The mass tort defendants strike back: are settlement class actions a collusive threat or just a phantom menace?

AuthorFranklin, Darren M.


The class action endures as one of the most debated procedures in mass tort litigation. Considered by some to be an invitation for meritless claims and attorney abuse, and regarded by others as a uniquely efficient device to provide fair compensation, the class action has garnered significant attention as judges and academics struggle to confront the current explosion of mass tort lawsuits. As personal injury claims for exposure to asbestos, tobacco, silicone gel, and other professed toxins threaten to swamp the torts system, many commentators have begun promoting the class action as a solution to the heavy court burdens, high transaction costs, and delayed benefits endemic to traditional mass tort litigation.

At one time, mass tort defendants fervently resisted class certification. The certification order was often the trial court's most important ruling. The potential for a jury to levy crippling liability upon a class action defendant created overwhelming incentives for the defendant to settle, often without regard to the merits of the claims. (1) As judges were asked to certify an increasing number of mass tort class actions, some courts began to see "a concern with forcing these defendants to stake their companies on the outcome of a single jury trial, or be forced by fear of the risk of bankruptcy to settle even if they have no legal liability." (2)

Recently, however, some mass tort defendants have begun to welcome the class action. (3) In cases such as Georgine v. Amchem Products, Inc., (4) Lindsey v. Dow Coming Corp., (5) and Ahearn v. Fibreboard Corp., (6) the defendants endorsed the class action certification and some even joined the certification motion. Some defendants have not only adopted the class action as their preferred means of resolving their mass tort liabilities, but have also actually begun to solicit plaintiffs' attorneys to bring such suits. (7) Why is the class action, "once a sword for plaintiffs," increasingly "becoming a shield for defendants"? (8)

The answer, of course, is that the class actions that modern mass tort defendants seek are not the traditional actions in which the defendant runs the risk of a jury trial. Instead, they are carefully circumscribed procedures certified for settlement purposes only. Known as a "settlement class action," the device ranks as one of the most controversial developments in the already contentious field of mass tort class actions. Briefly, a settlement class action occurs when the class certification motion is presented simultaneously with a proposed settlement and is conditioned upon the court's acceptance of the settlement. The procedure differs substantially from certification for purposes of trial, where the defendant normally provides a vigorous opposition to the certification and the court can consider well-briefed arguments in making its ruling. With settlement classes, in contrast, the court certifies the class at the parties' behest, essentially acting for their benefit in binding absent parties to the settlement and sometimes neglecting the superiority requirements of Rule 23(b)(3) of the Federal Rules of Civil Procedure since litigation is not contemplated. (9)

Mass tort defendants welcome settlement classes for two main reasons. First, the absence of significant court involvement during settlement negotiations gives defendants, to a limited extent, more control over the parties and conditions that they must deal with in order to obtain favorable terms. Second, and perhaps more importantly, a settlement class offers the possibility of a final, global solution to all liability claims without the defendant having to risk a jury trial. This liability cap is possible because settlement classes especially, and often exclusively, (10) bind "futures" plaintiffs--people who have been exposed to or injured by the defendant's product--in addition to the already-filed "inventory" claimants. By negotiating a futures settlement class, a defendant can immediately dispose of thousands of future claims that otherwise could take decades to litigate and cost uncertain sums of money.

Many plaintiffs' attorneys and judges also approve of settlement classes. Settlement classes let plaintiffs' lawyers earn money representing people who might not even know they have been exposed to the defendant's product, without the lawyer risking his attorney's fee on the all-or-nothing result of a jury trial. For judges, "awed by the volume of individual yet similar tort claims and therefore in quest of modes of speedy disposition," (11) settlement classes offer protection from the inundation of mass tort cases and the heavy judicial workload that litigation entails.

But if settlement classes offer such benefits to the key players in mass tort disputes, why has their use "provoked a barrage of criticism," (12) not only from the courts which have rejected settlement classes, but also from "the overwhelming majority of the scholarly community who have expressed a view on this issue"? (13) Indeed, recent efforts to introduce settlement classes into the regime of Rule 23 "set off a firestorm of opposition by the academic community," (14) leading more than 120 law professors to organize a steering committee to oppose the changes. (15) Why are settlement classes so controversial?

