Class Actions and Other Multi-Party Litigation in a Nutshell

Robert H. Klonoff

§ 11.3 Recent Judicial Skepticism
Critics of the trend in favor of certifying mass tort cases argued that the mere threat of class certification is so devastating that defendants routinely choose to settle rather than risk bankruptcy on the results of a single trial. This view gained momentum in the mid-1990s, when various federal appellate courts issued a series of significant rulings.

An important ruling (discussed in various places in this text) was the Seventh Circuit's decision in In the Matter of Rhone-Poulenc Rorer Inc., 51 F.3d 1293 (7th Cir.1995). That case involved a nationwide class of hemophiliacs infected by the AIDS virus against drug companies that manufactured blood solids. The district court certified a class action, but the Seventh Circuit granted mandamus and reversed. The court was concerned that defendants were being coerced to settle out of fear of a potential classwide adverse verdict; that difficult choice-of-law questions were presented; and that the bifurcated trial approach envisioned by the trial court would violate defendant's Seventh Amendment jury-trial rights. The court distinguished Jenkins as involving a judicial crisis unique to asbestos.

Another significant ruling (also discussed in various places in this text) occurred in Castano v. American Tobacco Company, 84 F.3d 734 (5th Cir. 1996). In that case, the district court certified a class under Rule 23(b)(3) of all nicotine-dependent persons in the United States who have purchased and smoked cigarettes manufactured by defendants (along with the estates, spouses, children, relatives, and "significant others" of these nicotine-dependent smokers). The claims went back to 1943. The Fifth Circuit reversed, finding that individual issues of reliance and choice-of-law, among others, would predominate over common issues. The court echoed Rhone Poulenc's concern about the rush to settle class actions and about the Seventh Amendment problems in bifurcated jury trials.

The Supreme Court, in the late 1990s, issued two important mass tort class action cases. Both cases involved settlement classes involving exposure to asbestos.

In the first decision, Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997), discussed on pp. 189-92, supra, the Supreme Court rejected a Rule 23(b)(3) settlement class consisting of all individuals in the United States who had been exposed to asbestos occupationally and who had not yet filed an asbestos-related lawsuit against one of the defendants. The Supreme Court held that the proposed class could not satisfy predominance requirements because it was too sprawling, involving individuals exposed to different asbestos-containing products, for different amounts of time, in different ways, and over different periods. Furthermore, the class members had developed different symptoms because of their exposures, with some having no symptoms at all. Moreover, choice-of-law problems counseled against predominance.

Two years later, the Court decided Ortiz v. Fibreboard Corp., 119 S.Ct. 2295, (1999). That case, which is described in detail on pp. 54-58, supra, involved a mandatory "limited fund" settlement class that had been certified under Rule 23(b)(1)(B). The defendant, Fibreboard Corporation, having a net worth of approximately of $235 million, was litigating with its insurance companies over disputed coverage for what promised to be billions of dollars of asbestos liability. Fibreboard was able to agree with its insurance carriers to establish a settlement fund of approximately $1.5 billion, which then became the "limited fund" against which a mandatory class of asbestos claimants claimed entitlement under various tort theories. Unlike the defendants in Amchem, the defendant in Ortiz, by virtue of the mandatory class action, stood to gain a definitive cap on its asbestos liability by forcing all claimants to take from a fund consisting almost entirely of insurance proceeds, thereby permitting the corporation to continue with virtually all of its net worth intact.

The Supreme Court held that the class did not qualify for certification under (b)(1)(B). Although the Court stopped short of holding that limited-fund settlement classes could never be certified under (b)(1)(B) in mass tort settlement cases, it stated that "the applicability of Rule 23(b)(1)(B) to a fund and plan purporting to liquidate actual and potential tort claims is subject to question ......"

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