United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued April 3, 2000 Decided June 9, 2000
No. 99-7256
In Re: Vitamins Antitrust Class Actions, et al.,
Consolidated with
No. 99-7281
Appeals from the United States District Court
For the District of Columbia
(No. 99 MS 00197)
Elaine Metlin argued the cause for appellants Agri Beef
Company, et al. With her on the briefs were C. Brooks
Wood, Kenneth L. Adams, James van R. Springer, Gerald G.
Saltarelli, Mary Martin, James Morsch, Michael C. Man-
ning, Jenny J. Clevenger and John J. Rosenthal. Carmine R.
Zarlenga entered an appearance.
C. Brooks Wood argued the cause for appellant Nutra-
Blend, L.L.C.
Stephen Susman argued the cause for appellees. With him
on the brief were Michael D. Hausfeld, Ann C. Yahner,
David Boies, Robert Silver, Jonathan D. Schiller, William A.
Isaacson, Tyrone C. Fahner, Andrew S. Marovitz, D. Stuart
Meiklejohn, Lawrence Byrne, Bruce L. Montgomery, Mi-
chael L. Denger and John M. Majoras. George T. Manning
entered an appearance.
Before: Williams, Sentelle and Tatel, Circuit Judges.
Opinion for the Court filed by Circuit Judge Williams.
Williams, Circuit Judge: Over the 1990s, and even farther
back, vitamin manufacturers allegedly fixed prices on bulk
vitamin sales in violation of the antitrust laws. By September
1999 a Department of Justice investigation had secured guilty
pleas from several major suppliers. Dozens of private anti-
trust actions followed, and by late November 1999 approxi-
mately 49 cases were pending before the district court.
At a status conference for all interested parties on Novem-
ber 3, 1999, counsel for the proposed representatives of a
broad class of purchasers revealed that they had reached a
tentative settlement that would dispose of the class's claims
against seven of the defendants (who together with their
affiliates account for more than 90 percent of the bulk vita-
mins market). The then-draft agreement contained a so-
called "most favored nation" ("MFN") clause, requiring de-
fendants to hike their payments to the class in the event that
within two years of that date they reached a more favorable
settlement with a plaintiff who had opted out of the class.
See Settlement Agreement p p 1, 22. Appellants--who were
then presumptive members of the class but who have since
opted out--moved to intervene under Federal Rule of Civil
Procedure 24 for the limited purpose of opposing the MFN
clause. They argued--reasonably enough--that the clause
would make it harder for them to arrive at an independent
settlement, because it would raise the cost to defendants of
any more favorable agreement. The district court denied the
appellants' motion to intervene but granted them leave to
participate as amici curiae. Appellants filed timely notices of
appeal from denial of the motion to intervene.
While this appeal was pending, appellants all chose to opt
out of the class action. See Tr. of Oral Arg. (Apr. 3, 2000), at
4. The district court held its final hearing regarding class
certification and the proposed settlement, and on March 31,
2000 certified the class and approved the settlement. Neither
of those decisions is at issue in this appeal.
In rejecting appellants' motion for intervention, the district
court reasoned that they lacked standing to challenge the
settlement agreement on the grounds asserted. We agree.
* * *
Appellants focus on their claim to intervention as of right.
Federal Rule of Civil Procedure 24(a)(2) allows such interven-
tion for anyone who "claims an interest relating to the ...
transaction which is the subject of the action and ... is so
situated that the disposition of the action may as a practical
matter impair or impede [his] ability to protect that interest,
unless [his] interest is adequately represented by existing
parties." Id. Appellants argue that their interest in being
able to opt out of the class and to " 'go it alone' unhampered
by any judgment in the class action" qualifies as "an interest
relating to the ... transaction which is the subject of the
action." Fed. R. Civ. P. 24(a).
But appellants trip immediately over our decision in May-
field v. Barr, 985 F.2d 1090 (D.C. Cir. 1993). There we held
that class members who have opted out of a 23(b)(3) class
action have no standing to object to a subsequent class
settlement; by opting out they "escape the binding effect of
the class settlement." Id. at 1093. We distinguished cases in
which plaintiffs lost claims involuntarily, and concluded:
Our decision rests on the principle that those who fully
preserve their legal rights cannot challenge an order
approving an agreement resolving the legal rights of
others.
