Bowling, et al, v. Pfizer Inc, et al
Filing
3141
AMENDED ORDER APPROVING AMENDMENT AND DISTRIBUTION (Doc. 3138 ). Signed by Judge Timothy S. Black on 11/16/2015. (mr)
UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
ARTHUR RAY BOWLING, et al.,
Plaintiffs,
v.
PFIZER, et al.,
Defendants.
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Case No. C-1-91-256
Judge Timothy S. Black
AMENDED ORDER APPROVING AMENDMENT AND DISTRIBUTION
Before the Court is the Joint Motion for Final Approval of Proposed Amendment to
the Settlement and the Proposed Distribution (Doc. #3136) (“Joint Motion”). 1
In considering the Joint Motion, the Court also has taken into consideration the
presentations at the hearing on October 29, 2015, as well as the following prior filings in this
case, which are relevant to the proposed Amendment and distribution: Trustee’s Position
on Funds Needed for the Administration of the Bowling-Pfizer Settlement (Doc. #2821);
Report and Recommendations of the Supervisory Panel re: the Guidelines, the Future Scope
of Work of the Panel and Recommendations for the Use of Any Remaining Money in the
Patient Benefit Fund (Doc. #2871); Response of Class Counsel and Public Citizen to the
Report and Recommendations of the Supervisory Panel re: the Guidelines, the Future Scope
1
This Amended Order amends the Court’s previous Order Approving Amendment and Distribution (Doc. 3138)
solely to correct two minor typographical errors on pages 30 and 31 of the Order.
1
of Work of the Panel and Recommendations for the Use of Any Remaining Money in the
Patient Benefit Fund (Doc. #2881); Response of Special Counsel to the Report and
Recommendations of the Supervisory Panel re: the Guidelines, the Future Scope of Work of
the Panel and Recommendations for the Use of Any Remaining Money in the Patient
Benefit Fund (Doc. #2883); Response of Pfizer to the Report and Recommendation of the
Supervisory Panel re: the Guidelines, the Future Scope of Work of the Panel and
Recommendations for the Use of Any Remaining Money in the Patient Benefit Fund (Doc.
#2884); Report and Recommendations of the Supervisory Panel re: the Guidelines, the
Future Scope of Work of the Panel and Recommendations for the Use of Any Remaining
Money in the Patient Benefit Fund [sic] (Doc. #2889); Notice of Filing of Financial
Information for the Bowling-Pfizer Heart Valve Litigation Settlement Fund for the Years
2010, 2011, 2012 and 2013 (Doc. #2937); and Joint Motion for Preliminary Approval of
Proposed Amendment to the Settlement, and for Approval of Proposed Notices to the Class
and Proposed Notice Procedures (Doc. #3100).
The principal issues raised by the Joint Motion and the other filings listed above are
the final approval of the proposed Amendment to the Settlement Agreement in this case
(“the proposed Amendment”) and of the proposal by Class Counsel to distribute money
from the Patient Benefit Fund directly to members of the Settlement Class (“the proposed
distribution”). For the reasons set forth below, the Court approves both the proposed
Amendment and the proposed distribution.
2
FACTUAL AND PROCEDURAL BACKGROUND
A.
The Settlement Agreement
The original Settlement Agreement in this case was signed on January 23, 1992. The
parties thereafter executed various modifications and supplements in response to class
members’ objections to the Settlement Agreement. Some objections were resolved through
modifications or supplements executed before or during the original fairness hearing,
which took place in June and July of 1992 before Judge Spiegel. Objections that remained
unresolved following the fairness hearing were highlighted in an interim opinion issued by
Judge Spiegel. Bowling v. Pfizer, Inc., 143 F.R.D. 138 (S.D. Ohio 1992). For example, class
members objected to the lack of any cash compensation for spouses of BSCC patients.
Ultimately, $10 million was added to the fund for the spouses. Id. at 170. The parties
executed a range of other beneficial amendments (e.g., liberalized benefits for certain
foreign OSF claimants).
Finding it to be “fair, adequate, and reasonable,” Judge Spiegel approved the
“Supplemented Agreement of Compromise and Settlement” (Doc. #245) in an order dated
August 19, 1992 (Doc. #250). In his order approving the Settlement Agreement, Judge
Spiegel provided the following background information regarding the claims asserted in
this case:
From 1979 to 1986, Shiley, a wholly-owned subsidiary of Pfizer, produced
thousands of Bjork-Shiley convexo/concave heart valves. Somewhere
between 50,000 and 100,000 of these valves were implanted in patients from
all over the world. It is now thought that about 450 of these heart valves have
fracture, resulting in approximately 300 fatalities. Critics of Pfizer-Shiley
3
have alleged that Bjork-Shiley convexo/concave heart valves have a tendency
to fracture because of design and manufacturing defects. Pfizer-Shiley denies
any design or manufacturing defects and claims that its heart valves are not
any more likely to fracture than other heart valves available on the market.
Id. at 6-7.
In the same order, Judge Spiegel mentioned several features of the Settlement
Agreement that are relevant to the proposed Amendment currently before the Court,
including the following:
•
“The settlement offers benefits to class members who have the [Bjork-Shiley
convexo/concave] artificial valves and their spouse from funds totaling from
$165 million to $215 million, as well as certain other payments without any
monetary limit….”
•
“A fund of $75 million will be established….”
•
“The fund will pay for (a) research to develop diagnostic techniques to identify
valve recipients who may have a significant fracture risk, and (b) research to
characterize or reduce the risk of valve replacement surgery….”
•
“The fund will pay for certain expenses incurred by class members for diagnostic
testing services to identify recipients who have a significant risk of fracture when
the diagnostic techniques are developed or accepted by the FDA….”
•
“The Supervisory Panel will allocate research funds, administer the testing
program and select entities to perform research services….”
•
“Payments will be made from the $75 million fund for valve replacement surgery
which qualifies under the guidelines established by the Supervisory Panel….”
•
“Even if the $75 million is exhausted, Pfizer will remain obligated to continue to
pay benefits for qualifying valve replacement surgery….”
