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

> Briefs, arguments, decisions, and more.

URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0013%3A22

## Record

- **Collection:** Supreme Court brief
- **Document type:** Amicus Curiae Brief
- **Published:** January 1, 1997
- **Citation:** 521 U.S. 591

## Text

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

---

Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385014_0013%3A22. Public record. Not legal advice.