolina

state court. At the time, Copley was the defendant in numerous other lawsuits,

initiated after it had announced a voluntary recall of batches of contaminated

**
The Honorable J. Thomas Marten, District Judge, United States District
Court for the District of Kansas, sitting by designation.

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albuterol. Previously, the judicial panel for multi-district litigation had

consolidated the federal cases brought against Copley in the United States District

Court for the District of Wyoming. On October 28, 1994, that court had certified

the multi-district action as a Fed. R. Civ. P. 23(b)(3) class action of “[a]ll persons

throughout the United States and its territories who suffered damages as a result

of the inhalation of Albuterol manufactured, supplied, distributed or placed in

commerce by Copley Pharmaceutical, Inc.” In re Copley Pharm., Inc.,

(“Albuterol” Prod. Liability Litig.), 158 F.R.D. 485, 493 (D. Wyo. 1994). 1

Class counsel was ordered to give notice of the action by direct mail to

potential class members known to Copley 2 and class counsel, and by publication

in USA Today and speciality magazines. The district court set the opt-out

1
An account of the factual allegations, claims, and defenses in the class
action can be found in the district court’s order granting partial class certification.
See In re Copley Pharm., 158 F.R.D. at 487. See also In re Copley Pharm., Inc.
(“Albuterol” Prod. Liability Litig., 161 F.R.D. 456 (D. Wyo. 1995) (order denying
defendant’s motion to decertify the class and the court’s trial plan).
2
Copley was ordered to provide the names, addresses and phone numbers of
all persons who may be considered members of the class, including persons
identified from customer complaints, responses to recall notices, the lists of a
claims service, lists provided by pharmacists or distributors, and lists of potential
class members who had settled with Copley. Without making specific findings
tied to the evidence, the district court declined Copley’s request to require class
counsel to send notice to pharmacists, which was “how people were notified of
the problem” during the recall, Appellee’s Suppl. App. at 120-21. See also In re
Copley Pharm,, 158 F.R.D. at 493 (in certifying class, the district court noted that
“notice should not be terribly complicated [ ] [b]ecause Albuterol was distributed
through prescriptions and Copley has already contacted distributors through its
recall”).

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deadline of March 15, 1995. The parties reached a settlement on August 22,

1995, which the court preliminarily approved on August 28, 1995.

The following month, the Burnses learned of the class action from a

physician who was treating their child. After contacting attorneys, they filed a

motion to opt out of the class on October 20, 1995, and commenced their action in

state court. The case was removed to federal court and included in the class

action. On November 15, 1995, the district court entered an order finally

approving the class action settlement. It did not enter the final order of dismissal

required by the agreement 3 and retained jurisdiction to administer the agreement.

On May 3, 1996, the district court denied the Burnses’ motion to opt out, and

allowed them thirty days to file a proof of claim. Rather than proceeding with

their claim in the class action, the Burnses filed this appeal.

3
The settlement agreement is expressly conditioned upon the entry of an
order dismissing with prejudice the class action and the other cases transferred by
the judicial panel on multidistrict litigation.

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 DISCUSSION

A. Jurisdiction

We first examine whether we have jurisdiction over this appeal, in light of

the lack of a dismissal order and the district court’s continuing administration of

the settlement. As we have previously explained, under 28 U.S.C. § 1291,

we have jurisdiction only over “final” decisions of the district court;
that is, those decisions that leave nothing for the court to do but
execute the judgment. Notably, a decision “final” within the
meaning of § 1291 does not necessarily mean the last order possible
to be made in a case. Thus, a district court’s decision is appealable if
it falls within “that small class which finally determine claims of
right separable from, and collateral to, rights asserted in the action,
too important to be denied review and too independent of the cause
itself to require that appellate consideration be deferred until the
whole case is adjudicated.” Cohen v. Beneficial Industrial Loan
Corp., 337 U.S. 541, 546 (1949).

To come within Cohen’s collateral order doctrine, an order
must [1] conclusively determine the disputed question, [2] resolve an
important issue completely separate from the merits of the action,
and [3] be effectively unreviewable on appeal from a final judgment.
Myers v. Oklahoma County Bd. of County Comm’rs, 80 F.3d 421, 425 (10th Cir.),

cert. denied, 117 S. Ct. 383 (1996) (further citations and quotations omitted).

The circumstances of this case meet all three of the requirements of the

collateral order doctrine. The denial of the motion to opt out (1) conclusively

determines the status of the Burnses’ separate lawsuit; (2) resolves the Burnses’

claims concerning the adequacy of notice, which are separate from the merits of

the class action’s settlement agreement; and (3) will be unreviewable on an appeal

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from final judgment, in that the district court’s order effectively binds the Burnses

to the terms of the settlement agreement. We therefore conclude that the

challenged order amounts to a final decision and we exercise our jurisdiction

pursuant to § 1291.

