Amicus News
No. 9. August 28,
1996
FIFTH CIRCUIT UPHOLDS
ASBESTOS CLASS ACTION SETTLEMENT
The U.S. Court of Appeals
for the Fifth Circuit has affirmed a federal district court decision to
approve a class action settlement for future victims of asbestos-related
disease. Flanagan v. Ahearn, No. 95-40635 (July 26, 1996).
The class action was
designed to effect a global resolution of all claims against Fibreboard
Corp., which manufactured asbestos-containing products from 1920 to 1971.
Following protracted negotiation with plaintiffs attorneys and litigation
concerning i nsurance coverage, the action was filed in federal district
court for the Eastern District of Texas on behalf of future claimants --
asbestos victims who had not filed tort claims as of Aug. 27, 1993. On that
date, the parties informed the court that th ey had reached a settlement
agreement.
The agreement established
a trust, funded by over $1.5 billion, which would compensate injured class
members. Claimants who were dissatisfied with the amount offered by the
trust could proceed with mediation, and then to non-binding arbitration.
At that point, a claimant could reject the arbitration award and file a
tort action against the trust, with the right to trial by jury. Recovery
in tort actions, however, would be limited to $500,000, and punitive damages
would be unavailable.
The district court
certified the class as a mandatory, non-opt-out class action under Fed.
R. Civ. Pro. 23 and determined that the terms of the settlement were fair,
adequate and reasonable. Several members of the class who had intervened
to challenge t he class certification and the settlement appealed.
AAJ filed an amicus
curiae brief addressing the certification as a mandatory class action. AAJ
argued that depriving future claimants of the opportunity to opt out of
the class violated the Seventh Amendment right to trial by jury. That right
could be preserved by modifying the settlement agreement to allow a claimant
to file a tort suit within a reasonable time after discovery of the injury.
In a 2-1 decision,
the Fifth Circuit panel affirmed the district court, parting company with
the Third Circuit, which had disallowed a massive asbestos class action
settlement earlier this year. Georgine v. Amchem Products, Inc. ,
83 F.3d 610 (3rd Cir. 1996). The court stated that it is appropriate to
consider the settlement agreement in determining whether the class action
satisfies the requirements of Rule 23. In this respect, the court rejected
the position of the Third Circuit that judges shou ld apply the Rule 23
criteria as if the class action would go to trial. The court concluded that
the class action satisfied the requirements of commonality, typicality,
and adequacy of representation, rejecting assertions of conflicting interests
within t he class. The court notes that, unlike Georgine, where the settlement
prescribed the amount of compensation for various injuries, the settlement
here only established an equitable distribution process.
The court also dismissed
intervenors arguments that the attempt to resolve future claims was beyond
the federal courts subject matter jurisdiction and violated due process.
The court did not address the trial by jury issue. Dissenting Judge Jerre
E. Sm ith, however, termed the settlement a novel tort reform proposal thinly
disguised as the settlement of a lawsuit. Specifically quoting the AAJ
brief, Judge Smith stated:
Class members
causes of action are repealed in favor of the equivalent of a workers compensation
regime. The American Association for Justice summed up this point
nicely in an amicus brief opposing the settlement: The alchemy of the class
action settlement . . . had the effect of transforming the common law damage
claims of asbestos victims, which were clearly safeguarded by the right
to trial by jury, into administrative claims without that right.
For further information,
plea se contact Jeffrey White.
Phone: 202-965-3500
x310
FAX: 202-955-0920
E-Mail: jeffrey.white@justice.org
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