# Appendix — Flanagan v. Ahearn > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1349%3A2 ## Record - **Collection:** Supreme Court brief - **Document type:** Appendix - **Published:** January 1, 1997 - **Citation:** 521 U.S. 1114 ## Text Suprerme Court, U.S. FILED 961379 FEB 27 1997 No. rppee-oF-FHE_CLERK Iu The Supreme Court of the United States * October Term, 1996 + Nm A Rarer JAMES FLANAGAN AND DAVID H. MIDDLETON, Petitioners, ve GERALD AHEARN; JAMES McADAMS DENNIS; CHARLES W. JEEP; JAMES DRAKE; JUANITA DRAKE; JAMES ELLISON; ROLAND DEARBORN; JUDITH DEARBORN; KERWIN BUTCHER; Dir., WORKERS Comp., DIRECTOR, OFFICE OF WORKERS’ COMPENSATION PROGRAMS, U.S. DEPART- MENT OF LABOR; PAUL COCHRAN; IDA BECK; MARION BEHEE; LONGSHORE INTERVENOR; WILLIAM JAMES MITCHELL; FIBREBOARD CORPORATION; BETHLEHEM STEEL CORPORATION; CONTINENTAL CASUALTY COM- PANY; PACIFIC INDEMNITY; FRANCIS McGOVERN; OWENS- ILLINOIS, INC.; PENN MUTUAL LIFE INSURANCE COMPANY; COLUMBIA CASUALTY COMPANY; CNA CASUALTY COM- PANY OF CALIFORNIA; CELOTEX CORPORATION, Respondents. ON PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT APPENDIX TO PETITION FOR WRIT OF CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR THE FIFTH CIRCUIT LEONARD C. JAQUES Counsel of Record THE JAQUES ADMIRALTY LAW FIRM, PC. 1370 Penobscot Building , Detroit, Michigan 48226 (313) 961-1080 Counsel for Petitioners Flanagan and Middleton ST ST i ne te Interstate Brief & Record Company, a division of North American Graphics. Lac. 1629 West Lafayette Boulevard, Detroit, MI 48216 (313) 962-6230 TABLE OF CONTENTS OF APPENDIX PAGE ORDER DENYING REHEARING EN BANC — United States Court of Appeals for the Fifth Circuit (November Sie STD: rs, also members of the Global Health Claimant Class, challenge certification in Ahearn and raise several objections specific to Rudd. We will refer to both groups of appellants collectively as “the intervenors.” 6 Class counsel for the Trilateral Health Claimant Class was James E. Coleman, Jr., of the law firm Carrington, Coleman, Sloman & Blumenthal, L.L.P. Class counse! for the Trilateral Third- Party Claimant Class were the same attorneys that represented the Global Third-Party Claimant Class. A-19 A. RULE 23(A) Rule 23(a) lists four prerequisites to a class action: (1) numerosity, (2) commonality, (3) typicality and (4) adequacy of representation. The district court found that all four of these prerequisites were satisfied. The intervenors do not dispute the district court's finding of numerosity, but argue that the Global Health Claimant Class meets none of the other prerequisites to a class action. The intervenors argue that the district court erred by considering the circumstances surrounding the settle- ment and the evidence adduced at the fairness hearing in making findings under Rule 2¥(a). This argument is contrary to Fifth Circuit precedent and would require a court to ignore important and relevant information that sits squarely in front of it when deciding whether to certify a settlement class. In /n re Corrugated Container Antitrust Litigation (Container I), we held that the dis- trict court should consider the settlement in deciding whether the settlement class satisfied the prerequisites of Rule 23. 643 E2d 195, 211 (Sth Cir.), aff'd, 659 F2d 1322 (Sth Cir. 1981), cert. denied, 456 US. 998, 102 S.Ct. 2283, 73 L.Ed.2d 1294, and cert. denied, 456 US. 1012, 102 S.Ct. 2308, 73 L.Ed.2d 1309 (1982). We rejected a challenge to the district court's finding that the class was adequately represented as required by 23(a)(4) and found that the terms of the settlement were vitally important to the determination that certification was appropriate. /d. Most circuits to decide the issue have held that courts should consider the settlement in determin- ing whether Rule 23 prerequisites are satisfied. See Malchman v. Davis, 761 F.2d 893, 900 (2d Cir. 1985) (cer- tification appropriate because “the interests of the broadened class in the settlement were commonly held”) (emphasis added); White v. National Football League, 41 F.3d 402, 408 (8th Cir. 1994) cert. denied __ US, _, 115 S.Ct. 2569, 132 L.Ed.2d 821 (1995) (“adequacy A-20 of class representation ... is ultimately determined by the settlement itself”); Jn re Dennis Greenman Securities Litigation, 829 F.2d 1539, 1543 (1lth Cir. 1987) (“in assessing the propriety of class certification, the courts evaluate the negotiation process and the settlement itself”); In re A.H. Robins Co., Inc., 880 F2d 709, 740 (4th Cir.) cert. denied, 493 US. 959, 110 S.Ct. 377, 107 L.Ed.2d 362 (1989) (“if not a ground for certification per se, cer- tainly settlement should be a factor, and an important factor to be considered when determining certifica- tion”). Only the Third Circuit has refused to look at set- tlements before it when deciding class certification issues and even that court admits that taking the settle- ment into account may be “the better policy.” Georgine v. Amchem Products, Inc., 83 F.3d 610, 617-18 (3d Cir. 1996). The rule that a court should consider a proposed settlement, if one is before it, when deciding certifica- tion issues makes good sense. Settlements and the events leading up to them add a great deal of informa- tion to the court's inquiry and will often expose diverging interests or common issues that were not evi- dent or clear from the complaint. See Herbert Newberg & Alba Conte, 2 Newberg on Class Actions § 11.28 at 11-58 (3d ed. 1992) (in settlement class context, common issues arise from the settlement itself). We are bound to follow Container I's holding that the district court can and should look at the terms of a set- tlement in front of it as part of its certification inquiry. We would adopt this rule even if we were not bound by precedent because it enhances the ability of district courts to make informed certification decisions. 