Amicus Curiae Brief — Dow Chemical Co. v. Stephenson

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| Supreme Court. US

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| ‘oF iy

4 DEC 19 ap

No. 02-271 |

CLERK

IN THE as $i}

Supreme Court of the United States

DOW CHEMICAL COMPANY, MONSANTO COMPANY, et al.,

Petitioners,

Vv.

DANIEL RAYMOND STEPHENSON, SUSAN STEPHENSON,

DANIEL ANTHONY STEPHENSON, EMILY ELIZABETH

STEPHENSON, JOE ISAACSON, and

PHYLLIS LISA ISAACSON,

Respondents.

On Wait oF CERTIORARI TO THE

UNITED STATES Court OF APPEALS FOR THE SECOND CIRCUIT

BRIEF FOR THE DEFENSE RESEARCH INSTITUTE

AS AMICUS CURIAE IN SUPPORT OF PETITIONERS

PaTRICK LYSAUGHT

Counsel of Record

Paut S. PENTICUFF

ELIZABETH S. RAINES

BAKER STERCH! COWDEN

& Rice LLC

Attorneys for Amicus Curiae

Crown Center

2400 Pershing Road, Suite 500

Kansas City, MO 64108-2504

(816) 471-2121

178046 g

COUNSEL PRESS

(800) 274-3321 + (800) 359-6859

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TABLE OF CONTENTS

I. The Second Circuit’s Expansive Collateral

Attack Ruling Shakes The Foundations of

Every Class Action Decision in This Country

and Threatens to Undermine if Not Destroy

One of the Civil Justice System’s Most

Important Tools in Resolving Disputes. ... .

The Defendants’ Interest in Finality

Outweighs A So-Called “Absent” Class

Member’s Interest in Having Their Day in

Court, and to Undermine Such Finality

Denies Defendants Due Process Of Law,

While Undermining the Usefulness of Class

Action Settlements in Our Civil Justice

eaten enVeCieeue binhén dees 6

. The Second Circuit’s Attempt to

Retroactively Apply Current Legal Standards

and Factual Realities, in Hindsight, to The

Agent Orange Decision Flies in The Face

of This Court’s Limits on Retroactive

Application of The Law and Further Erodes

The Bedrock Principle of Finality, upon

Which All Settlements Are Built. .........

23

ul

TABLE OF CITED AUTHORITIES

Page

CASES

Allen v. McCurry, 449 U.S. 90 (1980) ........... )

Amchem Products, Inc v. Windsor, 521 U.S. 591

CIDDT) . wc cccvccvevcsscceseuseeseueeenuee passim

Bano v. Union Carbide Corp., 273 F.3d 120 (2d Cir.

BOOED on ccccccccccesveseuesunns anne 4

C.L. Grimes v. Vitalink Communications Corp.,

17 F.3d 1553 (3d Cir. 1994) ..........ce eee 8,19

Clark-Cowlitz Joint Operating Agency v. Federal

Energy Regulatory Comm'n, 755 F.2d 366

(D.C. Cle. 19BS) .. cvescccccesscasenuyuaueen 3

Epstein v. MCA, 179 F.3d 641 (9th Cir.) ......... 19

Federated Department Stores, Inc. v. Moitie,

432 U.S. 904 (1GS1) .. cvccccccccccsususegeen 9,10

Harper v. Virginia Dept. of Taxation, 509 U.S. 86

CIDR) ... ccvcccecscvcctecnecdeeeunnn EEE 25, 26

Hart Steel Co. v. Railroad Supply Co., 244 U.S. 294

Up eee 9

In re Agent Orange Product Liability Litigation,

597 F. Supp. 740 (E.D.N.Y. 1984) ..........-. 7,15

ul

Cited Authorities

Page

In Re Agent Orange Prod. Liab. Litig., 611 F. Supp.

cobs tee ecesecocecocces 7

In re Agent Orange Prod. Liab. Litig., 996 F.2d 1425

EEE 5

In re Agent Orange Product Liability Litigation MDL

No. 381, 818 F.2d 155 (2d Cir. 1987) ......... 16, 20

In re Exxon Valdez, 229 F.3d 790 (9th Cir. 2000)

DUPER EESGbGesesdcccccccecoccece 4

In re General Motors Corp. Pick-up Truck Fuel Tank

Prods. Liab. Litig., 55 F.3d 768 (3d Cir. 1995) ... 4

Johnson v. New Jersey, 384 U.S. 719 (1966) ..... 25

Miranda vy. Arizona, 384 U.S. 436 (1966) ........ 25

Nottingham Partners v. Trans-Lux Corp., 925 F.2d

EE 19

Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999)

DP PPEREEGBSECER SCO COSC Ceo SC CCC ese eees passim

Phillips Petroleum Co. v. Shutts, 472 U.S. 707 (1984)

DPE P Shee ape sescccesesoccccce ce 19

Reed v. Allen, 286 U.S. 191 (1932) ............. 9,10

iv

Cited Authorities

Page

Reynoldsville Casket Co. v. Hyde, 514 U.S. 749

TODD oc ccccccccccccccccccccessossccesoes 26

Schiavone v. Fortune, 477 U.S. 21 (1986) ........ 21

Southern Pac. R. Co. v. United States, 168 U.S. 1

COED ccccccctccvcesdassvcessenevecsesees 18

Stephenson v. Dow Chemical Co., 273 F.3d 249 |

(24 Cie. 2001) 2. cccccccccccccccesccsccces passim

Walker v. Armco Steel Corp., 446 U.S. 740 (1980) r

CONSTITUTIONS, STATUTES AND RULES

Cal. Code Civ. Proc. § 340(3) .........----e eee 21

Dad, B. Gon RED cc cccccccecesocccccesceasese 20, 24

Pie.Be. 6 GB.0CS) 2. ccccccccccccccccccccecces 21

Mo. Rev. Stat. § 516.120 ..........-ce ee eeueee 21

ARTICLES AND REPORTS

Asthma Spray Settlement Approved, Nov. 27, 1995,

available in 1995 WL 4415241 ..........555. 29

Vv

Cited Authorities

Page

Big Class Action, at http://www. bagclassaction.com/

settlements/consumer html (reporting class action

settlements and verdicts) (last visited Dec. 18,

Dy sbusnenesdcupdaacseasentddbichescees 29

Bruce L. Hay, Some Settlement Effects of Preclusion,

LE i ctensucceneeedsecens 20

Bruce Vincent, Suit Claims Chrysler Hid Latch

Defect, Tex. Law., Dec. 18, 1995 ............. 29

Class Action Reports Inc., at http://www.classaction

reports/stats2.htlm (reporting federal class actions

filed through 2001) (last visited Dec. 11, 2002) . . . 27, 28

Deborah R. Hensler, A Glass Half Full, A Glass Half

Empty: The Use of Alternative Dispute Resolution

in Mass Personal Injury Litigation, 73 Tex. L.

EE onosebdbieevaddendendecer: 17

Federal Jurisdiction & Procedure, 116 Harv. L. Rev.

PD NeUekdcendecwdeonneceonces 27

Geoffrey P. Miller, Full Faith & Credit to Settlements

in Overlapping Class Actions: A Reply to

Professors Kahan and Silverman, 73 N.Y.U.L.

i whe duanddvdeuddeahedsiescne 23

Heart Valve Maker Settles Suit, Cui. Day L. BuLt.,

Aug. 20, 1992, at 1

vl

Cited Authorities

Judge Oks Race Bias Pact, Nat’. L.J., Feb. 8, 1993,

> © | ReerrrrrrrTrririt ttt

Marcel Kahan & Linda Siberman, The Inadequate

Search for “Adequacy” in Class Actions: A

Critique of Epstein v. MCA, Inc. 73 N.Y.U.L. Rev.

FES CIDBED on cccccccecccccccccccccccccsses

Marian Segal, “A Status Report on Breast Implant

Safety”, November 1995, FDA Consumer .....

