In re Telectronics Pacing Systems, Inc.

Delaware corporation TPLC Holdings, Inc., owned by Telectronics Pacing Systems, Inc. (TPLC) (defendants), manufactured a pacemaker lead that was implanted in 40,000 people. Australian companies Pacific Dunlop, Ltd. and Nucleus, Ltd. (defendants) owned TPLC. After it emerged that TPLC’s lead wires tended to break, injuring patients’ hearts and blood vessels, numerous suits against the defendants were brought and ultimately consolidated in federal court, where the plaintiffs sought to represent a class asserting multiple tort claims. The defendants began settlement negotiations with a court-appointed Plaintiff’s Steering Committee (Committee). Together, the defendants and the Committee moved for class certification and settlement approval under Federal Rule of Civil Procedure (FRCP) 23(b)(1)(B). The basis for using FRCP 23(b)(1)(B), which prohibited class members from opting out, was that recovery would be made from a limited fund of $78 million from TPLC and $10 million from Pacific Dunlop. Of that, $38 million was for patients, who were assigned to various categories; $20 million for operating expenses; $19 million for attorneys’ fees; and $11 million for expenses unassociated with the pacemaker litigation. After considering TPLC’s finances, the district court determined that TPLC had a limited fund from which to pay claims, thereby justifying certification under FRCP 23(b)(1)(B). The court did not consider the finances of Pacific Dunlop or Nucleus, but there was evidence that those companies had sufficient assets to pay all claims if individually brought. After TPLC reported that no settlement would be made unless Pacific Dunlop and Nucleus were released, the court approved the settlement. Objecting class members appealed.