521 U.S. 591 (1997)

A 1997 United States Supreme Court opinion in which the Court held that certifying a class action merely for purposes of achieving a global settlement was not permitted under Rule 23 of the Federal Rules of Civil Procedure.

This case involved hundreds of asbestos claims filed in federal courts around the country.  Due to the vast volume and complexity of the asbestos litigation, the Judicial Panel on Multi-District Litigation transferred all of the asbestos claims to the Eastern District of Pennsylvania.

Following the consolidation, counsel for the plaintiffs and the defendant manufacturers reached a partial global settlement: a class consisting of all individuals with potential asbestos claims who had not yet filed lawsuits would be certified pursuant to Fed. R. Civ. Pro. 23(b)(3) (FRCP) for purposes of settlement only. The proposed settlement created an administrative structure which provided set compensation for certain asbestos-related diseases. The District Court approved the plan, and certified the proposed class.

The Court of Appeals for the Third Circuit, however, vacated the district court’s certifiation order, finding that the requirements of class certification had not been met. Specifically, the Third Circuit held that while a class may be certified for the sole purpose of settlement, the certification requirements of Rule 23 of the Federal Rules of Civil Procedure must still be met as though the case were going to trial. In this instance, the class failed to demonstrate that common issues predominated over other questions, FRCP 23(b)(3), or that the named plaintiffs would “fairly and adequately protect the interests of the class.”

The Supreme Court affirmed.  The Court rule that, while the court of appeals had erred by stating that settlement was not relevant to class certification determinations, the lower court had, in fact, closely examined the terms of the settlement, and remand was therefore not merited. A court considering a class for settlement need not consider whether certification would present intractable management problems at the trial stage, but the remaining requirements of FRCP 23 must be met. Here those requirements were not fulfilled. First, despite the over-arching issue of asbestos-related health problems, common issues did not predominate given the very different injuries suffered by the plaintiffs, and the fact that some class members had not yet manifested physical disease. FRCP 23(b)(3). Second, the named parties would not adequately represent the class because those currently injured had interests distinct from those who had been exposed to asbestos but had not yet exhibited any physical symptoms. FRCP 23(a)(4). In resolving the case the Court declined to reach the issue of whether the settlement proceeding was a justiciable case or controversy under Article III because, it held, determination of class certification was logically antecedent to these issues.

Reference Desk

Altrichter v. Inamed Corp., No. 2:97-CV-11411-RDP (N.D. Al. May 19, 2010)

In Amchem Products v. Windsor, the Supreme Court, affirming the Third Circuit’s decision to decertify a class action under Rule 23(b)(3) purporting to achieve global settlement of current and future asbestos-related claims, concluded that “named parties with diverse medical conditions sought to act on behalf of a single giant class rather than on behalf of discrete subclasses. In significant respects, the interests of those within the single class are not aligned. More saliently, for the currently injured, the critical goal is generous immediate payments. That goal tugs against the interest of exposure-only plaintiffs in ensuring an ample, inflation-protected fund for the future.” 521 U.S. 591, 626, 117 S. Ct. 2231, 138 L. Ed. 2d 689 (1997) (citing Gen. Tel. Co. of Nw., Inc. v. EEOC, 446 U.S. 318, 331, 100 S. Ct. 1698, 64 L. Ed. 2d 319 (1980)). The Court, refining this analysis in Ortiz, concluded that “a class divided between holders of present and future claims (some of the latter involving no physical injury and to claimants not yet born) requires division into homogenous subclasses under Rule 23(c)(4)(B), with separate representation to eliminate conflicting interests of counsel.” 527 U.S. at 856 (citing Amchem, 521 U.S. at 627) (emphasis added). In other words, the rule in Amchem, and as clarified in Ortiz, is not a general class management rule to be blindly applied without reference to the class’s dynamics, identity, and nature of relief; rather, the mandate to sub-class is relevant only as a safety-valve against class counsel subordinating the interests of some class members to benefit others, including non-class members as in Ortiz. See id. at 864-65 (“Those separate settlements, together with other exclusions from the claimant class, precluded adequate structural protection by subclass treatment, which was not even afforded to the conflicting elements within the class as certified.”).

Ramirez v. DeCoster, 203 F.R.D. 30 (Ma. D. C. 2001)

The Supreme Court has spoken definitively about the certification of settlement classes. To certify such a class, “a district court need not inquire whether the case, if tried, would present intractable management problems. . . . But other specifications of [Rule 23]–those designed to protect absentees by blocking unwarranted or overbroad class definitions–demand undiluted, even heightened, attention in the settlement context.” Amchem Products, Inc. v. Windsor, 521 U.S. 591, 620, 138 L. Ed. 2d 689, 117 S. Ct. 2231 (1997)These specifications “focus court attention on whether a proposed class has sufficient unity so that absent members can fairly be bound by decisions of class representatives. That dominant concern persists when settlement, rather than trial, is proposed.” Id. at 621.

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