Settlements, Awards, Nat’t L.J., July 29, 1991, at 6,

Oe DD oo 0d6nduse60eees6use00nedebeedne ess

Silicone Breast Implants in Relation to Connective

Tissue Discases and Immunologic Dysfunction,

A Report by a National Science Panel to the

Honorable Sam C. Pointer Jr. Coordinating Judge

for the Federal Breast Implant Multi-District

Litigation (Nov. 30, 1998) ..........--0e0e5:

Stanford Law School Securities Class Action

Clearinghouse, at Attp://securities.standord.edu/

1002/CD98 (reporting securities class action

settlements) (last visited Dec. 18, 2002) .......

Thomas E. Willging, Laura L. Hooper & Robert J.

Nienmic, An Empirical Study of Class Actions in

Four Federal District Courts: Final Report of the

Advisory Committee on Civil Rules 60 (1996),

available at Attp://wwwfjc.gov. ..... 6.660565:

Page

29

23

12

29

12

28

27

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INTEREST OF THE AMICUS CURIAE

The Defense Research Institute (“DRI”) is an organization

with more than 21,000 individual lawyer and 400 corporate

members throughout the United States. It seeks to advance the

cause of the civil justice system in America by ensuring that

issues important to the defense bar, to its clients and to the

preservation and enhancement of the judicial process are

properly and adequately addressed.

These objectives are accomplished through the publishing

of scholarly material, educating the bar by conducting seminars

on specialized areas of law, through testimony before Congress

and state legislatures on select legislation impacting the civil

justice system, and by participation as amicus curiae on issues

of significance to the defense bar and its clients. DRI also

provides a national forum for networking by members of state

and local defense organizations who share a concern for the

proper and efficient operation of the civil justice system. '

SUMMARY OF ARGUMENT

When a defendant enters into a class action settlement, as

with all settlements, the most important benefit that the

defendant receives, indeed, the only benefit the defendant

receives, is that it will no longer be subject to lawsuits or claims

based on the issues underlying the class action. Once the trial

court approves a class action judgment or settlement and direct

appeals are exhausted, the parties, including a defendant, should

be able to rely on the final judgment as being truly final. This is

the sole benefit of the bargain that inures to the defendant

following a class action settlement, which is a contract validated

as to its fairness by the court. It is in the defense of this bargained-

1. Pursuant to Rule 37(6) of the Supreme Court of the United States,

DRI states that counsel for petitioner and respondent had no part in

authoring any portion of this brief. No one other than DRI made a

monetary contribution to the preparation or submission of this brief.

Pursuant to Rule 37(3)(a) of the Supreme Court of the United States,

DRI states that all parties to this case have consented to the filing of

amicus curiae briefs.

2

for benefit, not only here, but as much more broadly implicated

in virtually all class action settlements, past and future, that

amicus curiae, the Defense Research Institute, speaks. .

The Second Circuit’s decision in this case creates a virtually

limitless right of so-called “absent class members” to collaterally

attack a class action settlement on the grounds of “adequacy of

representation.”? The Second Circuit’s flawed analysis ignores

certain indisputable facts, including that the incorrectly

denominated “absent” class members (a) received fair notice

under the law in this case’; and (b) had their full and fair

rtunity to challenge the adequacy of their representation

in me as in the trial court at the time of the sporsoeame

roval.* Simply put, plaintiffs in the suit below were no

“sbeent” class in they were class members who derived

specific benefits by their inclusion within the class. Their

interests were adequately represented despite the fact that they

claim otherwise now. Furthermore, the Second Circuit’s decision

fails to give appropriate judicial recognition to the fact that the

trial court had already determined that the class representatives

were adequate for the entire class, which determination was

twice affirmed on appeal. Essentially, the Court of Appeals

decision broadly states that an “absent” class member can

challenge the adequacy of representation in a class action if he

can articulate any culpable reason, including any changes in the

2. Presumably, the legal principle, to the extent one exists (which

amicus curiae denies), on which the Second Circuit has created such an

unfettered right to attack a final judgment could be applied with equal

vigor to any circumstance that might cause someone to second guess a

class settlement after it becomes final. . ;

3. As recognized by the Second Circuit's opinion, the notice

standard is, “notice ‘reasonably = to apprise interested parties

f the action.”” Jd. at 260.

. gore : Circuit acknowledges the procedural history of the

underlying claims and class action settlement, but fails to accord the

careful and correct substantive and procedural undertakings by the trial

court any deference. See, Stephenson v. Dow Chemical Co., 273 F.3d

249 (2d Cir. 2001).

3

law or facts that would affect the initial class action settlement

had it been known then. Under such a rule, no class action

settlement, past, present or future is beyond the pale of attack.

Under the Second Circuit's analysis, the finality of every

class action settlement, and judgment entered thereon, as

approved and finalized by any court, even after direct appeal or

after the time for appeal has passed, is subject to an attack based

upon virtually any claim that the settlement was unfair or that a

class member was not adequately represented. At a time when

both the plaintiff and defense bar must increasingly rely on class

actions to obtain settlements of claims with multiple plaintiffs,

the Second Circuit’s ruling undermines and seriously threatens

the usefulness of the class action device as a method for resolving

such litigation. More importantly, it is antithetical to important

legal policy principals, including predictability’, mutuality and

finality.

Although this Court has recently given new guidance as to

how the class action settlement requirements are to be analyzed,

the Second Circuit’s decision goes far beyond this Court’s ruling

in Amchem Products, Inc. v. Windsor, §21 U.S. 591(1997) and

Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999).° Despite the

5. Sound judicial policy should be based on judicial economy,

fairness, predictatility and clarity. See, e.g., Clark-Cowlitz Joint

Operating Agency v. Federal Energy Regulatory Comm'n, 755 F.2d 366,

372 (D.C. Cir. 1985) (discussing the judicial goals of “clarity, consistency,

judicial economy, efficiency and the avoidance of needless expense”);

(in ruling on matters, “courts should consider the preservation of

constitutional rights, clarity, judicial economy, the likelihood of

inconsistent results and possibilities for confusion”).

6. Amchem and Ortiz require a trial court, in certifying a class

action, to secure “structural assurance of fair and adequate representation

for the diverse groups and individuals affected” by a class action

settlement were present and conformed with due process. Amchem, 521

U.S. at 626; Ortiz, 527 U.S. at 856. This was a somewhat more stringent

and specific standard than that which governed the pre-Amchem

jurisprudence, which required that the settlement be “fair, adequate and

(Cont'd)

4

lack of any cognizable legal policy reason for doing so, the

Second Circuit’s decision provides a limitless power to

collaterally attack a class action settlement by previously bound

class members who are willing to do so. All that is necessary is

for such class members to claim they were not adequately

represented and thus, they were not bound by the class

settlement. Under that analysis and approach, defendants who

settle class claims literally cannot protect themselves against

future litigation after a class settlement is reached. If that is the

case, the judicial policy favoring settlement will be completely

frustrated.’ Additionally, if any such a broad collateral attack is

to be permitted, which amicus curiae steadfastly opposes, sound

judicial policy requires that this Court not retroactively apply

the class action law of today to the Agent Orange settlement of

1984.

I. The Second Circuit’s Expansive Collateral Attack

Ruling Shakes The Foundations Of Every Class Action

Decision In This Country And Threatens To Undermine

If Not Destroy One Of The Civil Justice System’s Most

Important Tools In Resolving Disputes.

The Second Circuit’s decision permits a collateral attack

on a class action settlement that has been final for nearly 20

years. Defendants who entered into the settlement of such

disputed claims had no reason to anticipate that nearly two

decades after they secured collective peace with the courts’

(Cont'd) |

reasonable”, as a opposed to satisfying ordinary class action certification

requirements. Amchem, 521 U.S. at 618, 621-22. By extending the class

action certification “prerequisites” to settlement class actions, Amchem

vastly expanded the necessary inquiry at the trial court level. There is

no language in either Amchem or Ortiz that supports retroactive

application of these standards, which is the approach embraced by the

Second Circuit’s decision in this case.

7. See Bano v. Union Carbide Corp., 273 F.3d 120, 129 (2d.Cir

2001); In re Exxon Valdez, 229 F.3d 790, 795 (9th Cir. 2000); Jn re

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

F.3d 768, 805 (3d Cir. 1995).

