Amicus Curiae Brief — Amchem Products, Inc. v. Windsor

oo WN FILED

Jeb 16 199g _No. 96-270 “e

IN THE

Supreme Court of the United States

OCTOBER TERM, 1995

AMCHEM PRODUCTS, INC., ET AL.,

Petitioners,

V.

GEORGE WINDSOR, ET AL..,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals for the Third Circuit

MOTION OF THE CHAMBER OF COMMERCE OF THE

UNITED STATES OF AMERICA FOR LEAVE TO FILE A

BRIEF AS AMICUS CURIAE

AND

BRIEF FOR AMICUS CURIAE THE CHAMBER OF

COMMERCE OF THE UNITED STATES OF AMERICA

IN SUPPORT OF PETITIONERS

STEPHEN A. BOKAT JOHN H. BEISNER*

RoBIN S. CONRAD BRIAN D. BOYLE

NATIONAL LITIGATION EVELYN L. BECKER

CENTER, INC. TERESA KWONG

1615 H. Street, N.W. O'MELVENY & MYERS LLP

Washington, D.C. 20062 555 Thirteenth Street, N.W.

(202) 463-5337 Washington, D.C. 20004

(202) 383-5300

*Counsel of Record

Counsel for The Chamber of Commerce

of the United States of America

SS

|

United States Court of Appeals for the Third Circuit

THE UNITED STATES OF AMERICA FOR LEAVE

TO FILE A BRIEF AS AMICUS CURIAE

2

fessional organizations, and state and local chambers of

commerce. The Chamber regularly participates as amicus

curiae in civil cases raising issues of national concern to the

Chamber member businesses often have been, and in

numerous cases presently are, defendants in cases initiated

by class action complaints. Those cases have asserted

allegations on a wide array of matters, such as products

liability, securities, tort, and antitrust claims. In some of

these putative class actions, the parties may be able to reach

a settlement before the district court has decided whether the

class should be certified for the purpose of litigating the

claims set forth in the complaint. The present case raises the

question of how the standards for class certification set forth

in Federal Rule of Civil Procedure 23 should be applied in

such circumstances.

As set forth in the accompanying brief, there is a long

history of courts’ taking the parties’ voluntarily negotiated

settlement into account in deciding whether to certify a class.

Given the frequency with which Chamber member businesses

are made targets of federal class action complaints, the

Chamber has a strong interest in informing the Court of the

extent to which the settlement class device is used to resolve

class action litigation, and the extent to which any ruling that

changes long-standing settlement class procedures might

affect the public interest.

Consent was granted by many of the parties, but was

refused by Prudential Reinsurance Co. ef al. and American

3

Reinsurance Co. et al. Accordingly, the Chamber moves for

leave to file the accompanying brief as amicus curiae.

December 16, 1996 Respectfully submitted,

Stephen A. Bokat John H. Beisner*

Robin S. Conrad Brian D. Boyle

NATIONAL CHAMBER Evelyn L. Becker

LITIGATION CENTER, INC. Teresa Kwong

1615 H. Street, N.W. O'MELVENY & MYERS LLP

Washington, D.C. 20062 555 Thirteenth Street, N.W.

(202) 463-5337 Washington, D.C. 20004

(202) 383-5300

*Counsel of Record

Counsel for The Chamber of Commerce

of the United States of America

Il.

Ii.

THE THIRD CIRCUIT’S NEW

INTERPRETATION OF RULE 23 IS AT

ODDS WITH THE LONG-STANDING

AN AFFIRMANCE OF THE THIRD

CIRCUIT’S APPROACH COULD

THREATEN EXISTING CLASS

RESOLUTIONS AND RENDER THE

MANAGEMENT OF COMPLEX CLASS

LITIGATION MORE DIFFICULT.

THE DECISION BELOW IN-

12

TABLE OF AUTHORITIES

Cases

Ace Heating & Plumbing Co. v. Crane Co.,

453 F.2d 30 (3d Cir. 1971) ..........

Alexander v. NFL, 1977-2 Trade Cas. (CCH)

4 61,730 (D. Minn. 1977)...........

Alliance to End Repression v. City of Chicago,

91 F.R.D. 182 (N.D. Ill. 1981), rev'd on

other grounds, 742 F.2d 1007 (7th Cir.

American Pipe & Constr. Co. v. Utah, 414

Fe |. BRPPTTTTIT ire

Arenson v. Board of Trade, 372 F. Supp. 1349

|!) | ) rere

Badgett v. IBEW, 21 Fed. R. Serv. 2d 173

GOLD. Gile IDTE . ccc ec cccccceses

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

GREP TERED 6 Seve cts ved etcevute’s

Breslow v. Prudential-Bache Properties, Inc..,

1993 Fed. Sec. L. Rep. ¢ 97,693 (N.D. Ill.

Eee wesoucebsecesseteesenees

Brown v. Ticor Title Ins. Co., 982 F.2d 386

(9th Cir. 1992), cert. dismissed, 511 U.S.

lif See Se a ree

Cagan v. Anchor Savings Bank FSB, 1990 Fed.

Sec. L. Rep. 4 95,324 (E.D.N.Y. 1990) . .

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

ot ft. | ee re

Chateau de Ville Prods., Inc. v. Tams-Witmark

Music Library, 586 F.2d 962 (2d Cir. 1978)

13

15

15

10

3, 16,

17

1]

ae ek

-

Chatelain v. Prudential-Bache Sec., Inc., 805

F. Supp. 209 (S.D.N.Y. 1992)........ 8

City of Detroit v. Grinnell Corp., 356 F. Supp.

