Respondents Brief — Amchem Products, Inc. v. Windsor

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AMCHEM PRODUCTS, INC., et al.

es t % hee: Petitioners,

FoR facet iy a

= GEORGE WINDSOR, et al.,

reed gi Pe Respondents.

* 4 *€

a ge

ih eee ON WRIT OF CERTIORARI TO THE UNITED STATES

tee wee

7 ~

‘ Be

~ BRIEF FOR RESPONDENTS

AILEEN CARGILE, ET AL.

Se i Wy. fom | oN e ts JOCELYN D: LARKIN

Ga eee DONNA M. Ryu

ae 1049 Key Route Boulevard

yee ate Albany, CA 94706

CEEE RAR S25 (510) 527-9385

STEVEN KAZAN

' AARON SIMON

KAZAN, MCCLAIN, EDISES, SIMON

| -& ABRAMS

aa | ce Mey 174 Twelfth Street, Third Floor

SAE toe SS gts) ($10) 465-7728

TABLE OF CONTENTS

TABLE OF AUTHORITIES .....................0004..

EC indsetediswiencevssiosevocsesccosdccccess

RELEVANT BACKGROUND AND TERMS

ok, eee

THE DISTRICT COURT’S CLASS CERTI-

ow Be ae

THE THIRD CIRCUIT’S OPINION..............

INTRODUCTION AND SUMMARY OF

in dtntdcusunybdeteddeesd<étececcesce

ET crbhdideuccdlebnainteebbsissdessoeveeescess

THE THIRD CIRCUIT’S APPROACH,

WHILE OVERBROAD, CORRECTLY

FOCUSED THE ANALYSIS OF CLASS

CERTIFICATION ON THE UNIQUE

REQUIREMENTS OF RULE 23(b)(3) ...........

A. The History and Purposes of Rule 23(b)(3) .

B. Analysis of Rule 23(b)(3) Requirements

Ne ee cc cdueceurens

1. Predominance of Common Issues ......

a. Predominance Establishes the

Threshold Existence of a Cohesive

PAGE

Il.

Predominance Should be Evaluated

Without Consideration of the

DOCOURGEE «cic ncvisuachescsstamuaen

A Finding of a Settlement’s Fair-

ness under Rule 23(e) Cannot

Substitute for Independent Evalu-

ation of Rule 23(b)(3) Predom-

SRRROS « vcccncncsensnkdusauecehunnees

Requiring that Predominance

Exist Independent of any Pro-

posed Settlement Will Not Hamper

Class Resolution of Complex

oo . Pee

Mandatory Notice and Opt-Out.........

THIS SETTLEMENT CLASS DOES NOT MEET

THE RULE 23(b)(3) REQUIREMENTS OF

PREDOMINANCE AND NOTICE ...............

A. The Class Does Not Satisfy the Requirement

that Common Issues Predominate...........

B. The District Court Improperly Approved

Rule 23(b)(3) Class Treatment Where

Meaningful Notice and the Right to

Exclusion Were Not Provided ...............

Ensuring Adequate Notice and Opt-Out

Rights in a Rule 23(b)(3) Action

Involving Future Claims Requires Close

SOCUCI « o 00 000006ueeseesusenneeeeneeeee

PAGE

“*“*

PAGE

2. Notice and the Right to Opt-Out Are

Illusory in this Case .............-..-... 36

CONCLUSION

TABLE OF AUTHORITIES

Cases PAGE

Bowling v. Pfizer, Inc., 143 F.R.D. 141 (S.D. Ohio

CS ar ater ara ee ee 22

Castano v. American Tobacco Co., 84 F.3d 734

ESR RS, POEL CT meme 24, 33

Cooper v. Federal Reserve Bank, 467 U.S. 867 (1984) 26

East Texas Motor Freight Sys. v. Rodriguez, 431 U.S.

Pe MRS UD canéntcisdsinesindsbicninidsabiiades 15

Eisen v. Carlisle & Jacquelin, 417 U.S. 156

Sen ccunténcasesdodétssenvecséaeas 15, 29, 30, 35, 36

Erie R.R. v. Tompkins, 304 U.S. 64 (1938) ............ 32

General Tel. Co. of Southwest v. Falcon, 457 U.S. 147

PG cnnnsescacidiinienestiddiadmbindnnebens 15

Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975).......... 24

Greenfield v. Villager Industries, Inc., 483 F.2d 824

OG. Bese iccncccdeanitevcnstessesséindeseetens 30

Grunin v. International House of Pancakes, 513 F.2d

114 (8th Cir.), cert. denied, 423 U.S. 864 (1975) 25

In re “Agent Orange” Prod. Liab. Litig., 689 F.Supp.

SP ED itidnvdaducescncesdddectcscees 41

In re “Agent Orange” Prod. Liab. Litig. (“Agent

Orange I”), 818 F.2d 145 (2d Cir. 1987), cert.

denied, 484 U.S. 1004 (1988)..................... 41

In re “Agent Orange” Prod. Liab. Litig. (Agent

Orange I1), 996 F.2d 1425 (2d Cir. 1993), cert.

denied sub nom, Ivy v. Shamrock Chemicals Co.,

FSD Be, FE ee ccc ecesncsécieccenesseegvers: 4)

PAGE

In re A.H. Robins, 880 F.2d 709 (4th Cir.), cert. denied

sub nom., Anderson v. Aetna Casualty & Surety Co.,

ED nidendenacintadstsndencnoussss 26

In re American Medical Sys., 75 F.3d 1069 (6th Cir.

Dl ctpinatinisminen insite taibidadansees 33

In re Asbestos Litigation, 90 F.3d 963

LET Ie RS I ae: a passim

In re First Commodity Corp. Customers Accounts

Litig., 119 F.R.D. 301 (D. Mass. 1987)........... 22

In re General Motors Corp. Pick-Up Truck Fuel

Tank Prods. Liab. Litig., 55 F.3d 768 (3d Cir.),

cert. denied, 116 S.Ct. 88 (1995)............. 21, 25, 31

In re Independent Gasoline Antitrust Litig., 79 F.R.D.

RE See 27

In re Real Estate Title & Settlement Serv. Antitrust

Litig., 869 F.2d 760 (3d Cir.), cert. denied, 493

I ee 2

In re School Asbestos Litig., 789 F.2d 996 (3d Cir.),

cert. denied sub nom., Celotex Corp. v. School

Dist. of Lancaster, 479 U.S. 852, and National

Gypsum Co. v. School Dist. of Lancaster, 479

ls GE ing cbetecsociesceceiccnse 31, 32, 33, 34

In re United States Financial Sec. Litig., 69 F.R.D. 24

Lh Cty EE icictiaceeeseebonecesnneséasouseces 27

International Brotherhood of Teamsters v. United States,

Ge Wh SITET cetedndacchotndnécensesecstess 27

Jenkins v. Raymark, 782 F.2d 468 (Sth Cir.), reh'g

denied en banc (5th Cir. 1986) ................... 19

PAGE

Mars Steel Corp. v. Continental Illinois Nat'l. Bank &

Trust Co., 834 F.2d 677 (7th Cir. 1987) .......... 20

Moore v. San Jose, 615 F.2d 1265 (9th Cir. 1980)..... 25

Mullane v. Central Hanover Bank & Trust Co., 339

REE, SEO REE Re 29, 30, 35

Officers for Justice v. Civil Serv. Comm'n, 688 F.2d

615 (9th Cir. 1982), cert. denied, 459 U.S. 1217

FR ibindnddacécibidviscabdstiesschDbbbbinddtedes 21, 26

Pettway v. American Cast Iron Pipe Co., 494 F.2d 211

Sth Cir. 1974), cert. denied, 439 U.S. 1115

SRE ndntdvnddaenubdenisdcebarscoetbevciivecsetes 27

Phillips Petroleum Co. v. Shutts, 472 U.S. 797 (1985) 32

Richards v. Jefferson County, 116 S.Ct. 1761 (1996) . 15

Walsh v. Ford Motor Co., 807 F.2d 1000 ( D.C. Cir.

1986), cert. denied, 482 U.S. 915

Ge sseccnsdsendsedineuitiaesiceniees 15, 24, 29, 32, 33

Walsh v. Great Atlantic & Pacific Tea Co., 726 F.2d 956

Ee ea Ee ee ih ee 19

Weinberger v. Kendrick, 698 F.2d 61 (2d Cir. 1982),

cert. denied, 464 U.S. 818 (1983) ................ 24

Woodward v. Nor-Am, No. 94-0780-CB-C, 1996 U.S.

Dist. LEXIS 7372 (S.D. Ala. May 23, 1996)..... 22

Yandle v. PPG Industries, Inc., 65 F.R.D. 566 (E.D.

Wks Pe cacetinscdeieriadatidsencdetdidessoecs 33

Rules:

Federal Rules of Civil Procedure

EE SE SPE eee o: | OM OTe aye aye ree 22

vil

PAGE

a cncviacieditanntdvbesdheesensesdsevssensein passim

EEE eee ee pee ee rene Peer 10, 14, 18, 19

I Nas ak ee eeeskedanaeneds 10, 31

STE PT ES ee Ome: 16, 23

Ce ee ee deenaeieeeseuenten passim

a oe sahebanie meee 20, 24

a en acuanedeseass passim

ad etn useaseuind passim

ESE EE A ae ee ERE passim

oe ed iemebenneeseess 7, 24, 25, 30

California Code of Civil Procedure

a a ek. a ohinebamnnt 9,39

EE DEE io cddin cenkobedenacssonsbbeeseccsesaes 9

Miscellaneous:

Amendments to Rules of Civil Procedure, Rules

Advisory Committee Notes to Amended

Rule 23, 39 F.R.D. 69 (1966) ............ 60.0 eee, passim

Marvin Frankel, Some Preliminary Observations Con-

cerning Civil Rule 23, 93 F.R.D. 39 (1967) .......... 20

Benjamin Kaplan, Continuing Work of the

Civil Committee: 1966 Amendments of

the Federal Rules of Civil Procedure,

81 Harv. L. Rev. 356 (1967).............. 17, 18, 20, 28

Manual for Complex Litigation, Third (Federal

ED oe i sec aeebb cbéceecees 35

James Wm. Moore, 3B Moore's Federal Practice,

q 23.45[3] at 23-313 n.5 (2d ed. 1987)....... 17, 20, 23

Herbert Newberg and Alba Conte, | Newberg on

Class Actions (3d ed. 1992) ...........6.0055. 16, 20, 35

Vill

PAGE

Judith Resnik, From Cases to Litigation 54 Law and

Contemporary Problems (Summer !1991)......... 17, 18

Thomas E. Willging, Laural L. Hooper and Robert J.

Niemac, An Empirical Analysis of Rule 23 to

Address the Rulemaking Challenges, 71 NYU

Law Rev. 74 (April-May 1996)....................05- 26

IN THE

Supreme Court of the United States

OCTOBER TERM, 1996

No. 96-270

AMCHEM PRODUCTS, INC., et al.,

Petitioners,

GEORGE WINDSOR, et ai.,

Respondents.

ON WRIT OF CERTIORARI TO THE UNITED STATES

COURT OF APPEALS FOR THE THIRD CIRCUIT

BRIEF FOR RESPONDENTS

AILEEN CARGILE, ET AL.

