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The Third Circuit Court of Appeals interprets settlement agreements like contracts: absent ambiguity, the four corners control.
This week, the appellate court ruled that, even in the face of changing technologies, a court can't redefine the terms of a clearly-written settlement.
Between 1994 and 1997, American Home Products Corporation — now Wyeth — marketed and sold fenfluramine and dexfenfluramine, prescription weight loss drugs. Wyeth withdrew the drugs from the market after studies — and an FDA public health advisory — linked the drugs to valvular heart disease.
Thousands sued, claiming they had been injured by the drugs. Wyeth ultimately entered a settlement agreement, which largely enjoined class members from suing Wyeth for all diet drug-related injuries.
One exception to the settlement injunction allows class members to sue Wyeth if they can demonstrate that they developed PPH — a lung condition — through the use of the diet drugs. To qualify for the exception, a class member must produce “pulmonary function tests” (PFT) showing that the class member’s “total lung capacity” is greater than “60% of predicted at rest.” (The 60 percent threshold was intended to limit recovery for lung conditions that were not caused by the drugs.)
Carmen Cauthen, a member of the settlement class, filed a complaint in June 2011 alleging that she developed PPH as a result of the Wyeth’s diet drugs. She included a “pulmonary consultation note” prepared by Dr. Terry Fortin with her claim.
Dr. Fortin stated in the consultation note that, based on a PFT she had conducted, Cauthen’s total lung capacity was 56 percent. Dr. Fortin acknowledged that Cauthen’s lungs “clearly have some restriction,” but explained that Cauthen’s PPH was caused by the drugs.
The district court dismissed Cauthen’s complaint because she didn’t satisfy the 60 percent PPH threshold. Cauthen appealed, arguing that even if she did not meet the technical definition of PPH provided by the settlement agreement, the court should have reformed the settlement agreement, given changes in diagnostic capabilities that rendered the 60 percent lung capacity requirement obsolete.
The Third Circuit disagreed.
Settlement agreements are interpreted according to basic contract principles. When the terms of a contract are clear and unambiguous, its meaning must be determined from the four corners of the contract.
Here, the settlement agreement clearly and unambiguously states that a putative PPH plaintiff must demonstrate, through a PFT, that her total lung capacity is greater than 60 percent of predicted at rest. That is the only way, under the specific terms of that agreement, to rule out “greater than mild restrictive lung disease” as a cause of PPH.
Cauthen produced only one PFT, which showed that her lung capacity was only 56 percent of predicted at rest. Based on the terms of the agreement, the appellate court ruled that the “physician’s confident assertion that Cauthen’s PPH was caused by the diet drugs is therefore irrelevant in the face of the settlement agreement.”