3d Cir. OKs Pact Between Nutraquest, Football Player's Family

A federal appeals court has affirmed a $75,000 settlement among bankrupt dietary-supplement maker Nutraquest Inc., two other companies and the family of a Northwestern University football player who died during a team practice session on the same day he took two ephedra-containing products.

Although the cause of death was found to be bronchial asthma, the player's family contended that his use of the supplements was a factor in his death.

The settlement was designed not to shift too much of the potential liability for the player's death to Northwestern, the panel of the U.S. Court of Appeals for the 3d Circuit said, finding the pact complies with federal bankruptcy law.

As recounted in the panel's ruling, Rashidi Wheeler, a starting safety for the university, collapsed and died Aug. 3, 2001, during one of the team's conditioning tests. Earlier on the day he died, Wallace took two dietary supplements containing ephedra, one of which, Xenadrine RFA-1 was made by a company called Phoenix Laboratories under the direction of Nutraquest, the opinion said.

The Food and Drug Administration banned ephedra in 2004 because it was associated with an increased risk of heart arrhythmia and stroke.

Wheeler's family filed suit in Illinois state court against Northwestern and some of its personnel, claiming they failed to respond properly to Wheeler's asthma attack. Seeking contribution, Northwestern then filed suit against Nutraquest, Phoenix, Next Proteins Inc. (the manufacturer of the other supplement) and General Nutrition Corp., at whose stores both supplements were purchased.

Wheeler's family also eventually sued the four supplement defendants, contending that their products contributed to his death.

Facing a slew of wrongful-death and personal-injury lawsuits related to its ephedra products, Nutraquest filed for Chapter 11 bankruptcy protection in October 2003 in the U.S. Bankruptcy Court for the District of New Jersey. The Wheeler case and the other suits were transferred to the U.S. District Court for the District of New Jersey because they were related to the Nutraquest bankruptcy.

Eventually, the Wheelers settled with Nutraquest, Phoenix and GNC for $75,000 — $25,000 in cash from each Phoenix and GNC and an unsecured claim for $25,000 against Nutraquest's bankruptcy estate, the opinion explains.

Northwestern objected, arguing that the settlement was an attempt to shift an unfair portion of any eventual liability to the university. Under Illinois law, a settlement with one tortfeasor bars other alleged tortfeasors from seeking contribution from the settling defendant, the panel explained.

The District Court overrode Northwestern's objections and approved the settlement as complying with both federal bankruptcy rules and Illinois law. The case was remanded to Illinois state court for further proceedings.

Northwestern appealed to the 3d Circuit, which affirmed.

With respect to the settlement's compliance with bankruptcy law, the panel said the trial court did not abuse its discretion in finding the pact "fair and equitable." The lower court could reasonably have concluded that even if the Wheelers' case was weak, the deal would save Nutraquest's estate the expense of defending a complex lawsuit, the panel said.

Although Northwestern might still seek discovery from Nutraquest as it defends the Wheeler case, that discovery is likely to be much less complex and expensive than defending a lawsuit, the panel said.

The settlement also complies with the Illinois Contribution Act, the panel said, because it does not unfairly shift too much liability to Northwestern. The university argued that the $75,000 settlement amount was "nominal" in light of the millions of dollars the Wheelers initially sought. Citing a series of cases from Illinois, the 3d Circuit panel said courts in that state have previously rejected such arguments.