Back to the future? Product liability class actions and proposed Rule 23 changes.

• Author: Gallacher, Ian
• Position: Federal Rules of Civil Procedure

After 30 years, class action jurisprudence is in ferment, and proposed changes in Rule 23 will add to the mix

The current version of Rule 23 of the Federal Rules of Civil Procedure is almost 31 years old. As perhaps with all children, the class action has evolved in ways other than its parents, the Civil Rules Advisory Committee and the Judicial Conference of the United States, might have expected, and has developed a personality all its own. In particular, Rule 23's adolescent flirtation with products liability and settlement classes has deepened into a serious, and apparently permanent, relationship.

Professor Benjamin Kaplan, reporter to the advisory committee that drafted the 1966 amendments to Rule 23, was quoted as remarking that "it will take a generation or so before we can fully appreciate the scope, the virtues, and the vices of the new Rule 23."(1) As the modern class action enters middle age, however, it faces an uncertain future. Recent decisions from the Fifth, Sixth and Seventh Circuits indicate that the future of large products liability classes is in doubt. Moreover, the availability and nature of the settlement class no doubt will change as a result of recent conflicting decisions in asbestos litigation in the Third and Fifth Circuits and the U.S. Supreme Court's review of the issue.

Now the Civil Rules Advisory Committee has decided to try to reimpose some control on its unruly offspring. It has proposed draft changes in the class action rule that, if adopted, will no doubt set its course into the foreseeable future. Public hearings on the amendments have been held in Philadelphia, Dallas and San Francisco, and the period for public comment closed February 15 of this year.

PRODUCTS LIABILITY CLASS ACTIONS

When Rule 23 was amended in 1966, it was clear that the Civil Rules Advisory Committee had no intention of creating a device that allowed for the certification of nationwide, let alone worldwide, products liability class actions. In its note, the committee stated:

A "mass accident" resulting in injuries to

numerous persons is ordinarily not appropriate

for a class action because of the likelihood

that significant questions, not only of

damages but of liability and defenses to

liability, would be present, affecting the individuals

in different ways. In these circumstances

an action conducted nominally as a

class action would degenerate in practice

into multiple lawsuits separately tried.

Over the years, the Advisory Committee has been criticized as being "shortsighted,"(2) causing some courts to read and apply Rule 23 narrowly.(3) In particular, the Advisory Committee note came under attack from those who argue that the class action device is being improperly restricted(4) and that a broader interpretation of Rule 23 would achieve the goal of judicial economy and preservation of resources.(5)

Ultimately, even an ex-officio member of the advisory committee, Charles Alan Wright, sought to distance himself from the committee's 1966 position

I was an ex officio member of the Advisory

Committee on Civil Rules when Rule

23 was amended, which came out with an

Advisory Committee Note saying that mass

torts are inappropriate for class certification.

I thought then that was true. I am profoundly

convinced now that that is untrue. Unless we

can use the class action and devices built on

the class action, our judicial system is simply

not going to be able to cope with the challenge

of mass repetitive wrong that we see in

this case and so many others that have been

mentioned this morning and afternoon.(6)

The value of Professor Wright's much-quoted retreat is somewhat diminished by the fact that he was appearing on behalf of the party seeking class certification in the school asbestos litigation.(7) Recently, the Fifth Circuit noted that Professor Wright's comments "must be viewed with some caution" and quoted a letter from him in which he appears to change his position yet again:

I certainly did not intend by that statement

to say that a class should be certified in all

mass tort cases. I merely wanted to take the

sting out of the statement in the Advisory

Committee Note, and even that said only that

a class action is "ordinarily not appropriate"

in mass tort cases. The class action is a complex

device that must be used with discernment.