1380 (S.D.N.Y. 1972), aff'd in part, rev'd

in part on other grounds, 495 F.2d 448 (2d

Ge SC UCC Les ob) Powe ee ee’ 6

City of Detroit v. Grinnell Corp., 495 F.2d

ee 7

Coopers & Lybrand v. Livesay, 437 U.S. 463

SS Wow ewb wd dee ECSU TE We 6 15-16

Desimone v. Industrial Bio-Test Labs, Inc., 83

F.R.D. 615 (S.D.N.Y. 1979)... ...... 9

Dorey Corp. v. E.1. duPont de Nemours and

Co., 1975-2 Trade Cas. (CCH) 4 60,576

8 ee ee 5

Fisher Bros. v. Phelps Dodge Indus., Inc., 604

F. Supp. 446 (E.D. Pa. 1985) ........ 9

Georgine v. Amchem Prods., Inc., 83 F.3d 610

PPD: culos owe «dees bece'’s passim

Hansberry v. Lee, 311 U.S. 32 (1940) ... 14, 15

Harper v. Virginia Dep’t of Taxation, 509 U.S.

PP eee cece eecdéceceébe’ 13

In re A.H. Robins Co., Inc., 880 F.2d 709 (4th

SE, OFS 6 6 SWS SUSU bo 0 oS 7

In re American Med. Sys., Inc., 75 F.3d 1069

Ges SED ole c'S Ob. 6d es cs deca ce 3, 11,

| 17

In re Anthracite Coal Antitrust Litig., 79

F.R.D. 707 (M.D. Pa. 1978) ......... 6

In re Armored Car Antitrust Litig., 472 F.

Supp. 1357 (N.D. Ga. 1979), modified in

part on other grounds, 645 F.2d 488 (5th

Cis. Unig B 1981) 2... cc ccc cees

In re Asbestos Litig., 90 F.3d 963 (Sth Cir.

UE db Wdubabath ees icce ae “Tr

In re Baldwin United, 105 F.R.D. 475

AA Pes ee eee

In re Beef Indus. Antitrust Litig., 607 F.2d 167

Pepa MD -ocntperaeboescacld

In re Bendectin Prods. Liab. Litig., 102

F.R.D. 239 (S.D. Ohio), mandamus granted,

749 F.2d 300 (6th Cir. 1984) .........

In re Chicken Antitrust Litig., 560 F. Supp.

957 (N.D. Ga. 1980) ..............

In re Cuisinart Food Processor Antitrust Litig. ,

38 Fed. R. Serv. 2d 446 (D. Conn. 1983) .

In re Dun & Bradstreet Credit Serv. Customer

Litig., 130 F.R.D. 366 (S.D. Ohio 1990) .

In re Electric Weld Steel Tubing Antitrust

Litig., 1982-2 Trade Cas. ¢ 64,872 (E.D.

Se GD.« oN cbweine dds deuawees

In re "Factor VIII or IX Concentrate Blood

Products” Prods. Liab. Litig., Nos.

MDL-986; 93-C-7452, Pretrial Order No. 32

(N.D. Ill. Aug. 14, 1996) ...........

In re First Commodity Corp. Customer

Accounts Litig., 119 F.R.D. 301 (D. Mass.

UD -cevvcocect Viet t covmers ae

Page

10

10

“ee ee

In re First Investors Corp. Sec. Litig., No. 9C

Civ. 7225(MJL), 1993 U.S. Dist. LEXIS

18044 (S.D.N.Y. Dec. 22, 1993)........

In re General Motors Corp. Pick-Up Tuck Fuel

Tank Prods. Liab. Litig., 35 F.3d 768 (3d

Cir.), cert. denied, 116 S. Ct. 88 (1995) . .

In re Jiffy Lube Sec. Litig., 1989-90 Fed. Sec.

L. Rep. ¢ 94,859 (D. Md. 1990) ......

In re Kendall Square Research Corp. Sec.

Litig., 869 F. Supp. 53 (D. Mass. 1994) . .

In re Marine Midland Motor Vehicle Leasing

Litig., 155 F.R.D. 416 (W.D.N.Y. 1994) .

In re Michael Milken & Assocs. Sec. Litig.,

150 F.R.D. 57 (S.D.N.Y. 1993) .......

In re Mid-Atlantic Toyota Antitrust Litig., 564

F. Supp. 1379 (D. Md. 1983) ........

In re Norplant Contraceptive Prods. Liab.

Litig., 168 F.R.D. 577 (E.D. Tex. 1996) .

In re Petro-Lewis Sec. Litig., 1984-85 Fed.

Sec. L. Rep. { 91,899 (D. Colo. 1984)...

In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293

(7th Cir.), cert. denied, 116 S. Ct. 184

GED 6's 0 Bo 0 ees Fb.0 466 eb oad

In re Silicone Gel Breast Implant Prods. Liab.

Litig., No. MDL 926, 1994 U.S. Dist.

LEXIS 12521 (N.D. Ala. Sept. 1, 1994) ..

In re Telectronics Pacing Sys., Accufix Atrial

"J" Leads Prods. Liab. Litig., 168 F.R.D.

203 (S.D. Ohio 1996) ...........5-.

James B. Beam Distilling Co. v. Georgia, 501

fe |. Perea a a ee

17

Kusner v. First Penn. Corp., 74 F.R.D. 606

(E.D. Pa. 1977), aff'd mem., 577 F.2d 726

ey MD ed on 6 65 0 on ee bes

Officers for Justice v. Civil Serv. Comm’n, 688

Fae GS GO Cir. 1G... cee ccs

Phillips Petroleum Co. v. Shutts, 472 U.S. 797

ee ee ee ee eee ee

Picower v. Lord, 1976-77 Fed. Sec. L. Rep.

{ 95,882 (S.D.N.Y. Feb. 22, 1977) .....

Ruiz v. Stewart Assoc., Inc., 167 F.R.D. 402

ee a He ne bees teerews

Sanders v. Robinson Humphrey/American

Express, Inc., 1990 Fed. Sec. L. Rep.

{ 95,315 (N.D. Ga. 1990) ..........

Simer v. Rios, 661 F.2d 655 (7th Cir. 1981) .

Smith v. Vista Org. Partnership, No. 89 Civ.