STATEMENT

The rulings of the courts below represent two extreme and

opposite interpretations of.the significance of settlement on

class certification under Rule 23. While the district court

allowed the existence of a settlement to substitute for satis-

faction of the requirements of Rule 23, the court of appeals

broadly held that settlement is irrelevant to class certification.

Neither approach is correct.

Rule 23 mandates that courts adopt a middle ground that

recognizes the relevance of settlement to a number of Rule 23

requirements, an approach actually followed by the Third Cir-

cuit (despite its overbroad holding). However, settlement, by

itself, cannot establish the required predominance of common

issues Over individual questions that is at the heart of a Rule

23(b)(3) action. Moreover, the right to opt-out of such actions

must be meaningful. Because common issues did not pre-

dominate, and the opt-out right was illusory, the class certi-

fication in this case was improper. And the Third Circuit,

therefore, should be affirmed.

This brief is filed on behalf of six Californians, all of whom

have either contracted mesothelioma or are at risk of con-

tracting it in the future. Mesothelioma, though rare, is the

most lethal form of asbestos disease—invariably fatal within

two years of diagnosis. Those individuals who actually con-

tracted mesothelioma—John Soteriou, Harold Hans Emmerich

and Thomas Corey—were first diagnosed shortly after the

period for exercising a right to opt-out of the class had

expired. JA 921-23. None of the three received actual or pub-

lished notice of the class action; all three have since died.'

The remaining three respondents—-Aileen Cargile, Betty Fran-

com, and John Wong—believe that the Settlement class cer-

tification did not take into account the interests of California

residents, particularly those who will contract mesothelioma.”

Both Mrs. Cargile and Mrs. Francom have an intimate under-

standing of mesothelioma; they each watched their long-time

spouses die of the disease. JA 337-38, 348-49.

, The claims of these men are now being pursued by their suc-

cessors in interest. This Court granted the Motion of Respondents Aileen

Cargile, et al. to Substitute Parties on January 6, 1997.

2 These individuals filed a motion to certify an opt-out class of all

California residents who have contracted or will contract mesothelioma.

They have not consented to jurisdiction in this matter. Jn re Real Estate

Title & Settlement Serv. Antitrust Litig., 869 F.2d 760, 770-71 (3d Cir.),

cert. denied, 493 U.S. 821 (1989). They asserted that the “benefits” of the

Settlement provide little or nothing to California residents who already

enjoy these or greater benefits under the unique California law. The dis-

trict court denied the motion. See Order, filed September 2, 1994, Docket

No. 1156.

1. RELEVANT BACKGROUND AND TERMS OF

SETTLEMENT

Procedural Posture.—Simultaneously, on January 15, 1993

the named plaintiffs filed a class complaint,’ the defendants,

the Center for Claims Resolution (CCR), filed an answer, and

those parties (“the Settling Parties”) jointly filed a Stipula-

tion of Settlement (the “Settlement”) and a motion for class

certification. Pet. App. 23a-24a. The district court granted the

motion two weeks later. Pet. App. 26a. The district court

issued final approval of class certification and ruled that the

Settlement was fair on August 16, 1994. Pet. App. 29a. The

court later entered a preliminary injunction, prohibiting

the class members from filing suit against CCR until a final

judgment was entered. Pet. App. 30a.

To date, the district court has not entered a final, appealable

judgment in this action. Judgment cannot be entered because

settlement of this action was expressly conditioned upon

CCR’s insurers assuming liability; a third-party action filed

by CCR against its insurers to resolve coverage remains pend-

ing.* Pet. App. 24a n.4, 34a. Since no final judgment has been

entered below, an appeal of the district court’s fairness deter-

mination would be premature.° This appeal is thus only from

> «The complaint asserts various theories of liability, including

negligent failure to warn, strict liability, breach of warranty, emotional

distress, enhanced risk of disease, medical monitoring and civil con-

spiracy. Pet. App. 24a.

4 The Settlement, by its own terms, is premised upon each of the

members of CCR obtaining certain assurances from their insurers regard-

ing coverage under existing general insurance policies. JA 99-100. If the

pending third party action results in a denial of coverage, the Settlement

will not become effective. JA 99. Despite the fact that the third party

action against the CCR insurers has been pending for nearly four years,

there has been virtually no activity in the case. To date, the district court

has not even set a trial date in that action.

. Petitioners repeatedly imply that Respondents either chose not

to challenge the fairness of the Settlement, or have somehow forsaken

such arguments. See, e.g., Brief for Petitioners at 15. Since the time for

the district court’s issuance of the preliminary injunction,

which bars class members from filing lawsuits against the

CCR members in state or federal courts.

Scope of the Settlement. The proposed Settlement would

resolve all present and future claims of individuals who were

exposed to asbestos products produced by any of the 21 CCR

defendants and who had not filed a lawsuit prior to the initi-

ation of this action. The class is defined to include all persons

who had been exposed to asbestos either occupationally or

through exposure as a spouse or household member of such

exposed persons, and all spouses and family members of such

persons. Pet. App. 23a and n.3.

There is no dispute that the proposed Settlement encom-

passes hundreds of thousands of claims. Brief for Petitioners

(“Pet.Br.”) at 1. These claims arise in over fifty jurisdictions,

based on different types of asbestos disease, against 21 dif-

ferent companies. The class members were “exposed to dif-

ferent asbestos-containing products, for different amounts

of time, in different ways, and over different periods.” Pet.

App. 4la.

Settlement Compensation Scheme. The Settlement does not

simply establish a general recovery fund, leaving the liqui-

dation of each claim within the control of each claimant, but

creates an elaborate administrative scheme that dispenses

compensation to claimants meeting certain rigid exposure and

medical criteria. Compensation is only provided for each of

four categories of disease: mesothelioma,® lung cancer,

appealing the district court’s fairness finding has not even begun to run,

such implications are groundless, especially since even petitioners admit

that “[e]very aspect of the proposed settlement was sharply contested by

the objectors” at the district court level. /d. at 9.

® Mesothelioma is a fatal cancer of the lining around the lung

and/or abdomen that results from exposure to asbestos. Although only a

small fraction of those exposed to asbestos will contract mesothelioma,

its victims generally die within two years of diagnosis. Pet. App. 56a, JA

certain other cancers (including colo-rectal, laryngeal,

esophageal, and stomach cancer), and non-malignant condi-

tions (asbestosis and bilateral pleural thickening). For those

claimants who qualify under the specified medical criteria,

the Settlement “fixes a range of damages that CCR will award

for each disease, and places caps both on the amount that a

particular victim may recover and on the number of qualify-

ing claims that will be paid in any given year.” Pet. App. 25a.

The exact damage amount that will be awarded to each

claimant is determined by CCR, with virtually no right of

appeal.’ /bid.

335. Unlike other asbestos diseases (such as lung cancer), the only med-

ically established cause of mesothelioma is asbestos exposure. /bid.

Mesothelioma can be caused by only slight or incidental exposure to

asbestos fibers. The disease has been known to occur in children who

lived with an asbestos-exposed parent or worker. Pet. App. 56a. “[T}he

unpredictability of mesothelioma is further exacerbated by the long

latency period between exposure to asbestos and the onset of the disease,

typically between fifteen to forty years.” Ibid; see also JA 335.

? There are only two extremely limited scenarios under which

a claimant may receive an amount in excess of the damage ranges. First,

for a restricted number of “Extraordinary” claims (between one and three

percent of the total number of qualified claims in the four disease cate-

gories), CCR may award an amount in excess of the range, although the

total amount that may be paid for such claims is itself capped. Pet. App.

25a.

Second, a small number of claimants who qualify for payment under

the Settlement, but are dissatisfied with the damage amount offered by

CCR, may pursue their claims in court. /bid. However, the number of

claimants who may pursue this “back-end opt-out” is very low. Between

one-half of one percent and two percent of the total number of claims in

each disease category from the previous year may exit to the tort system.

Ibid. For example, only 700 mesothelioma claims can be resolved in the

first year of the Settlement, and only 2%—14 victims—may seek an exit

to their local court system. JA 108, JA 174. By the Settlement’s tenth

year, these figures drop to a maximum of 455 mesothelioma cases annu-

ally with only nine (9) exit permits. /bid. Moreover, if the number of

peuple who seek to re-enter the tort system in a particular year exceeds

the annual quota, the surplus applicants have to wait one or more years

for one of the few allocated spaces. Predictably, after less than two years,

there is already a backlog of claimants waiting for exit visas. See Mem-

Although CCR makes no claim of potential insolvency for

even one of its members, the Settlement fixes damages at

amounts which are only a small fraction of the damages

typically awarded in the tort system. For example, those

“unlucky” few who contract mesothelioma are “relegate[d]

. . to a modest recovery, whereas the average recovery of

mesothelioma plaintiffs in the tort system runs into millions

of dollars.” Pet. App. 49a; see also JA 351-52. The “negoti-

ated average value” under the Settlement for mesothelioma

claims ranges from $37,000 to $60,000. JA 110. According

to an analysis that CCR conducted of their pre-class action

settlement history, for all high value mesothelioma claims,

their own national average was $359,715. JA 461. Fifteen

percent of high value claims were from California and the

California average was $419,674. The California state aver-

age is more than double the maximum allowable recovery

for Non-Extraordinary Claims ($200,000), ibid, and 40%

higher than the Extraordinary Claim cap ($300,000).* See

JA 85, 110, 461. Moreover, the Settlement provides no cash

compensation to pleural claims “even though such claims

regularly receive substantial monetary payments in the tort

system.” Pet. App. 26a.

The class members are bound to the Settlement in perpe-

tuity. In contrast, the CCR companies may choose to with-

draw after ten years.’ Pet. App. 25a-26a.

orandum in Support of Additional Class Counsel’s Motion to Alter FIFO

Ordering For Mesothelioma Claims Under Part X at 3 (filed with district

court on October 25, 1996). Given the short life expectancy of mesothe-

lioma victims, most will likely die before they can exit the Settlement

system.

* The number of Extraordinary Claims is limited to a maximum of

21 per year in the first two years and declining thereafter. JA 85, 109.

° Moreover, for the first ten years, the Settlement provides no

adjustment of the compensation levels, even to account for inflation. Pet.

App. !4la. After ten years, the values in the compensation schedule may

be subject to a one-time adjustment, but by no more than 20%. Pet. App.

138a.

2. THE DISTRICT COURT’S CLASS CERTIFICA-

TION DECISION

In the district court, the Settling Parties took the position

that so long as the settlement itself is found to be fair under

Rule 23(e), the settlement class would satisfy the certification

requirements of Rule 23. See, e.g., JA 41. They unambigu-

ously argued that the “standards for determining whether a

class should be certified are considerably more lenient when

certification is sought for purposes of settlement, rather than

for purposes of litigation.” JA 39 (emphasis added).

The district court adopted the Settling Parties’ position.

The decisions regarding fairness and class certification were

made simultaneously. The district court certified the class,

after only a perfunctory review of Rule 23 certification

requirements. It held that the Rule 23 requirements for class

certification “are often more readily satisfied in the settlement

context because the issues for resolution by the court are

more limited than in the litigation context.” Pet. App. 224a

(citations omitted).