This note analyzes the settlement class action controversy, starting with an overview of the case history and concluding with a critique of the recent proposals to introduce settlement classes explicitly into the Rule 23 regime. Part I traces settlement class history from its roots in the early 1980s Agent Orange and Bendectin litigation through the mid-1990s circuit court split over the propriety of settlement classes in asbestos and other cases. Part II presents and analyzes the arguments for and against settlement classes as they might have been made in the mid-1990s, when the big asbestos settlement classes were making their way through the circuit courts. It was around this time that the Cornell Law Review hosted a symposium titled "Mass Tortes: Serving Up Just Desserts" (16) and Professor John Coffee published his often-cited article, Class Wars: The Dilemma of the Mass Tort Class Action. (17) This note draws upon the scholarship of these and later articles, as well as relevant case law. In particular, there appear to be three major positions taken on settlement classes: 1) settlement classes are beneficial and should be encouraged; 2) settlement classes are bad policy because they un fairly advantage defendants and disadvantage futures plaintiffs; and 3) settlement classes are unconstitutional.

Part III analyzes how recent developments might affect the settlement class controversy, focusing on the Federal Judicial Center's 1995 empirical study on the general use of class actions, (18) the seminal Supreme Court opinions in Amchem Products, Inc. v. Windsor (19) and Ortiz v. Fibreboard Corp., (20) and the recently proposed amendments to Rule 23 offered by the Advisory Committee on Civil Rules. The section closes with a critique of the proposal. In particular, I would recommend four changes to the published March 1996 proposed amendments. First, the new Rule 23(b)(4) should state explicitly whether courts should interpret it as consistent with Amchem or consistent with In re Asbestos Litigation (21) and similar cases. The March 1996 proposal is ambiguous as to whether a class's commonality is separate from a proposed settlement or whether the settlement's fairness is the central issue. Second, the Advisory Committee should consider extending the new "maturity" requirement of proposed Rule 23(b)(3)(C) to settlement classes. Third, the new Rule 23(b)(4) should be supplemented with additional safeguards to protect the rights of futures plaintiffs and the ability of class counsel to negotiate effectively, as well as to prevent conflicts of interest among class attorneys and the defendant's exercise of undue influence over the choice of class counsel. Fourth, proposed Rule 23(e) should contain specific criteria for courts to follow in evaluating a proposed settlement.

In short, this note examines the controversy over whether settlement classes invite attorney collusion and abuse of the torts system, or are just a phantom menace.


    A brief examination of mass tort class action history will provide a useful context for the analysis that follows. This Part roughly observes the three "phases" in the development of mass tort class actions identified by Professor Francis McGovern. (22)

    Phase One: Getting Used to the Idea

    Mass torts, as we know them today, were born during the late 1970s and early 1980s with the appearance of thousands of injury claims due to three insidious products: asbestos, Agent Orange, and the Dalkon Shield intrauterine device. Suddenly faced with seemingly insurmountable caseloads, a few judges decided to cope with the immense queue of plaintiffs by experimenting with Rule 23. Among the earliest was Judge Spencer Williams of California, who conditionally certified a nationwide class of punitive damages claimants in the Dalkon Shield litigation. (23) Two years later, Judge Jack Weinstein of New York certified a class of Vietnam veterans exposed to Agent Orange. (24) Perhaps signaling the future development of settlement classes, Judge Weinstein noted that certification was desirable partly because it "may encourage settlement." (25) Other early certification approvals include the cases of asbestos property damage (26) and Three Mile Island. (27)

    One of the first instances of a mass tort settlement class was the 1984 Bendectin certification. (28) As trial loomed, defendant Merrell Dow Pharmaceuticals offered a $120 million settlement conditioned on certification of a mandatory class of all present and future claimants who had used the anti-nausea drug Bendectin during pregnancy. (29) Plaintiffs' counsel consented, and...

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