Id. Compare New Mexico ex rel. Energy & Minerals Dep't
v. United States Dep't of the Interior, 820 F.2d 441 (D.C. Cir.
1987), in which we concluded that dismissal of the intervening
Navajo Tribe's complaint was proper because the settlement
reached by the other parties "d[id] not serve to dispose of the
Tribe's claims." Id. at 445.
Appellants point to a number of cases in which we indicated
a willingness to construe Rule 24(a)'s "interest" requirement
liberally. See Cook v. Boorstin, 763 F.2d 1462, 1466 (D.C.
Cir. 1985); Foster v. Gueory, 655 F.2d 1319, 1324-25 (D.C.
Cir. 1981); Smuck v. Hobson, 408 F.2d 175, 179 (D.C. Cir.
1969) (plurality opinion); Nuesse v. Camp, 385 F.2d 694, 700
(D.C. Cir. 1967). But of all these, only Nuesse even ad-
dressed the issue of standing. Thus, because decisions that
depend on a merely assumed jurisdiction have no precedential
value on the jurisdictional issue, Steel Co. v. Citizens for a
Better Environment, 523 U.S. 83, 91 (1998); Lewis v. Casey,
518 U.S. 343, 352 n.2 (1996), only Nuesse could assist appel-
lants. But Nuesse affords them no help, as there the court
found on the specific facts a sufficient interest for standing in
the stare decisis effect of a judgment, an analysis that has no
parallel here.
Standing, of course, is issue-specific. See Lujan v. Defend-
ers of Wildlife, 504 U.S. 555, 571-78 & nn.7-8 (1992). And as
we noted in Mova Pharmaceutical Corp. v. Shalala, 140 F.3d
1060 (D.C. Cir. 1998), potential intervenors must demonstrate
"prudential" as well as constitutional standing. Id. at 1074-
76. In the case of statutory rights, this requires would-be
intervenors to show that their interests are "arguably within
the zone of interests to be protected or regulated by the
statute." Association of Data Processing Serv. Orgs., Inc. v.
Camp, 397 U.S. 150, 153 (1970). Even if a particular litigant
is outside the class for whose benefit the statute was enacted,
that litigant retains prudential standing so long as "its inter-
ests are sufficiently congruent with those of the intended
beneficiaries that the litigants are not more likely to frustrate
than to further ... statutory objectives." Mova Pharmaceu-
tical, 140 F.3d at 1075 (internal quotation marks omitted).
But as appellants' counsel admitted at oral argument, their
interests are not congruent with the interests of the settling
class that were in play at the time of their motion to
intervene. See Tr. of Oral Arg. at 13-14. As opt-out plain-
tiffs they have no interest in the specifics of the settlement
except for their desire to be free of a troublesome MFN
clause. Id. at 14.
Appellants' MFN objection is, moreover, incongruent with
the interests that the rules charge the district court with
addressing. When appellants moved to intervene, the court
had remaining before it the questions of whether (1) the
proposed class satisfied the prerequisites for certification
under Rule 23(a) and (b), (2) the form and manner of notice
satisfied Rule 23(c), and (3) the proposed settlement satisfied
the requirements of Rule 23(e). Appellants' arguments
against the MFN clause have no logical relationship to any of
these. The first two questions are clearly irrelevant to
appellants' claims. Appellants do not seek to argue that the
proposed class failed to satisfy the conditions for class certifi-
cation. See Fed. R. Civ. P. 23(a), (b)(3). And appellants'
Rule 23(c) arguments--which are treated more fully below--
do not challenge the form and manner of notice at all.