1. Commonality and typicality The district court, in its findings of fact, found that the entire Global Health Claimant Class had the fol- lowing issues in common: (i) avoiding the potentially disastrous results of a loss by Fibreboard in the Coverage Case appeal; eee A-21 (ii) maximizing the total settlement contribution from Fibreboard and the Insurers; (iii) stream- lining the procedures for the filing, processing and resolution of claims, and thereby reducing transactions costs and delays in compensation; (iv) minimizing the percentage of their compen- sation diverted from them to pay attorneys’ fees; and (v) adopting procedures that provide for payments to claimants in an equitable manner. The intervenors do not disagree that the settlement class holds these issues in common. Instead, they argue that these issues do not support a finding of common- ality because they are derived from the settlement rather than from the Ahearn complaint. As we noted above, this argument has no merit and is foreclosed by our holding in Container /. Because the evidence is over- whelming that the class holds the above issues in common under the settlement (even the intervenors concede this point), we agree with the district court that the Ahearn action and the Global Settlement Agree- ment presented it with questions of law and fact common to the entire Global Health Claimant Class. Typicality focuses on the similarity between the named plaintiffs’ legal and remedial theories and the legal and remedial theories of those whom they purport to represent. Jenkins v. Raymark Indus. Inc., 782 F2d 468, 472 (5th Cir. 1986). The district court found that the legal and remedial theories of the representative plain- tiffs were typical of the class because all members of the Global Health Claimant Class presented claims based on exposure to Fibreboard asbestos. The district court also found that the named plaintiffs’ interests in maximizing recovery for the class and eliminating the risk posed by the insurance coverage litigation were identical to interests held by all members of the class. The intervenors do not argue that the named plain- tiffs’ claims rest on theories different from those of the other class members. Instead, in their attempt to show ae A-22 that the class is too diverse to meet the typicality requirement, they point to individual issues such as varying family situations, separate histories of cigarette smoking, differences in medical expenses and differ- ences in state law. These differences will certainly result in significant differences in the amount of damages that each claimant recovers but do not affect the settlement in the least. The Global Settlement Agreement does not award damages to individual victims:’ it provides money and an equitable distribution process to pay victims.* The central remedial and legal theory of each of the named plaintiffs, that Fibreboard is liable in tort for damages incurred due to exposure to Fibreboard asbestos, is typical of the entire class. Even the defini- tion of the class makes this clear.’ Further, the issues that brought the named plaintiffs to settle Ahearn are the same issues that the district court found common 7 Determinations of individual damage awards will be made by the trust and the plaintiff's attorney in settlement negotiations or in a full trial on the merits. The back-end opt out provision will force the trust and plaintiffs to consider state law and individual circum- stances, such as smoking history, when negotiating damages because the alternative to agreement is a full trial by jury under relevant state law. 8 an eS See oe 0 eee oe ree oe Oa ae ee ee damages to class members based on the Seely eee injuries alone, sae, 88 Sd 610 (Sd Cir. 1996), We would agree with the Third Circuit that a class action requesting individeal damages for members of a global class of asbestos claimants would not satisfy the typicality requirements due to the huge number ef individuals and their varying medical expenses, smoking histories, and family situations. In Ahearn, only commonly held questions regarding insurance coverage for the class’ injuries and establishment of an equitable distribution process to insure that all class members receive com were decided. As a result, this settlement is unaffected by the typicality and common- ality problems cited in Georgine. 