0048(MJL), 1991 U.S. Dist. LEXIS 10484

GEA. Subp SD, SBM ww ccc ccc

South Carolina Nat’l Bank v. Stone, 749 F.

Supp. 1419 (D.S.C. 1990) ..........

Valerio v. Boise Cascade Corp., 80 F.R.D.

626 (N.D. Cal. 1978), aff'd, 645 F.2d 699

OT ee

Walsh v. Ford Motor Co., 807 F.2d 1000

(D.C. Cir.), cert. denied, 482 U.S. 915

eS c4:0 cessed thea basics

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

I pe. ee ee

Wells v. Dartmouth Bancorp., Inc., 813 F.

Supp. 126 (D.N.H. 1993) ...........

Page

West Va. v. Charles Pfizer & Co., 314 F.

Supp. 710 (S.D.N.Y. 1970), aff'd, 440 F.2d

1079 (2d Cir. 1971) ww ccc cee

Whitford v. First Nationwide Bank, 147 F.R.D.

135 (W.D. Ky. 1992) .......--406:

Woodward v. NOR-AM Chem. Co., No.

94-0780-CB-C, 1996 U.S. Dist. LEXIS 7372

(S.D. Ala. May 23, 1996)...........

Statutes

28 U.S.C. § 331 (1994) .......-2525s

Federal Rule of Civil Procedure 23 ......

Other Authorities

Annual Report of the Proceedings of the

Judicial Conference of the United States

DT «sees beeen eeeeseeesens

3 Herbert B. Newberg, CLASS ACTIONS

By! ORC) ee

Proposed Amendments to the Federal Rules of

Civil Procedure, 167 F.R.D. 559 (1996) . .

Recent Case, 109 HARV. L. REV. 870 (1996)

Statement of White, J., 61 U.S.L.W. 4390

“Ty 2 eee

Peel ee 6 ny

No. 96-270

IN THE

Supreme Court of the United States

OCTOBER TERM, 1995

AMCHEM PRODUCTS, INC., ET AL.,

Petitioners ,

V.

GEORGE WINDSOR, ET AL.,

Respondents.

On Writ of Certiorari to the

United States Court of Appeals for the Third Circuit

BRIEF FOR AMICUS CURIAE THE CHAMBER OF

COMMERCE OF THE UNITED STATES OF

AMERICA IN SUPPORT OF PETITIONERS

INTEREST OF AMICUS CURIAE

The Chamber of Commerce of the United States of

America is the largest federation of business, trade and

professional organizations in the United States. The

Chamber represents more than 215,000 companies, as well

as several thousand trade and professional organizations, and

state and local chambers of commerce. The Chamber

regularly participates as amicus curiae in civil cases raising

issues of national concern to the business community.

2

allegations on a wide arra prod

llega a y of matters, such as ucts

liability, securities, tort, and antitrust claims. In some of

such circumstances.

The Third Circuit’s rule that the parties’ settlement

cannot be considered in applying Rule 23’s class certification

prerequisites is markedly at odds with almost thirty years of

Judicial tradition in reviewing and approving conse

eee of class action settlements without determining

ypothetically, whether the actions could be tried on a class

basis. If the Third Circuit’s j

settlement as a practical option in many class actions, an

23 imposes on class actions

Proposed for trial. According]

amicus has a strong interest i y,

— in the outcome of the decision

Nt tay eo Leal + ahi lie

A An IN RL ON, ta

apetieenete tnt tte te eT

3

SUMMARY OF ARGUMENT

Given the broad diversity of the Chamber’s member

businesses, it is not surprising that members do not all share

a uniform view of ultimate merits of the settlement class

device. On the one hand, businesses well recognize that the

existence of the settlement class device may encourage

wholly untriable class actions brought for the sole purpose of

obtaining large settlements. On the other hand, many

businesses have long accepted the practical reality that

classwide settlement is often the most efficient and fair way

of resolving complex claims brought by numerous persons.

The fact is, however, that the Third Circuit’s

interpretation of Rule 23 -- in particular, its holding that

Rule 23 precludes consideration of the fact and terms of the

parties’ settlement in determining whether the requirements

of subdivisions (a) and (b) of the Rule are met -- flies in the

face of the consistent practice of the federal courts since

Rule 23 was last amended in 1966. The Third Circuit’s

recognition that Rule 23(a)’s requirements of "commonality,"

"typicality” and “adequacy of representation,” and Rule

23(b)(3)’s requirements that common questions

“predominate” over individual questions and that classwide

handling be “superior” to individual adjudication, must be

applied rigorously before sanctioning a classwide trial is

consistent with the developing views of its sister courts,’

and is to be applauded. But its rigid view that these

! See, e.g., Castano v. American Tobacco Co., 84 F.3d 734

(Sth Cir. 1996); In re American Med. Sys., Inc., 75 F.3d 1069,

1080-86 (6th Cir. 1996); In re Rhone-Poulenc Rorer, Inc., 51

F.3d 1293 (7th Cir.), cert. denied, 116 S. Ct. 184 (1995).

4

requirements must be applied to a consensual settlement class

as if the case will be tried ignores the fact that Rule 23’s

prerequisites are designed to safeguard the class action

defendant's due process rights as much as the rights of

absent class members. Where the defendant, as part of a

class settlement, proposes to surrender its due process rights

to full-fledged litigation, the due process inquiry underlying

Rule 23 necessarily is simplified. The Third Circuit failed

to appreciate this important respect in which the purposes of

Rule 23 scrutiny differ in the case of settlement classes.

Acceptance of the Third Circuit’s conclusion that the

parties’ settlement must be ignored in conducting the

estan toma gem for

Class litigants and the federal courts. Settlement of “mass

tort” and like class claims prior to certification would occur,

if at all, only in the unusual situation in which the defendant

were willing to concede the certifiability of the action for

trial. Many class settlements under judicial review could be

disrupted as well. And an affirmance of the Third Circuit’s

ruling might prompt collateral attacks even to finalized

settlements. These consideratio ions strongly counsel in favor

of deference to the interpretations of Rule 23 made over the

last thirty years by members of the Judicial Conference who

created the Rule, rather than allowing the Third Circuit to

use judicial fiat to advance its minority position with respect

to the viability of settlement classes.”