5

blessing, they would be hauled into court yet again. Years after

all the settlement funds have been disbursed, and after petitioners

have relied on the trial and appellate courts’ approval of the

class action settlement to protect them from future “Agent

Orange” litigation, two individuals otherwise bound by that

settlement have mounted a collateral attack on the original

settlement.’ Respondents simply assert that they were not

adequately represented in the original proceeding and as a result

they could not be bound to the terms of the settlement. Such

claims were pursued despite the fact the Second Circuit approved

the original class settlement on two occasions. See Jn Re Agent

Orange Prod. Liab. Litig., 996 F.2d 1425 (2d Cir. 1993), cert.

denied, 510 U.S. 1140 (1994). Now, the Second Circuit has

inexplicably reversed its earlier course by allowing a collateral

attack in the instant case. The Second Circuit now allows a twice-

rejected collateral attack on the class settlement, purportedly

8. The Second Circuit, avoiding a discussion of the true result,

suggests that plaintiffs are not attacking the class action settlement at all

by its assertion, “Plaintiffs do not attack the merits on finality of the

settlement itself, but instead argue that they were not proper parties to

that judgment. If plaintiffs were not proper parties to that judgment, as

we concluded below, res judicata cannot defeat their claims.” Stephenson,

273 F.3d at 259. Despite plaintiffs’ efforts to claim otherwise, they do

directly attack the sanctity of the class action settlement and judgment

by the district court. In effect, their argument is that anyone otherwise

bound by the class action settlement can escape its effect by coming

into court alleging that their interests were not adequately protected.

Such claims can be asserted under the Second Circuit’s analysis

irrespective of the merits of such claim, as the Court held —

We are therefore concerned only with whether they were

afforded due process in the earlier litigation. Part of the

due process inquiry (and part of the Rule 23(a) class

certification requirements) involves assessing adequacy of

representation and intra-class conflicts. The claims’ ultimate

merits have no bearing on whether the class previously

certified adequately represented the plaintiffs.

Id. at 261.

6

based on both newly announced legal standards’ that did not

exist at the time of the original determination.

To fully appreciate the potentially broad application of the

decision of the Court of Appeals below, one need only look

briefly at the history surrounding this case. The “Agent Orange”

controversy was a lightening rod for media coverage from the

1970s through the 1990s. Government use of various defoliants,

combined with belated sympathy for Vietnam veterans and the

burgeoning environmental movement pushed this issue to

the forefront of the collective national consciousness. It is

inconceivable that at the time of the initial class action

determination in this case that the overwhelming majority of, if

not all, Vietnam veterans were well aware of their exposure to

“Agent Orange” and had notice of their stake as class members. "°

Those who were not ill in 1984 either knew or should have

known that they could be directly impacted by the class action

settlement if they developed symptoms they attributed to “Agent

Orange.” If the “window” of benefits set to expire in 1994 was

not enough to protect them or others, they certainly had the

opportunity to timely object to the terms of the settlement. Judge

Weinstein below, based upon the existing law and facts as known

9. Itis not uncommon for parties to regret, for good reason, a past

settlement. Often it is because some subsequent event occurs which

makes liability, damages or some other pertinent factor clear, when at

the time it was not. Presumably, a class member could attack a settlement

of a class action by arguing class counsel should have more vigoruusly

pursued certain avenues of discovery, critical liability facts would have

been uncovered. This is true despite the fact that the critical information

did not become public knowledge until decades after the settlement.

There is no end to the mischief the Second Circuit’s decision portends.

10. Rule 23 requires, under the circumstances, the best practicable

notice be given to class members. The district court provided notice be

given to class members by mail, as well as by television, radio and print

media over the course of several months from March 1984 through the

early summer of 1984. The Second Circuit found that notice to meet the

requirements under the rule. Stephenson, 273 F.3d at 255.

7

and knowable, crafted a useful mechanism for future recovery,

with a fixed endpoint for benefits that expired on December

31, 1994."'

Based upon the information available when the settlement

occurred, there was no reason to differentiate be*veen pre- 1994

and post-1994 injuries. The year “1994” though arbitrary, was

not arbitrarily chosen. The “science” purporting to support

plaintiffs’ claims was so weak that the tria! court judicially

concluded that after the 1994 date plaintiff class members would

have many ailments that were similar to those asserted on behalf

of the class, yet they could not be traceable to exposure to Agent

Orange."* See, e.g., In Re Agent Orange Prod. Liab. Litig., 611

F. Supp. 1376, 1418 (E.D.N.Y. 1985). In simple terms, the Court

concluded that as the class members grew older and experienced

11. The Agent Orange class was composed of

those persons who were in the United States, New Zealand

or Australia Armed Forces at any time from 1961 to

1972 who were injured while in or near Vietnam by

exposure to Agent Orange or other phenoxy herbicides,

including those composed in whole or in part of 2,4,5-

trichlorophenoxyacetic acid containing some amount of

2,3,7,8-tetrachlorodibenzo-p-dioxin. The class also includes

spouses, parents, and children of the veterans born before

January 1, 1984 directly or derivatively injured as a result

of the exposure.

In re “Agent Orange” Product Liability Litigation, 597 F. Supp. 740,

756 (E.D.N.Y. 1984).

12. The Second Circuit’s analysis may be as simple as this, you

cannot be bound by a class action settlement if you received no direct

payment under its terms. It found that,

It is true that on direct appeal and on the Ivy/Hartman

litigation we previously concluded that there was adequate

representation of all class members in the original Agent

Orange settlement. However, neither this Court nor the

district court has addressed specifically the adequacy of

representation for those members of the class whose injuries

manifested after depletion of the settlement funds.

Stephenson, 273 F.3d at 258-59.

8

the maladies that accompany the aging process, the already scant

“science” suggesting a causal connection with “Agent Orange”

would exceed the outer limits of medical probability.'’ Thus, a

final date, which had to be chosen, was set as a limit on recovery

for future claims and benefits.

Presumably, the Second Circuit decision was in part a

reflection of its belief that respondents receive no benefit from

the class settlement. While that should not impact the sanctity

and finality of the class action settlement and judgment, it is

also simply not true. First, the $35 million set aside for the Class

Assistance Program eventually became $71.3 million, and was

at least of indirect benefit to them, as is true as to all other class

members. Additionally, they were protected class beneficiaries

under the terms of the class settlement agreement during the

liability window established under its terms. Merely because

they did not develop symptoms within the window does not

mean they were not protected and did not receive benefit from

the settlement. Neither of these benefits would have been

available to them except for the terms of the settlement they

now attempt to disavow.

By allowing purportedly “absent” class members to

collaterally attack the Agent Orange settlement, the Second

Circuit has pushed the envelope as to when such a collateral

attack may occur over the brink of rationality. Unknowingly,

the Court of Appeals has ushered in a judicial construct that

places virtually no value on a defendant’s right to finality in a

class action settlement context. It has also subverted the

“important policy interest of judicial economy,” which is served

by “permitting parties to enter into comprehensive settlements

that ‘prevent relitigation of settled questions at the core of a

class action.’” C.L. Grimes v. Vitalink Communications Corp.,

17 F.3d 1553, 1563 (3d Cir. 1994).

13. As Judge Weinstein stated during the hearing in the instant

case, in summarizing the lack of scientific data to support plaintiffs’

claims, “{hjad there been no settlement, there would have been no

recovery for the veterans.”

9

This Court has long recognized the “vital public interests”

served by the finality, clarity, certainty, and predictability that

res judicata promotes. See Federated Department Stores, Inc.

v. Moitie, 452 U.S. 394, 401 (1981). It has defined res judicata

as, “a rule of fundamental and substantial justice, ‘of public

policy and of private peace,’ which shouid be cordially regarded

and enforced by the courts... .” /d. citing Hart Steel Co. v.

Railroad Supply Co., 244 U.S. 294, 299 (1917). Respondents’

alleged nghts and interests here do not outweigh or countenance

overriding the vital purposes served by res judicata and collateral

estoppel, which are to “relieve parties of the cost and vexation

of multiple lawsuits, conserve judicial resources, and, by

preventing inconsistent decisions, encourage reliance on

adjudication.” Allen v. McCurry, 449 U.S. 90, 94 (1980).