Thus, with respect to the Rule 23(b)(3) requirement that

class issues predominate, the district court specifically held

that this requirement is “more readily satisfied in the settle-

ment context than in the litigation context.” Pet. App. 226a

(citations omitted). The court concluded that there was pre-

dominance:

The members of the class have all been exposed to

asbestos products supplied by the defendants and all

share an interest in receiving prompt and fair compen-

sation for their claims, while minimizing the risks and

transaction costs inherent in the asbestos litigation pro-

cess as it occurs presently in the tort system. Whether the

proposed settlement satisfies this interest and is other-

wise a fair, reasonable and adequate compromise of the

claims of the class is a predominant issue for purposes of

Rule 23(b)(3)."°

Ibid. (emphasis added)

With respect to the mandatory notice and opt-out require-

ment for Rule 23(b)(3) actions, the district court held that

notice was adequate because “over 6.8 million persons,

including individuals who were likely class members,

received individually-delivered notice materials, and that mil-

lions more persons, including likely class members, were

notified through media efforts.” Pet. App. 267a. The district

court ignored substantial evidence that it is impossible to pro-

vide adequate notice to individuals who, at some date in the

future, will contract asbestos-related conditions such as

mesothelioma. Moreover, those individuals who actually

received notice were forced, in 1993, to make a final, irre-

vocable decision about opting-out of the class, despite the

overwhelming dearth of information that they had regarding

their future medical condition or what recovery, if any, the

Settlement would provide. See discussion, infra, Section

I1.B.2.

The district court did not consider, or make any factual

findings, regarding the substantial evidence that recoveries

for asbestos victims varied greatly from state to state. See JA

351-52, 464-68, 562, 572-78."' While the district court

With respect to the superiority prong of Rule 23(b)(3), the dis-

trict court again relied upon the fairness and adequacy of the proposed

settlement, concluding that because the settlement “provided class mem-

bers with fair compensation for their claims while reducing the delays

and transaction costs endemic to the asbestos litigation process as it

occurs presently,” it was “superior to other available methods for the fair

and efficient resolution” of these claims. Pet. App. 228a. The district

court's opinion does not reflect consideration of whether an individual's

interest in controlling his or her own legal action, particularly the

extremely valuable mesothelioma claims, might outweigh the efficiency

afforded by a classwide settlement.

'! Average mesothelioma settlements against the CCR defendants

ranged from a low of $11,638(Maine) to a high of $198,041(South

described at length the perceived procedural advantages of

the Settlement, it ignored the marked differences in the

substantive and procedural rights of asbestos plaintiffs in

different states.'? For example, most of the procedural bene-

fits provided by the Settlement are already available for Cali-

fornia claimants, who enjoy unique procedural advantages

under state law.'’ In a single footnote, the court summarily

dismissed the evidence of interstate differences. Pet. App.

248-249 n.64.

3. THE THIRD CIRCUIT’S OPINION

The ostensibly governing legal standard articulated by the

Third Circuit required that for the purpose of certifying a set-

tlement class, each of the requirements of Rule 23 “must be

satisfied without taking into account the settlement, and as if

the action were going to be litigated.” Pet. App. 39a. How-

ever, despite its own pronouncement, in fact it took the Settle-

Dakota). For lung cancer, the low was $1,500 (Nebraska) to a high of

$122,866 (District of Columbia). JA 572-78. California mesothelioma

verdicts were 53% higher than the national average. JA 351-52.

12 The objectors sought discovery from the Settling Parties con-

cerning their consideration of inter-state differences with respect to the

legal standards governing asbestos cases and the average amount of dam-

ages awarded to plaintiffs, on a state by state basis. This evidence was

highly relevant to analyzing the terms of the Settlement, particularly with

respect to inter-state conflicts among class members. All such discovery

was disallowed on grounds of relevance. JA 327.

3 For example, one of the purportedly key benefits of the Settle-

ment to many claimants is that CCR agrees to waive all statutes of lim-

itations. JA 75. For California claimants, this provision is of little value

because such protection is already available under California Code of

Civil Procedure Section 340.2, which provides a generous statute of lim-

itations for claims for injury or illness based upon exposure to asbestos.

Cal. Code Civ. Pro. § 340.2. Similarly, California provides calendar pref-

erence for fatally ill plaintiffs, which permits recovery at least as quickly

as the Settlement. Cal. Code Civ. Pro. § 36(d); see also JA 351. For fur-

ther discussion, see Written Objections of John Musante, filed with Dis-

trict Court on February 10, 1994, Docket No. 739, at 6-15.

ment into account in some respects in reviewing the district

court's evaluation of certification. While the legal standard

articulated by the Third Circuit is overbroad and unrealistic,

the decision below should be affirmed because the court

found that the Rule 23(b)(3) requirement of predominance and

the Rule 23(c)(2) notice and opt-out requirements were not

satisfied.'*

Predominance of Common Issues. The Third Circuit

acknowledged that a number of common issues existed" suf-

ficient, perhaps, for a Rule 23(a)(2) showing of commonality,

and instead focused its commonality analysis on the (b)(3)

requirement that common questions predominate over indi-

vidual issues. Pet. App. 43a. Under this demanding (b)(3)

standard, the court determined that “the huge number of

important individualized issues,” overwhelmed the common

and largely settled issue of the capacity of asbestos fibers to

cause physical injury. Pet. App. 40a, 43a, 48a. The court

noted the broad range of individual issues:

Class members were exposed to different asbestos-

containing products, for different amounts of time, in

different ways, and over different periods. Some class

members suffer no physical injury or have only asymp-

tomatic pleural changes, while others suffer from lung

cancer, disabling asbestosis, or from mesothelioma

. . . . Each has a different history of cigarette smoking,

a factor that complicates the causation inquiry.

'* Examining the terms of the Settlement, the court also concluded

that the Rule 23(a) requirements of typicality and adequacy of repre-

sentation were not met. Pet. App. 49a, 53a.

'S The Third Circuit noted that exposure to asbestos and the capac-

ity of asbestos fibers to cause physical injury are common questions

under Rule 23(a)(2). Pet. App. 40a. The court also recognized that “there

may be several other common questions, such as whether the defendants

had knowledge of the hazards of asbestos, whether the defendants ade-

quately tested their asbestos products, and whether the warnings accom-

panying their products were adequate.” /bid.

The futures plaintiffs especially share little in common,

either with each other or with the presently injured class

members. It is unclear whether they will contract

asbestos-related disease and, if so, what disease each

will suffer. They will also incur different medical

expenses because their monitoring and treatment will

depend on singular circumstances and individual medi-

cal histories.

Pet. App. 41a. With respect to the vast state-by-state differ-

ences in legal standards, the court observed that because “we

must apply an individualized choice of law analysis to each

plaintiff's claims, . . . the proliferation of disparate factual

and legal issues is compounded exponentially.”"* /bid.

Superiority. Rule 23(b)(3)'s requirement that the action be

“superior to other available methods” requires the court “to

balance, in terms of fairness and efficiency, the merits of a

class action against those of ‘alternative available methods’

of adjudication.” Pet. App. 54a (citation omitted). The court

concluded that superiority had not been established.

In terms of efficiency, the court, ignoring the Settlement,

held that “a class of this magnitude and complexity could not

be tried.” Pet. App. 54a. With respect to the fairness prong of

the superiority inquiry, the court determined: (a) that the

superiority requirement would not be met if the class were

“(clonsidered as a litigation class,” and (b) that superiority

was lacking even if the settlement were considered, because,

“in this class action,” plaintiffs “have a substantial stake

in making individual decisions on whether or when to settle”

yet “may become bound to the settlement even if they are

unaware” of the settlement “or lack sufficient information

to evaluate it.” Pet. App. 55a (emphasis added). The court

16 The court contrasted the lack of common issues in this case with

more limited certifications that involve injunctive relief, Pet. App. 42a,

property damage actions, ibid, cases where there was a central single

issue such as one basic defense, Pet. App. 45a, or cases involving only

partial certification of common issues, Pet. App. 47a.

emphasized that these problems could have been alleviated

if the Settlement provided for “an opt-in rather than opt-out

procedure, or allowed plaintiffs to opt-out after they contract

a disease.” Pet. App. 56a n.16.

Notice. Finally, the court noted that Rule 23(b)(3) fairness

concerns were exacerbated by “the difficulties in providing

adequate notice” to “exposure-only plaintiffs [who] may

eventually contract a fatal disease, mesothelioma, from only

incidental exposure to asbestos.” Pet. App. 56a. Given the

long latency period between exposure to asbestos and

the onset of the disease,

persons contracting the disease today may have little or

no knowledge or memory of being exposed. It is unre-

alistic to expect every individual with incidental expo-

sure to asbestos to realize that he or she could someday

contract a deadly disease and make a reasoned decision

about whether to stay in this class action.

Ibid.

INTRODUCTION AND SUMMARY OF ARGUMENT

Petitioners focus their entire attack on the broad, abstract

holding of the Third Circuit that the existence of a settlement

may not be considered in determining certification of a settle-

ment class. In fact, the Third Circuit ultimately did examine

the Settlement in determining the appropriateness of certi-

fication. Its thorough and thoughtful analysis is carefully

tailored to the specific requirements and purposes of Rule

23(b)(3) class cases.

The district court, on the other hand, adopted an extreme

approach to class certification not embraced by any circuit

court: that the settlement itself, and the settlement approval

process, may substitute for the predominance of common

questions required by Rule 23(b)(3).

Petitioners offer this Court a stark and unnecessary choice

between the unqualified holding of the Third Circuit—that

class certification must be assessed without considering the

settlement—and their own equally broad-brush approach that

would essentially allow the settlement and its asserted fair-

ness to establish compliance with Rule 23(b)(3).

We agree that the settlement and its fairness should not be

ignored in assessing class certification; we also concur that

the court need not “pretend” that all aspects of the case will

be tried. And we agree, arguendo, that the existence of a fair

settlement may well be relevant to a Rule 23(b)(3) showing

that the class action is “superior to other available methods

for the fair and efficient adjudication of the controversy.”

Fed.R.Civ.Pro. 23(b)(3).

On the other hand, in Rule 23(b)(3) class actions, a fair

settlement is no substitute for a showing that common issues

predominate. The predominance requirement stems from the

special nature of damage actions, where individual control of

an action is a substantial interest, and class treatment is dis-

cretionary. Because such actions are by nature less cohesive

than Rule 23(b)(1) or (b)(2) actions, and the need for unitary

resolution is not essential, predominance is the core require-

ment, which determines if a Rule 23(b)(3) class exists. Pre-

dominance ensures that there is sufficient cohesiveness among

class members such that collective action, which will have a

binding effect on all class members, may substitute for the

presumption in favor of individual litigation of personal

injury damage claims. Nothing in Rule 23 or the case law

supports the district court’s conclusion that the settlement

alone can establish the Rule 23(b)(3) requirement that class

issues predominate. Indeed, no circuit court has so held. Peti-

tioners’ approach ultimately eviscerates the predominance

requirement entirely. If a settlement will always satisfy the

Rule 23(b)(3) predominance requirement, Rule 23(b)(3) set-

tlements classes will automatically be certified.