B. Standard of Review

We review the district court’s denial of an opt-out motion for abuse of

discretion. See Silber v. Mabon, 18 F.3d 1449, 1453 (9th Cir. 1994); In re Piper

Funds, Inc. (Institutional Gov’t Income Portfolio Litig.), 71 F.3d 298, 304 (8th

Cir. 1995). “A court has abused its discretion when it ‘based its decision on an

erroneous conclusion of law or where there is no rational basis in evidence for the

ruling.’” Mann v. Reynolds, 46 F.3d 1055, 1062 (10th Cir. 1995) (quoting Wang

v. Hsu, 919 F.2d 130, 130 (10th Cir.1990)). “A district court that does not

exercise its discretion, or makes a decision without providing reasons, abuses that

discretion.” ARW Exploration Corp. v. Aguirre, 45 F.3d 1455, 1459 (10th

Cir.1995).

C. Denial of Motion to Opt-Out

The plaintiff class in the underlying action was certified as a Rule 23(b)(3)

class, in which the judgment, whether favorable or not, includes all members who

do not request exclusion. See Fed. R. Civ. P. 23(c)(3). “To alert class members

to their right to ‘opt out’ of a (b)(3) class, Rule 23 instructs the court to ‘direct to

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the members of the class the best notice practicable under the circumstances

including individual notice to all members who can be identified through

reasonable effort.’” Amchem Prods., Inc. v. Windsor, 117 S. Ct. 2231, 2246

(1997). Individual notice is “mandatory in (b)(3) actions” and the “requirement

may not be relaxed based on high cost.” Id. at 2246-47 (citing Eisen v. Carlisle &

Jacquelin, 417 U.S. 156, 173-77 (1974)). Actual receipt of notice is not

necessary, however, so long as the best practicable notice was given to absent

class members. Silber, 18 F.3d at 1454.

The Federal Rules of Civil Procedure allow the district court discretion in

fashioning notice in class actions, see In re Agent Orange Prod. Liab. Litig., 818

F.2d 145, 168 (2d Cir. 1987), and in dealing with untimely motions to opt out, see

Supermarkets Gen. Corp. v. Grinnell Corp., 490 F.2d 1183, 1186 (2d Cir. 1974).

This discretion is the same whether the matter is viewed as arising under the

court’s discretion to extend time under Rule 6(b)(2), to grant relief from an order

or judgment under Rule 60(b), or to implement Rule 23. See id. See also Silber

v. Mabon, 18 F.3d at 1454 (referring to authority under Fed. R. Civ. P 6(b)(2), 23,

and 60(b) to extend a class member’s time to opt out); In re Four Seasons Sec.

Laws Litig., 493 F.2d 1288, 1290-91 (10th Cir. 1974) (granting extension of time

to opt out under Fed. R. Civ. P. 6(b)(2)).

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 On a late motion to opt out, a district court must determine (1) whether the

movant’s neglect was excusable, and (2) whether either party would be

substantially prejudiced by the court’s action. See Supermarkets Gen., 490 F.2d

at 1186. The Ninth Circuit has provided a list of factors which may inform the

court’s discretion:

the degree of compliance with the best practicable notice procedures;
when notice was actually received and if not timely received, why
not; what caused the delay, and whose responsibility was it; how
quickly the belated opt out request was made once notice was
received; how many class members want to opt out; and whether
allowing a belated opt out would affect either the settlement or
finality of the judgment.

Silber, 18 F.3d at 1455 (footnote omitted).

The record shows that the Burnses’ opt-out motion, which was filed

approximately one month after the Burnses received actual notice of the class

action and one month before final approval of the settlement, raised many of these

concerns. 4 The district court, however, issued a summary ruling:

The Court finds that the class notice procedures in this action
complied with the requirements of Federal Rule of Civil Procedure
23 and due process and, therefore, were sufficient to bind all class
members (including those who received constructive notice by
publication) who failed to timely seek exclusion from the class. The
above listed persons [including the Burnses] have failed to

4
Copley argues that the Burnses waived consideration of the adequacy of the
individual notice by failing to make an explicit reference to that issue in the
initial motion. We disagree. The argument that the movant deserved individual
notice is implicit in an opt-out motion based on lack of actual receipt.

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 demonstrate good cause for allowing them to now exclude
themselves from the class. Their motions, objections, and requests
are, therefore, overruled and denied.

Appellee’s Suppl. App. at 110. 5

Because this ruling provides no findings indicating how the district court

reached its conclusions, we cannot conduct meaningful appellate review. We

accordingly remand this action to give the district court an opportunity to make

the appropriate findings, consider the factors relevant to the Burnses’ motion to

opt out of the class action, and exercise its discretion on the matter.

REVERSED and REMANDED.

Entered for the Court

J. Thomas Marten
District Judge

5
The above ruling disposed of all untimely motions for exclusion pending at
the time of entry. The Burnses’ motion was only one of many. We recognize that
the district court was performing yeoman’s duty in dealing with this multi-district
litigation.

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