## Facts

- Patients filed products-liability claims alleging defects in Accufix Atrial “J” pacemaker leads manufactured by Telectronics Pacing Systems, Inc. (TPLC), asserting risks of fracture and potentially fatal injury.
- Approximately 40,000 leads were implanted worldwide, including about 25,000 in the United States.
- Federal cases were centralized in multidistrict litigation in the Southern District of Ohio.
- Defendants and a court-appointed Plaintiffs’ Steering Committee negotiated a global settlement and sought class certification under Rule 23(b)(1)(B) on a “limited fund” theory, creating a mandatory non-opt-out class.
- The asserted fund consisted primarily of $78 million from TPLC and $10 million from Pacific Dunlop, with releases extending to parent entities including Pacific Dunlop and Nucleus.
- The allocation set aside $38 million for patient compensation, $20 million for administration/operating costs, $19 million for attorneys’ fees, and $11 million for other expenses.
- The district court found TPLC’s assets insufficient to satisfy potential judgments but did not make comparable findings about the parents’ ability to pay, despite record indications of substantial parental assets.
- The district court certified the mandatory class and approved the settlement as fair, adequate, and reasonable; objecting class members appealed.

## Issues

1. Whether certification of a mandatory “limited fund” class under Rule 23(b)(1)(B) was proper where the court assessed the subsidiary’s insolvency but granted releases to parent corporations without substantiated findings that the entire available fund was actually limited.
2. Whether approving a non-opt-out settlement that diverted significant portions of the fund to non-compensation categories satisfied Rule 23 and due process requirements for mandatory settlement classes after Ortiz v. Fibreboard Corp.

## Decision

- The Sixth Circuit vacated the orders certifying the class and approving the settlement and remanded.
- The court held the Rule 23(b)(1)(B) certification failed to meet the strict requirements for limited-fund treatment identified in Ortiz.
- The court found the limited-fund showing inadequate because the district court did not determine whether assets available from released parent entities were part of a genuinely limited fund.
- The court also found the settlement structure and allocation materially departed from the traditional limited-fund model because a large share of the fund was not directed to claimant compensation.
- Because the mandatory class mechanism binds members without opt-out rights, the deficiencies in factual findings and structure required vacatur.

## Legal Principles

- Rule 23(b)(1)(B) limited-fund classes require a rigorous, evidence-based showing of a genuine, pre-existing limit on the total resources available to satisfy aggregated claims, consistent with Ortiz.
- When a settlement releases multiple entities, the court must evaluate whether the combined resources of the released entities constitute a truly limited fund for purposes of mandatory treatment.
- A limited-fund settlement must substantially devote the fund to claimant compensation and provide equitable treatment among similarly situated claimants, rather than channeling major portions to non-claimant uses.
- Mandatory, non-opt-out settlement classes demand heightened scrutiny because they compromise individual personal-injury claims without exit rights, implicating due process.

## Conclusion

The Sixth Circuit set aside a mandatory limited-fund class settlement because the record and findings did not establish that the total resources of all released entities were actually limited and because the fund allocation departed from limited-fund requirements governing mandatory, non-opt-out treatment.


In re Telectronics Pacing Sys., Inc., 221 F.3d 870 (6th Cir. 2000)