A proper application of Rule 23(b)(3) balances the interests

of efficiency against the rights of absent class members. Rec-

Ognizing this important balance, the Third Circuit correctly

concluded that the Settlement class did not meet the Rule

23(b)(3) predominance requirement and, moreover, properly

underscored the failure of the Settlement to afford meaning-

ful notice and opt-out rights to future claimants who have no

idea if, or when, they may fall victim to one or more asbestos-

related diseases. To conclude otherwise would allow parties

to sacrifice the bedrock requirement of class cohesiveness and

the opportunity to opt-out of the class upon the altar of expe-

diency. It would allow any parties, so long as represented by

competent counsel, to impose a settlement upon enormous

numbers of putative class members without regard for their

interests or desires. Res judicata should not be the reward for

the achievement of judicial efficiency at any cost.

ARGUMENT

I. THE THIRD CIRCUIT’S APPROACH, WHILE

OVERBROAD, CORRECTLY FOCUSED THE ANAL-

YSIS OF CLASS CERTIFICATION ON THE UNIQUE

REQUIREMENTS OF RULE 23(b)(3)

The Third Circuit articulated a legal standard that was

plainly too broad and inflexible. In holding that settlement

must be ignored for al// elements of the certification inquiry,

the court enunciated a principle that was not only inconsistent

with what a number of other circuits have heid, but was one

which it did not itself apply. Contrary to its own maxim, the

Third Circuit's actual analysis of the Settlement weighed the

Settlement itself in evaluating a number of the Rule 23 cer-

tification requirements.'’ As such, resolution of petitioners’

The Third Circuit considered the Settlement in analyzing the

adequacy of representation and typicality requirements under Rule 23(a)

and the superiority requirement under Rule 23(b)(3). Thus, even if peti-

tioners’ position were adopted, the Third Circuit would reach the same

result.

complaint about the Third Circuit’s broad statement of the

theoretical standard will have little impact on the resolution

of this—or any other—class action settlement.

If one sets aside the Third Circuit’s unqualified statement

of its legal standard, its actuai »nalysis was, for the most part,

a textbook example of the careful scrutiny that must be

applied to class certification in the settlement context.'* Mosi

importantly, the Third Circuit scrupulously focused on the

unique purposes and prerequisites for Section (b)(3) class

treatment and expressly limited its commonality holding on

that basis. Pet. App. 19a. Section (b)(3) actions—where class

treatment may be desirable but not necessary to achieve a just

result—were intended for use only where the putative class

demonstrates sufficient cohesion and the right of class mem-

bers to retain individual control of their claims is preserved.

Recognizing the careful balancing of interests which under-

lie Rule 23(b)(3), the Third Circuit was correct in requiring

that the predominance requirement be satisfied independent

of the existence of the settlement.

A. The History and Purposes of Rule 23(b)(3)

Section 23(b)(3) was added to Rule 23 in 1966 as part of

a comprehensive revision of the class action rule by the Advi-

‘8 This Court has repeatedly held that the requirements of Rule 23

are mandatory. See, e.g., General Tel. Co. of Southwest v. Falcon, 457

U.S. 147, 160-61 (1982); East Texas Motor Freight Sys. v. Rodriguez, 431

U.S. 395, 405 (1977); Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176

(1974) (rejecting suggestion that the mandatory notice requirement for

Rule 23(b)(3) actions should be excused because of its expense or because

there had been adequate representation); Richards v. Jefferson County, 116

S.Ct. 1761, 1766-67 (1996)(adequate representation does not cure a lack

of notice). See also Walsh v. Ford Motor Co., 807 F.2d 1000, 1007 (D.C.

Cir. 1986) (no basis for applying Rule 23 less stringently in Magnuson-

Moss action), cert. denied, 482 U.S. 915 (1987). “Actual, not presumed,

conformance” with Rule 23 is “indispensable.” Falcon, 457 U.S. at 160.

We focus, here, solely on Rule 23(b)(3) predominance and notice require-

ments—the narrowest grounds consistent with the Issue Presented—

because the Third Circuit's approach to these issues conforms to the

purposes underlying Rule 23(b)(3).

sory Committee on Civil Rules. The Committee chose to

jettison the existing rule’s cumbersome and obscure classi-

fication system (i.e., true, hybrid, spurious) in favor of “more

practical” descriptions of the circumstances in which class

actions could be maintained as well as “the measures. . .

to assure the fair conduct of these actions.” Amendments to

Rules of Civil Procedure, Rules Advisory Committee Notes

to Amended Rule 23, 39 F.R.D. 69, 99 (1966). The new sub-

division (b) of Rule 23 described the “varying situations” in

which the Committee believed the use of class actions could

be justified. /d. at 100.

Rule 23(b)(1) was intended to address those circumstances

where “an adjudication as to one or more members of the

class will necessarily or probably have an adverse practical

effect on the interests of other members who should therefore

be represented in the lawsuit.” Jd. at 101. This subdivision

encompasses, for example, the disposition of a traditional

“limited fund.” Where a fund exists which is too small to sat-

isfy all claims against it, unitary class disposition is necessary

to “effect a pro-rata reduction of all claims in order to treat all

claimants fairly.” In Re Asbestos Litigation, 90 F.3d 963, 986

(Sth Cir. 1996). In such actions, “equitable circumstances dic-

tate the need for unitary adjudication regardless of the indi-

vidual consent of the parties affected.” Herbert Newberg and

Alba Conte, | Newberg on Class Actions § 1.22 at 1-51 (3d

ed. 1992). In the classic (b)(1) limited fund context, a failure

to grant class relief may result in many class members receiv-

ing a severely diminished recovery or no recovery at all.

Rule 23(b)(2) was intended for equitable actions seeking

primarily injunctive or declaratory relief against a party

which “has acted or refused to act on grounds generally appli-

cable to the class.” Fed.R.Civ.Pro. 23(b)(2). Like Rule 23(b)(1)

actions, adjudication of the rights of one class member will

necessarily determine the rights of others.

Thus, in both Rule 23(b)(1) and (b)(2) actions, class treat-

ment “arises out of the necessity to protect all interested per-

sons and to give full relief when numerosity precludes join-

der.” James Wm. Moore, 3B Moore's Federal Practice,

4 23.45[2] at 23-298 (2d ed. 1987). In such cases, a failure to

grant class relief is often tantamount to a denial of all relief

for class members.

The third, and most controversial, subdivision of the 1966

amendment was the creation of the Rule 23(b)(3) opt-out

class action. Benjamin Kaplan, Continuing Work of the Civil

Committee: 1966 Amendments of the Federal Rules of Civil

Procedure, 81 Harv. L. Rev. 356, (1967); Judith Resnik, From

Cases to Litigation, 54 Law and Contemporary Problems 5, 9

(Summer 1991). While the historical roots of Rule 23(b)(1)

and 23(b)(2)-type class actions can be traced to traditional

equitable class action procedure recognized at English com-

mon law, the Rule 23(b)(3) opt-out class action device was an

invention of the 1966 Advisory Committee.’ Jn Re Asbestos

Litigation, 90 F.3d at 987 n.16.

The Advisory Committee envisioned that Rule 23(b)(3)

would be used in situations “where class-action treatment

is not as clearly called for” as it was in the Rule 23(b)(1)

and Rule 23(b)(2) situations, but might “nevertheless be con-

venient and desirable.” Advisory Committee Notes, 39 F.R.D.

at 102-03.

Subdivision (b)(3) encompasses those cases in which a

class action would achieve economies of time, effort,

and expense, and promote uniformity of decision as to

persons similarly situated, without sacrificing procedu-

ral fairness or bringing about other undesirable results.

Ibid (emphasis added).

9 The only historical antecedent to Rule 23(b)(3) was the “spu-

rious” opt-in action of the 1938 version of Rule 23 which was a per-

missive joinder device rather than a true class action. See Advisory

Committee Notes, 39 F.R.D. at 98-99.

At the heart of the debate was a concern that, in circum-

stances where unitary resolution is not essential (as it is in the

Rule 23(b)(1) and (b)(2) situations), the rule should account

for each individual’s interest in retaining the right to control

his or her own claim. Where, for example, the amount of an

individual's potential stake is small, and thus the individual's

need to exercise direct control of the lawsuit is minimal, dis-

cretionary use of class treatment under Rule 23(b)(3) might

well be desirable and would achieve “economies of time,

effort and expense.” Advisory Committee Notes, 39 F.R.D. at

102. On the other hand, “where the stake of each member

bulks large and his will and ability to take care of himself are

strong,” class treatment might not be appropriate. Kaplan,

Continuing Work, at 391. The Committee recognizcd that

“[t}he interests of individuals in conducting separate lawsuits

may be so strong as to call for denial of a class action.” Advi-

sory Committee Notes, 39 F.R.D. at 104.7°

To accommodate this compelling interest in individual con-

trol over claims, the Committee erected three independent

hurdles to be met for Rule 23(b)(3) discretionary class treat-

ment, in addition to the requirements of numerosity, typi-

cality, commonality and adequacy of representation found in

Rule 23(a). These requirements are that: 1) common issues

predominate, 2) class resolution will be superior to alternative

methods of adjudication; and 3) class members receive notice

aa Indeed, the Advisory Committee's concern for individual con-

trol of traditional damage claims is reflected in its opinion that “a ‘mass

accident’ resulting in injuries to numerous persons is ordinarily not

appropriate for a [Rule 23(b)(3)] class action.” Advisory Committee

Notes, 39 F.R.D at 103. The drafters viewed tort actions as “quintessen-

tially cases involving individuals” and this vision reflects, among other

things, a concern “for plaintiffs whose autonomy, individuality and con-

trol could be limited.” Resnik, Cases to Litigation, at 17. While the case

law regarding the class treatment of mass torts has obviously evolved

since 1966, the Advisory Committee's concern reflects the significance

that was placed on individual control in determining the propriety of cer-

tifying a Rule 23(b)(3) discretionary class action. Resnik, Cases to Lit-

igation, at 17-19. .

and a right to opt-out of the class. These additional hurdles

take into account the fact that Rule 23(b)(3) classes are by

nature less cohesive than (b)(1) or (b)(2) classes, and thus

require more stringent protections for absent class members.

Walsh v. Great Atlantic & Pacific Tea Co., 726 F.2d 956, 963

& n.1 (3d Cir. 1983).

B. Analysis of Rule 23(b)(3) Requirements for

Settlement Classes

Rule 23(b)(3) ultimately requires a balance between the

strong interest in individual control of an action and the inter-

ests of efficiency and fairness. For the predominance and opt-

out requirements, the concern with individual control is

paramount, and thus the the fact of settlement is not relevant

to the analysis. The superiority requirement, on the other

hand, permits considerations of the fairness and efficiency of

a settlement.