Id. at 10-12. Addressing the provisions of the Settlement Agreement related to the $75
million Patient Benefit Fund, Judge Spiegel expressed confidence “that the research money
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will be spent for the benefit of the class” and observed that “in no event may the research
money revert to Pfizer-Shiley.” Id. at 56.
B.
The Settlement Class
As of January 23, 1992, the date the original Settlement Agreement was signed,
approximately 84,000 individuals had been implanted with the Bjork-Shiley convexoconcave (“BSCC”) artificial heart valve.
The Settlement Class currently includes anyone who had been implanted with a
BSCC artificial heart valve as of January 23, 1992 and is still alive, and that person’s spouse if
the spouse was married to the implantee on that date and still is married to him or her.
C.
The Proposed Amendment
Section 5 of the Settlement Agreement established the Patient Benefit Fund. Under
the Settlement Agreement, Shiley and Pfizer devoted $75 million to that fund to support
programs, including valve-related medical research aimed at developing a non-invasive
medical device that would diagnose fracture-prone BSCC valves.
Paragraph 5.5 of the Settlement Agreement anticipated that at some point the
Supervisory Panel might determine that research no longer would be useful and that the
remaining money in the Patient Benefit Fund should be devoted to other uses beneficial to
the Settlement Class. In this regard, Paragraph 5.5 currently states as follows:
If the Supervisory Panel at any time determines that any money remaining in
the Patient Benefit Fund cannot productively be spent for the specific
purposes set forth herein, including payment of benefits for valve
replacement surgery, it may recommend to the Court that such remainder
should therefore be devoted to some other purpose for the benefit of the
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Settlement Class (other than direct distribution to the class members). Subject
to the approval of the Court, the Panel shall then direct the disposition of the
remainder of the Fund. At such time, all of Shiley’s and Pfizer’s obligations
under this section 5 shall cease, except to make any remaining unpaid
installments (up to a maximum of $75 million) into the Patient Benefit Fund.
Settlement Agreement, p. 18.
When the Supervisory Panel determined in 2010 that valve-related research no
longer would be useful, it invoked Paragraph 5.5 of the Settlement Agreement. Doc. #2670.
Subsequent to that, however, in 2014, at the urging of Class Counsel, Pfizer, Public Citizen,
and the Special Master/Trustee, Judge Weber approved a Cleveland Clinic research study
entitled “Assessment of Outlet Strut Status on Bjork-Shiley Prosthetic Valves Using High
Resolution X-Ray Computed Tomography.” Doc. #3000. At the time of its approval, the
Cleveland Clinic study was viewed as a test—in all probability the last test—of the
Supervisory Panel’s conclusion that further research into diagnostic tests would not be
useful. In September 2014, the data obtained from that study confirmed that the imaging
technique studied could not detect a fractured valve, so the decision was made not proceed
further with any research. No active research programs are underway.
The decision now before the Court is what to do with the remainder of the Patient
Benefit Fund, currently $18,610,233.
As it now reads, Paragraph 5.5 of the Settlement Agreement would prohibit
distributing money in the Patient Benefit Fund directly to the members of the class. Class
Counsel and Pfizer have agreed on language for the proposed Amendment, the main
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purpose of which is to remove this prohibition, so that money in the Patient Benefit Fund
could then be distributed directly to class members.
The proposed Amendment, which Class Counsel and Pfizer jointly submitted to the
Court for approval and which Special Counsel and Public Citizen also support, would
eliminate a prohibition in current Paragraph 5.5, 2 which precludes “direct distribution” of
money in the Patient Benefit Fund “to the class members.” Eliminating this prohibition
would permit a distribution of money in the Patient Benefit Fund directly to the members
of the class.
In addition, the proposed Amendment addresses and provides for several other
eventualities.
First, it provides that, “If the Supervisory Panel at any time determines that the
money remaining in the Patient Benefit Fund cannot productively be spent for the specific
purposes set forth in Paragraph 5.2, excepting subsection 5.2.3, the Panel shall recommend
to the Court that the remainder of the Patient Benefit Fund be devoted to some other
purpose for the benefit of the Settlement Class. Upon receiving such recommendation from
the Panel under this Paragraph, the Court may either terminate the work of the Supervisory
Due to a typographical error, the preamble on the copy of the proposed Amendment
submitted for preliminary approval omitted certain words. The preamble stated that the
Amendment would “[d]elete existing Paragraph 5.5 with the following new Paragraph 5.5
….” The preamble should have stated “Delete existing Paragraph 5.5 and replace it with the
following new Paragraph 5.5 ….” The notice to the class, however, made clear that under
the Amendment new Paragraph 5.5 was to replace current Paragraph 5.5.
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Panel or suspend it until, in the opinion of the Court, circumstances warrant further
involvement by the Panel or any of its members.”
Second, the Amendment provides that, “If the Court opts to terminate or suspend
the work of the Supervisory Panel under this Paragraph 5.5, the Court may retain as a
consultant any medical or scientific expert it deems necessary.”
Third, the Amendment provides that, “If the Court approves the recommendation of
the Supervisory Panel under this Paragraph 5.5, the Court may order that the remainder of
the Patient Benefit Fund be distributed to some or all of the members of the Settlement
Class.”
Fourth, the Amendment provides that, if the Court orders a distribution to some or
all of the members of the class, a sufficient amount of money will remain in the Patient
Benefit Fund to cover the future costs of administering the settlement, which amount shall
be approved by the Court (the “hold-back”). The Amendment states that the hold-back
shall be:
sufficient to cover the reasonable and foreseeable
(a)
costs of reimbursing qualified class members’ uninsured
expenses related to explant surgeries under subsection
5.2.3, including those who qualify under the
Supervisory Panel’s guidelines and those later
diagnosed with single-leg fractures;
(b)
fees and expenses of the Settlement Administrator;
(c)
fees and expenses of the Special Master/Trustee;
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(d)
fees for any necessary tax return preparation and
accounting and for a biennial review of the remaining
funds by a qualified outside accounting firm;
(e)
costs associated with administering, implementing,
and/or enforcing the terms of the Settlement, including
any additional expenses of the Supervisory Panel or its
members and any further work that the Court might ask
of the Panel or any of its members; and
(f)
fees and expenses related to any distribution.