9 The Global Health Claimant Class consists of persons who ne ee ee ee for which Fibreboard may bear legal liability . . A-23 to the entire class. The named plaintiffs settled Ahearn because of their desire to avoid the risks of insurance coverage litigation and to insure that money remains available to pay their claims when they make it through the settlement and/or tria! process to final judgment. These same concerns affect each member of the Global Health Claimant Class. We are satisfied that the district court did not abuse its discretion by finding that the issues of }aw and fact faced by the named plaintiffs were typical of the Global Health Claimant Class. 2. Adequacy of representation The intervenors argue that the district court should not have certified the Global Health Claimant Class because of impermissible conflicts of interests by class counsel.” Rule 23(a)(4) states that a class action may be maintained only if “the representative parties will fairly and adequately protect the interests of the class.” This requirement for fair and adequate representation encompasses both class representatives and class counsel. North American Acceptance Corp. v. Arnall, Golden & Gregory, 593 F2d 642, 644 n.4 (5th Cir. 1979). However, “[jjust what measure of representation is ade- quate is a question of fact that depends on each pecu- liar set of circumstances.” Guerine v. J/& W Investment, Inc., 544 F.2d 863, 864 (5th Cir. 1977), citing Johnson v. Georgia Highway Express Inc., 417 F.2d 1122 (Sth Cir. 1969). The district court has the continuing duty to see that the class is adequately represented. Guerine, 544 F2d at 864. A district court may not certify a class without con- cluding that class counsel are “‘qualified, experienced, and generally able to conduct the proposed litigation.’ Obviously, an attorney who should be disqualified because of a conflict of interest will not meet this 10 intervenors do not challenge the adequacy of representation of class representatives so we do not consider this issue. A-24 requirement.” North Amer. Acceptance, 593 F.2d at 644 (quoting Johnson v. Georgia Hwy. Express, Inc., 417 F2d 1122, 1125 (Sth Cir. 1969)). In August 1993, the district court, on the recommen- dation of Judge Higginbotham, formally appointed four counsel (Messrs. Rice, Cox, Kazan, and Wartnick) to rep- resent the Global Health Claimant Class. Messrs. Rice and Cox are partners with the Ness Motley firm, one of the leading U.S. firms representing asbestos claimants. Ness Motley has been engaged in litigation with Fibre- board since 1990. Mr. Kazan is a partner with Kazan, McClain, Edises, & Simon. He has handled asbestos- related cases for about twenty years. Mr. Wartnick is a member of the law firm of Wartnick, Chaber, Harowitz, Smith & Tigerman. His practice has been devoted to representing asbestos claimants since 1981. In addition to their experience in asbestos litigation generally, Messrs. Kazan and Wartnick were Fibreboard’s chief liti- gation adversaries on the West Coast, where Fibreboard is located. The appointed class counsel retained the firm of Caplin & Drysdale to advise them in areas out- side their own expertise. The district court found that these counsel are “prominent attorneys, highly respected for their know- ledge, experience, skill and special competence in the field of asbestos litigation” and that they provided “ade- quate, professional and ethical representation” to the class. The intervenors do not question the skill, compe- tence or experience of class counsel, but instead argue the existence of impermissible conflicts that prevented them from adequately representing the class. Both sides agree that in determining the existence of a conflict, we look to the ABA Model Rules of Professional Conduct for guidance. Rule 1,7 states: (b) A lawyer shall not represent a client if the representation of that client may be mater A-25 ally limited by the lawyer's responsibilities to another client or to a third person, or by the lawyer's own interests, unless: (1) the lawyer reasonably believes the repre- sentation will not be adversely affected; and (2) the client consents after consultation. When representation of multiple clients in a single matter is undertaken, the consultation shall include explanation of the implications of the common rep- resentation and the advantages and risks involved. Model Rules of Professional Conduct, Rule 1.7(b). At the fairness hearing, the intervenors and the set- tling parties each called a legal ethics expert to express an opinion on whether class counsel had conflicts. The intervenors offered Professor John Leubsdorf, a law professor at Rutgers University Law Schoo! who has taught courses in civil procedure and legal responsi- bility The district court qualified Professor Leubsdorf as an expert on issues of legal ethics and professional responsibility but found him lacking in practical experi- ence in mass tort litigation. The settling parties called Professor Geoffrey Hazard, a law professor at the University of Pennsylvania Law School and a recognized scholar in the field of legal ethics and professional responsibility. Professor Hazard