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In re RC2 Corp. Toy Lead Paint Products Liability Litigation

February 20, 2008

IN RE RC2 CORP. TOY LEAD PAINT PRODUCTS LIABILITY LITIGATION


The opinion of the court was delivered by: Harry D. Leinenweber, Judge United States District Court

MDL No. 1893

Hon. Harry D. Leinenweber

MEMORANDUM OPINION AND ORDER

Before the Court is Plaintiffs' Emergency Motion for Preliminary Injunction Pursuant to the All Writs Act [6] and Defendants' Motion to Stay Proceedings [2]. For the following reasons, Plaintiffs' Motion is denied and Defendants' Motion is granted.

I. FACTS & PROCEDURAL HISTORY

Plaintiffs in this Multi-District Litigation ("MDL") are numerous individuals who purchased toys marketed and distributed by Defendants RC2 Corporation and its subsidiary Learning Curve Brands, Inc. for young children. Defendants distributed Thomas & Friends Wooden Railway components ("Thomas Toys") that are made using surface paint containing lead, which is hazardous to children. On June 14, 2007, the U.S. Consumer Product Safety Commission ("CPSC") issued a recall of approximately 1.5 million Thomas Toys because the toys contained excessive and unsafe levels of lead paint. As part of the recall, RC2 offered consumers a replacement toy and a bonus toy. On September 26, 2007, RC2 announced a recall of five additional Thomas Toys, including one of the replacement toys, due to unsafe levels of lead paint.

Dozens of federal lawsuits have been filed throughout the country by consumers against RC2 alleging various causes of action relating to these toys. On November 7, 2007, Plaintiffs filed a Second Amended Consolidated Class Action Complaint on behalf of all persons who purchased Thomas Toys that contain lead paint and were imported and/or distributed by Defendants between January 2005 and June 2007. Second Amd. Compl. ¶ 1. Plaintiffs allege, among other things, causes of action for violations of various state consumer protection laws, breach of implied warranties, negligence, product liability, and medical monitoring. On December 19, 2007, the Judicial Panel ordered the consolidation of these actions and their transfer to this Court as MDL Docket No. 1893. See MDL No. 1893 Transfer Order.

Defendants have filed a motion to dismiss, which is now fully briefed. The parties have engaged in some discovery, including exchange of documents, requests to admit, and service of notice of depositions.

On October 12, 2007, the parties held a Rule 26(f) conference call. The parties dispute what kind of settlement discussions took place during this call and in several exchanges after this call. Plaintiffs state that Interim Co-Lead Counsel William Riley raised the issue of settling with defense counsel. Riley Dec. ¶ 3. According to Mr. Riley, Mr. Petersen stated that Defendants wanted settlement discussions to take place in the context of a mediation with a written proposal from Plaintiffs. Id. Mr. Petersen states that they discussed the possibility of mediation and defense counsel "may have said that any settlement demand should be in writing." Supp. Petersen Dec. ¶ 6. Mr. Riley states that Ms. Fegan stated that Plaintiffs wanted an assurance that RC2 was not negotiating with other lawyers if Plaintiffs were to provide a written demand, and that "Defense counsel tacitly agreed with this assertion." Riley Dec. ¶¶ 4-5. Mr. Petersen states that Ms. Fegan "did not ask us during the October 12, 2007 conference whether we were negotiating with any other parties." Supp. Petersen Dec. ¶ 6. Mr. Riley sent a letter dated October 17, 2007, referenced "Proposed Settlement Discussion" that outlines basic contours of a settlement proposal. Ex. A, Riley Dec. Mr. Riley and Petersen spoke on various occasions in October and November 2007 regarding settlement and mediation. Riley Dec. ¶ 8-11.

On November 7, 2007, Interim Lead Counsel and Defense counsel met and discussed settlement. Supp. Murphy Dec. ¶¶ 6-7; Riley Dec. ¶¶ 12-14. Mr. Riley asserts that Mr. Murphy requested a "second demand" with "hard numbers." Riley Dec. ¶ 12. Mr. Murphy stated that Plaintiffs should make a demand, but denies using the words "second demand." Supp. Murphy Dec. ¶ 6. Ms. Fegan stated that Plaintiffs needed data from Defendants to make such a demand. Riley Dec. ¶ 13. Plaintiff and defense counsel exchanged emails regarding this information in the ensuing weeks. See Ex. 28, Pls.' Reply. On December 10, 2007, Plaintiffs made a formal written demand. Ex. 15, Pls.' Reply. Defendants never responded to this demand.

On August 7, 2007, Byron Barrett filed a Class Action Complaint against RC2 in the Circuit Court of Cook County (Barrett v. RC2 Corp., No. 2007 CH 20924). Ex. 1, Pls.' Mem. In Support of Emergency Mot ("Pls.' Mem."). Barrett brought the action on behalf of purchasers of Thomas Toys that were recalled in June and September 2007 due to excess lead surface paint. Id. Barrett's counsel, along with other counsel representing a similar putative class in a case filed in another state, met with RC2's counsel to discuss their views of the case and pre-trial procedures. See State Pls.' Response to Emergency Mot. for Injunction at 7. In October 2007, Barrett's counsel and RC2's counsel retained a mediator, Judge Robert Boharic (Ret.). The parties had several mediation sessions with Judge Boharic over the next two months and exchanged discovery. Id. On November 30, 2007, a settlement agreement was reached in principle.

Defs.' Response at 10. The parties presented a settlement agreement (see Ex. 3, Pls.' Mem.) to the court for preliminary approval, and on January 22, 2008, Judge Maki entered a handwritten preliminary approval order. See Exs. 5 & 26, Pls.' Mem.

On January 25, 2008, RC2 moved to stay proceedings in this court pending the outcome of the proceedings before the Circuit Court of Cook County. See Defs.' Mot. to Stay Proceedings. On January 28, Plaintiffs filed their motion requesting that this Court "enjoin Defendants, and all those acting in conjunction with Defendants, from pursuing, entering, negotiating, executing, or enforcing any settlement of any claims presented in this action without the express approval of this Court." Pls.' Mem. at 24. On the same day, Plaintiffs filed an Emergency Application for Leave to Intervene as Plaintiffs and Stay Notice in the Barrett action. On January 29, the Circuit Court stayed class notice pending further court order. See App. A, Pls.' Mot. ...


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