And, fifth, the proposed Amendment states that “Nothing in this Paragraph 5.5 shall
affect Shiley’s and Pfizer’s obligations under Section 7 or any other provision of this
Agreement, including the payment of ‘additional or alternative benefits’ referred to in
Paragraph 5.6 and set forth thereafter; except that, if the Court orders that the remainder of
the Patient Benefit Fund (minus the appropriate hold-back as described above) be
distributed directly to some or all of the members of the Settlement Class, upon completion
of that distribution all of Shiley’s and Pfizer’s obligations under subsection 5.3.3 of this
Agreement shall cease.
Notwithstanding any other provision of this Agreement, the
provisions of this Paragraph 5.5 are controlling.” This language means that if the Court
approves the proposed Amendment, Shiley and Pfizer would continue to compensate class
members for any individual valve-fracture claims. This language also means that Shiley
and Pfizer would continue to pay the additional or alternative benefits referred to in section
5.6 of the Settlement Agreement. These additional or alternative benefits include payment
of $38,000 for all miscellaneous costs and expenses relating to and following hospitalization
for qualifying valve replacement surgery; payment for such class member’s actual lost
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income due to time lost from work (up to $1500 per week up to 16 weeks, and longer in the
case of a class member who becomes disabled as a result of the surgery) to the extent not
otherwise covered by workers’ compensation, sick pay, disability, or other benefits; and
other payments in the event such class member dies or becomes disabled as a result of
qualifying valve replacement surgery.
To clarify further the ramifications of the Amendment, claims by eligible class
members for reimbursement of the uninsured costs of qualifying valve replacement
surgeries would be among the expenses paid out of the hold-back. Under subsection 5.3.3
of the Settlement Agreement, the uninsured costs of qualifying valve replacement surgeries
currently are paid out of the Patient Benefit Fund, and Shiley and Pfizer currently would
have an obligation to pay those uninsured costs if that fund ever ran out of money.
Although this obligation would cease under the proposed Amendment, Class Counsel,
Pfizer, Special Counsel, Public Citizen, and the Special Master/Trustee all maintain that the
proposed amount of the hold-back—$1,619,835—would be sufficient to cover these and
other costs, given the relatively minimal amounts that have been expended for that purpose
in recent years. 3
D.
The Proposed Distribution and Hold-Back
If the Court approves the proposed Amendment, Class Counsel also asks the Court
to approve a direct distribution to Settlement Class members of the money in the Patient
Such reimbursements totaled about $1.3 million over the 23-year life of the settlement and
$397,421.56 since 2001. But they have only totaled $107,953.88 over the past 12 years, and
$3,083.97 over the past seven years.
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Benefit Fund, minus the appropriate hold-back discussed above. Class Counsel propose
that $16,990,398 of the $18,610,233 currently in the Patient Benefit Fund be distributed
directly to the members of the class—in other words, a hold-back of $1,619,835. Class
Counsel, Special Counsel, Public Citizen, and Pfizer have agreed on this as the appropriate
hold-back.
The Special Master/Trustee also concurs with the proposed amount of the
distribution and hold-back.
If the Court approves this proposed distribution, Class Counsel have proposed that
each living registered implantee class member would be eligible to receive a share of it, as
would each living spouse of an implantee class member who was married to that implantee
as of January 23, 1992 and who is still married to that implantee when the proposed
distribution is approved.
Class Counsel have proposed that the total amount of money available for the
qualifying spouses’ aggregate awards (“the spouses’ aggregate share”) would be one-eighth
of the total amount of money available for the qualifying implantees’ aggregate awards
(“the implantees’ aggregate share”), just as with the original distribution.
Under this
proposal, each qualifying implantee would receive a larger percentage of the implantees’
aggregate share than in the original distribution, and each qualifying spouse would receive
a larger percentage of the spouses’ aggregate share than in the original distribution. The
reason for this is logical—there would be fewer eligible implantees and eligible spouses this
time around due to deaths among implantee class members and deaths or divorces among
spouse class members.
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FINDINGS OF FACT AND CONCLUSIONS OF LAW
A.
The Court’s Preliminary Approval Order and Compliance With It
The first step in the process of approving a proposed class action settlement—or, as
in this case, an amendment to one—is commonly known as “preliminary approval.” It
warrants preliminary approval if it is within the range of what ultimately could be
considered fair, reasonable, and adequate—a determination left to the sound discretion of
the Court. 4 In its Order dated July 24, 2015 (Doc. #3111), the Court found that the proposed
Amendment is within the range of what ultimately might be found to be fair, reasonable,
and adequate. The Court thus preliminarily approved the proposed Amendment and
directed that notice be issued to the class.
The original 1992 notice involved an extensive combination of worldwide first-classmail and publication notice, which Judge Spiegel found met the demands of Rule 23 and
due process. Although the original notice did not indicate that monetary payments would
or could be made from leftover Patient Benefit Fund monies, it did inform class members
that they would receive at least $80 million (and as much as $130 million) in cash,
representing at least $2,500 per class member. See Bowling v. Pfizer, Inc., 143 F.R.D. 141, 149
(S.D. Ohio 1992) (describing the original cash distribution aspect of settlement).5 In fact,
See In re Southern Ohio Correctional Facility, 173 F.R.D. 205, 211 (S.D. Ohio 1997).
It should be noted that the 1992 notice was not the only notice undertaken in this case.
Beginning in 2005, the Court oversaw another significant notice program. Its specific
purpose was to attract additional registrants so that they could avail themselves of
settlement benefits. In June 2005, all class members registered with Medic Alert were
notified. Later, in 2006, a similar notice was published in seven foreign and thirteen U.S.
4
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each registered implantee-class member received $6,147, and each qualified spouse-class
member received $1,009.
Although previous modifications of the Settlement Agreement before, during and
after the original fairness hearing did not trigger any new class notices, and due process
may not have required class notice in this instance, out of an abundance of caution the
Court deemed it is advisable to provide class members with the best practicable notice of
the proposed Amendment and the proposed distribution.