* The Third Circuit’s decision arose in the context of objections

to the district court’s prelim inary injunction preventing class

members from pursuing their claims in any other court pending

the issuance of a final order. The objectors challenged the district

court’s jurisdiction over the underlying class action, the

5

ARGUMENT

I. THE THIRD CIRCUIT’S NEW INTERPRETATION

OF RULE 23 IS AT ODDS WITH THE LONG-

STANDING PRACTICE OF OTHER FEDERAL

COURTS.

The question whether a district court presented with a

pre-certification settlement must ignore that settlement in

applying the standards for class certification is one that has

often arisen, and will continue frequently to arise, in a wide

variety of cases, the vast majority of which have nothing to

do with asbestos litigation. For the past 30 years, parties

have negotiated, and courts often have approved, pre-

certification class action settlements resolving a wide array

of such cases.

Shortly after adoption of the 1966 amendments to Rule

23, district courts began taking pre-certification settlements

into account in applying the standards for class certification

and certifying classes solely for purposes of settlement. See,

e.g., West Va. v. Charles Pfizer & Co., 314 F. Supp. 710

(S.D.N.Y. 1970), aff'd, 440 F.2d 1079 (2d Cir. 1971)

(antitrust); Dorey Corp. v. E.I. duPont de Nemours and Co.,

1975-2 Trade Cas. (CCH) 4 60,576 (S.D.N.Y. 1975)

(antitrust); Badgett v. IBEW, 21 Fed. R. Serv. 2d 173 (N.D.

Ohio 1975) (employment discrimination); Picower v. Lord,

1976-77 Fed. Sec. L. Rep. { 95,882 (S.D.N.Y. Feb. 22,

justiciabili case, the adequacy of class notice, and the

Inc., 83 F.3d 610, 617 (3d Cir.), cert. granted, 116 S. ae

(1996). This brief addresses only the question on which this Court

granted certiorari.

6

1977) (securities); Kusner v. First Pera. ., 74 F.R.D.

606, 607 (E.D. Pa. 1977) (securities), hn ly 577 F.2d

726 (3d Cir. 1978); Alexander v. NFL, 1977-2 Trade Cas.

(CCH) 461,730 (D. Minn. 1977) (antitrust); Valerio v.

Boise Cascade Corp., 80 F.R.D. 626 (N.D. Cal. 1978)

(antitrust and securities; citing 1973 order), aff'd, 645 F.2d

699 (9th Cir. 1981). In a number of cases, the courts did so

while expressly noting that the class likely could not be

certified absent the settlement. See, e.g., In re Anthracite

Coal Antitrust Litig.. 79 F.R.D. 707, 711 (M.D. Pa. 1978)

(antitrust); Arenson v. Board of Trade, 372 F. Supp. 1349

1353-54 (N.D. Ill. 1974) (antitrust); City of Detroit v.

pate so we F. Supp. 1380, 1390 (S.D.N.Y. 1972)

antitrust), part, rev'd in on

F.2d 448 (2d Cir. 1974). sia ae ana

validity of such certifications. In an early landmark

decision, Judge Wisdom, writing for the Fifth Circuit, held

that certifying a class based on (and for purposes of) the

parties’ settlement (1) is consistent with the language of Rule

23, (2) accords with the flexibility that is the "hallmark" of

that rule, (3) constitutes “an important segment of court

flexibility in administering and managing" class actions, and

(4) provides advantages to class members that outweigh any

perceived risks. See In re Beef Indus. Antitrust Litig., 607

F.2d 167, 173-78 (Sth Cir. 1979) (citation omitted). Several

years later, Judge Friendly, writing for the Second Circuit,

concurred with “Judge Wisdom’s thorough opinion,”

rejecting the argument that “a firm prophylactic rule”

prohibiting the certification of settlement classes is necessary

to address potential collusion. See Weinberger v. Kendrick,

7

698 F.2d 61, 72-73 (2d Cir. 1982).* Similar conclusions

were reached by the Ninth Circuit, see Officers for Justice v.

Civil Serv. Comm’n, 688 F.2d 615, 632-35 (9th Cir. 1982),

and by the Fourth Circuit, see In re A.H. Robins Co., Inc.,

880 F.2d 709, 725-48 (4th Cir. 1989).

To be sure, courts and commentators have occasionally

raised concerns about possible abuses of settlement classes.

As Judge Wisdom recognized, courts must be mindful of the

possibility of “collusion, individual settlements, ‘buy-offs’

where the class action is used to benefit some individual at

the expense of absent members, and other abuses." Jn re

Beef Indus., 607 F.2d at 174. In light of such concerns,

some courts, while persuaded of the benefits of settlements

classes, have urged careful scrutiny of settlement terms and

conditions (as well as the procedural history leading up to

the settlement). See, e.g., Ace Heating & Plumbing Co. v.

Crane Co., 453 F.2d 30, 33-34 (3d Cir. 1971) (court must

be doubly careful where negotiation occurs before

certification and designation of class); In re Baldwin United,

105 F.R.D. 475, 481 (S.D.N.Y. 1984) ("[T]he trial courts

‘are bound to scrutinize the fairness of the settlement

agreement with even more than the usual care . . . in order

> In City of Detroit v. Grinnell Corp., 495 F.2d 448, 464 (2d

Cir. 1974), another Second Circuit panel rejected the argument

that the district court had erred by certifying the class “for the

purposes of settlement and refus{ing] to make the same legal

finding for all other purposes.” The court both “reject[ed] the

initial premise” of this argument — that such certification was not

authorized by Rule 23 — and held that the value of requiring a

certification for hypothetical litigation was “somewhat remote.”