1. Predominance of Common Issues

a. Predominance Establishes the Thresh-

old Existence of a Cohesive Class

The first hurdle imposed by Rule 23(b)(3) is that “questions

of law and fact predominate over any questions affecting only

individual class members.” The predominance finding ensures

that there is a sufficient cohesiveness of common interests to

justify class treatment. Unlike the Rule 23(a) commonality

requirement which may be satisfied by one common issue of

law or fact,”' Rule 23(b)(3) requires:

a Because the threshold for demonstrating the Rule 23(a) com-

monality requirement is quite low, it will rarely be an impediment to cer-

tification of a settlement class. Jenkins v. Raymark, 782 F.2d 468, 472

(Sth Cir.) reh'g denied en banc (Sth Cir. 1986); Pet. App. 42a. Indeed, the

Third Circuit in this case had no trouble identifying sufficient common

issues to satisfy this requirement without considering the settlement. Pet.

App. 40a, 43a. In a Rule 23(b)(1) or (b)(2) class action settlement, com-

monality under 23(a) will normally be easily established without reliance

on the settlement, because the additional requirements of sections (b)(1)

common questions [must] not only exist but “predomi-

nate” over questions touching only individual members

of the class. For a class action loses attractiveness as the

individual questions are seen to have such scope or vari-

ety as to overload the action.

Kaplan, Continuing Work, at 390.

Predominance requires that there be a group which is “more

bound together by a mutual interest in the settlement of com-

mon questions than it is divided by the individual members’

interest in the matters peculiar to them.” 3B Moore's Federal

Practice, 4 23.45[2] at 23-299. The predominance requirement

is not simply a tool to ensure administrative efficiency, “it is

a necessary feature in the demonstration of the existence of an

actual class.” /d. 9 23.45[2] at 23-299 n.5. Without predom-

inance, there is no class.

The unique predominance requirement of Rule 23(b)(3)—

but not of Rule 23(b)(1) or (b)(2)—flows, in part, from the

historic change from the “opt-in” provision of the old “spu-

rious” class action to the new “bound if no opt-out” rule. With

the revised opt-out approach, it was recognized that, even

with an opt-out right, members of the class could be bound to

the class judgment as a result of inaction rather than personal

choice. Marvin Frankel, Some Preliminary Observations Con-

cerning Civil Rule 23, 43 F.R.D. 39, 44-45 (1967). To avoid

“potentially capricious” results, a more stringent showing of

cohesion was required as an extra safeguard. 3B Moore's Fed-

eral Practice, 9 23.45[2] at 23-300.

and (b)(2) virtually always demonstrate commonality. 1 Newberg on

Class Actions, § 3.10 at 3-56. Thus, for example, in a Rule 23(b)(1)(B)

case, the risk of diminished recovery by all members of the class, in the

absence of class treatment, is a common issue of fact. See /n re Asbestos

Litigation, 90 F.3d at 975-76.

b. Predominance Should be Evaluated

Without Consideration of the Settle-

ment

Because predominance serves as a safeguard to ensure that

discretionary class treatment under Rule 23(b)(3) is appro-

priately invoked, the Third Circuit correctly evaluated this

requirement without reliance on the Settlement. The thresh-

old inquiry for Rule 23(b)(3) is: do the claims (and defenses

thereto) of a disparate collection of individuals share enough

common features to establish an interest in a unitary resolu-

tion despite individual interests? Unless this finding can affir-

matively be made, then the parties are not entitled to use Rule

23(b)(3); instead, the presumption in favor of individual con-

trol of claims will prevail. If a settkement were allowed to

establish predominance, it would defeat the Rule 23(b)(3)

recognition of the desirability of individual control and, more

importantly, would beg the essential threshold question of

whether there is sufficient class cohesiveness.

Petitioners attempt to justify the district court’s approach

to class certification on the grounds that it is based on a “judi-

cial consensus” that “the existence of a settlement should be

taken into account in applying the Rule 23 criteria.” Pet.Br. at

22-23 and accompanying footnotes. Although there is broad

consensus that settlement classes are permissible,”* and there

may be a consensus that settlement may be taken into account

in some fashion in making the certification decision, there is

no authority for the proposition that a setthkement may sub-

stitute for establishing the existence of a class. Most signif-

icantly for our purposes, of the appellate court cases cited by

petitioners, none has held that a settlement establishes the

Rule 23(b)(3) requirement of predominance.”

22 The Third Circuit is part of this consensus. See Pet. App. 36a; Jn

re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55

F.3d 768, 799-800 (3d Cir.) cert. denied, 116 S.Ct. 88 (1995).

23 There are but three district court cases that hold that a settlement

is relevant to the predominance requirement, yet none of these cases con-

Petitioners also argue that a proposed settlement eliminates

all uncommon or “disparate” issues, leaving the remaining

issue of only whether the settlement is fair to the class.

Pet.Br. at 42. But a settlement proposal does not erase the dif-

fering claims and interests of class members, including their

interest in controlling their own claims. Rather, a Rule

23(b)(3) settlement presumes that the underlying claims share

sufficient unity to justify class treatment. Only if that pre-

sumption is, in fact, correct do the putative class represen-

tatives and class counsel have the authority te compromise

those claims. Petitioners’ approach would essentially boot-

strap the class determination from the fact that a settlement

has been offered. Such an approach would invariably elimi-

nate the predominance requirement in all settlements. While

that may be “efficient,” it is not the purpose of the Rule

23(b)(3) predominance requirement.**

tain any analysis whatsoever. Woodward v. Nor-Am, No. 94-0780-CB-C,

1996 U.S. Dist. LEXIS 7372, at *42 (S.D. Ala. May 23, 1996); Bowling

v. Pfizer, Inc., 143 F.R.D. 141, 160 (S.D. Ohio 1992); In re First Comod-

ity Corp. Customers Accounts Litig., 119 F.R.D. 301, 307 (D. Mass.

1987).

Petitioners’ repeated reliance on the goal of “efficiency” is par-

ticularly inappropriate for cases such as this, where certification is sought

under Rule 23(b)(3). To be sure, the predominance requirement also

ensures that class litigation will be an efficient use of judicial resources.

Since arguably any class action may be more efficient than numerous

individual actions, however, the requirement is not met merely by an

assertion that a class action will be efficient. In order to certify a Rule

23(b)(3) class, the rule mandates careful evaluation of each class mem-

ber’s due process rights and interest in controlling his or her own liti-

gation. Fed.R.Civ.P. 23(b)(3). While efficiency is one factor to be

balanced in the (b)(3) superiority inquiry, it does not substitute for a

showing of either predominance of class issues or a meaningful notice

and opt-out right.

Nor does Rule | of the Federal Rules of Civil Procedure, which pro-

vides that the rules must be construed to secure the “just, speedy, and

inexpensive determination of every action,” Fed.R.Civ.Pro. 1 (emphasis

added), suggest that efficiency should override Rule 23 prerequisites.

Rule | focuses upon the need for both efficiency and justice. An inter-

pretation of Rule | which sacrifices fairness on the altar of efficiency is

Moreover, the claim that petitioners have “obligated them-

selves to compensate [qualifying] class members” and have

“waived all defenses” under the terms of the Settlement does

not change the analysis.*° Pet.Br. at 42. If anything, it under-

scores the need for rigorous and independent analysis of Rule

23(b)(3) predominance. The procedural and substantive rights

provided by state law to asbestos victims vary widely among

the states. For asbestos victims considering whether to litigate

or settle, the rights unique to their individual states, along

with the likely recovery for claims that flow from those dif-

fering rights, will be determining factors. The Settlement does

not “waive” such differences—it obliterates them and imposes

a one-size-fits-all standard on the class.** Perhaps such a

national standard might be justified if class resolution were

necessary (for example in a limited fund Rule 23(b)(1)(B)

completely contrary to both the language and spirit of the federal rules.

See 3B Moore's Federal Practice 923.45[3) at 23-313 n.5 (“the admin-

istration of justice is not an end in itself. It is only a means to get jus-

tice.”)

25 Petitioners’ justification of the district court's analysis, based on

the so-called “background presumptions” underlying the federal rules.

also fails. Pet.Br. at 31-33. They imply that the parties may waive Rule

23. This argument presupposes the very issue that the district court must

address—whether there is in fact a class cognizable under Rule 23(b).

Only if there is a class would the representative have the authority to

make agreements, or waive claims on behalf of the class. If the require-

ments of Rule 23(b) are not met, then the parties do not have the author-

ity to impose their agreement upon the class.

2 ~~‘ The Settlement sets forth a non-exhaustive list of over eighteen

factors which CCR may consider in setting compensation for claimants

within its specified damage ranges. While the “location of the forum in

which a lawsuit” might otherwise be filed by a claimant is included on

that long list, the Settlement provides no formula or system for weigh-

ing this or any other factor. Indeed, there is utterly no guidance about

how these factors should be evaluated or compared. JA 80. Instead,

victims are left to the unfettered discretion of the CCR defendants they

can no longer sue. Such discretionary and standardiess determinations

cannot substitute for an assessment of whether state-by-state differences

are material enough to compel a finding against predominance.

action) or where state law differences were not significant

However, in a Rule 23(b)(3) action, such differences, in fact,

may expose the essential lack of cohesion of the class, and the

lack of predominance of common issues. See Castano v.

American Tobacco Co. 84 F.3d 734, 741 (Sth Cir. 1996);

Walsh v. Ford Motor Co. 807 F.2d at 1016-17.

c. A Finding of a Settlement’s Fairness

under Rule 23(e) Cannot Substitute for

Independent Evaluation of Rule 23(b)(3)

Predominance

While the terms of a settlement and its approval process

may undoubtedly provide evidence relevant to a number of

the Rule 23 requisites, the Rule 23(e) settlement inquiry—

which serves distinct purposes—does not address the same

purposes that underlie the predominance requirement.

Rule 23(e) prohibits the dismissal of a class action “with-

out approval of the court.” This has uniformly been inter-

preted to mean that the district court must determine that the

proposed settlement is “fair, adequate and reasonable.” Girsh

v. Jepson, 521 F.2d 153, 156-57 (3d Cir. 1975). This inquiry

will focus on the terms of the settlement itself and its fairness

to the class overall. As the Second Circuit explained in Wein-

berger v. Kendrick, 698 F.2d 61, 73-74 (2d Cir. 1982), cert.

denied, 464 U.S. 818 (1983):

Determination [of] whether a proposed class action

settlement is fair, reasonable and adequate involves con-

sideration of two types of evidence. The primary concern

is with the substantive terms of the settlement: ‘Basic to

this .. . is the need to compare the terms of the com-

promise with the likely rewards of litigation.’ [citations

omitted] * * * In order to supplement the thus neces-

sarily limited examination of the settlement’s substantive

terms, attention also has been paid to the negotiating

process by which the settlement was reached, and courts

have demanded that the compromise be the result of

arm’s length negotiations and that plaintiffs’ counsel

have possessed the experience and ability, and have

engaged in discovery, necessary to effective represen-

tation of the class's interests. [citations omitted]

See also Moore v. San Jose, 615 F.2d 1265, 1271 (9th Cir.

1980) (the sole question before the district court in reviewing

a settlement agreement is whether the agreement is funda-

mentally fair or just); Grunin v. International House of Pan-

cakes, 513 F.2d 114, 124 (8th Cir.) (the most important factor

in assessing fairness is the strength of the case on the merits

balanced against the amount offered as settlement), cert.

denied, 423 U.S. 864 (1975). Thus, the court is concerned

with the substance of the agreement and the process by which

the agreement was reached. Moreover, as the district court in

this case noted, the focus in a fairness inquiry is whether the

proposed settlement “evaluated as a whole, and not term-by-

term or plaintiff-by-plaintiff” is fundamentally fair. Pet. App.