Respondents seek a potential windfall by attempting to

litigate their claims separately from the class to which they

belong. This Court has made clear that collateral attacks will

not be sanctioned where litigants seek a windfall by claiming

they are not bound by a prior judgment. See id. at 400-01.

The words of this Court spoken years ago in Reed vy. Allen, 286

U.S. 191, 198-99 (1932), ring as true today and pinpoint why a

collateral attack on a class settlement nearly 20 years old by

plaintiffs who are within the class should not be upheld:

The predicament in which respondent(s] fin[d]

themselves is of [their] own making... . . [this Court]

cannot be expected for [their] sole relief, to upset

the general and well-established doctrine of res

judicata, conceived in the light of the maxim that

the interest of the state requires that there be an end

to litigation — a maxim which comports with

common sense as well as public policy. And the

mischief which would follow the establishment of

precedent for so disregarding this salutary doctrine

against prolonging strife would be greater than the

benefit which would result from relieving some case

of individual hardship.

10

Moreover, the res judicata effect of the court-approved

settlement cannot be “altered by the fact that the judgment may

have been wrong or rested on a legal principle subsequently

overruled in another case.” Federated, 452 U.S. at 398. A “final

judgment” of the scope and magnitude here cannot be

collaterally attacked based on subsequent precedent or factual

developments without creating “uncertainty and confusion” and

“undermining the conclusive character” of court-approved

settlements, “consequences which it was the very purpose of

the doctrine of res judicata to avert.” Federated, 452 U\S. at

398-99. The time-honored propositions quoted in Reed explain

why the Second Circuit’s decision to apply Amchem and Ortiz

retroactively to permit a collateral attack is unjustifiable:

... all controversies and contentions involved are

set at rest by a judgment or decree lawfully rendered

which, in its terms, embodied a settlement of the

right of the parties. It would undermine the

foundation of the principle upon which it is based if

the Court might inquire into and revise the reasons

which led the court to make the judgment. We are

unable to find reason or authority supporting the

proposition that because a judgment may have been

given for wrong reasons or has been susequently [sic]

reversed, that is any the less effective as an estoppel

between the parties while in force.

Reed, 286 U.S. at 199-200, quoting Deposit Bank v. Frankfort,

191 U.S. 499 (1903). By allowing this unprecedented collateral

attack two decades after the trial court’s final approval of the

class settiement, which was twice upheld on direct appeal, the

conceptual framework and practical benefits of a Rule 23

settlement are being grossly subverted and perhaps destroyed.

As briefly mentioned, important principles are at stake here,

including that of mutuality. A defendant would never be allowed

to collaterally attack a class action settlement based on a change

in circumstances, whether legal or factual, as the following

hypothetical demonstrates. Consider that an airline and

ll

manufacturer of the aircraft involved in a crash agreed, in a

class action settlement, to pay benefits to the estates of over

200 individuals who perished. The class action lawsuit alleged

a defective fuel tank caused a mid-air explosion of the airplane,

resulting in the untimely deaths and seeking actual and punitive

damages. Under the impression that there was potential liability

for compensatory damages and some potential for punitive

damages (while denying same in the settlement papers), the

airline and the manufacturer agreed to pay a substantial sum of

money to the surviving heirs of each passenger. Many years

after the settlement is finalized and approved by the trial court,

and the time for direct appeal has passed, new findings surface

that call into question the basis for the class action settlement.

Simultaneously, a government investigation of terrorism

determines that it was not, in fact, a fuel system defect in the

ill-fated airplane, but rather, a ground-to-air missile, launched

by a terrorist group, which caused the explosion and subsequent

crash. Unquestionably, it is now patently clear to all parties that

there was no defect in the design, manufacture or maintenance

of the plane which caused or contributed to the mid-air

explosion. Instead, it was an act of cowardice in an undeclared

war by an extreme terrorist group that ended more than 200

lives. Could the airline or manufacturer of the aircraft reopen

the class settlement based on this information, seeking to recoup

the money mistakenly paid out in settlement? The answer would

be a resounding “no.” Despite the “unfairness” of such a result,

it is the right result.'*

14. A “real-life” example of the above airline hypothetical is found

in the continuing saga of “breast-implant” litigation. Although numerous

cases were settled in the early 1990s, including class action cases, the

science regarding the alleged adverse effects of these implants was not

well developed. As additional scientific studies were performed, it

became clear that rates of immune-related diseases and connective tissue

diseases (the primary claim of the plaintiffs in breast implant cases)

were not higher for women with silicone breast implants, Ss :

ont’

12

Plaintiffs in this case, however, seek to reopen a court-

approved class settlement based on a much less convincing

argument. Plaintiffs have cast themselves in the role of “absent

class members” whose interests were inadequately protected in

the 1984 settlement.'* The alleged “inadequate representation”

is based on their effort to spin-doctor their status in 1984 as

being different from other potential class member who likewise

had not yet suffered any alleged health effects from Agent Orange

as of 1984. They were not then nor are they now different than

(Cont'd)

studies of the Mayo Clinic and the Harvard Nurses’ Health Study.

See Manian Segal, ‘A Status Report on Breast Implant Safety’, November

1995, FDA Consumer. Shortly thereafter, Judge Pointer, the Coordinating

Judge for the Federal Breast Implant Multi-District Litigation, appointed

a neutral panel of scientists to determine whether scientific data supported

plaintiff's claims that silicone breast implants caused connective tissue

disease and immunologic dysfunction. Their report, in summary,

concluded on November 30, 1998 that there was no scientific support

for such claims. See, Silicone Breast implants in Relation to Connective

Tissue Diseases and Immunologic Dysfunction, A Report by a National

Science Panel to the Honorable Sam C. Pointer Jr. Coordinating Judge

for the Federal Breast Implant Multi-District Litigation, pp. 1-8

(November 30, 1998). Would it be appropriate for breast implant

manufacturers to seek to re-open past settlements, class action or

otherwise, to address this information? “No” is the simple answer yet

plaintiffs in this case seek the same type of relief.

15. As noted, plaintiffs, with the Second Circuit's blessing, seek

to avoid the application of the doctrine of mutuality by contending they

were never bound by the class settlement and judgment (See n.8).

Apparently, if these two plaintiffs had developed symptoms on or before

December 31, 1994, they would be bound and mutuality would apply,

but because they did not, they magically are not bound. This approach

ignores the fact that the district court had concluded that the 1994 cutoff

was fair based upon all that was known and knowable at the time. Now,

second-guessing what the trial court found as fair, the Second Circuit

creates its own ad hoc subclass of persons who manifested no injury by

December 31, 1994 and concludes that its new subclass was not

adequately represented.

13

all of the other class members who had not yet developed any

identifiable symptoms from exposure. In fact, all individuals

who were not ill in 1984 were represented, and a fund was

created that would disburse benefits for a 10-year period

following the settlement approval.'* If the plaintiffs below had

developed symptoms of any specific illness listed in the

settlement before 1994, they would have received benefits.

Because they did not develop symptoms in that time-period,

they were not eligible to receive direct monetary payments from

the class settlement. All class members, including plaintiffs

below, did receive the indirect benefit of the monies paid to

various Vietnam Veterans’ agencies. Plaintiffs were certainly

within the group, all “Agent Orange” exposed and injured

individuals, which the trial court and Second Circuit found to

be adequately represented."’

16. The settlement provided that defendants would pay a total of

$180,000,000 into a settlement fund. Stephenson, 273 F.3d at 252. $10

million of this fund would indemnity defendants against future state

court actions alleging same claims. /d. The majority of the $180 million

settlement proceeds (75%) were to be distributed to veterans and

surviving spouses or children from January 1, 1985 through December

31, 1994. Id. at 253. This amounted to roughly $135 million (75% of

$180 million). The remaining roughly $35 million ($45 million minus

$10 million for indemnity) was to be used to establish the Agent Orange

Class Assistance Program, which made grants to entities serving Vietnam

veterans and their families. /d. Ultimately, the fund paid out $196.5

million. /d. at 255. Of that amount, $73.2 million was paid to veterans

with injuries on or before May 7, 1984, $52 million was paid to veterans

whose injuries manifested after May 7, 1984, and $71.3 million was

paid to the Class Assistance Program. /d. The $10 million originally set

aside for indemnification was transferred back to the district court and

was paid as part of the $71.3 million distributed by the Class Assistance

Program. /d.