In the motion seeking preliminary approval, Class Counsel, Pfizer, Special Counsel,
and Public Citizen proposed a long-form notice and short-form notice. They further
recommended that the proposed long-form notice be mailed to every member of the class
newspapers and was placed on the domestic and foreign newswires. In these notices, class
members were informed that registering with the Claims Administrator would help them
obtain future benefits and settlement-related information. The notice to the Medic Alert
registrants, entitled “Last Mailed Notice to Register for Bjork-Shiley C/C Heart Valve Legal
Settlement Benefits,” provided the following boxed warning in bold type: “You must
register to be eligible to receive important information and learn more about benefits
available to you.” It further informed the recipient that registration with Medic Alert alone
was not necessarily sufficient to obtain the settlement’s full benefits: “If you registered with
Medic Alert or any other organization, you still need to register with the Claims
Administrator.” Similarly, the published notice, entitled in all capital letters “Important
Notice to All Bjork-Shiley Convexo-Concave Heart Valve Implantees,” “urge[d] [class
members] to register as soon as possible with the Bowling Settlement Claims
Administrator, if you have not already done so.” It warned in bold type that “There will be
no further formal notification issued about registration,” and that “If you do not register, it
may be impossible to contact you with information about your particular heart valve and
about settlement benefits to which you may be entitled or to which you may later be entitled to
receive.” (Emphasis added.) As a result of the 2005-2006 notice program, 291 additional
class members registered with the Claims Administrator 281 as a result of the Medic Alert
notice and 10 as a result of the publication notice.
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and that the short-form notice be posted on various websites. The Special Master/Trustee
joined in these recommendations.
The long-form notice explained the proposed Amendment and the proposed
distribution, including the dollar amounts that would be distributed and held back, and the
approximate dollar amount that each class member could expect to receive under each
proposal. That notice also adequately informed class members of the scheduled hearing
and of their opportunity to comment on or object to the proposed Amendment and the
proposed distribution before or at that hearing. It also properly advised class members on
the importance of updating their personal information (e.g., change of address, death of
implantee or spouse, etc.) to help ensure the efficiency and accuracy of the proposed cash
distribution, if one were to be ordered; and it adequately described the various means by
which class members could do so (i.e., online via a website, by email, by mail, or by calling
the settlement administrator’s office free of charge). For the Medic Alert registrants only,
the proposed long-form notice properly explained that any distribution to a Medic Alert
registrant would be contingent on the individual granting permission to the settlement
administrator to add his or her name to the list of registered class members and provided
directions on the various means by which Medic Alert registrants could grant such
permission (again, online via a website, by email, by mail, or by calling the settlement
administrator’s office free of charge).
The Court approved the long-form notice and the proposed procedures for its
dissemination in the Order dated July 24, 2015 (Doc. #3111).
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The short-form notice proposed by Class Counsel and Pfizer and agreed to by all
counsel and the Special Master/Trustee provided class members with a more limited
amount of information about the proposed Amendment and distribution, while directing
them to more complete information, including the long-form notice and the Bowling/Pfizer
settlement website. The Court approved the short-form notice in the Order dated July 24,
2015 (Doc. #3111), requiring it to be posted on various websites, including “the
Bowling/Pfizer website and relevant blogs or websites pertaining to health-related class
actions, consumer law, or cardiology,” and that it be sent “to the foreign medical societies
and agencies that received earlier notices in this case or their successors.”
On October 27, 2015, the Special Master/Trustee filed the Declaration of Nancy A.
Johnson, President of CAC, the settlement administrator in this case. In her Declaration,
Johnson stated the following with respect to the actions taken to comply with the Order of
July 24:
5.
Given the preceding information, I caused the following to
occur as effort to fulfill the Notice requirements outlined in the Notice:
a. On or before September 14, 2015, the “Notice Packet” was
translated into 12 languages, attached hereto as Exhibit 1.
b. On September 17, 2015, the U.S. Class Member List was
updated using the National Change of Address system
(NCOA), which updates the addresses for all persons and
businesses who had moved in the previous four years and
who had filed a change of address with the U.S. Postal
Service for U.S. Class Members. Special postal software
similar to NCOA was used for the International Class
Member List;
c. On September 17, 2015, the Notice, W9 and W9 Instructions
were printed, personalized, and inserted into a #10 window
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d.
e.
f.
g.
h.
i.
envelope (the “Notice Packet”). The Notice Packet was
provided to three thousand two hundred and twenty-three
(3,223) U.S. Settlement Class members and two hundred
and thirty-one (231) Canadian Settlement Class members in
the English language. The Notice and tax forms are
attached hereto as Exhibit “1”;
On September 17, 2015, the Notice, W8-BEN and W8-BEN
Instructions were printed in 12 languages, personalized,
and inserted into a #10 window envelope (the “Notice
Packet”). The International Notice Packet was mailed to
five thousand seven hundred and ninety (5,790) Settlement
Class Members. The International Notice Packets in 12
languages is attached hereto as Exhibit “1”
Of the (9,244) Notice Packets that were mailed to Settlement
Class Members, seven hundred eighty two (782) were for
individuals on the Reconsideration List.
The
Reconsideration List consisted of Class Members who did
not make a claim or receive any prior distributions, but
wanted to be included should any future distributions take
place. Their serial number had been verified against the
serial numbers in our original database and were found to
be a match. Marriage certificates were required in order for
any spouse to receive a payment.
A list of the countries that the Notice Packet was mailed to
is attached hereto as Exhibit “2”.
On September 17, 2015, three thousand four hundred and
fifty-four (3,454) Notice Packets, comporting with each of
the individuals listed on the Class Member List for the U. S.
and Canada were mailed, using first-class postage, at the
U.S. Post Office in Eagan, Minnesota.
On September 17, 2015, five thousand seven hundred and
ninety (5,790) International Notice Packets were mailed,
using first-class postage, at Action Mailing Services, in
Peterborough, U.K.
On September 24, 2015 an e-mail blast was sent to two
hundred (200) country medical associations or societies for
posting of the short form notice to their websites. Attached
here to is Exhibit “3”
6.
As of October 21, 2015, twenty-nine (29) Notice Packets were
returned to CAC by the U.S. Postal Service with forwarding addresses. The
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Class Member List was subsequently updated with the new addresses and a
Notice Packet was re-mailed to said Settlement Class Members at each of the
new addresses.
