Is there a future for future claimants?

• Author: Raskolnikov, Alex
• Position: Case Note

1. INTRODUCTION: THE PROBLEM OF FUTURE CLAIMS

   In September 1990, the Chief Justice of the U.S. Supreme Court appointed an Ad Hoc Committee on Asbestos Litigation in response to what was widely perceived as a "`failure of the federal court system to perform one of its vital roles in our society.'"(1) Less than a year later, the Judicial Panel on Multidistrict Litigation transferred all untried asbestos cases to the eastern district of Pennsylvania for pretrial proceedings.(2) In January 1993, these proceedings produced a global settlement class action of historic proportions, which the district court eventually approved in August 1994.(3) In May 1996, in Georgine v. Amchem Products, Inc.,(4) the Third Circuit vacated the settlement and remanded the case to the district court with directions to decertify the class. One month later, the Fifth Circuit affirmed a $1.535 billion global settlement between Fibreboard Corp. and a class virtually identical to that decertified by the Third Circuit.(5) In June 1997, the Supreme Court decided Amchem Products, Inc. v. Windsor,(6) in which it affirmed the Georgine decision, and vacated the Fifth Circuit settlement.(7) Decades of asbestos litigation(8) years of effort by the most sophisticated members of the mass tort bar,(9) and millions of dollars in transaction costs were rendered moot by the same Court that had recognized the crisis and called for an extraordinary response seven years before.

   The Court rejected the settlement for two reasons. First, it held that common questions of law or fact did not predominate and thus the Georgine class failed to satisfy the requirement of Rule 23(b)(3).(10) Second, the Court concluded that because the named plaintiffs could not adequately represent the interests of the class, the action failed the adequacy prong of Rule 23(a).(11) Almost as important as the holding itself were the opinion's dicta. Justice Ginsburg, writing for the Court, expressed skepticism about whether class action notice to a class of the kind presented in the case could ever satisfy Rule 23 or the Constitution.(12) though she stopped short of holding that the notice violated due process. The Court also reserved its opinion about the standing of future claimants to bring suit.(13) This exercise of judicial restraint helps to put some of the Amchem language in perspective. The Court announced that "any overarching dispute about the health consequences of asbestos exposure cannot satisfy the Rule 23(b)(3) predominance standard."(14) It emphasized that the "specifications of [Rule 23(b)(3)(D)]--those designed to protect absentees by blocking unwarranted or overbroad class definitions--demand undiluted, even heightened, attention in the settlement context."(15) Finally, the Court did more than merely reverse Georgine, the principal case, on the narrowest grounds. It insured that at least one of its holdings applied to the Fifth Circuit's decision as well.(16) The Court clearly raised the standards used to evaluate class action settlements in mass torts. The question that remains is whether these new standards can ever be satisfied.

   The Court rejected a long-awaited solution to the mass tort crisis in part because the legions of asbestos victims may still have alternative avenues for relief. One such alternative is congressional action. While the Court clearly prefers this alternative.(17) such action is highly unlikely.(18) This may be a blessing, not a curse. The only congressional venture into the mass tort arena to date(19) has been a well-documented disaster.(20) A second alternative is bankruptcy, which may be the only judicial solution available in the absence of class actions.(21) Indeed, many have argued that bankruptcy is a better remedy for mass torts than class actions like Ahearn(22) and Georgine.(23)

   An insight into the Court's views on the continuing vitality of settlement class actions to resolve mass torts and on whether bankruptcy would be preferable to any class action may come from discerning the Court's main concerns in Amchem. This Note asserts that the Court was fundamentally concerned with the (mis)treatment of future claimants.(24) To be sure, the Amchem holding was not expressly based on the grossly disparate treatment of future claimants in the Georgine global class as compared to the present claimants in the "inventory settlements" negotiated by the same parties almost simultaneously. But the Court was certainly aware of this disparity.(25) And as I try to demonstrate, it was this disparity that prompted the Court to act.