17. The Second Circuit concluded that for purposes of the Agent

Orange litigation, “injury occurs when a deleterious substance enters a

persons body, even through its adverse effects are not immediately

apparent.” /vy/Hartman, 996 F.2d ai 1433-34. Of course, this would

include plaintiffs.

14

Based on subsequent favorable application of the military

contractor defense and the complete paucity of evidence

supporting a causal link between Agent Orange and health

problems, defendants, like the airline in the above hypothetical,

could conceivably challenge the 1984 court-approved

settlement. Legal principals of finality, however, would bar such

a claim. Similarly, plaintiffs’ collateral attack on the 1984

judgment should be rejected to appropriately uphold the

principle of finality that is at the core of all settlements in our

civil justice system. Mutuality, a corollary but no less important

legal principle, mandates that the same rule of finality must

apply to all parties to a class action settlement. Final judgments

approving a class settlement must be given a fair meaning and

be extended to protect those who have settled irrespective of

whether they are a plaintiff or defendant.

Il. The Defendants’ Interest In Finality Outweighs A So-

Called “Absent” Class Member’s Interest In Having

Their Day In Court, And To Undermine Such Finality

Denies Defendants Due Process Of Law, While

Undermining The Usefulness Of Class Action

Settlements In Our Civil Justice System.

In a typical non-class action settlement, a defendant receives

nothing from a plaintiff other than the legal assurance that it

will never again be subject to a claim or a lawsuit for the settled

claims in that case. This is the benefit of the bargain which is

“purchased” by the defendant through an exchange of

consideration, usually a monetary payment. By settling a case,

defendant obtains a shield, which forever protects it from any

attempt by plaintiff to recover damages against the defendant

within the scope of the matters settled.'* Regardless of the terms

18. Defendants, of course are not claiming that a settlement or

judgment is never subject to collateral attack. The exceptions to this

rule, not present here, would include cases where plaintiffs can prove

fraud, misrepresentation, bad faith, duress, undue influence, or

inadequate consideration. The instant case does not >

( ,

15

used to describe this bar, whether it be “res judicata” or

“collateral estoppel”, settlement acts to prohibit future claims

that fall within the scope of the settlement, and is the single

asset taken by a defendant from any settlement. Without the

assurance that the litigation is finally over, a defendant would

never engage in settlement talks, much less agree to pay money

for nothing.

In a class action context, the bar to future claims and

lawsuits is of even greater importance to the defendant. Class

action settlements are many times reached early in litigation in

an effort to resolve the claims and thus often occur without

defendant fully developing liability defenses that might

effectively defeat a plaintiff’s claims. As is the case in any

settlement, but more significantly in settling class action claims,

numerous factors are taken into account, including the current

law on important issues, the facts relevant to liability and

damages, the proclivities of the trial judge and jury pool likely

to decide the controversy, the ability of the opposing counsel,

and a host of other factors, depending upon the circumstances. '®

(Cont'd)

allegations so any issues regarding the standards for collateral attack in

such egregious situations is not before the Court and need not be

addressed.

19. In examining the fairness of the class settlement, Judge

Weinstein considered multiple factors. He considered 14 separate

categories of concerns expressed by class members, ranging from

concerns regarding financial help for those too ill to work to the need to

settle now “to get on with life.” Jn re “Agent Orange” Product Liability

Litigation, 597 F.Supp. 740, 764-72 (E.D.N.Y. 1984). Judge Weinstein

also examined the factual problems with the plaintiffs’ claims, specifically

addressing “evidence of causality,” “Scientific Studies on Casuality”

and “knowledge of government and defendants.” /d. at 799-851.

He examined government action on the issue, before announcing his

approval regarding the fairness of the plan and the “nuts and bolts” of

administering the settlement. /d. at 851-62. Indeed, it is difficult to

imagine a more detailed or thoughtful consideration of fairness issues

under the class action rules in existence at the time of Judge Weinstein’s

decision.

16

Because of the vast number of individual claims by plaintiffs,

defendant generally does not develop case-specific liability and

damage evidence as to each and every individual plaintiff prior

to a class settlement. Such evidence might lower the value or

even eliminate individual plaintiff's claims (particularly in cases

involving personal injury). In the class action context, the best

claims are lumped in with the worst claims, and though there

may be different levels of recovery based on various factors

associated with particular class plaintiffs, all plaintiffs receive

a negotiated “fair share” of the settlement proceeds paid by the

defendant.

Defendants often, as is true here, settle class action cases

because to do ~~ is the most efficient means to deal with the

possibility of hundreds or thousands of lawsuits.” This is true

even when liability is, at best, thin. Without the class settlement

vehicle, such litigation could drain a corporation of significant

financial resources, the vast majority of which would otherwise

be paid in legal fees to defend multiple cases or paid in verdicts

to a few plaintiffs in certain plaintiff-friendly venues. In reaching

a class settlement, a defendant sometimes pays a premium that

would not be justifiable based on an individual case evaluation,

but it does so because it receives, in return, the assurance that it

will never be haled into court for the wrongs covered within the

scope of the settlement. Furthermore, plaintiffs are not

discriminated against based on factors beyond their control, such

as the venue where their individual claim must be pursued.

The nature of mass tort class actions such as this one

amplifies not only the public policies that require finality in

litigation but also the potential for abuse of the broad new avenue

for collateral attack established by the Second Circuit. As one

20. Approximately 123,531 potential class members, including

Vietnam veterans, were sent notices of the Agent Orange class settlement.

In re: Agent Orange, 818 F.2d at 167-68. This notice, in addition to

media coverage and other notice required by the Court, resulted in an

estimated 240,000 claims by 1987. /d.

17

commentator who has studied mass tort class action settlements,

such as the Dalkon Shield IUD litigation, observed:

Mass personal injury litigation also appears to

stimulate a higher rate of claiming than is associated

with ordinary personal injuries. . . . The precise rate

of claiming in mass torts is indeterminate because

no databases record the number of people who have

used the products involved in the various litigations

and who have been injured. In response to notices

of the pendency of Dalkon Shield manufacturer A.H.

Robins’ bankruptcy, 327,064 plaintiffs filed claims.

The court determined that 197,000 plaintiffs

demonstrated sufficient evidence of using the Dalkon

Shield to merit payment. These numbers represent

13% and 8% respectively of the 2.5 million IUD

users in the United States, of whom an unknown

but smaller number were actually injured by the

Dalkon Shield. Of the 180,000 people reportedly

affected by salmonella-contaminated dairy products

marketed by Jewel Food Stores, 30,000 — about

17% — filed claims against Jewel Food. These

numbers suggest that claiming rates may be at least

two to three times higher than for product-related

injuries generally. Whatever the overall rate of

claiming, the history of mass torts has shown that

publicizing the possible link between product use

and injuries and the availability of legal remedies

— whether through mass media coverage, lawyer

advertising, or court-ordered notices — results in

a large increase in the number of claims that are

filed... .

Deborah R. Hensler, A Glass Half Full, A Glass Half Empty:

The Use of Alternative Dispute Resolution in Mass Personal

Injury Litigation, 73 Tex. L. Rev. 1587, 1598-99 (1995). In

this case, all who were exposed to Agent Orange, including

plaintiffs, had a right to benefits under the class settlement. Like

18

the other mass tort actions cited in the previous example, this

one was highly publicized. The “numerositvy, commonality,

interdependence of case values, scientific controversy, heated

emotional atmosphere, and increased propensity to claim,” not

only increased defendants’ exposure to liability but also

increased all potential plaintiffs’ opportunities to participate,

make their claims known and receive benefits. Hensler, supra,

at 1600. .