237a. Thus, nothing in Rule 23(e) is intended to safeguard the

substantive or procedural rights of individual class members.

In contrast, Rule 23(b)(3) focuses on the cohesiveness of

the class and a proper regard for individual control of an

action. Additionally, while the fairness process examines the

substantive fairness of a settlement, Rule 23(b)(3) is con-

cerned with the due process rights of the class. Jn re General

Motors Corp. Pick-Up Fuel Tank Prod. Liab. Litig., 55 F.3d

768, 796 (3d Cir.), cert. denied, 116 S.Ct. 88 (1995).

d. Requiring that Predominance Exist

Independent of any Proposed Settle-

ment Will Not Hamper Class Resolu-

tion of Complex Cases

Contrary to petitioners’ dire predictions, the requirement

that predominance be established without reliance on the set-

tlement will not impede settlement of civil rights, antitrust,

and securities actions, or even appropriate mass tort cases.

Pet.Br. at 35-37.

First, because predominance is only a requirement for cases

certified under Rule 23(b)(3), many types of class actions are

unaffected. Many civil rights cases, for example, are certified

under Rule 23(b)(2).*’ Similarly, in many mass tort cases,

recovery is subject to a limited fund, requiring certification

under Rule 23(0)(1).** While some overreaching settlements

in mass tort cases may be precluded under Rule 23(b)(3) if a

court cannot rely on the proposed settlement to get over the

predominance hurdle, this result is necessary to preserve the

core values of Rule 23(b)(3): class cohesion and individual

control of damage actions.

Second, outside of the field of mass torts, petitioners have

not demonstrated that the predominance requirement would be

a major impediment to class settlements. Indeed, even in

securities actions, class certification is relatively routine

in the litigated context. See Thomas E. Willging, Laural L.

Hooper and Robert J. Niemac, An Empirical Analysis of Rule

23 to Address the Rulemaking Challenges, 71 NYU Law Rev.

74, 89 (April-May 1996). Moreover, in contrast to complex

personal injury mass tort actions, civil rights, antitrust, secu-

rities and fraud cases present substantially fewer individu-

alized claims than those in mass tort cases. Statutory actions,

such as civil rights, antitrust or securities cases, present no

choice of law or inter-state differences because they are based

upon a single body of law. Furthermore, courts have already

developed a variety of procedural devices to streamline any

potentially individualized determinations in such actions. See,

e.g., Cooper v. Federal Reserve Bank, 467 U.S. 867, 878-81

27 ‘Indeed, the Rules Advisory Committee describes civil rights

cases as the prototypes of (b)(2) class actions. Advisory Committee

Notes, 39 F.R.D. at 102. See, e.g., Officers for Justice v. Civil Service

Comm 'n., 688 F.2d 615, 622 (9th Cir. 1982) (certified as Rule 23(b)(2)

for purposes of injunctive, declaratory and back pay relief), cert. denied,

459 U.S. 1217 (1983).

28 «See. e.g., In re Asbestos Litigation, 90 F.3d at 974; In re A.H.

Robins, 880 F.2d 709, 742 (4th Cir.), cert. denied sub nom., Anderson v.

Aetna Casualty & Surety Co., 493 U.S. 959 (1989).

(1984) (classwide allegation of pattern and practice of dis-

crimination decided separately from individual claims);

International Brotherhood of Teamsters v. United States, 431

U.S. 324, 359-62 (1977) (liability and damages bifurcated

with burden shifted to defendant at damage phase); Pettway

v. American Cast Iron Pipe Co., 494 F.2d 211 (Sth Cir. 1974)

(approving formulaic determination of classwide backpay

award in civil rights case), cert. denied, 439 U.S. 1115

(1978); In re Independent Gasoline Antitrust Litig., 79 F.R.D.

552, 561-62 (D. Md. 1978) (approving formulaic determina-

tion of classwide damages in antitrust case); Jn re United

States Financial Sec. Litig., 69 F.R.D. 24, 47-48 (S.D. Cal.

1975) (approving formulaic determination of classwide dam-

ages in securities case). Thus, a requirement that predomi-

nance be assessed without regard to settlement is unlikely to

hamper settlement of such cases.

2. Superiority

The second, independent hurdle of Rule 23(b)(3) is the

requirement that “a class action is superior to other available

methods for the fair and efficient adjudication of the con-

troversy.” Fed.R.Civ.Pro. 23(b)(3). “That common questions

predominate is not itself sufficient to justify a class action

under subdivision (b)(3), for another method of handling the

litigious situation may be available which has greater prac-

tical advantages.” Advisory Committee Notes, 39 F.R.D. at

103.

The Rule provides that the “superiority” determination

include consideration of two factors which directly address

concerns for individual control and autonomy: “the interest of

members of the class in individually controlling the prose-

cution or defense of separate actions” and “the desirability or

undesirability of concentrating the litigation of the claims in

the particular forum.” Fed.R.Civ.Pro. 23(b)(3). “The court is

to consider the interests of individual members of the class in

controlling their own litigations and carrying them on as they

see fit.” Advisory Committee Notes, 39 F.R.D. at 104. These

factors are balanced, under the rule, against considerations of

“manageability” and “the extent of litigation. . .already com-

menced.”*® Fed.R.Civ.Pro. 23(b)(3).

In contrast to the predominance inquiry, the superiority

requirement explicitly directs some consideration of the prac-

tical aspects of “managing” the case. It would serve, rather

than hinder, the purposes of Rule 23(b)(3) to consider the Set-

tlement in this calculation. The Third Circuit erred in ignor-

ing the Settlement in determining manageability.*°

3. Mandatory Notice and Opt-Out

Even where common issues predominate and class resolu-

tion is “superior,” Rule 23(b)(3) incorporates yet another pro-

tection for the rights of individuals to control their claims:

mandatory notice and a right to opt-out of the class. “[E]ven

when the action is found by the court to lie within (b)(3),

individual preference is still allowed to operate, and in a

somewhat novel manner.” Kaplan, Continuing Work, at 391.

Subdivision (c)(2) requires that, in all (b)(3) actions, class

members receive notice and the right to exclusion from the

class.

[T]he interests of the individuals in pursuing their own

litigations may be so strong here as to warrant denial of

29 Petitioners dismiss Rule 23(b)(3) predominance and superiority

requirements as focused “largely on avoidance of inefficiencies.” Pet.Br.

at 30. Because Rule 23(b)(3) prescribes a careful balancing of individ-

ual control and judicial economy, petitioners’ characterization of Rule

23(b)(3) as nothing more than a tool for achieving judicial efficiency and

convenience tells only half of the story. While manageability is one of

several factors to be considered in assessing superiority, a factor we agree

can properly be considered in the settlement context, efficiency is not the

sine qua non of Rule 23(b)(3) treatment.

30 - However, as argued infra, Section 11.B.2, the Third Circuit's

overall finding that superiority was absent because of the inherent prob-

lems of notice to future asbestos victims was correct.

a class action altogether. Even when a class action is

maintained under subdivision (b)(3), this individual

interest is respected. Thus the court is required to direct

notice to the members of the class of the right of each

member to be excluded from the class upon his request.

Advisory Committee Notes, 39 F.R.D. at 104-05. Moreover,

the right to notice and opt-out in a Rule 23(b)(3) action is

mandatory. Eisen, 417 U.S. at 176 (rejecting suggestion that

the mandatory notice requirement for Rule 23(b)(3) actions

should be excused because of its expense).*' Walsh v. Ford

Motor Co., 807 F.2d at 107-08.

The mandatory notice requirement for Rule 23(b)(3) actions

“is designed to fulfill requirements of due process to which

the class action procedure is of course subject.” Advisory

Committee Notes, 39 F.R.D. at 107 (citations omitted). In

Eisen, this Court, in applying Rule 23(c)(2)’s notice require-

ment for (b)(3) actions, reaffirmed its earlier holding in Mul-

lane v. Central Hanover Bank & Trust Co., 339 U.S. 306

(1950), that notice must be meaningful:

when notice is a person’s due, process which is a mere

gesture is not due process. The means employed must be

such as one desirous of actually informing the absentee

might reasonably adopt to accomplish it. The reason-

te The Court in Eisen also rejected plaintiff's contention that ade-

quate representation, rather than notice, was the “touchstone of due pro-

cess” in a Rule 23(b)(3) class action.

Rule 23 speaks to notice as well as to adequacy of representation

and requires that both be provided. Moreover, petitioner's argument

proves too much, for it quickly leads to the conclusion that no

notice at all, published or otherwise, would be required in the pre-

sent case. This cannot be so, for quite apart from what due process

may require, the command of Rule 23 is clearly to the contrary. We

therefore conclude that Rule 23(c)(2) requires that individual notice

be sent to all class members who can be identified with reasonable

effort.

Eisen, 417 U.S. at 176-77.

ableness and hence the constitutional validity of any

chosen method may be defended on the ground that it is

in itself reasonably certain to inform those affected.

Eisen, 417 U.S. at 174, quoting Mullane, 399 U.S. at 315. See

also Greenfield v. Villager Industries, Inc., 483 F.2d 824, 834

(3d Cir. 1973).

There is no justification for a relaxed or liberalized analysis

of notice and opt-out rights in the context of a settlement. In

Eisen, this Court expressly rejected arguments that the parties

be allowed to dispense with notice in a Rule 23(b)(3) case in

circumstances where notice was difficult, expensive or unjus-

tified by the size of the class member’s stake. Eisen, 417 U.S.

at 176. Notice and opt-out are “unambiguous requirement(s]

of Rule 23.” /bid. For all (b)(3) settlement classes, courts

must ensure that meaningful individual notice and the right to

exclusion are provided.” If this mandatory requirement is not

met, the putative class may not be certified and the class set-

tlement, whatever its benefits, must be rejected. In other

words, no cost-benefit calculus will justify inadequate notice

and opt-out rights.

Indeed, in contrast to notices for litigated classes, greater

scrutiny of settlement class opt-out notices is necessary for at

least two reasons. The contents of a settlement notice will

often be substantially longer and more complex because it

will describe the underlying litigation, the opt-out process,

and the settlement provisions and procedures for objecting to

the fairness of the settlement. Second, faced with a lengthy

docuiment that describes a complex settlement, a class mem-

ber may feel as if he or she is being ; resented with a “fait

accompli.” Mars Steel Corp. v. Continental Illinois Nat'l.

°2 Notice and an opportunity for exclusion are not required for

actions under Rule 23(b)(1) and (b)(2) because unitary resolution man-

dates the binding of all class members. /n re Asbestos Litigation, 90 F.3d

at 986-87. Class notice of a settlement will, however, be provided to class

members to permit them to object to the settlement or, if appropriate, to

file a claim. Fed.R.Civ.Pro. 23(e).

ee a Ne pe OE Ree Re Re ae nT ORES OR

Bank & Trust Co., 834 F.2d 677, 680-681 (7th Cir. 1987);

GM Trucks, 55 F.3d at 789.