   The Court had had many chances to consider mass tort settlements--and it had always declined to do so.(26) What was different this time? Georgine and Ahearn combined for the first time a global settlement--i.e., a settlement binding all future plaintiffs--with a complete exclusion of present claimants from the class. As Judge Smith noted in his Ahearn dissent, this combination had the effect (if not the purpose) of excluding all those who were likely to receive notice, monitor the class action, and oppose the class attorneys' conflicts and other inadequacies.(27) Conceivably, the Court abandoned its noninterventionist posture because it could not allow abrogation of future claimants' rights on such a grand scale. The Court's uncompromising stand vis-a-vis the Rule 23(b)(3) predominance standard supports this conclusion. Class actions under Rule 23(b)(3) are the only ones that are optional for present plaintiffs. Because future claimants cannot opt out, at least at the front end,(28) 23(b)(3) class actions have the highest potential for unequal treatment of present and future claimants. Consequently, it is revealing that the Court went to the greatest lengths to make sure that these class actions fail by using the broadest possible language.(29) Finally, the Court emphasized its dissatisfaction with a "settlement [that] includes no adjustment for inflation; in which only a few claimants per year can opt out at the back end; and in which loss-of-consortium claims are extinguished with no compensation."(30) All of these concerns relate explicitly to the protection of future claimants.

   If one of the main purposes behind the Amchem decision was to protect future claimants, the future of mass tort class actions becomes clearer. Whether the new class action standards can ever be satisfied, and whether class actions will ever be preferable to bankruptcy, depends on whether one can devise a regime that would, while satisfying other requirements, guarantee appropriate protection for future claimants. In this Note, I propose just such a solution, one that is a more fair and efficient way to deal with mature mass torts.(31) I call this solution a global limited fund mandatory settlement class action with a modified pro rata distribution of benefits for present and future claimants.

   My proposal does not provide future claimants with absolute protection or discover a way to resolve all the uncertainties facing the parties to a global settlement. No realistic proposal could accomplish these goals. No matter how successful our judicial system is in discovering "the truth," no matter how advanced our science is in unearthing "the facts," it is impossible to know everything one must know to insure that a global settlement is entirely "fair" to future claimants. Nevertheless, there are ways to make global settlements fairer. My proposal suggests one such way.

   Because most of the discussion in this Note focuses on future claimants, it is helpful to define who they are, when they appear, and what threats they face. Part II addresses these questions. In Part III, I explain my proposal. In Section III.A, I clarify the substance of the pro rata rule and argue that it is fair, responsive to the Court's concerns in Amchem, beneficial to some present parties, and much more protective of future plaintiffs' interests than is the current regime. Another advantage of the pro rata rule, I argue, is its consistency with the law of bankruptcy, which is highly relevant at the global settlement stage. I go on, in Section III.B, to introduce a new interpretation of the Rule 23(b)(1) limited fund concept, which I assert brings many advantages both to future claimants and to mass tort participants generally. Such class actions may also be acceptable to the courts, as they are both similar to and clearly different from bankruptcy. In Section III.C, I argue for a mandatory class action with no opt outs at the front or the back end. Recognizing serious problems with this proposal, I attempt to demonstrate that its benefits, at least within my overall scheme, outweigh its costs. I conclude Part III by discussing the modifications to the pro rata rule made necessary by great indeterminacies external to particular mass torts. Reversing the overall thrust of the Note, I suggest that future claimants should bear most of such external risks. Part IV argues that the proposed regime is preferable to bankruptcy, mainly because it creates incentives to initiate global settlement negotiations at the right time. I conclude by suggesting that just before the Georgine and Ahearn settlements were negotiated, asbestos was ripe for the treatment proposed in this Note. I also argue that recent procedural and substantive legal changes, especially those at the state level, have created an environment in which an increasing number of mass torts will soon become prime candidates for my proposal.

2. THE CURRENT REGIME--UNPROTECTED FUTURE CLAIMANTS

   The Georgine and Ahearn settlements are the latest and the most vivid examples of the grossly inadequate protection given future claimants under the current class action regime. The settlements exploited both factual and legal uncertainties surrounding future claimants to reduce disproportionately their share of the overall recoveries. It is necessary to examine both the nature of these uncertainties and their magnitudes in...