was a member of the Rand Civil Justice Institute advi- sory council for studies concerning asbestos litigation and a reporter to the commission responsible for the preparation of the ABA Model Rules of Professional Conduct. Moreover, Professor Hazard has previously testified in asbestos cases and has extensive experience as a consultant in this type litigation. A-26 After hearing the testimony of both the legal experts and the negotiators, the district court credited Pro- fessor Hazard’s testimony as “consistent with existing federal legal principles and the underlying facts of this case.” The court found that Professor Leubsdorf's testi- mony in a number of areas was either not supported by the factual record or contrary to settled federal law. Also, the district court felt that Professor Leubsdorf's conclusions and recommendations often were specula- tive and impractical because of his insufficient experi- ence in mass torts and asbestos litigation. The record amply supports these findings. The intervenors argue that class counsel for the Global Health Claimant Ciass had impermissible con- flicts due to concurrent representation both (1) of pre- sent asbestos claimants and the Class of future claimants and (2) of purported conflicting subgroups within the class. a. Alleged conflict between present claimants and the class The intervenors contend that class counsel by simul- taneously representing both present claimants and the class of future claimants represented clients who were directly competing for Fibreboard’s limited resources. The district court found that during the negotiations no conflict existed that materially limited counsel's respon- sibilities to the future claimant class. In analyzing whether a conflict existed, both Pro- fessor Hazard and the guardian ad litem appointed for the futures class, Professor Eric D. Green, divided the three-year negotiations period into smaller discrete time periods: (1) Early 1991 throug): April 9, 1993; (2) April 9, 1993, through August 9, 1993; (3) August 9, 1993, through August 27, 1993; (4) August 27, 1993, through October 12, 1993; and (5) October 12, 1993, through December 23, 1993. A-27 (i) Early 1991 through late March 1993 Most of the settlement discussions until late March, 1993 were between only Fibreboard and class counsel. The Insurers did not participate. These exploratory dis- cussions focused on a possible settlement with both present and future claimants combined in an opt-out class. Fibreboard was stiil seeking to settle by assigning its insurance rights to the class. During this time, Fibre- board continued to settle various law firms’ “invento- ries” of present claims, including claims with the law firms of the four class counsel. Again, ribreboard accomplished these settlements by assigning its insur- ance rights against Continental and Pacific; thus, these settlements were contingent on a favorable decision for Fibreboard in the California coverage case. During this period, Fibreboard executed the initial Ness Motley agreement which settled approximately 20,000 inventory claims with the Ness Motley firm. This agreement required Fibreboard to obtain Continental's consent to this assignment of insurance rights or to seek a court order approving the assignment. In Jan- uary 1993, Fibreboard filed suit against Continental in the Eastern District of Texas to obtain the court order. Professor Hazard testified that during this time period no conflict existed between the present and future claimants because all discussions o{ a global settlement included both groups and both groups shared the risk of losing the coverage case. If coverage was found and if assignment was not a breach of contract, then the insurance policies of Continental and Pacific offered potentially unlimited coverage. (ii) April 1993 through August 9, 1993 In March 1993 Continental joined the negotiations and Judge Parker appointed Judge Higginbotham as a settle- ment facilitator. In an April 9, 1993 agreement, Fibre- board agreed to stop executing assignment settlements and Continental agreed to work toward a global settle- A-28 ment of all present and future claimants, including both pre- and post-1959 exposed claimants. But Continental insisted that the settlement be a mandatory, non-opt- out class and that Pacific contribute to the total settie- ment fund. Class counsel began to consider a mandatory class, but only if the settlement proceeds were adequate to insure fair restitution to present and future claimants and if a back-end opt-out provision was included. During this period, Continental filed suit in the Eastern District of Texas against both Pacific and Fibreboard seeking a declaration that the Pacific Agree- ment did not impair Continental's contribution rights against Pacific. Fibreboard, now joined by Continental, continued negotiations on inventory claims. Specifically, Fibre- board and Continental began negotiations with the Ness Motley firm on a revised Ness Motley agreement. The parties succeeded in reaching the Substitute Ness Motley Agreement on August 5, 1993. Generally, Conti- nental agreed to a