Il. THIS SETTLEMENT CLASS DOES NOT MEET

THE RULE 23(b)(3) REQUIREMENTS OF PRE-

DOMINANCE AND NOTICE

A. The Class Does Not Satisfy the Requirement that

Common Issues Predominate

If the Settlement is not taken into account—as it should not

be—the class clearly does not satisfy the Rule 23(b)(3) pre-

dominance requirement.

The district court identified only one common question of

law or fact, apart from the class's interest in the fairness

of the settlement: that “members of the class have all been

exposed to asbestos products supplied by the defendants.

. . .” Pet. App. 226a. The Third Circuit, while noting that

this was probably sufficient to meet the relatively low thresh-

old for commonality under Rule 23(a)(2), Pet. App. 43a,

described the issue of exposure and its harmful consequences

as “settled long ago.”*’ Pet. App. 40a, citing In Re School

Asbestos Litig., 789 F.2d 996, 1000 (3d Cir.), cert. denied sub

nom., Celotex Corp. v. School Dist. of Lancaster, 479 U.S.

852, and National Gypsum Co. v. School Dist. of Lancaster,

479 U.S. 915 (1986).

On the other hand, as the Third Circuit concluded, absent

consideration of the Settlement, “the number of uncommon

issues in this humongous class action, with perhaps as many

as a million class members, is colossal.” Pet. App. at 42a. The

legion of uncommon factual issues encompassed by the pro-

posed class are manifest in that the Settlement covers all

forms of asbestos disease, despite their differing pathologies,

*3 The Third Circuit identified a few other common issues, such as

defendants’ knowledge of the hazards of asbestos, whether they ade-

quately tested their products or if they offered adequate warnings accom-

panying their products. Pet. App. 40a.

causes and degrees of injury. For example, mesothelioma,

perhaps the worst form of asbestos disease, has but a single

cause (exposure to asbestos), unlike lung cancer, which has

been linked to other causes. Pleural thickening usually causes

TWo-physical impairment at all, while mesothelioma ensures

swift and certain death. As the Third Circuit noted, “{js]ome

class members suffer no physical injuries or have only asymp-

tomatic pleural changes, while others suffer from lung cancer,

disabling asbestosis, or from mesothelioma. . . Each has a dif-

ferent history of cigarette smoking, a factor that complicates

the causation inquiry.” Pet. App. 41a. The Third Circuit fur-

ther noted that “[iJt is unclear whether they will contract

asbestos related disease and, if so, what disease each will suf-

fer. They will also incur different medical expenses because

their monitoring and treatment will depend on singular cir-

cumstances and individual medical histories.” Pet. App. 41a.

These uncommon factual situations may lead to significant

legal differences with respect to affirmative defenses, cau-

sation, comparative fault, and the types of damages available

to each class inember. Pet. App. 41a.

Finally, and critically, the proposed class ignores the sub-

stantive and procedural differences among the states.** State

laws ‘iffer on a variety of issues relevant to class member

claims: “availability of causes of action for medical moni-

toring, increased risk of cancer, and fear of future injury; cau-

4 Such state law differences cannot be ignored. Cf. Phillips

Petroleum Co. v. Shutts, 472 U.S. 797, 823 (1985) (constitutional limi-

tations on choice of law apply even in nationwide class actions); Erie

R.R. v. Tompkins, 304 U.S. 64, 78-80 (1938) (federal court sitting in

diversity jurisdiction must apply common law of the state in which case

would normally be tried rather than general federal common law). It is

the duty of class proponents to establish, through “extensive analysis,”

that state law differences do not undermine the predominance of class

issues. In re School Asbestos Litig., 789 F.2d at 1010. Such an assertion

cannot be accepted “on faith.” Walsh v. Ford Motor Co., 807 F.2d at

1016. See also Castano, 84 F.3d at 742 (state law differences must be

examined by district court).

sation; the type of proof necessary to prove asbestos expo-

sure; statutes of limitations; joint and several liability; and

comparative/contributory negligence.” Pet. App. 41a-42a.

Moreover, these differences are not mere abstractions—the

claims of class members and defenses thereto, and the values

of their claims, are directly tied to such state law and proce-

dural differences, as is graphically reflected by the subsian-

tial inter-state variation in settlements and judgments in

asbestos cases. See JA 572-578, 562, 464-468. Such varia-

tions in state law and procedure “swamp any common issues

and defeat predominance.” Castano, 84 F.3d at 741. See also

In re American Medical Sys., 75 F.3d 1069, 1085 (6th Cir

1996); cf. Walsh v. Ford Motor Co., 807 F.2d at 1017 (state

law variations may defeat predominance unless major factual

issues are “identical or virtually so”); Jn re School Asbestos

Litig., 789 F.2d 996, 1010 (3d Cir. 1986) (“extensive analysis”

demonstrated state law differences fall within four categories

in property damage action).

The Third Circuit correctly found that, given the large

number of uncommon issues that are present, predominance

cannot be established. See Castano, 84 F.3d at 742 n.15 (dis-

cussing difficulty in establishing predominance and com-

paring to problems described in Third Circuit decision in this

case). Indeed, substantially more cohesive proposed classes

have failed the Rule 23(b)(3) predominance test. See, e.g.,

Yandle v. PPG Industries, Inc., 65 F.R.D. 566, 570-71 (E.D.

Tex. 1974).

A finding of lack of predominance for this immense and

immeasurable class does not mean that more narrowly tailored

classes would not meet the Rule 23(b)(3) predominance test.

A class may be defined in an infinite number of ways.** The

In this case, there has been no showing that state law differences

fall within a few patterns. See, e.g, In re School Asbestos Litig.. 789 F.2d

at 1010. Nor were narrower geographic classes explored. For example,

a more focused action, limited to a single state or group of states with

similar substantive and procedural rules, would present substantially

fewer individualized issues. In this regard, it bears noting that settlements

scope of the class will, however, directly impact the degree to

which common issues predominate. In this case, petitioners’

reach greatly exceeded the permissible grasp of Rule

23(b)(3).

B. The District Court Improperly Approved Rule

23(b)(3) Class Treatment Where Meaningful

Notice and the Right to Exclusion Were Not

Provided

The lack of predominance of common issues, which

resulted in a proposed class that lacked any cohesion, meant

that many disparate class members were swept up by a settle-

ment that imposed a resolution of their future claims. This

obvious mischief might have been partly alleviated if there

were a meaningful method by which class members could

exclude themselves from the Settlement, specifically through

the mandatory Rule 23(b)(3) opt-out right. Instead, the Set-

tlement exacerbated the lack of class cohesion by providing

for a largely illusory process for receiving notice and exer-

cising exclusion rights. Accordingly the district court should

not have certified this action as a Rule 23(b)(3) class.*®

from a handful of states account for a large portion of the petitioners’

past liability. See JA 562, et. seg. (showing that claims from California,

New York, Pennsylvania and Texas account for 50% of all CCR settle-

ment payments).

36 The Third Circuit explained that the class definition and the

terms of the Settlement raised serious questions regarding whether ade-

quate notice and opt out rights were provided to the class. Pet. App. at

31a, 56a-57a. While it declined to base its holding on the sufficiency of

the opt-out notice under Rule 23(c)(2), it concluded that the notice prob-

lems in this case demonstrated that the Rule 23(b)(3) superiority require-

ment had not been met. /d. at 55a-57a. Its analysis, as well as our Rule

23(c)(2) analysis, considers the terms of the Settlement and the class def-

inition. Whether the notice problem is analyzed as a Rule 23(c)(2) or

superiority issue, it remains clear that the certification of this case as a

(b)(3) class was improper.

1. Ensuring Adequate Notice and Opt-Out

Rights in a Rule 23(b)(3) Action Involving

Future Claims Requires Close Scrutiny

In evaluating certification of any Rule 23(b)(3) class—

whether a litigation or settlement class—a district court must

find that each class member will receive meaningful indi-

vidual notice and the right to opt-out. Eisen, 417 U.S. at 176.

This requirement must be met even where predominance and

superiority have already been established. See discussion

supra, Section 1.B.3. The right to individual notice and opt-

out is an integral component of the Rule 23(b)(3) balance; it

ensures that the desired efficiencies that may be accomplished

through class treatment do not subsume the equally important

right of any individual class member to control his or her

legal claim. The demanding requirement of notice and opt-out

rights cannot be relaxed in the context of a settlement. See

discussion supra, Section 1.B.3.

Rule 23(b)(3) settlement classes that seek to bind future

class members present the most difficult issues of notice and

opt-out and demand the most careful review. For future class

members to actually receive meaningful notice of a right to

opt-out of a settlement—whether through individual or pub-

lished notice—they must be susceptible to identification and

they must be in a position to make an informed choice about

whether to opt-out. Otherwise, notice in any form to the class

is nothing more than “a mere gesture.” Mullane, 339 U.S. at

315. As a leading class action commentator noted:

For class members who cannot currently identify them-

selves for purposes of protecting their interests with

respect to a class action purportedly commenced on their

behalf, an opt-out right with a court designated period of

time, (if opt-outs are permitted for other known mem-

bers), is of no beneficial use.

1 Newberg on Class Actions, § 1.23 at 1-55 (emphasis added).

Indeed, the Manual for Complex Litigation, Third (Federal

Judicial Center 1995) highlights the particular concern raised

by settlement classes:

The court should consider the impact of the settlement

on persons who may not currently be aware that they

have a claim or whose claim may not yet have come into

existence. Since they cannot be given meaningful notice,

they may be particularly prejudiced by the settlement,

and their opt-out rights (in a Rule 23(b)(3) action) may

be illusory.

Id. at 244 (emphasis added).

Even assuming that future class members may be identified,

the notice inquiry is still not complete. The court must also

ascertain whether future class members—who do not know if

and to what extent they may later suffer injury—have «nffi-

cient information to evaluate their choices and meaningfully

exercise their rights to exclusion. While class members in

both litigation and settlement ciasses are often required to

exercise opt-out rights based upon incomplete or imperfect

information, the court must nonetheless determine whether—

in the particular factual circumstances—there is sufficient

information to meaningfully exercise opt-out rights.

2. Notice and the Right to Opt-Out Are Illu-

sory in this Case

The Settlement defines a class, which includes all persons

who in the future will get one or more of a number of

asbestos related diseases from occupational exposure caused

by one or more of the 21 CCR companies as well as their

family members (who will either contract an asbestos disease

themselves or will have wrongful death claims for the indi-

vidual who was occupationally exposed). Rule 23(b)(3)

requires that. ~h of the members of this enormous and amor-

phous class receive the best practicable notice. Eisen, 417

U.S. at 176.

Since it is impossible to predict at the present time who

will get any asbestos disease, and even harder to predict who

will get which asbestos disease, class notice of necessity had

to aim broadly to reach all who might potentially fall victim

to any asbestos-related disease. The district court estimated

that nearly seven million people received individually deliv-

ered notice. Pet. App. 219a, 267a.

Because of the unique factors present in this case, what

appears at first blush as extensive notification is, in fact,

legally insufficient. To begin, many who have been occupa-

tionally exposed to asbestos may no longer be working in the

related industries and would not have received individual

notice triggered by their employment status. Even if they had

received notice—either through mail or publication—they

may not recall exposure that has occurred long in the past.