Currently, parties must meet the Amchem and Ortiz

requirements in order for a class settlement to be approved by

the court under the present interpretation of Federal Rule of

Civil Procedure 23. Prior to the Amchem decision, individual

courts crafted divergent standards in their interpretation of

federal class action rules, but most often, the individual class

action settlements were approved by the district courts and

subject to direct appeal, just as this instant case was appealed

twice to the Second Circuit.

The Second Circuit’s decision in this case goes far beyond

any constitutional or statutorily required approach. Likewise, it

goes far beyond holdings involving class action law under Rule

23 as promulgated by this Court.”' The Second Circuit's ruling

essentially nullifies the only benefit a defendant receives in a

class action settlement, the benefit of finality. By effectively

taking from defendants this single but significant benefit, the

Second Circuit ignores not only the precedent of this Court, but

also ignores the critical importance of finality to the fair and

efficient administration of our civil justice system.

Finality, indeed, is a bedrock principle in our civil justice

system, and the principle is “administered” by the courts through

the doctrine of “res judicata”. See, e.g., Southern Pac. R. Co.

v. United States, 168 U.S. 1, 49 (1897). When parties settle a

class action or a judgment is rendered in a class action, the

21. It is assumed without any discussion in the Second Circuit’s

opinion below that Amchem and Ortiz are to be given retroactive effect.

Not a single word in either of these decisions supports such an

application.

19

Court’s determination normally binds absent class members.

See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 812 (1984).

“As a judgment, the settlement and release of claims is a contract

that not only is agreed upon by the parties, but also is stamped

with the imprimatur of the court with jurisdiction over the parties

and the subject matter of the lawsuit.” C.L. Grimes, 17 F.3d at

1557. The best approach for the efficient administration of justice

is to hold that the question of adequacy of representation in a

settled class action cannot be reopened via a subsequent

collateral attack. See Epstein v. MCA, 179 F.3d 641 (9th Cir.)

cert. denied, 528 U.S. 1004 (1999). If an “absent class member”

wishes to challenge a class action settlement, they should either

opt out, object to certification or object to the settlement in the

trial court. /d. Where the claims asserted fall within a court-

approved settlement agreement and release, that judgment and

contract precludes collateral claims by any class member, even

if they object to the settlement, if the court employed “acceptable

procedural safeguards,” which include notice of the class action

plus an opportunity to be heard and participate. CL. Grimes,

17 F.3d at 1557, 1560-61, citing Nottingham Partners v. Trans-

Lux Corp., 925 F.2d 26, 32-33 (1st Cir. 1991).

Here, the court ordered extensive dissemination of notice

by plaintiffs’ counsel. ” Plaintiffs did not object to the class

22. The following excerpt from the Second Circuit’s opinion

upholding the class settlement describes the notice ordered by the Court:

(1) Written notice was to be mailed to (a) all persons who had filed

actions in the federal district courts, or had filed actions in state courts

later removed to federal court, that were pending in or transferred to the

Eastern District; (b) all persons who had intervened or sought to do so;

(c) each class member then represented by counsel associated with the

PMC who had not yet commenced an action or sought to intervene;

(d) all persons then listed on the United States Government’s Veterans’

Administration “Agent Orange Registry”; (2) Announcements were to

be sent to the major radio and television networks, and to radio stations

with a combined coverage of at least one half of the audience in each of

the top 100 radio markets; (3) Notice was to be published in certain

(Cont'd)

20

settlement, nor did they opt out, and cannot now be heard to

complain. Respondents’ effort to spin-doctor their status in the case

below as “absent” class members is telling indeed. If they were not

members of the class bound by the settlement, there would be no

need to challenge the class settlement at all. Since they were to be

bound by the terms of the class settlement, they were accorded the

same rights to object or opt out as any other members of the class.”

See Fed. R. Civ. P. 23. Whether the decision not to opt out or object

was aconscious one or whether the result of inadvertence, the result

is the same.

In looking at “preclusion rules”, (claim and issue preclusion),

their “classic” role in the legal system is to “bring litigation to a

close.” Bruce L. Hay, Some Settlement Effects of Preclusion, 1993

U. Iw. L. Rev. 21. This “spare{s] both victorious parties and the

courts that burden of repeatedly litigating matters already decided.” /d.

The “classic role”, however, is not the only important role of issue

preclusion. As professor Hay points out, “by limiting in advance

the number of times a claim can be litigated, preclusion rules

determine a claim’s expected value in court to each party.” Jd.

(Cont'd)

leading national newspapers and magazines, in servicepersons’

publications, and in newspapers in Australia and New Zealand;

(4) A toll-free “800” telephone number was to be obtained and staffed

by persons who would provide callers with basic information about the

litigation; (5) Notice was to be sent to each state governor requesting

that he or she refer the notice to any state agency dealing with the

problems of Vietnam veterans. The notice sent to individual veterans

_. . informed potential class members of the pendency of the class action

and their right to opt out of the Rule 23(b)(3) class. The notice made

clear that exclusion could be effectuated only by written request, and an

“Exclusion Request Form” was attached to the notice for convenience.

In re Agent Orange Product Liability Litigation MDL No. 381,818 F.2d

155 (2d Cir. 1987).

23. If this were not a settlement class, but either a class certified

for trial and tried to a defense verdict or had the trial court on motion for

summary judgment entered judgment for all defendants, all class

members including these plaintiffs, would be bound. Rule 23

contemplates they would be, because if not the rule would be useless.

21

In other words, if there were no preclusion rules, other factors,

such as the relative wealth of the parties and/or their desire for

repeated litigation would improperly skew the settlement value of

lawsuits. Instead of the merits of the case determining the factors

to consider for settlement, the spectre of re-litigation would force

the party who was less able to wage war in the courts to give up a

substantial amount of “value” during settlement negotiations.”

By stripping the mantle of finality from the Agent Orange

settlement, the Second Circuit not only imperils closed cases,

but also negatively impacts the ability of parties to settle future

class action lawsuits based on the merits. The lurking possibility

of a collateral attack poisons the well of settlement talks by

eliminating a defendant’s ability to call any settlement “final.”

“Finality” is also enshrined in our jurisprudence in the area

of statutes of limitation. This Court has correctly characterized

the public policy behind such statutes, stating “[t]he statute of

limitations establishes a deadline after which the defendant may

legitimately have peace of mind; it also recognizes that after a

certain period of time it is unfair to require the defendant to

attempt to piece together his defense to an old claim.” See Walker

v. Armco Steel Corp, 446 U.S. 740, 751 (1980); see also

Schiavone v. Fortune, 477 U.S. 21, 31 (1986) (“Of course, there

is an element of arbitrariness here, but that is a characteristic of

any limitations period. And it is an arbitrariness imposed by the

legislature and not by the judicial process.”)*

24. The author does not believe that the abolition or weakening of

claim preclusion would end the settlement of cases, as he is of the opinion

parties would rationally sign agreements that would limit re-litigation.

Professor Hay believes that the “main effect” of preclusion lies beyond

the notion of bringing “finality” to proceedings Jd. at 24. Rather, the

preclusion rules prevent a party from “extract[ing] from her opponent a

settlement unrelated to the merits of a dispute.” Jd. at 32.

25. For example, the statutes of limitations for personal injury

actions vary widely from state to state, Fla. St. § 93.11(3) (four-year

statute of limitations); Cal. Code Civ. Proc. § 340(3) (one-year statute

of limitations, recently changed to a two-year statute by S.B. No. 688

(1)); Mo. Rev. Stat. § 516.120 (five-year statute of limitations).

22

In its analysis below, the Second Circuit, with the hindsight

easily developed decades after an event decided that a ten-year

window was not enough. Apparently, it believes that the district

court got it wrong by not providing for a longer latency period.