Id. at 465.

to meet the concerns noted in the Manual’") (quoting

Weinberger, 698 F.2d at 73); Simer v. Rios, 661 F.2d 655,

664-66 (7th Cir. 1981) (requiring a higher showing of

fairness where settlement negotiated prior to certification).

But while courts all along have been mindful of the

potential abuses of settlement classes, the prevailing view

from the beginning has been to avoid an “inflexible”

construction of Rule 23 that would preclude the practical

benefits of settlement. See 3 Herbert B. Newberg, CLAass

ACTIONS § 5570(c) at 475-76 (1977). Thus, over the past

either certainly, or at least possibly, could not have been

certified for purposes of litigation. See, e.g., In re Silicone

Gel Breast Implant Prods. Liab. Litig., No. MDL 926, 1994

U.S. Dist. LEXIS 12521 (N.D. Ala. Sept. 1, 1994) (medical

products liability); In re Marine Midland Motor Vehicle

Leasing Litig., 155 F.R.D. 416, 420 (W.D.N.Y. 1994)

(RICO); In re First Investors Corp. Sec. Litig., No. 90 Civ.

7225(MJL), 1993 U.S. Dist. LEXIS 18044, *14 (S.D.N.Y.

Dec. 22, 1993) (securities); Chatelain v. Prudential-Bache

Sec., Inc., 805 F. Supp. 209, 214 (S.D.N.Y. 1992)

(securities); Bowling v. Pfizer, Inc., 143 F.R.D. 141, 157-58

(S.D. Ohio 1992) (medical products liability); Smith v. Vista

Org. Partnership, No. 89 Civ. 0048(MJL), 1991 U.S. Dist.

LEXIS 10484, *24 (S.D.N.Y. July 29, 1992) (securities); Jn

re Dun & Bradstreet Credit Serv. Customer Litig., 130

F.R.D. 366, 369, 371 (S.D. Ohio 1990) (credit information

fraud); South Carolina Nat’l Bank v. Stone, 749 F. Supp.

1419, 1426 (D.S.C. 1990) (securities); Sanders v. Robinson

Humphrey/American Express, Inc., 1990 Fed. Sec. L. Rep.

{ 95,315 at 96,492 (N.D. Ga. 1990) (securities); In re First

9

Commodity Corp. Customer Accounts Litig., 119 F.R.D.

301, 314 (D. Mass. 1987) (commodities fraud); Fisher Bros.

v. Phelps Dodge Indus., Inc., (04 F. Supp. 446, 450 (E.D.

Pa. 1985) (antitrust); In re Petro-Lewis Sec. Litig., 1984-85

Fed. Sec. L. Rep. $91,899 at 90470 (D. Colo. 1984)

(securities); In re Bendectin Prods. Liab. Litig., 102 F.R.D.

239, 240 n.4 (S.D. Ohio) (medical products liability),

mandamus granted, 749 F.2d 300 (6th Cir. 1984); In re

Mid-Atlantic Toyota Antitrust Litig., 564 F. Supp. 1379,

1390-91 (D. Md. 1983) (antitrust); Jn re Cuisinart Food

Processor Antitrust Litig., 38 Fed. R. Serv. 2d 446, 453 (D.

Conn. 1983) (antitrust); In re Chicken Antitrust Litig., 560

F. Supp. 957,960-61 (N.D. Ga. 1980) (antitrust); Jn re

Armored Car Antitrust Litig., 472 F. Supp. 1357, 1371-73

(N.D. Ga. 1979) (antitrust), modified in part on other

grounds, 645 F.2d 488 (Sth Cir. Unit B 1981); Desimone v.

Industrial Bio-Test Labs, Inc., 83 F.R.D. 615, 620

(S.D.N.Y. 1979) (securities).*

* Numerous other courts have certified classes solely for

purposes of settlement without suggesting whether the classes also

could have been certified for purposes of trial. Recent examples

include Woodward v. NOR-AM Chem. Co., No. 94-0780-CB-C,

1996 U.S. Dist. LEXIS 7372, *41 (S.D. Ala. my =

chemical products liability); Ruiz v. Stewart Assoc., Inc.,

PAD. 402, 404 n.4 (N._D. Ill. 1996) (RICO); In re Kendall

Square Research Corp. Sec. Litig., 869 F. Supp. 53, 54 (D. Mass.

1994) (securities); In re Michael Milken & Assocs. Sec. Litig., 150

F.R.D. 57, 62 (S.D.N.Y. 1993) (securities); Breslow v.

Prudential-Bache Properties, Inc., 1993 Fed. Sec. L. Rep.

4 97,693 (N.D. Ill. 1993) (securities); Wells v. Dartmouth

Bancorp., Inc., 813 F. Supp. 126, 130 (D.N.H. 1993) (securities);

Whitford v. First Nationwide Bank, 147 F.R.D. 135, 142-43

(W.D. Ky. 1992) (Magistrate) (lending violations); Cagan v.

10

In perhaps the most recent example of a settlement class,

a nationwide class was preliminarily certified for settlement

purposes in light of an agreement that would settle claims

against a number of chemical manufacturers by hemophiliacs

alleging injury from exposure to the HIV virus. See In re

"Factor VIII or IX Concentrate Blood Products" Prods. Liab.

Litig., Nos. MDL-986; 93-C-7452, Pretrial Order No. 32

(N.D. Ill. Aug. 14, 1996). Notably, a year earlier, the

Seventh Circuit reversed an order that had certified

essentially the same class for purposes of litigation. See In

re Rhone-Poulenc Rorer, 51 F.3d 1293.°

There is no justification for the Third Circuit’s rejection

of the federal courts’ historical application of Rule 23 at this

late stage. Certainly, the due process concerns that

apparently influenced the Third Circuit do not justify so rigid

an approach. It is true, as the Third Circuit observed, that

the requirements of Rule 23(a) and (b) are aimed in

Significant part at ensuring that classwide litigation is a

procedurally fair substitute for individualized adjudication.