7.
As of October 21, 2015, six hundred and two (602) Notice
Packets have been returned to CAC by the U.S. Postal Service without
forwarding addresses. A skip trace was performed and four hundred eightytwo (482) new addresses were found. The Class member List was
subsequently updated with the new addresses and a Notice Packet was remailed to said Settlement Class Members at each of the new addresses. CAC
will explore any available options for locating domestic Class Members
whose packets were returned and whose addresses were not found through
the skip tracing utilized thus far.
8.
As of October 21, 2015, fifty-two (52) foreign Notice Packets
have been returned to CAC by the U.S. Postal Service without forwarding
addresses. We have no means to do skip tracing on foreign mail so no further
action was taken.
Declaration of Nancy A. Johnson (Doc. # 3134-1), ¶¶ 5-8.
Based on the Declaration of Nancy A. Johnson, the Court is satisfied that the Special
Master/Trustee and the administrator complied with the July 24 Order to the best of their
ability.
B.
Final Approval of the Proposed Amendment and Distribution
1.
Subject to an appropriate hold-back, a direct distribution represents
the optimal use of the remaining funds.
Even though the parties, when they originally executed the Settlement Agreement,
anticipated that the day could come when it no longer would be useful to devote money
from the Patient Benefit Fund to diagnostic research and that another use for that Fund
would have to be found, they also originally agreed that direct cash payments to class
members would not be permitted. One might argue that this should be the last word on the
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subject. It is important to note, however, that the parties specifically reserved the right to
modify or amend their Settlement Agreement by mutual consent. See Paragraph 12.3 of the
Settlement Agreement (permitting modifications or amendments in writing, signed by all
parties, meaning Pfizer and the class).
Indeed, the parties modified the Settlement
Agreement multiple times before Judge Spiegel approved it. See Doc. #250, p. 3. It is,
therefore, clearly within the capacity of these parties to modify or amend the terms of their
Settlement Agreement to fit changed circumstances.
Any proposed amendment or modification is, of course, subject to this Court’s
approval. The question for the Court is whether the proposed Amendment is fair,
reasonable, and adequate. See Fed. R. Civ. P. 23(e)(2).
Class Counsel and Pfizer submit that their proposed Amendment is fair, reasonable,
and adequate because it facilitates a direct distribution to class members, which they
contend represents the optimal use of the money remaining in the Patient Benefit Fund,
subject to a hold-back of funds sufficient to cover essential ongoing settlement benefits and
expenses. Special Counsel and Public Citizen agree that a direct distribution is the optimal
use of the remaining funds and that the proposed hold-back is sufficient funds to cover
essential benefits and expenses.
Class action case law and the Settlement Agreement itself require that remaining
monies be used to benefit the people whose legal claims led to the settlement and the
creation of the fund in the first place—that is, the members of the class. See Settlement
Agreement, current Paragraph 5.5 (noting that after the Panel determines that medical
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research will no longer be fruitful, the remaining funds should be “devoted to some other
purpose for the benefit of the Settlement Class”).
Now that all diagnostic research sponsored by the Supervisory Panel has come to an
end (based on the recommendation of the Panel itself), devoting funds to further research is
not a viable option. Other possible uses for the funds would be far less likely to benefit a
large number of class members than would a direct distribution. For example, a cy pres
distribution to a charity that conducts research or other programs generally related to the
needs of the class (e.g., a charity that sponsors cardiac research or provides cardiac care to
needy people) is unlikely to confer a direct benefit on many, if any, of the remaining class
members, who are spread all over the world. In contrast, a cash distribution would confer a
direct and immediate benefit on thousands of class members, including all currently
registered class members and BSCC Medic Alert members who have been notified and
have chosen to register with the settlement administrator.
Similarly, using the remaining monies to set up a fund to pay for implantees’
medical expenses or for medical monitoring of some kind is less likely to confer a direct
benefit on class members than would a cash distribution. Given the demographic and
geographical attributes of the class, most implantees-class members’ medical care already is
covered by Medicare in the case of U.S. implantees or national health insurances programs
in the case of non-U.S. implantees.
Moreover, a settlement-administered medical care
program, though commendable in some ways, would encounter inefficiencies that a direct
distribution program would not. The claims administrator would be required to decide
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class members’ eligibility for any such new medical benefits, and determinations would
have to be made as to whether implantees were already covered by private or public
insurance. See Settlement Agreement, Paragraph 3.8, and Subsections 5.2.2, 5.6.1.2, and
5.6.1.3 (medical benefits under the Bowling settlement are paid only when not covered by
private or public insurance). In contrast, a direct distribution to class members would allow
them to decide what to do with the remaining money. If a class member would prefer to
devote the amount received to a charitable donation or toward additional medical care for
himself or herself, he or she simply could choose to use some or all of the cash distribution
for one or both of those purposes. Moreover, a non-monetary benefits program would
continue to require the expenditure of the class members’ funds on various administrators,
lawyers, and others, while the proposed direct distribution program would devote those
funds to the class members themselves.
Accordingly, the Court agrees that a distribution to the class members represents the
optimal use of the remainder of the Patient Benefit Fund because it would confer a direct
and immediate benefit on thousands of implantees and their loved ones and would allow
them to decide how best to use it. The parties originally intended the Patient Benefit Fund
to be used primarily for research purposes. However, the Supervisory Panel’s
determination that research no longer would be useful and that the remaining money in the
Patient Benefit Fund should be devoted to other uses beneficial to the class, and the Court’s
acceptance of that determination, foreclose using the Patient Benefit Fund for research
purposes in the future. For the settlement to continue to be—as Judge Spiegel said at the
20
time he approved it—“a good deal for the members of the Class,” the Patient Benefit Fund
must be put to a new and different use that directly benefits class members.
Under the circumstances that currently exist, the Court is satisfied that permitting
money in the Patient Benefit Fund to be distributed directly to class members is fair,
reasonable, and appropriate. The Court also is satisfied that, even as it opens the door to a
direct cash distribution and relieves Pfizer and Shiley of their obligation to replenish the
Patient Benefit Fund, the proposed Amendment preserves other significant payment
obligations on the part of Pfizer and Shiley, which will continue to provide tangible benefits
and comfort to the members of the class.
