In re Pharmaceutical Industry Average Wholesale Price Litigation

520 F. Supp. 2d 274, 2007 U.S. Dist. LEXIS 82144
District Court, D. Massachusetts·Decided November 2, 2007·No. M.D.L. No. 1456; Civil Action No. 01-12257-PBS·Published·Cited by 5 cases

Opinion

MEMORANDUM AND ORDER

PATTI B. SARIS, District Judge.

I. INTRODUCTION

Demra Jordan, a class member, was the sole objector to the $70 million class settlement of all claims pending against the GlaxoSmithKline (“GSK”) defendants in the average wholesale pricing (“AWP”) multi-district litigation. She has appealed this Court’s final approval of the class settlement. Plaintiffs filed a motion for the imposition of an appeal bond in the amount of $131,700 pursuant to Fed. R.App. P. 7. After a review of the submissions, I ALLOW Plaintiffs’ Motion for an Appeal Bond in the amount of $61,000.

II. BACKGROUND

On August 10, 2006, Plaintiffs and GSK filed the motion for certification, for settlement purposes, of three nationwide classes. Ms. Jordan is a member of the Consumer and Third-Party Payor Class for Payments Made for Medicare Part B Drugs Outside the Medicare Context (“Private Payor Class”). The drugs at issue are primarily physician-administered drugs for patients with serious ailments like cancer and HIV. Plaintiffs’ core assertion was that the AWPs were inflated, thereby causing third-party payors (“TPPs”) and consumers to overpay for drugs. In re Pharm. Indus. Average Wholesale Price Litig., 491 F.Supp.2d 20, 29 (D.Mass.2007). Significantly, under the settlement, all consumers would receive 100% of the claim amount. The settlement was independently evaluated by a well-known, court-appointed expert, Francis McGovern (See Docket No. 4466) (“[t]he conclusion of this report is that the settlement is fair, adequate and reasonable with respect to all class members, including consumer class members, and is consistent with other similarly situated and approved settlements”). It was mediated by Professor Eric Green, a nationally recognized mediator. Many class members are sick and elderly, and would be affected by the [277]*277delay resulting from an unsuccessful appeal.

Ms. Jordan filed an objection to the certification of the Private Payor settlement class and to the final approval of the GSK settlement on June 22, 2007. She had not opted out or filed a claim. Identifying herself as a member of the proposed Private Payor settlement class, she stated, “The proposed Settlement Class cannot be properly certified due to a lack of predominance of common issues pursuant to Federal Rule of Civil Procedure 23(b)(3), as evidenced by this Court’s prior rulings in this case.” The objection was one sentence long; she was the only class objector. See Doc. No. 4403 ¶ 3.

The Court held a hearing with respect to the settlement on July 19, 2007. Neither Ms. Jordan nor her attorney attended this hearing. The Court entered its Final Order and Judgment Granting Final Approval to Proposed Class Action Settlement with the GlaxoSmithKline Defendants, Approving Proposed Allocation of Settlement Funds, and Approving Class Counsel’s Application for Attorneys’ Fees, Reimbursement of Litigation Expenses and Compensation to Class Representatives on August 7, 2007.

Ms. Jordan filed her notice of appeal on August 23, 2007. Arguing that Ms. Jordan is acting as a “spoiler” and that her appeal is “frivolous,” Plaintiffs moved for the imposition of an appeal bond shortly thereafter.

III. DISCUSSION

1. Availability of Appeal Bond

Plaintiffs seek an appeal bond of $131,700, which includes $70,000 for attorneys’ fees, $61,000 for administrative costs associated with any delay and $700 for costs. “In a civil case, the district court may require an appellant to file a bond or provide other security in any form and amount necessary to ensure payment of costs on appeal.” Fed. R.App. P. 7. The parties disagree as to whether this Court may require security for “costs” like attorneys’ fees and administrative costs caused by a delay in the distribution process. The First Circuit has held that when the district court determines that an appeal may be frivolous, it may require security for the costs, including appellate attorneys’ fees that may be awarded on appeal pursuant to Fed. R.App. P. 381 and 39 as a sanction for a frivolous appeal. See Sckolnick v. Harlow, 820 F.2d 13, 15 (1st Cir. 1987). Other circuits have held to the contrary. See, e.g., Azizian v. Federated Dep’t Stores, Inc., 499 F.3d 950, 955-58 (9th Cir.2007) (discussing the circuit split regarding inclusion of attorneys’ fees in appeal bonds). See generally 16A Charles Alan Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure, § 3953 (3d ed.1999) (costs secured by a Rule 7 Bond “do not include attorney fees that may be assessed on appeal”).

With respect to objections to class action settlements, some courts have gone one step further and held that costs under Rule 7 may also include administrative costs to the classes that will likely be caused by the delay. See Barnes v. Fleet-Boston Fin. Corp., No. 01-10395-NG, 2006 U.S. Dist. LEXIS 71072, at *8-9 (D.Mass. Aug. 22, 2006) (imposing interest on the class settlement for one year as costs); In [278]*278re Compact Disc Minimum Advertised Price Antitrust Litig., No. MDL 1361, 2003 WL 22417252 (D.Me. Oct.7, 2003) (imposing an appeal bond to cover a portion of fees of bank administering the class settlement fund and other costs as well as projected attorneys’ fees); In re NASDAQ Mkt.-Makers Antitrust Litig., 187 F.R.D. 124, 128-29 (S.D.N.Y.1999) (requiring appellant to provide security for disruption costs from a shut-down of the settlement administration). But see In re AOL Time Warner, Inc., Sec. & “Erisa” Litig., No. 02-5575, 2007 WL 2741033, at *4 n. 4 (S.D.N.Y. Sept.20, 2007) (distinguishing precedent in the Second Circuit and explaining that the court in In re NASDAQ confuses supersedeas bonds with appeal bonds). Requiring objectors to post a bond will ensure that a class litigating a frivolous appeal will not be injured or held up by spoilers.

Plaintiffs argue that a bond should be imposed because the appeal is frivolous. First, they challenge Ms. Jordan’s standing to press an appeal. A non-named member of the class whose objection at the fairness hearing was overruled generally has standing to appeal that decision of the district court in order to protect her interests. See Devlin v. Scardelletti, 536 U.S. 1, 10-11, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002) (involving a class where petitioner had no ability to opt out pursuant to Fed.R.Civ.P. 23(b)(1)). Here, however, objector would have received 100% of her loss (or more) as a class member if she had filed a timely claim. Moreover, if 100%-plus recovery was not satisfactory, she had the right to opt out.

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In re Pharmaceutical Industry Average Wholesale Price Litigation, 520 F. Supp. 2d 274, 2007 U.S. Dist. LEXIS 82144 (D. Mass. 2007).

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In Re Pharmaceutical Industry Average Wholesale
520 F. Supp. 2d 274 (D. Massachusetts, 2007)