Interestingly, the Second Circuit has concluded that the trial

court got it wrong, but it is just as likely the trial court got it

right. For example, it may be that (a) there is indisputable

medical evidence of alternate causation for the injuries about

which plaintiffs Stephenson and Isaacson now complain, and

(b) that it is scientifically certain no one after 1994 could have

a medical condition caused by Agent Orange. The broad-based

right to collaterally attack a class action settlement envisioned

by the Second Circuit exists irrespective of whether there is

any interest to protect at all. In other words, even if Judge

Weinstein was right, not only on the law but on the science, the

collateral attack as embodied in the opinion below is still

available.

The opinion of the Second Circuit suggest that the strength

of or merits of plaintiffs’ claims in no way impact the issues of

adequacy of representation and thus the right to pursue a

collateral attack.”°

It is inconceivable that is true. Rather it is unquestionable

that adequacy of representation is inextricably intertwined with

whether the settlement was fair and adequate, which directly

implicates the strength and merits of the class members claims.

Here, the trial court analyzed the potential impact of various

liability issues such as the government contractor defense and

the strength or weakness of the science surrounding the class

claims. It is more than conceivable that petitioners paid nearly

two hundred million dollars to settle meritless claims which

had they been fully defended would have resulted in these

plaintiffs and other class members receiving nothing. When class

members, including plaintiffs, receive benefits under a

26. See n.8.

23

settlement which probably would not have been available if a

decision on the merits had been reached, it is counter-intuitive

to conclude they were not adequately represented.

The doctrine of finality dovetails seamlessly with the class

action device, which is intended to determine the rights of

multiple individuals with respect to similar claims against a

defendant, by using an efficient system designed for such

purpose. Permitting virtually unlimited collateral attacks,

such as the one in this case, seriously “undermine[s]” the very

efficiencies sought to be achieved by the class action

mechanism.” Marcel Kahan & Linda Siberman, The Inadequate

Search for “Adequacy” in Class Actions: A Critique of Epstein

v. MCA, Inc., 73 N.Y.U.L.Rev. 765 (1998). Indeed, one

commentator goes so far as to state that “all class action

settlements however generous to the class, however competently

litigated and however much the product of adversarial, arm’s

length negotiations between the parties, would be open to

collateral attack in a subsequent forum.” Geoffrey P. Miller,

Full Faith & Credit to Settlements in Overlapping Class Actions:

A Reply to Professors Kahan and Silverman, 73 N.Y.U.L.REv.

1167, 1189 (1998). For countless legal policy and practical

reasons, the Second Circuit’s ruling must not be the law.

Ill. The Second Circuit’s Attempt To Retroactively Apply

Current Legal Standards And Factual Realities, In

Hindsight, To The Agent Orange Decision Flies In The

Face Of This Court’s Limits On Retroactive Application

Of The Law And Further Erodes The Bedrock Principle

Of Finality, Upon Which All Settlements Are Built.

Whether these two plaintiffs were “adequately represented”

in the class action litigation and global settlement approval, to

which they were parties under the class definition, is an issue

that goes directly to the merits of the 1983 class certification,

the 1984 fairness hearing and the 1987 affirmation of both on

24

appeal.”’ Rather than viewing plaintiffs’ representation in context

of 1984 class action law, the Second Circuit has retroactively,

and thus impermissibly, applied the Amchem and Ortiz decisions

to support its conclusion that plaintiffs may collaterally attack

the class settlement because they claim they were not adequately

represented back in 1983, 1984 and 1987. See Stephenson, 273

F.3d at 251. (“This appeal requires us to determine the effect of

the Supreme Court’s londmark class action decisions in Amchem

...and Ortiz... ,on a previously settled class action concerning

exposure to Agent Orange during the Vietnam War.”).

Amchem and Ortiz are seminal opinions carefully

delineating the criteria courts must consider and follow when

evaluating any class settlement under Rule 23, Fed. R. Civ. P.

The Amchem holding of this Court was improperly applied

retroactively herein below, because

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.

27. If the Second Circuit is right, that plaintiffs here can escape

the res judicata effect of the settlement and judgment of the trial court,

the result will be catastrophic for the defendants. According to the Second

Circuit, Plaintiffs were not adequately represented below because of

the inherent conflict arising between those who have current injuries,

those whose injuries would become manifest after the settlement but

before December 31, 1994 and those whose injuries were recognized

only after that date. If so, then all parties to the settlement could

collaterally attack it because none of these groups or subclasses, nor

any others that could be dreamed up, were adequately represented since

counsel had divided loyalties as between and among each. Thus, any

member of the class, whichever group or subclass they find themselves

in has the same right to collaterally attack the judgment and seek

additional compensation or other relief based upon the allegation of

inadequate representation.

25

Harper v. Virginia Dept. of Taxation, 509 U.S. 86, 96 (1993)

(emphasis added). Accordingly, the Second Circuit’s retroactive

application of Amchem and Ortiz to sanction this attempted

collateral attack contradicts clear, longstanding and well

reasoned precedent to the contrary.

An example of the appropriate limits of retroactivity can

be found from application of the now well recognized Miranda

warnings. This Court did not retroactively apply Miranda v.

Arizona, 384 U.S. 436 (1966) to release every convicted criminal

who was not “read their rights” in each case finalized prior to

Miranda. See Johnson v. New Jersey, 384 U.S. 719, 921 (1966)

(holding that Miranda was to be applied prospectively only).”*

Similarly, Amchem should not be applied retroactively to the

instant case. To do so would open every previously settled class

action to such a collateral attack. Moreover and just as

importantly, purported compliance with Amchem and Ortiz

offers no safe haven from the type of collateral attack permitted

by the Second Circuit’s ruling. As here, a plaintiff simply need

allege that they were not adequately represented, despite any

and all attempts by the trial court to strictly comply with the

holdings in Amchem and Ortiz. Allowing such collateral attacks

is antithetical to the universally recognized legal policies of

certainty, mutuality and finality which are essential to the proper

functioning and preservation of our civil justice system.

Morc»ver, there are other compelling legal, equitable and

public policy reasons why new legal principles should not apply

retroactively in any effort to support a collateral attack on a

28. This Court stated in Johnson that “[r)etroactive application of

... Miranda would seriously disrupt the administration of our criminal

laws. It would require the retrial or release of numerous prisoners found

guilty by trustworthy evidence in conformity with previously announced

constitutional standards.” Johnson, 384 U.S. at 731. Similarly, in the

instant case, retroactive application of Amchem and Ortiz would disrupt

(ce oP ho yap eget

and judgments that were finalized in accordance with due process

requirements in existence at the time.

26

class settlement entered into and approved more than a decade

earlier. It is fundamentally unfair to settling defendants and the

rest of the class and an affront to judicial economy to permit

plaintiffs, who fall within a class bound by a court-approved

settlement in a case finally 2: posed of and well after the time

for direct appeal, to laurel. a collateral attack based on

subsequent decisional law. As held by this Court for good reason,

“[n]jew legal principles, even when applied retroactively, do not

apply to cases already closed.” Reynoldsville Casket Co. v. Hyde,

514 U.S. 749, 758 (1995). Here, the situation is not at all fairly

comparabie to that which exists when the law changes while a

case is still pending. See Harper, 509 U.S. at 96-98.

Constitutional and policy concerns that compel a presumption

of retroactivity in pending cases, such as “the prohibition of

selective temporal barriers,” are nowhere present here.

See Harper, 509 U.S. at 97. The chief concern is that parties

who are able to negotiate and craft a mutually agreeable

settlement have sufficient confidence that it will remain

The Second Circuit’s analysis, as noted, widely opens the

door to collateral attack by class members. Not only does it

apply in this case, and other cases that went to final judgment

well before Amchem and Ortiz, but the Second Circuit’s open-

door policy on collateral attack would apply equally to future

29. Predictability is critical when the business and legal realms collide.

The parties and the court in the Agent Orange settlement did everything by

the book and in fact and in part wrote the book, which others have since

read and followed. The parties and court had a right to rely on the current

status of the law which they did. No one could have predicted in 1984 or

1994 that the Second Circuit would say now that the trial court did it

wrong. Especially after twice saying it did it right. To allow retroactive

application of Amchen and Ortiz to this class action settlement, as well

as all others previously finalized, will have a chilling effect on litigants’

ability and willingness to make critical decisions in litigation, including

those involving settlement in reliance on current law. They will never

know when they might be whipsawed by newly crafted legal opinions,

losing the benefits they bargained for under current law.