But the object of Rule 23’s concern goes beyond the due

process interests of absentee plaintiffs; Rule 23(a)’s

specifications of “commonality” and “typicality,” and Rule

Anchor Savings Bank FSB, 1990 Fed. Sec. L. Rep. 4 95,324 at

96,557 (E.D.N.Y. 1990) (securities); In re Jiffy Lube Sec. Litig.,

1989-90 Fed. Sec. L. Rep. ¢ 94,859 at 94,657 (D. Md. 1990)

(securities); In re Electric Weld Steel Tubing Antitrust Litig., 1982-

2 Trade Cas. { 64,872 (E.D. Pa. 1982) (antitrust).

* Im another recent example, the Fifth Circuit upheld a

nationwide settlement class of persons asserting asbestos personal

injury claims against Fibreboard Corporation. See In re Asbestos

Litig., 90 F.3d 963 (Sth Cir. 1996).

ll

23(b)’s predominance and superiority requirements, are

designed to safeguard the due process rights of class

defendants as well. See, e.g., In re American Med. Sys., 75

F.3d at 1086 (defendant’s due process rights violated where

district court failed "to conduct a ‘rigorous analysis’ into

whether [Rule 23] criteria were met" by certifying class

without allowing defendant opportunity to submit evidence

to respond to the class action complaint); Chateau de Ville

Prods., Inc. v. Tams-Witmark Music Library, 586 F.2d 962,

966 (2d Cir. 1978) (same). For instance, the important Rule

23(b)(3) requirement that plaintiffs advance some “classwide

proof” of the essential elements of their claims, see Walsh v.

Ford Motor Co., 807 F.2d 1000, 1012 (D.C. Cir.), cert.

denied, 482 U.S. 915 (1986), is aimed primarily at

protecting the defendant from being subjected to classwide

liability on proof that is without classwide dimension, see id.

at 1017-18.

In reaching its conclusion below, the Third Circuit

voiced concern exclusively over the due process interests of

to the defendants’ agreement to surrender their due process

' in individualized litigati A. defendant’s

conditional surrender of its due process interests in

* See Georgine v. Amchem Prods., Inc., 83 F.3d at 631 ("The

[typicality] inquiry assesses whether the named plaintiffs have

incentives that align with those of absent class members so that

absentees’ interests will be fairly represented.”); id. at 632 ("We

think that typicality is more akin to adequacy of representation:

both look to the potential for conflicts in the class"); id. at 633

("This class action also suffers from serious problems in the

fairness it accords to the plaintiffs.”).

12

individualized factfinding wholly eliminates defendant-

focused due process concerns from the class certification

equation. And while the due process interests of the absent

class members must be examined in any event, the

availability of settlement terms and conditions to test the

fairness of the proposed relief to all concerned parties

significantly alters the complexion of this inquiry.

At bottom, the tradition from which the Third Circuit's

decision departs makes clear that settlement class actions are

not a novelty spawned by the pressure to do something about

mass torts in general or asbestos litigation in particular. To

the contrary, settlement classes have been used for decades

consensually to resolve all sorts of multi-plaintiff claims.

Wholesale rejection of the current practice of taking the fact

and terms of the parties’ proposed settlement into account in

applying Rule 23’s requirements is simply not justified by

the due process concerns enumerated by the Third Circuit.

Indeed, as more fully discussed below, acceptance of the

Third Circuit’s interpretation of Rule 23 at this late stage

would have potentially serious consequences for the

management of class litigation in the federal courts.

Il. AN AFFIRMANCE OF THE THIRD CIRCUIT’S

APPROACH COULD THREATEN EXISTING

CLASS RESOLUTIONS AND RENDER THE

MANAGEMENT OF COMPLEX CLASS

LITILATION MORE DIFFICULT.

An affirmance of the Third Circuit’s ruling that the

also for the federal courts’ management of complex class

13

litigation in the future. These consequences counsel extreme

caution in rejecting the judicial tradition that has developed

around settlement classes since the present version of Rule

23 was put in place, and suggest that so fundamental a

change in practice as the Third Circuit’s approach ordains

should be addressed in the rulemaking process rather than

through judicial decision.

To begin with, it should almost go without saying that,

were the Third Circuit’s approach erected as the law of the

land, many class settlements currently undergoing district

court review, or review on appeal to the circuit courts, could

well be challenged anew.’ An affirmance of the Third

Circuit’s ruling in this case would arguably be applicable to

class actions -- and all class settlements - pending at the

time of decision. See Harper v. Virginia Dep’t of Taxation,

509 U.S. 86, 97 (1993) ("When this Court applies a rule of

federal law to the parties before it, that rule is the

controlling interpretation of federal law and must be given

full retroactive effect in all cases still open on direct review

and as to all events, regardless of whether such events

predate or postdate our announcement of the rule."); see also

James B. Beam Distilling Co. v. Georgia, 501 U.S. 529,

538-44 (1991). At the very least, such pending settlements

? The presence of objectors dissatisfied with some or all of a

class settlement’s terms is the usual case. “Because settlement of

a class action, like settlement of any litigation, is basically a

members,” including named plaintiffs, may object to the terms of

the settlement. Alliance to End Repression v. City of Chicago, 91

F.R.D. 182, 195, 199 (N.D. Ill. 1981) (citation omitted), rev'd on

other grounds, 742 F.2d 1007 (7th Cir. 1984) (en banc).

14

could be subject to a fresh review under Rule 23(a) and (b)

with an eye toward whether the plaintiffs’ claims could fairly

and efficiently be tried on a class basis. Doubtless, of

course, some of the pending settlement classes might, on

close scrutiny, be found to satisfy Third Circuit-style

requirements for certification under Rule 23. But the

defendants in many such actions would likely be unwilling

to concede the propriety of a trial-like certification for fear

of a possible rejection of the settlement’s substantive terms

-- from which a classwide trial would then follow. As a

result, any pending settlements formed in actions in which

the class defendant has nonfrivolous grounds on which to

question the permissibility of class certification for trial

could potentially be restored to the adversary calendar.