higher-than-average value per claim with one-half due at closing and the remainder con- tingent on the outcome of the coverage case or on the existence of a settlement. Other inventory settle- ments were modeled after the Substitute Ness Motley Agreement. Now that Fibreboard’s suit against Continental con- cerning the initial Ness Motley agreement was settled, Continental sought an immediate trial of its suit against Fibreboard and Pacific. Continental's primary objective was to motivate Pacific to join the global settlement negotiations. The intervenors argue that an impermissible conflict existed because the Ness Motley counsel were simulta- neously negotiating for both present claimants (the inventory claims) and the class of future claimants. Pro- fessor Hazard testified that the present and future claimants were not competing for the same funds. At this stage of the negotiations, counsel were concen- A-29 trating on the settlement of their inventory of present claims. It is true that they were also discussing a global settlement, but these discussions were in the prelimi- nary exploratory stage. Certainly, at this time, counsel had no well-formed notions of how much Continental was willing to pay to settle the future claims." For this reason, Professor Hazard explained that each attorney in good faith was attempting to obtain the maximum dollar amounts for present claimants he represented, as well as for the future claimants. Counsel certainly knew in a general way that there was a sum beyond which Continentai would not pay. But because they did not know that limit, they did not know that this limit would be less than an amount they were willing to accept in settlement for both classes of claimants.” As the dis- trict court found, the Substitute Ness Motley Agreement likely aided the global settlement by increasing the average value per claim. We are persuaded that the record supports the district court's conclusion that class counsel vigorously represented both the present claimants and their future claimant clients against the same defendant. ll As Professor Hazard testified: Q. Well, to your knowledge, did the reality ever occur here to the plaintiff's lawyers that there would not be enough money to pay all future claimants? A. They confronted a situation-in which there was an external event creating a severe risk that that could happen. If Fibreboard won the a. litigation qualification as to the extent of ry then there was enough money to the extent of the insurance resources, which I take it for prac- tical [sic] without limit; that is they would have to policyholders to pay the money, but presumably if they stayed in the business they could do that. 12. Professor Hazard discussed the difference between the real- world of conflict of interest with the imaginary concept of ppronetheem 2h (concluded on page A-30) A-30 (iii) August 9, 1993, through August 27, 1993 On August 9, 1993, on the recommendation of Judge Higginboth»™, the district court appointed Messrs. Rice, Cox, Kazan, and Wartnick to negotiate the prospect of a settlement class composed of future claimants. The court knew that this settlement would have to be reached before the decision in the coverage case, which was expected on August 27, 1993. The court felt compelled due to this severe deadline and to the complexity of the issues to appoint only highly compe- tent and experienced attorneys who understood asbestos litigation. Professor Leubsdorf testified that the court should have required all class counsel to settle their present claims for cash or should have appointed other counsel. The district court did not err in concluding that this suggestion was impractical and would have seriously impeded any settlement. From August 9, 1993, to August 27, 1993, appointed counsel negotiated a global settlement. On August 22, 1993, Continental and Pacific reached an agreement to settle their dispute, vastly improving the odds of a (continued from page A-29) Q. That's your opinion, whether or not there’s an ethical violation him to say the circumstances. That is, the conflict of A-31 global settlement. The district court found that all nego- tiations during this time were vigorous, contentious, and at arm's length. Professors Hazard and Green both testified that the future claimants were not impaired by counsel’s representation of present claimants during this period. Indeed, they found that the present claimants had a substantial interest in a global settle- ment because such a settlement would secure their con- tingent back-end payments under the Substitute Ness Motley Agreement. Class counsel were also aware that any class settlement must be approved by the court and would face meticulous scrutiny. Thus, the present and future claimants had two common interests in reaching a settlement. First, they both wanted to avoid the risk of Fibreboard losing the coverage case. Second, they both wanted a diligently negotiated settlement: the future claimants wanted the settlement that yielded them maximum dollar recovery; the present claimants wanted a settlement that would withstand intense judi- cial