On the subject of class viability an extra word is needed for
appellant Nutra-Blend. According to its complaint, some of
the settling defendants compete with Nutra-Blend, selling
mixed vitamin products at retail prices below their wholesale
charges for the raw components and thus subjecting Nutra-
Blend to a "price squeeze." Accordingly it has argued that
the class representatives do not adequately represent its
interests. This of course sounds like the inquiry under Rule
23(a)(4) as to adequacy of representation. But Nutra-Blend's
objections were not made on the premise assumed by Rule
23(a)--namely, that the prospective class member would be
bound by the ensuing litigation supposedly conducted on its
behalf.1
__________
1 We have no occasion to decide whether a party must remain
within the class to intervene for the purposes of challenging class
certification under Rule 23(a), (b), or settlement under 23(e). Cf. In
re Brand Name Prescription Drugs Antitrust Litig., 115 F.3d 456,
457 (7th Cir. 1997); 3 Herbert Newberg & Alba Conte, Newberg on
Class Actions s 16.18, at 16-99 to 16-100 (3d ed. 1992).
Of course, in passing on the proposed settlement agree-
ment, the district court has a duty under Fed. R. Civ. P. 23(e)
to ensure that it is fair, adequate, and reasonable and is not
the product of collusion between the parties. See Pigford v.
Glickman, 206 F.3d 1212, 1215 (D.C. Cir. 2000); Thomas v.
Albright, 139 F.2d 227, 231 (D.C. Cir. 1998). Thus Rule 23(e)
provides a check against settlement dynamics that may "lead
the negotiating parties--even those with the best intentions--
to give insufficient weight to the interests of at least some
class members." Manual for Complex Litigation (Third)
s 30.42, at 238-40 (1995); see also Amchem Prods., Inc. v.
Windsor, 521 U.S. 591, 621-22 (1997) (noting the dangers that
can arise owing to the usually non-adversarial posture of a
Rule 23(e) hearing). But the district court's duty is to the
class members themselves; it lacks the power to conduct a
free-ranging analysis as to the broader implications of the
proposed settlement agreement. Compare Agretti v. ANR
Freight Sys., 982 F.2d 242, 248 (7th Cir. 1992) ("Nor do we
know of any cases finding standing for a non-settling party
because a settlement is allegedly illegal or against public
policy.") (cited with approval in Mayfield v. Barr).
Appellants' only mention of the class's interests appears in
a footnote in which they argue that the class will not actually
benefit from the MFN clause. But even here they do not say
that its inclusion actually harms the class members. Of
course they might argue that in securing the MFN clause the
class representatives must have traded away some alternative
(and real) advantage. But that argument's force would turn
on a showing that defendants seriously resisted the clause, on
which appellants offer no evidence. In fact the defendants
may well not have much resisted, affirmatively liking a
Ulysses-tied-to-the-mast arrangement that enables them to
convincingly stiff opt-outs who demand more. Cf. Decl. of
William M. Landes at 8-9 (excerpted at Joint Appendix 246).
In any event, appellants do not deny that their sole actual
concern is that the MFN clause limits their ability to reach a
settlement more lucrative than that offered to the class.
Consequently, their arguments fall outside of the zone of
interests protected by Rule 23(e).
Appellants' alternative tack invokes their right to opt out,
starting with the notice protections of Rule 23(c)(2). But the
rule by its terms is purely procedural. Any substantive right
to be free of ancillary effects flowing from a class settlement
must be found elsewhere.
Appellants next look to the Due Process Clause (presum-
ably of the Fifth Amendment) for their claimed right to be
free of any effects of the class settlement. It is, of course,
not in dispute that notice and an opportunity to opt out are
requirements of due process--for any party to be bound by
the litigation. See Fed. R. Civ. P. 23, Advisory Committee
Notes to the 1966 Amendment for Subdivision (d)(2) ("This
mandatory notice pursuant to subdivision (c)(2) ... is de-
signed to fulfill requirements of due process to which the
class action procedure is of course subject."); Ortiz v. Fibre-
board Corp., 527 U.S. 817, ___, 119 S. Ct. 2295, 2314-15;
Hansberry v. Lee, 311 U.S. 32, 40 (1940).