Even seemingly final settlements could be subject to

fresh challenges from disgruntled class members. Absent

class members unhappy with the disposition of their claims

in recently concluded settlements -- even those that have

survived final review -- might try to draw strength for new

collateral challenges to those settlements from an affirmance

of the Third Circuit’s approach. Since this Court's decision

over fifty years ago in Hansberry v. Lee, 311 U.S. 32

(1940), the permissibility of collateral challenges to class

action dispositions on due process grounds has been clear.

Id. at 40-42. Were this Court to accept the rule pronounced

by the Third Circuit in this case, disaffected class members

in many “final” class settlements — not otherwise precluded

from raising their own claims* - might try to initiate

* Statutes of limitations might pose obstacies for claimants

seeking to question settlements concluded long ago. However,

15

from raising their own claims* -- might try to initiate

their litigation interests were represented in the class

settlement process. See generally Phillips Petroleum Co. v.

Shutts, 472 U.S. 797, 812 (1985) (Due Process Clause

“requires that the named plaintiff at all times adequately

represent the interests of the absent class members” (citing

Hansberry, 311 U.S. at 42-43, 45)); see also Brown v. Ticor

Title Ins. Co., 982 F.2d 386 (9th Cir. 1992) (collateral

attack premised on counsel’s inadequate representation of

class requires inquiry into counsel’s performance in prior

action), cert. dismissed, 511 U.S. 117 (1994).

In addition to threatening to undermine both pending and ~

final class settlements, the Third Circuit’s rule would

inordinately (and unnecessarily) complicate the management

of mass tort, securities, and other pattern litigation in the

federal courts. Under the Third Circuit’s interpretation, the

parties and court in a purported class action would not be

permitted finally to proceed with a proposed settlement

unless and until the trial court made a formal finding that the

class would be suitable for trial on behalf of the putative

class. This would be an unlikely prospect in most pattern

litigation. As this Court has noted, “[c]ertification of a large

class" can enormously “increase the defendant’s potential

* Statutes of limitations might pose obstacles for claimants

seeking to question settlements concluded long ago. However,

lai who tring their individes! ldieatl ie o On

years of approval of the class settlement they desire to challenge

might try to claim the benefit of tolling for the period in which

the prior class action was pending. See American Pipe &

Constr. Co. v. Utah, 414 U.S. 538 (1974).

16

v. Livesay, 437 U.S. 463, 476 (1978).° For that reason,

defendants faced with putative class actions under the Third

Circuit’s regime generally would be unwilling to stipulate or

consent to a finding that any class could be certified for

purposes of litigation. In the event that a given settlement

were ultimately disapproved and the action returned to a trial

track, any such settlement stipulation might be cited by

plaintiffs as precluding any resistance to a certification order

for trial purposes. And even if the settlement were given

final approval, a settlement-induced finding by the trial court

that class treatment was appropriate could arguably serve as

a valuable precedent for future plaintiffs seeking to obtain

Class certification outside the settlement context. Thus; even

where class action defendants believed they could negotiate

a reasonable settlement, they would still be obliged to fight

class certification exhaustively.

Although, in the long run, the reluctance of class action

defendants to settle might discourage the filing of frivolous

class action complaints by persons hoping for a quick

settlement, in the short term lower courts would need to

Sodnditunanebemenmatinamation i

defenses to individual claims. See, e.g., Castano, 84 F.3d at 746;

In re Rhone-Poulenc Rorer, 51 F.3d at 1298.

a

17

that the typical multi-plaintiff litigation presents... The

crisis posed by the filing of unjustified class action

complaints would quickly assume calamitous dimensions.

The ultimate consequences of such a shift in the means

of resolving multi-plaintiff actions might well be long delays

in achieving final resolutions, but an equally probable result

would be the distortion of Rule 23’s requirements for trial-

Suitable classes as trial courts attempt to grapple with

increasingly insoluble caseloads. Put otherwise, under the

Third Circuit’s rule, courts might well be pressured to

distort the principles for deciding whether cases should be

certified for litigation in the cause of alleviating docket

congestion." For instance, a court seeking to alleviate the

docket crush created by an inability to consider settlement

classes might seek to promote settlement of a mass tort

© See, e.g., Georgine, 83 F.3d at 624-35; Castano, 84 F.3d

734 (decertifying class for litigation of alleged nicotine claims); In

re Rhone-Poulenc Rorer, 51 F.3d 1293 (decertifying class of

hemophiliacs for litigation of HIV exposure claims); In re

American Med. Sys., 75 F.3d 1069 (decertifying class for litigation

of penile implant claims); In re Telectronics Pacing Sys., Accufix

Atrial "J" Leads Prods. Liab. Litig., 168 F.R.D. 203 (S.D. Ohio

1996) (decertifying litigation class); In re Norplant Contraceptive

Prods. Liab. Litig., 168 F.R.D. 577 (E.D. Tex. 1996) (denying

certification of litigation class).

4“ The staggering number and complexity of mass tort class

actions brings extraordinary pressure to bear on the courts, all but

forcing judges to push settlement options in order to clear these

cases from their dockets. See Recent Case, 109 HaRV. L. REV.

870 (1996) ("[C]ourts faced with the delay and docket-crowding

conditions of [mass tort class actions] tend to encourage

settlement. ”)

18

action by certifying the class and allowing the case to

proceed pell-mell to trial, even though the class does not

meet all of Rule 23’s requirements. Unfounded and abusive

class action filings would likely continue to proliferate in

such an environment.

In sum, by potentially undermining existing settlements

and making the consensual resolution of class action liti-

gation more problematic, an affirmance of the Third

Circuit’s decision would exacerbate the inexorable pressures

of mass tort litigation on the federal courts.