As noted above, under the Amendment, Shiley and Pfizer would continue to
compensate class members for any individual valve-fracture claims, including paying the
additional or alternative benefits referred to in Paragraph 5.6 of the Settlement Agreement.
These additional or alternative benefits include payment of $38,000 for all miscellaneous
costs and expenses relating to and following hospitalization for qualifying valve
replacement surgery; payment for such class member’s actual lost income due to time lost
from work (up to $1500 per week up to 16 weeks, and longer in the case of a class member
who becomes disabled as a result of the surgery) to the extent not otherwise covered by
workers’ compensation, sick pay, disability, or other benefits; and other payments in the
event such class member dies or becomes disabled as a result of qualifying valve
replacement surgery. Moreover, as also noted above, claims by eligible class members for
21
reimbursement of the uninsured costs of qualifying valve replacement surgeries would
continue to be paid out of the hold-back.
Accordingly, the Court approves the proposed Amendment to the Settlement
Agreement.
2.
The proposed distribution also is approved, subject to a hold-back
in the amount of $1,619,835.
In addition to proposing the Amendment, Class Counsel, Pfizer, Special Counsel,
and Public Citizen also proposed that a significant portion of the remaining settlement
funds should be distributed to class members in cash, setting aside a limited reserve fund
(i.e., the hold-back) that would be sufficient to reimburse the uninsured costs of future
qualifying valve-replacement surgeries as well as cover the costs of the remaining
settlement administration.
In response to the notice, Class Counsel received very few written communications
from class members regarding the proposed Amendment and distribution. None of the
class members who communicated in writing with Class Counsel prior to the fairness
hearing objected to or opposed either the Amendment or the distribution. Three class
members offered specific written comments.
Dr. Walter Löwe of Germany, an implantee and a retired federal judge, wrote as
follows (in German, translated into English) on behalf of himself and his qualifying spouse:
We hope that the court approves the proposed change in the distribution of
the money in the patient assistance fund to the entitled members of the
group. If you wish, you may let Judge Black know that we consider the
proposed change as appropriate, because the surviving heart valve recipients
22
had to endure the fear over many years, that their valve is also prone to
breakage and might indeed be broken.
Doc. #3133-2.
Another implantee, Siegfried Leiter, also of Germany, wrote as follows (in English)
with respect to the Amendment and distribution:
… I accept the decision of the majority. I cannot be there on [October] 29,
2015. I get a pension from € 720. Life and work have not been easy, knowing,
that the valve could [break] anytime. At the moment my heart [works] 25%.
I hope, that the money will mainly be spent for those, who suffered, not for
bureaucracy.
Doc. #3135-1.
Dr. Gerard Batts, an implantee from Switzerland, submitted a lengthy statement
criticizing much of the way the settlement has been handled.
Agreeing with the
distribution, Dr. Batts nevertheless characterized the amount he expects class members to
receive as “nominal” in comparison to amounts charged by “the lawyers and the
Supervisory Panel members” over the years. For example, he stated:
Apparently there are c.7,000 of us BSCC patients left; “the silent majority”,
many of whom will be living with chronic stress and life-long anxiety
knowing an unknown number of sub-standard valves were implanted.
Nobody can say if all the sub-standard valves have been identified.
Much of the distress and anger was deflected from Pfizer in the establishment
of the settlement and a Supervisory Panel. I do believe that the lawyers
appointed and the Supervisory Panel genuinely strove to help patients and
families through their often unbearable nightmare. However, when analyzing
who gained the most from the settlement over its duration, for me it’s clearly
the lawyers and the Supervisory Panel members (travel expenses, hotels, time
billed for reading and writing scientific papers…). My research team and I
published c.21 papers in high impact journals without additional payment:
it’s what scientists do. The Supervisory Panel requested, and was given
23
50,000 USD from the dwindling Patient Benefit Fund to write a summary
paper (Harrison et al., 2013) simply to highlight their activities and attempt to
justify their management strategies over the decades. With my British sense
of humour, I would rename the Fund “The Supervisory Panel and Lawyer’s
Benefit Fund”.
Who gained the least? The very people for whom the settlement was
established. Now there appears to be some desire to distribute a nominal
amount so those patients who made it through c.30 years of chronic stress
finally receive some pocket change, if you will.
While I agree with a distribution to patients, it would be helpful for us to
know how much of the millions spent (75,000,000-18,641,257 = 56,358,743
USD) was allocated to scientific research in the search for a diagnostic device
to save lives? Most lawyers and Supervisory Panel members have been
billing the Patient Benefit Fund for decades. When one looks at the nominal
amounts predicted to be distributed to patients (Class Counsel’s hearing
notice, September 2015) perhaps it’s appropriate for them all to offer to work
pro bono from here on in, and distribute a fraction more to those who have
gained so little.
In most class actions patients often receive meaningful (life changing) funds
early-on in the settlement, and then perhaps additional benefit of a diagnostic
device following research efforts with time. I feel at the end of this medical
drama us BSCC patients will receive neither.
Doc. 3133-1, pp. 1-2 (emphasis omitted). Dr. Batts added:
Whilst I support a distribution to patients, research should also continue for a
diagnostic device for detection of a Single Leg Separation. There seems to be
resistance within the Supervisory Panel (presumably not all members) to
update radiographic imaging at the Heart and Vascular Institute, Hershey
Medical Center ….
Id. at 3 (emphasis in original). Dr. Batts concluded his submission by stating that, while he
agreed with the distribution, he also would favor holding back (1) additional dedicated
funds in the amount of $100,000-$200,000 for immediate reassessment and reinstitution of
the Hershey study done many years ago, (2) additional dedicated funds in the amount of
24
$100,000-$200,000 “only for future imaging research” if “in the opinion of the Court
circumstances would warrant a Panel member or other imaging specialist to be activated to
assess the potential of new imaging technologies as they arise that might benefit Class
Members in future years,” and (3) an unspecified additional amount for “close monitoring
of the BSCC patient cohort … to detect any future spikes in fractures.” Id. at 4.