27

actions. The Court’s holding will potentially impact hundreds

of thousands of plaintiffs and those defendants who have entered

into court-approved settlements with them, as is illustrated by a

brief review of some relevant statistics on class action filings

and settlements. For example, between 1973 and 1996 (before

Amchem and Ortiz), the average number of class actions filed

annually in federal courts was approximately 1,568.” Federal

Judiciary Center researchers have determined that, in four federal

district courts, 62% to 100% of certified class actions have

settled. See Federal Jurisdiction & Procedure, 116 Harv.L. Rev.

332 (Nov. 2002), citing, Thomas E. Willging, Laura L. Hooper

& Robert J. Niemic, An Empirical Study of Class Actions in

Four Federal District Courts: Final Report to the Advisory

Committee on Civil Rules 60 (1996), available at http://

www.fjc.gov. The large percent resolved by settlement is

consistent with the federal court policies of encouraging

settlement and minimizing protracted, expensive litigation.

To allow courts to apply new legal principles retroactively to

class actions settled long ago would thwart these policies.

Defendants nationwide, like petitioners here, have

justifiably relied on court-approved class settlements based on

the law and facts, known or knowable, when they agreed to

settle and the court rendered its decision. Petitioners, like other

class-action defendants, have spent hundreds of millions of

dollars in reliance on the trial court’s decision that, based on

the applicable legal principles, the settlement was consistent

with Rule 23 (as it was interpreted at the time of the class

determination) which would preclude further expensive and

time-consuming litigation. Petitioners here had no reason to

believe that the district court’s decision to approve the class

settlement was potentially incorrect or could not be fully relied

upon as to its finality. In fact, it was not at the time incorrect nor

should it be subject to collateral attack long after it became final.

30. See Class Action Reports Inc., Statistics tbl.2. at http://

www.classactionreports/stats2.htm (reporting federal class actions filed

through 2001) (last visited Dec. 11, 2002).

28

Petitioners expended a substantial amount of money based on

these understandings and they should not be forced to relitigate

the same claims based on new law or alleged facts that did not

exist at the time.

As the number of class actions filed (pending) in federal

courts has risen from 1,356 in 1996 to 3,092 in 2001, it becomes

even more imperative that current and future defendants who

pay substantial or potentially bankrupting amounts of money to

settle class claims have confidence that their court-approved

settlement will not be subject to collateral attack based on law

made long after the case has closed. See Class Action Reports

Inc., supra, Statistics tbl.2. Furthermore, the Second Circuit’s

willingness to apply the Amchem and Ortiz analyses to determine

the adequacy of representation in this case can only encourage

plaintiffs and lawyers, who in hindsight feel “left out,” “unfairly

compensated,” or now wish they had objected, to pursue a

judicially approved but potentially disastrous second chance to

challenge this and virtually every other significant class

settlement. The level of uncertainty created by the retroactive

application of new legal principles after the time for direct review

has passed places an undue hardship on all who have invested

substantial time, resources and money in multi-million and

multi-billion dollar settlements, including the courts who have

shepherded such class actions through various phases to ultimate

resolution. Imagine the chaos that surely would ensue if all class

action settlements — past, present or future — were subject to

such unlimited collateral attack, as the following nine random

examples demonstrate:

* Cendant Securities Litigation: $3.525 billion recent settlement

with plaintiffs who alleged that Cendant, its predecessor

corporation and three of its officers violated the Securities

Exchange Act of 1934 by publishing false and misleading financial

statements.”

31. Stanford Law School Securities Class Action Clearinghouse,

at http//secutrities.standord.edu/1002/CD98/ (reporting securities class

action settlements) (last visited Dec. 18, 2002).

29

* Chrysler Minivan Litigation: $120,000,000 {1995 dollars)

settlement with approximately 3.3 million plaintiffs who alleged

that Chrysler minivans manufactured between 1984 and 1995 have

defective rear hatch door locks.”

* Bjork-Shiley Convexco-Concave Heart Valve Litigation:

Estimated $215 million (1992 dollars) settlement with 51,000

plaintiffs who alleged that Pfizer, Inc. knew that heart valves sold

between 1979 and 1986 could fracture and possibly cause death.*’

* EEOC v. Western Electric: $66 million (1991 dollars) settlement

with more than 13,000 plaintiffs who alleged that AT&T denied

gre Deoran maar naaponee 1965 and 1977."

* Albuterol Ltigiation: $150 million (1995 doilars) settlement with

approximately 12,000 plaintiffs after Copley Pharmaceutical

announced that its asthma spray was contaminated with bacteria.**

* Airline Ticket Price Fixing: $458 million (1993 dollars) settlement

by seven major airlines with plaintiffs who alleged that these airlines

conspired to artificially inflate domestic airline ticket prices.”

* Haynes v. Shoney $ Inc.: $105 million (1993 dollars) settlement

with more than 50,000 plaintiffs who alleged Shoney’s

discriminated against them based on race.*’

* Lucent Technologies Phone Leasing Litigation: Approximately

$300 million settlement with plaintiffs who alleged that they paid

32. See Vincent, Bruce, Suit Claims Chrysler Hid Latch

Defect, Tex. Law., Dec. 18, 1995, at 2; Big Class Action, at Attp://

www. bigclassaction.com/settlements/automotive.html (reporting class

action settlements and verdicts) (last visited Dec. 18, 2002).

33. Heart Valve Maker Settles Suit, Cui. Dany L. But., Aug. 20,

1992, at 1.

34. Settlements, Awards, Nat’. L.J., July 29, 1991, at 6, col. 3.

35. Asthma Spray Settlement Approved, Nov. 27, 1995, available

in 1995 WL 4415241.

36. Big Class Action, at http://www.bigclassaction.com/

settlements/travel. html (reporting class action settlements and verdicts)

(last visited Dec. 18, 2002).

37. Judge Oks Race Bias Pact, Nat’. L.J., Feb. 8, 1993, at 21,

col.1.

30

“unconscionably high rental charges” to AT&T and Lucent for

residential phones.”*

¢ Pondimin and Redux Litigation: Estimated $13,200,000,000

settlement by Wyeth with approximately 370,000 plaintiffs who

took the prescription diet drugs Pondimin and Redux.”

The view of retroactivity embraced by the Second Circuit

discounts both the procedural and substantive care surrounding

this settlement and defendants’ judicially mandated right to peace.

The uncertainty created by the possibility of collateral attack after

settlement is only compounded and complicated by a rule that

encourages that new decisional law be applied retroactively.

Complete consideration of the facts, circumstances and public

policies implicated by this attempted collateral attack leads to the

conclusion that it is manifestly unfair and unjust to deprive

defendants of finality in this respect. It is similarly unjust to subject

every other defendant who has, or may in the future, enter into

court-approved class settlements to similar collateral attacks, after

a decision that is otherwise final. Defendants in class actions who

compensate the class(es) through a settlement must be able to rest

assured that the court’s and the parties’ legal assessment of the

settlement’s legitimacy will not be nullified based on subsequent

changes in the law. At some point, “final” must mean final; in this

case, that time is here and now.

Critical legal principles which have served our justice system

well require that it be made crystal clear to all that the unlimited

collateral attack on class action settlements encouraged and

authorized by the Second Circuit’s opinion is not the law.

38. Big Class Action, at http://www.bigclassaction.com/

settlements/consumer.html (reporting class action settlements and

verdicts) (last visited Dec. 18, 2002).

39. Big Class Action, at hitp://www.bigclassaction.com/

settlements/pharmaceutical.html (reporting class action settlements and

verdicts) (last visited Dec. 18, 2002).

wey

Respectfully submitted,

Patrick LySAUGHT

Counsel of Record

Paut S. PENnTICUFF

ELizABeTH S. RAINES

BAKER STERCH! COWDEN

& Rice LLC

Attorneys for Amicus Curiae

Crown Center

2400 Pershing Road, Suite 500

Kansas City, MO 64108-2504

(816) 471-2121