Ill. THE DECISION BELOW INAPPROPRIATELY

PREEMPTS THE RULEMAKING PROCESS OF

THE JUDICIAL CONFERENCE.

Although admittedly a matter of speculation, the

Chamber respectfully submits that the Third Circuit's

decision to part company with the hundreds of cases over

thirty years interpreting Rule 23 to allow settlement classes

could have been spawned by concern over class actions that

assert frivolous claims, raise issues not worthy of litigation,

or otherwise invoke the class action device for purposes

never intended. As the Seventh Circuit has recently noted,

the sheer magnitude of the theoretical exposure and burdens

that any class action creates for a defendant often leaves the

defendant with little choice but to pursue settlement. See In

re Rhone-Poulenc Rorer, 51 F.3d at 1298 (“settlements

induced by a small probability of an immense judgment in a

class action [are] ‘blackmail settlements’") (quoting Henry J.

Friendly, FEDERAL JURISDICTION: A GENERAL VIEW 120

(1973)). | Without question, such cases often yield

settlements that accomplish little but the enrichment of the

attorneys who fiied the complaints.

ee a

ee -

OORT oe te ena

19

To the extent that the Third Circuit’s decision was

motivated by these concerns, the Chamber applauds the

intent. Something must be done to curtail attempts to invoke

the class action device for purposes never intended by its

creators. But the Third Circuit's bid to legislate its preferred

changes to Rule 23 by judicial fiat is a disruptive and

unauthorized means to that end. The current version of Rule

23 was the mid-1960s handiwork of the Judicial Conference

of the United States,” and the members of that Judicial

Conference have on hundreds of occasions interpreced the

rule they wrote as authorizing the settlement class device.

Particularly in light of this thirty-year history, a minority of

the members of that conference should not be permitted

effectively to amend the rule by announcing a radically

different interpretation thereof.

If there is any need to reexamine the course that lower

courts have charted in interpreting Rule 23 in the settlement

context, neither the Third Circuit nor any other court should

be allowed to circumvent the rulemaking procedure. At

@ 28 U.S.C. § 331, which establishes the Judicial Conference

of the United States, provides that “[t}he Conference shall . . .

Carry on a continuous study of the operation and effect of the

general rules of practice and procedure . . . prescribed by the

Supreme Court for the other courts of the United States pursuant

to law." The statute further provides that “[s}uch changes in and

additions to those rules as the Conference may deem desirable to

promote simplicity in procedure, fairness in administration, the

just determination of litigation, and the elimination of unjustifiable

expense and delay shall be recommended by the Conference from

time to time to the Supreme Court for its consideration and

adoption, modification or rejection, in accordance with law." The

current version of Rule 23 was a product of that process.

20

present, the Advisory Committee on Civil Rules ("Advisory

Committee")” has launched efforts to amend Rule 23 to

address possible abuses of the class action device. See

Proposed Amendments to the Federal Rules of Civil

Procedure, 167 F.R.D. 559 (1996). Through the Judicial

Conference, the Third Circuit (as well as any other court or

member of the Bar) is welcome to participate in the

Advisory Committee’s examination of Rule 23 and any

proposed amendments thereto.

Deference to the rulemaking process would offer several

important advantages over the adjudicatory change to Rule

23 reflected in the Third Circuit’s decision. First, the rule-

making process would allow careful weighing of the substan-

tial policy considerations attendant to taking settlement into

new Rule 23(b)(4) that effectively would overrule the Third

Circuit’s position and amend Rule 23 to leave no doubt that

settlement classes are authorized. See id at 560, 563. This

amendment was proposed in the immediate aftermath of the Third

Circuit’s decision in In re General Motors Corp. Pick-Up Tuck

Fuel Tank Products Liability Litigation, 35 F.3d ’

cert. denied, 116 S. Ct. 88 (1995), holding that the requirements

of Rule 23(a) must be applied without regard to whether the

parties have proposed a settlement class.

21

account in class certification decisions. Importantly, these

policy tradeoffs could be weighed in the first instance by

"the Judicial Conference and its committees, . . . ‘[who] are

in a far better position to make a practical judgment on [the

Rules”} utility or inutility than [the Court].’" Statement of

White, J., 61 U.S.L.W. 4390, 4391 (U.S. Apr. 27, 1993)

(quoting Statement of Douglas, J., 383 U.S. 1089, 1090

(1966) (Douglas, J., dissenting)). Second, if class action

practice is to be changed, an amendment to Rule 23, unlike

a judicial pronouncement, would indicate a future date upon

prevent disruption of pending class settlements; the parties

would be able to continue negotiations with full

understanding of the scope and timing of any changes in

existing law. Finally, use of the rulemaking process would

avoid the inevitable threat of challenges to the finality of

already concluded settlements that would be created by a

judicial change in the treatment of settlement classes under

Rule 23.

For more than three decades, parties have relied on the

federal courts to thoughtfully and carefully consider

settlement classes in resolving sometimes extraordinarily

complex litigation. The Third Circuit’s sudden pronounce-

ment that Rule 23 does not countenance a role for settlement

considerations in testing the prerequisites for class

certification is less an interpretation of the Rule than a quasi-

legislative change the RuJe’s imperatives; clearly,

concerns such as those expressed vy the Third Circuit are

best mediated by the rulemaking machinery for the Federal

Rules. If members of the Judicial Conference determine that

Rule 23 needs to be clarified or changed, an amendment can

be pursued to effect the required clarification or change with

22

minimal disruption to the judicial system and to the

expectations of parties in existing class settlements.

CONCLUSION

For the foregoing reasons, the Chamber urges the Court

to reverse the judgment of the U.S. Court of Appeals for the

Third Circuit.

December 16, 1996

Stephen A. Bokat

Robin S. Conrad

NATIONAL CHAMBER Evelyn

LITIGATION CENTER, INC. Teresa Kwong

1615 H. Street, N.W.

Washington, D.C. 20062