Indeed, as Mayfield makes clear, one may challenge a
settlement agreement to which he is not a party if the
agreement will cause him " 'plain legal prejudice,' as when
'the settlement strips the party of a legal claim or cause of
action.' " Mayfield, 985 F.2d at 1093 (quoting Agretti, 982
F.2d at 247); see also Alumax Mill Prods. v. Congress Fin.
Corp., 912 F.2d 996, 1002 (8th Cir. 1990) (allowing nonsettling
defendant to challenge a partial settlement that dismissed
with prejudice its cross-claims and stripped it of indemnity
and contribution rights). But the MFN clause here causes no
plain legal prejudice. Although the alleged injury is more
substantial than that claimed by the nonsettling plaintiffs in
Mayfield, here as there the nonsettling plaintiffs have fully
preserved their "right to litigate their claims independently."
985 F.2d at 1093.
Other cases have turned on a similar understanding of
"plain legal prejudice." In Quad/Graphics, Inc. v. Fass, 724
F.2d 1230 (7th Cir. 1983), cited with approval in Mayfield, a
settlement required a participant not to "voluntarily" partici-
pate in the continuing litigation. The court insisted that the
non-settling party show "plain legal prejudice," a formula it
took from its cases interpreting Federal Rule of Civil Proce-
dure 41(a)(2). 724 F.2d at 1231. It found none, even though
that party clearly had had reason to expect advantageous
cooperation from the settling party, and the settlement re-
striction would require it to incur the burden of a lawsuit to
extract whatever cooperation it was legally entitled to. Id. at
1234. Similarly, in Agretti, 982 F.2d at 247-48, the court
ruled that a party to a contract had no standing to challenge a
settlement agreement in which a settling party on the same
side agreed to declare the contract void. Because the nonset-
tling party retained the right to assert that the contract was
valid and enforceable, it suffered no plain legal prejudice,
despite the obvious practical burden of having its contractual
partner disavow the contract. See id. at 248. The settlement
limitations imposed by the MFN clause are no more onerous
than the burdens imposed on non-settling parties in these
cases.
Finally, we turn to appellants' argument that the district
court abused its discretion in denying them permissive inter-
vention under Rule 24(b)(2). Although the denial of a motion
for permissive intervention is not normally appealable in
itself, see Twelve John Does v. District of Columbia, 117 F.3d
571, 574 (D.C. Cir. 1997), we may exercise our pendent
appellate jurisdiction to reach questions that are "inextricably
intertwined with ones over which we have direct jurisdiction."
Id. at 574-75. Here the basis for appellants' motion for
permissive intervention is the same as the basis for its quest
for intervention as of right. The two are in that respect
inextricably intertwined.
But there is uncertainty over whether standing is neces-
sary for permissive intervention. Compare EEOC v. Nation-
al Children's Ctr., Inc., 146 F.3d 1042, 1045-46 (D.C. Cir.
1998) (recounting that Rule 24(b) requires would-be interve-
nors to have "an independent ground for subject matter
jurisdiction" on a claim or defense that shares a common
question with the claims of the original parties), and Dia-
mond v. Charles, 476 U.S. 54, 76 (1986) (O'Connor, J., concur-
ring) ("The words 'claim or defense' manifestly refer to the
kinds of claims or defenses that can be raised in courts of law
as part of an actual or impending lawsuit"); with National
Children's Ctr., 146 F.3d at 1045-46 (noting that our circuit
precedent avoids "strict readings of the phrase 'claim or
defense,' allowing intervention even in 'situations where the
existence of any nominate 'claim' or 'defense' is difficult to
find.' " (quoting Nuesse, 385 F.2d at 704)). And Steel Co.
precludes us from reaching merits issues in the absence of
jurisdiction. See 523 U.S. at 94. Of course if standing is
required, then what we have said above clearly precludes
appellants' success on this theory as well. If it is not, then
appellants would have to show that the trial court abused its
discretion in denying intervention but granting them amicus
status--enabling them to elucidate the court on their position
with less risk of delaying the settlement. In view of the
unresolved standing issue, however, we think it inappropriate
to exercise our pendent jurisdiction.
* * *
The district court's decision is
Affirmed.