Class Counsel also received oral feedback from the remaining class representatives
who could be located, namely Emma Wright, Archie Calvert, and Janet Boggess. All of
them expressed support for the proposed Amendment and distribution.
The Court agrees with Class Counsel, Pfizer, Special Counsel, and Public Citizen that
money from the Patient Benefit Fund should be distributed directly to the members of the
class; that each living implantee-class member should receive a share of the distribution, as
would each living spouse of an implantee-class member who was married to that implantee
as of January 23, 1992 and who is still married to that implantee when the proposed
distribution is approved; that the total amount of money available for the spouses’
aggregate share would be one-eighth of the total amount of money available for the
implantees’ aggregate share, just as with the original distribution; and that each qualifying
implantee would receive a percentage of the implantees’ aggregate share that is similar but
not identical to the percentage they received in the original distribution, and each qualifying
spouse would receive a percentage of the spouses’ aggregate share that is similar but not
identical to the percentage they received in the original distribution.
25
We therefore turn to the appropriate amount of the hold-back. The Settlement
Agreement provides that the Patient Benefit Fund is to be used to reimburse eligible class
members for the uninsured costs of qualifying valve replacement surgery. However, a
relatively small number of class members are eligible for this benefit. Fewer than 50 class
members currently qualify for this benefit under the guidelines, and that number is
decreasing rapidly. The Supervisory Panel’s decision in 2012 not to revise the guidelines
ensures that this number will continue to decrease steadily until 2036, when it is estimated
that the last qualified class member will become ineligible for this benefit. Given the history
of such reimbursements over the course of this settlement, it would be unjustifiable to
reserve more than all agree is necessary to cover future reimbursements of uninsured costs
of qualifying valve replacement surgeries in the years ahead.
Research sponsored by the Supervisory Panel ceased in 2009, and in 2012 the Panel
decided not to revise its guidelines. These developments signaled the end of the Panel’s
work for all practical purposes. The Court has approved the proposed Amendment in the
discussion above. Included in newly approved Paragraph 5.5 is a provision stating that,
upon the Panel’s recommendation that the remainder of the Patient Benefit Fund be
devoted to some other purpose for the benefit of the Settlement Class, “the Court may
either terminate the work of the Supervisory Panel or suspend it until, in the opinion of the
Court, circumstances warrant further involvement by the Panel or any of its members.”
Newly approved Paragraph 5.5 also provides that, if the Court opts to terminate or suspend
the work of the Supervisory Panel under this Paragraph 5.5, the Court may retain as a
26
consultant any medical or scientific expert it deems necessary.” In 2010, the Supervisory
Panel notified Judge Weber that it had concluded that it would no longer be useful to spend
the money in the Patient Benefit Fund on research. The Panel confirmed that conclusion in
the wake of the Cleveland Clinic study done in 2014. At the hearing on April 24, 2015, the
Court in effect suspended the work of the Supervisory Panel when it “ordered that the
Supervisory Panel shall remain on stand-by to provide its expertise when requested by the
Court.” The Court hereby confirms that, pursuant to new Paragraph 5.5, the work of the
Supervisory Panel is suspended until, in the opinion of the Court, circumstances warrant
further involvement by the Panel or any of its members. The suspension of the Panel’s
work greatly reduces the amount needed for the hold-back.
Implementing the direct distribution to class members will undoubtedly require
additional attorney time, which must be covered by the hold-back. After the distribution,
however, there will be far less need for significant attorney time and, thus, far less
justification for substantial attorney fees, particularly because Class Counsel and Special
Counsel 6 have committed to serving pro bono thereafter. Public Citizen’s counsel already
has shifted to providing services pro bono. These developments also greatly reduce the
amount needed for the hold-back.
Finally, to determine the appropriate amount of the hold-back, it is necessary that
the Court assess Dr. Batts’s proposals. As noted above, Dr. Batts suggests that a total of
$200,000 to $400,000 be held back for further x-ray imaging research, with a specific
6
James Capretz is Special Counsel to Class Counsel.
27
recommendation that $100,000 to $200,000 of that be spent for imaging of class members at
the Hershey Medical Center. Doc. #3133-1, at 4. Many years ago, the Supervisory Panel
recommended, and Judge Weber approved, funding for an x-ray imaging program at
Hershey. The Supervisory Panel later determined that the Hershey program should end,
and it did end six years ago. For the reasons that follow, the Panel was correct to end that
program, and Dr. Batts’s suggestions for reviving it are rejected.
Before explaining why, on purely scientific grounds, the Hershey program (or any
other imaging program) should not be reinstated, two preliminary points warrant mention.
First, Dr. Batts appears to be asking this Court to order the diversion of funds to reinstitute
a Hershey program and for other future imaging research. This Court, like any federal
court, lacks that power. Class action settlements, and amendments to them, are matters of
contract between the parties, with courts having up or down approval authority, but
nothing more. Evans v. Jeff D., 475 U.S. 717, 726 (1986) (“[T]he power to approve or reject a
settlement negotiated by the parties before trial does not authorize the court to require the
parties to accept a settlement to which they have not agreed.”). Thus, although a court may
make suggestions for amendments when it believes that the pending settlement is not
approvable, it lacks power under Rule 23(e) to order particular settlement terms. Id. at 727.
Second, Dr. Batts’s suggestion would reallocate money currently proposed to be
distributed to individual class members. If Dr. Batts’s suggestion were adopted, the total
amount of money available to class members would be smaller than the amount set forth in
the notice previously sent to the class members.
28
Though the total amount would be
reduced by a relatively small amount, before this Court considers whether Dr. Batts’s
proposals should become a part of the settlement, class members arguably would be
entitled to a revised notice and another opportunity to object and explain why the money
should go to them and not to imaging programs.
In any case, Dr. Batts’s proposals are unwarranted on their own terms. The purpose
of imaging technology is to determine whether a BSCC valve inside a patient’s chest
contains a single-leg separation (“SLS”). SLS is a precursor to a potentially catastrophic
outlet strut fracture (“OSF”). OSF is either fatal or results in serious injuries. So, the overall
theory of a successful imaging program is that, if the technology can reliably diagnose SLS
in living patients implanted with BSCC valves, patients who test positive for SLS may then
undergo valve replacement surgery and thereby avoid OSF.