I think for example that Judge Jones in

Louisiana would be creating a Frankenstein's

monster if he should allow certification of

what purports to be a class action on behalf

of everyone who has ever been addicted to

nicotine.(8)

By the late 1980s, the courts had been gradually persuaded by the original arguments and found that the Advisory Committee's suggestion was unworkable. It was increasingly disregarded. By 1989 it was possible for the Fourth Circuit in A.H. Robins Co. Inc. to state, "It is obvious that there is a movement towards a more liberal use of Rule 23 in the mass tort context."(9)

SUPPLEMENTAL JURISDICTION

One of the rationales used to justify certification of mass tort class actions was that the class device permits litigants with relatively small claims to have their day in court.(10) The U.S. Supreme Court addressed this issue in Eisen v. Carlisle & Jacquelin, an antitrust case that nevertheless has been much cited in the mass torts and products liability area. The Court stated: "A critical fact in this litigation is that petitioner's stake in the damage award he seeks is only $70. No competent attorney would undertake this complex antitrust action to recover so inconsequential an amount. Economic reality dictates that petitioner's suit proceed as a class action or not at all."(11)

However, in Zahn v. International Paper Co., a year before Eisen, the Supreme Court took the position that in class actions brought pursuant to 28 U.S.C. [sections] 1332(a)'s grant of diversity jurisdiction, "Each plaintiff in a Rule 23(b)(3) class action must satisfy the jurisdictional amount, and any plaintiff who does not must be dismissed from the case--`one plaintiff may not ride in on another's coattails.'"(12)

Although Zahn did not present an insurmountable obstacle to those determined to bring claims of negligible economic value in federal court, it was nonetheless a useful tool for those defending against meritless claims and a bar to those seeking to circumvent the statutory amount in controversy requirement for diversity jurisdiction. This situation persisted until Congress passed the Judicial Improvements Act of 1990, codified at 28 U.S.C. [sections] 1367, which provides for supplemental jurisdiction "over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy." Claims under certain rules are exempted, but not claims under Rule 23.

The act has met with extensive criticism,(13) which is understandable when its legislative history is considered. The House Committee on the Judiciary intended it to be "noncontroversial."(14) Indeed, the stated essential purpose of the act was to overrule by statute the Supreme Court's decision in Finley v. United States,(15) which held that federal courts could not exercise pendant-party jurisdiction without an express legislative grant. The House report states that the supplemental jurisdiction section of the act was not "intended to affect the jurisdictional requirements of 28 U.S.C. [sections] 1332 in diversity-only class actions, as those requirements were interpreted prior to Finley."(16) Since Zahn was a pre-Finley case, the act was clearly not intended to apply to the Zahn holding.

Unfortunately, the drafters of the act omitted Rule 23 from the list of the Rules of Civil Procedure unaffected by the act. In a law review article, three of the drafters conceded:

It would have been better had the statute

dealt with explicitly with this problem, and

the legislative history was an attempt to

correct the oversight. The resulting combination

of statutory language and legislative

history, however, creates the delicious possibility

that despite Justice Scalia's opposition

to the use of legislative history, he

will have to look to the history or conclude

that Section 1367 has wiped Zahn off the

books.(17)

The result of the drafters' "oversight" was inevitable. In In re Abbott Laboratories, the Fifth Circuit concluded that, although the omission of class actions from the act's exceptions might have been a clerical error,

... the statute is the sole repository of

congressional intent where the statute is clear

and does not demand an absurd result....

Abolishing the strictures of Zahn is not an

absurd result. Justice Brennan's dissent

joined by Justices Douglas and Marshall

states the counterposition. Some respected

commentators would welcome Zahn's demise....

We are persuaded that under Section

1367 a district court can exercise supplemental

jurisdiction over members of a class,

although they did not meet the amount-in-controversy

requirement, as did the class representatives.(18)

The Fifth Circuit's decision is not the last word on this issue. Two district courts, for example, have found ambiguity in the act and have looked to the legislative history to resolve it.(19) Neither court, however, came up with a particularly strong reason for its finding of ambiguity, and it is likely that the Abbott court's holding ultimately will prevail, a result that inevitably will lead to more diversity-based class actions in federal court, either through direct filing or removal. The acceptance of small claim class actions, moreover, will support the certification of class actions filed purely for settlement purposes, in which the majority of class members will receive an amount less than $75,000.

RHONE-POULENC

At the beginning of 1995, the future of the products liability class action appeared limitless. First there was A.H. Robins, holding that a more liberal approach to class certification in the products liability area was appropriate. Then...