Their family members (who may not have even known the

future victim at the time of exposure) will be even less likely

to receive mailed notice or to self-identify as a class member.

The problem of effectuating notice is particularly acute for

those who will ultimately get mesothelioma, which may result

from slight exposure forty years in the past, see JA 335. The

future class member may be entirely unaware of the exposure.

He or she may not currently work—or have ever worked—in

the asbestos-related trades. As a result, the class member is

also unlikely to have received mailed individual notice. If he

or she happened to see one of the published or broadcast

notices that ran during the eight-week notice period, he or she

will have little reason to believe that his or her rights will be

affected by a pending lawsuit.*’ As the Third Circuit con-

37 Asbestos diseases, and particularly mesothelioma, are relatively

unique because of their long latency period and the risk from incidental

exposure. This is, for example, quite different from other mass tort cases

such as those involving breast implants or heart valves, where the poten-

tial victims can self-identify (one would expect an individual to know if

either had been implanted) or be tracked through medical records or man-

ufacturers’ sales records. In those cases, class members who have not yet

manifested injury must still make hard choices but they will do so with

cluded, because a person may contract mesothelioma based on

slight or incidental exposure which occurred fifteen to forty

years ago, “it is unrealistic to expect . . . every [exposed]

individual to realize that he or she could someday contract a

deadly disease.” Pet. App. 56a. For the family members of a

future mesothelioma victim, the connection becomes impos-

sibly attenuated.

But this is not the end of the problem. Even assuming a

putative class member did, in fact, receive a notice in this

case, it is inconceivable that he or she could comprehend the

vast complexity of the Settlement’s provisions, calculate the

probabilities and consequences of contracting one of many

asbestos diseases, and make a meaningful decision whether to

opt-out, all within less than 12 weeks.

The Settlement agreement encompasses the full range of

asbestos diseases—from pleural thickening to mesothelioma.

The settlement notice specifies technical and detailed medi-

cal proof requirements for each separate disease that must be

met to qualify for compensation. JA 227 et. seq. The Settle-

ment includes separate dollar value ranges for different dis-

eases but provides virtually no information from which a

class member can determine where in the range their poten-

tial claim would fall. The Settlement limits the number of

claims in each disease category that may be processed each

year. While these “flow rates” will affect how quickly a claim

may be processed within the settlement resolution process,

the likely number of claims (particularly since the size of the

class is unknown) would be a mystery to the class member,

who could not begin to determine whether his claim would be

reached in year one, year ten, or never.

But, even assuming that the class member diligently read

and comprehended the Settlement’s contents, he or she must

much greater information about the range of options that they have. Thus,

a ruling that notice is impossible for all or part of the present class will

not impede the future evolution of class action methods to resoive many

mass torts.

also attempt to predict which disease or diseases he or she

might get, and then assess whether the offered damage ranges

are reasonable. ** The reasonableness of the damage ranges,

however, turns on a comparison with the values obtainable by

litigation or settlement in the jurisdiction in which the class

member resides. This latter assessment is complicated still

further by the impossibility of predicting when one will fall

ill—another critical question since the Settlement provides for

no inflation adjustment during the first ten years and then

only a single modest adjustment thereafter.

The significance of the exclusion decision cannot, more-

over, be underestimated. For mesothelioma victims in par-

ticular, remaining in this class may be of immense and

catastrophic consequence since “([t)he [S]ettlement relegates

those who are unlucky enough to contract mesothelioma in

ten or fifteen years to a modest recovery, whereas the average

recovery of mesothelioma plaintiffs in the tort system runs

into the millions of dollars.” Pet. App. at 49a. Moreover, res-

olution of their claims under the Settlement may be delayed

by its flow rate limitation, while under state law, their claim

might have priority for adjudication. See, e.g., Cal. Code Civ.

Pro. 36(d). Those who suffer the devastating and fatal con-

sequences of mesothelioma have the strongest interest in pur-

suing their own individual litigation and will have no trouble

finding attorneys willing to prosecute their claims. Indeed, the

Advisory Committee anticipated that “[t}he interests of indi-

viduals in conducting separate lawsuits may be so strong as to

call for denial of a class action.” Advisory Committee Notes,

39 F.R.D. at 104-05.

= Historically, only about 3% of all claims against CCR defen-

dants were for mesothelioma, and a bit more than 4% for lung cancer.

JA 570, 580. Thus, while the potential class targeted for notice is exceed-

ingly large. only a relatively small proportion of the class will fall vic-

tim to these asbestos cancers. For most class members, the remote

possibility of fatality will likely not figure into their consideration of the

notice.

These overwhelming inadequacies of notice are exacerbated

by the Settlement itself, which required that the right to opt

out be exercised precisely at the point at which most indi-

viduals had the least information or incentive to make such a

choice—before diagnosis of any asbestos-related disease. Yet

the class definition and the complexity of the Settlement

make it very unlikely that potential mesothelioma victims will

appreciate the impact of the Settlement. Had the Settlement,

instead, provided a meaningful right to opt-out after the onset

of any disease, it would have done much to alleviate these

serious notice problems. Pet. App. 56a. Instead, the Settle-

ment limits the number of mesothelioma victims nationwide

who may exit to the tort system to a maximum range of nine

(9) to fourteen (14) individuals annually, only 2% of an

already capped number of such claims that may be resolved

each year.

Thus, as the Third Circuit summarized, the notice is prob-

lematic for undiagnosed plaintiffs because: (1) “[such] plain-

tiffs may not know that they have been exposed to asbestos

within the terms of this class action;” 2) even if aware of their

exposure, these plaintiffs who suffer no physical injuries,

have little reason to “pay attention to class action announce-

ments;” and 3) “even if class members find out about the

class action and realize they fall within the class definition,

they may lack adequate information to properly evaluate

whether to opt out of the settlement.” Pet. App. 55a-56a.

In contrast to the Third Circuit's careful analysis, the dos-

wrict court summarily rejected the concern that potential class

members would be unable to self-identify or evaluate their

risk of future injury and thereby receive meaningful notice

and the right to exclusion.”

9% ‘The distfiet court made only the following unsubstantiated con-

clusion:

I am satisfied, however, that after more than 20 years of extensive

litigation, over 15 bankruptcies (many with extensive notice) and

Petitioners may argue that Rule 23(c)(2) requires individ-

ual notice only to class members “who can be identified

through reasonable effort.” Fed.R.Civ.Pro. 23(c)(2) (empha-

sis added). Given that notice was mailed to 6.8 million house-

holds, Pet. App. 267a, they may contend that reasonable

massive publicity about asbestos, persons who have had occupa-

tional exposure to asbestos are aware of that exposure.

JA 311. The district court ignored the fact that the class included not just

those with occupational exposure but family members of those with occu-

pational exposure. Its conclusion was particularly unfounded for

mesothelioma victims, where exposure may have been caused by wash-

ing the household laundry, or living with a parent who was exposed to

asbestos in the workplace. JA 335.

To support its decision, the district court relied primarily on

bankruptcy cases, which permitted notice to future asbestos victims.

These cases are particularly inapposite since they involve bankruptcy

procedures where notice and the right of exclusion are not mandatory (as

they are ir Rule 23(b)(3) classes). Moreover, as with Rule 23(b)(1)(B)

limited fund cases, due process requirements may differ where a unitary

resolution is mandated. See In Re Asbestos Litigation, 90 F.3d at 986-87.

The district court also relied on the decision in /n re “Agent Orange”

Prod. Liab. Litig. (“Agent Orange I”), 818 F.2d 145, 154, 168-69 (2d Cir.

1987), cert. denied, 484 U.S. 1004 (1988), which is similarly distin-

guishable. Unlike mesothelioma victims, absent class members in Agent

Orange had sufficient information to self-identify. The class included

only Vietnam War veterans, spouses, parents, and children born before

January 1, 1984. Claimants knew that they were Vietnam veterans and

potentially affected by the settlement, when they learned of it through

mai! or published notice. Also unlike mesothelioma claims, the Agen:

Orange claims were legally weak and therefore worth very little. /n re

“Agent Orange” Prod. Liab. Litig. (“Agent Orange II”), 996 F.2d 1425,

1436-37 (2d Cir. 1993). cert. denied sub nom, Ivy v. Shamrock Chemicals

Co., 510 U.S. 1140 (1994). Finally, the district court treated the class set-

tlement as functionally a limited fund case. After 2500 class members

opted out pursuant to a Rule 23(b)(3) setlement notice, the district court

granted summary judgment against all of the opt-out plaintiffs on the

issues of causation and the military contractor defense. The disirict court,

with the approval of the parties, then took the unprecedented step of

allowing all the opt-out claimants to rejoin the class and share in the set-

tlement fund. See In re “Agent Orange” Prod. Liab. Litig., 689 F Supp.

1250, 1261-63 (E.D.N.Y. 1988). The extraordinary facts and circum-

stances of the Agent Orange saga render that case sui generis.

efforts have been exercised. See Pet.Br. at 48-49 n.25. But,

the notice issue presented in this case is not whether the par-

ties have exercised reasonable efforts to deliver a notice doc-

ument to known class members. This is not, for example,

about whether some class members have moved and cannot be

traced to a new address. Instead, the problem here is that peti-

tioners have defined a class that includes millions of Ameri-

cans who have been exposed to asbestos within the definition

of the Settlement but may not be aware of their exposure and

are unlikely to receive or appreciate notice. Even if they do,

class members cannot know what disease might lie in store

for them, when they will get sick, how many years they will

have to wait for claim processing and payment through CCR,

or what their claim might to worth in court or through settle-

ment. A class member could well conclude that the settlement

would be acceptable if he developed a pleural plaque next

year, but not. if he developed mesothelioma in fiwe years.

Indeed, he could get both, yet he has to decide to either stay

in or opt-out before falling victim to either. These people,

who represent the vast majority of the class, cannot receive

meaningful notice and intelligently decide whether to opt-out

because of the very nature of this Settlement. Consistent with

Rule 23(b)(3)’s purpose of providing for meaningful indi-

vidual control of claims, where notice and opt-out rights are

illusory, a class simply cannot be certified. See Advisory

Committee Notes, 39 F.R.D. at 104-05.

CONCLUSION

Even though the Third Circuit erred in its broad pro-

nouncements on general principles of class action law, on the

basis of its actual examination of this case and this record, the

Third Circuit correctly concluded that the proposed class

failed to meet the predominance requirement of Rule 23(b)(3)

and failed to provide adequate notice to class members of

their right to opt out. Therefore, its judgment should be

affirmed.

Respectfully submitted.

BRAD SELIGMAN

Counsel of Record

JOCELYN D. LARKIN

DONNA M. RYU

SHARON R. VINICK

ANN. BLESSING

1049 Key Route Boulevard

Albany, CA 94706

(510) 527-9385

STEVEN KAZAN

AARON SIMON

KAZAN, MCCLAIN, EDISES, SIMON

& ABRAMS

171 Twelfth Street, Third Floor

Oakland, CA 94607

(510) 465-7728

Counsel for Respondents

Aileen Cargile, Betty Francom,

John Wong, Sharon Soteriou,

Laena Emmerich and Barbara Cerey

This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.