But as the Supervisory Panel told Judge Weber in 2010, the Hershey program failed
because it could not show that the imaging technology had the capacity to reliably diagnose
SLS in BSCC patients:
The panel has never seen sufficient data from th[e Hershey] study to verify
the validity of the x-ray imaging technology. Without such sensitivity and
specificity data, the panel has little confidence in the imaging result as a
diagnostic device or tool for patients or their physicians. The results of the
Hershey imaging study have not satisfied the panel that the method is
reliable for differentiating intact valves from those with SLS of an outlet strut.
Doc. #2670, at 13 (Jan. 15, 2010).
As the Supervisory Panel emphasized in its submission, a key problem with the
Hershey study was that very few patients (39) were willing to participate and far fewer still
29
(7) later had their valves explanted. See id. The latter number is critical because only by
explanting valves and examining them for SLS can anyone know whether the technology is
capable of accurately detecting valves with SLS. These low numbers are not surprising.
Despite the Supervisory Panel’s efforts to enroll class members, very few class members,
many of whom are elderly and infirm, wanted to expose themselves to radiation in an effort
to test unproven technology. Moreover, given the serious risks of open-heart surgery
(particularly for older patients), only a tiny number of class members, understandably,
wanted to take on those risks.
If the Hershey program were revived, or a program like it were instituted, the
number of study participants and explantation surgeries would likely be even smaller than
they were in the original program (as noted, 39 and 7, respectively). Since the Hershey
program ended more than six years ago, with the passage of time, the number of living
class members has steadily declined. Moreover, as Dr. Batts acknowledges (Doc. #3133-1, at
2), thankfully, very few outlet strut fractures have occurred in recent years. See generally
Doc. #2670, at 5 (discussing this phenomenon). Moreover, as class members get older, it
makes less sense for them to undergo valve replacement surgery because open-heart
surgery becomes riskier with age. Id. This is why the Panel has determined that, as of 2015,
only 46 individuals in the entire class would benefit from valve replacement surgery—that
is, under the Panel’s valve replacement guidelines, there are only 46 class members for
whom the risk of OSF outweighs the risk of valve replacement surgery. See Exhibit A to
30
Joint Motion (Doc. #3137) (chart showing the estimated number of class members eligible
for valve replacement surgery year-by-year). 7
For all of these reasons, it would be impossible to recruit enough class members to
validly test x-ray technology aimed at detecting SLS valves in living class members. On
that ground alone, Dr. Batts’s suggestions are rejected.
One other consideration is even more important. Dr. Batts’s proposal appears to
assume that, other than draining the fund of several hundred thousand dollars, there could
be no possible harm to class members by reinstating the Hershey program or a program
like it. Using the money for research, Dr. Batts believes, may not help class members, but it
cannot hurt them. But that assumption is incorrect, as the results of the original Hershey
study demonstrate. The imaging technology used at Hershey did not exhibit the level of
accuracy that modern science demands.
That technology failed to predict the valve’s
correct status for at least four of the seven values explanted during surgery. See Doc. #2670-7
(Jan. 15, 2010). 8 Most troubling is that among the study’s four clear errors was a false
positive—in other words, one valve was imaged as “Probably SLS,” but, in fact, it was a
Even this small number (46) significantly overstates the number of class members who
would actually benefit from valve replacement surgery. Under the Panel’s valve
replacement guidelines protocol (Doc. #290), the Panel was required to assume that any
class member undergoing surgery would be in optimal health and would undergo surgery
at an optimal surgical facility. But the class members—most of whom are elderly and all of
whom suffer from at least some form of heart disease—are not in optimal health, and many
of them do not have access to an optimal surgical facility.
8 It is appropriate to say “at least” because, besides the four valves that indisputably were
mischaracterized by the imaging technology, a fifth valve was viewed as only “minimally
suspicious” upon x-ray, yet it had SLS upon post-surgical examination.
7
31
perfectly good, intact valve. See id. To be clear: This patient risked dying from inherently risky
open-heart surgery for no reason. In addition, one other error also could be considered a false
positive—it was imaged as “suspicious,” but, in fact, it was completely “intact.” See id. In
sum, based on the results of the original Hershey program, reinstituting the program could
be dangerous, risking more false positives for class members and thus post-operative death
or serious injury.
For all of these reasons, this Court defers to the Panel’s expertise and rejects Dr.
Batts’s proposals.
Having considered the arguments presented in the Joint Motion and at the hearing,
and the views of the class members, the Court accepts the unanimous assessment of Class
Counsel, Pfizer, Special Counsel, Public Citizen, and the Special Master/Trustee that the
proposed hold-back of $1,619,835 would be more than sufficient to cover the reasonable and
foreseeable (a) costs of reimbursing qualified class members’ uninsured expenses related to
explant surgeries under subsection 5.2.3, including those who qualify under the Supervisory
Panel’s guidelines and those later diagnosed with single-leg fractures; (b) fees and expenses
of the Settlement Administrator; (c) fees and expenses of the Special Master/Trustee; (d) fees
for any necessary tax return preparation and accounting and for a biennial review of the
remaining funds by a qualified outside accounting firm; (e) costs associated with
administering, implementing, and/or enforcing the terms of the Settlement, including any
additional expenses of the Supervisory Panel or its members and any further work that the
Court might ask of the Panel or any of its members; and (f) fees and expenses related to the
32
distribution. This hold-back will cover the foregoing expenses and any other costs
associated with carrying out the purposes of the Settlement Agreement in future years.
Accordingly, the Court hereby (1) approves the proposed Amendment and the
proposed distribution, (2) determines that $1,619,835 is an appropriate amount to be held
back for the purposes mentioned in new Paragraph 5.5(a) through (f), (3) orders that this
amount be held back for these purposes, and (4) instructs the Special Master/Trustee and the
administrator to carry out the distribution forthwith.
IT IS SO ORDERED.
s/ Timothy S. Black
Timothy S. Black
United States District Judge
Date: November 16, 2015
33
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