scrutiny. (iv) August 27, 1993, through October 12, 1993 From August 27, 1993, after announcing the Global Set- tlement Agreement in principle in open court, until October 12, 1993, when the Trilateral Settlement Agree- ment was reached, class counsel conducted no negotia- tions on the terms of the Global Settlement Agreement. On October 12, 1993, the district court appointed Pro- fessor Green as the guardian ad litem of the futurer class. (v) October 12, 1993, through December 23, 1993 From October 12 to December 23, 1993, when the Globa! Settlement Agreement was executed, the settling parties negotiated the specific terms of the agreement. By this time, the Trilateral Settlement Agreement had already been executed and would have triggered the back-end payments for the present clients in the Ness Motley or similar agreements even if the global settle- A-32 ment failed. Thus, the present clients’ settlement was secured and they no longer had an interest in a global settlement. The record supports the district court's finding that the negotiations during this period were vigorous and that the class was adequately represented. Thus, the district court considered the intervenors' conflicts argument for the entire time the settlement negotiations were underway and found that, at no time, did a material limitation on the representation of the class by class counsel exist due to concurrent represen- tation of present and future claimants. The court did not err in reaching this conclusion. b. The aileged intraciass conflicts On appeal, the intervenors assert only two claims of intraclass conflict: (1) interests of class members who presently have an asbestos-related illness (the “near” futures) and members whose iliness will not be apparent for many years (the “far” futures); and (2) interests of class members exposed pre-1959 and members having only post-1959 exposure. Whether a conflict exists is governed by Rule 1.7(b) as discussed above. Not every intraclass conflict, how- ever, will preclude approval of the settlement for inade- quate representation. See Container J, 643 F.2d at 207-08. The district court found that neither subclasses nor separate negotiating attorneys were required because no material intraclass conflict existed. The court found the common interests far outweighed any divergent interests the intraclass groups might have. The court enumerated those common interests as follows: avoiding the catastrophic results of a loss by Fibre- board in the coverage case appeal; maximizing the total settlement contribution from Fibreboard and the Insurers; streamlining the procedures for the filing, pro- cessing, and resolution of claims, thereby reducing transaction costs and delays in compensation; mini- mizing the percentage of their compensation diverted A-33 from the fund to pay attorney's fees; and adopting pro- cedures that provide for payments to claimants in an equitable manner. Intervenors suggest two intraclass conflicts. First, they argue that the “near” futures would prefer a settie- ment agreement that places no limits on the amount an individual may recover because these claimants do not anticipate that Fibreboard’s assets will be depleted before their claims mature. The “far” futures, on the other hand, would prefer to limit individual claims to conserve funds so that resources will be available to pay for their future illnesses. Professors Hazard and Green found no conflict between these two groups that would materially impair the performance of class counsel. Specifically, each found that the common interest in avoiding a lack of coverage vastly overwhelmed any differences between these groups. The “near” futures have no assurance that they would fare better in the absence of the Global Set- tlement Agreement. These claimants would face the risk that Fibreboard would live up to its pledge to actively defend any claims and delay any recovery. These claimants would also face the risk of attrition of avail- able funds from increased legal fees. Under the Global Settlement Agreement the entire class is benefited by the greater likelihood that funds will be available to compensate both “near” and “far” future claimants under a less complicated system. The intervenors rely on /n re Joint Eastern & Southern District Asbestos Litigation (Findley), 982 F2d 721 (2d Cir. 1992) to support requiring subclasses for the “near” and “far” futures. In a settlement trying to save the Manville Trust from insolvency, the Second Circuit held that sub- classes were required for a Rule 23(b)(1)(B) non-opt-out class because of clear conflicts between class members. More particularly, the Second Circuit did require sub- classes for groups comparable to our “nwar” futures and A-34 “far” futures. But the terms of the Manville Trust required that conclusion: significantly, the Second Cir- cuit opinion makes it clear that a “near” future claimant was assured of recovery under the Manville Trust instrument if the claim was filed before the Trust ran out of money because the Trust operated on a strict order-of-filing priority. The settlement abandoned this priority to the prejudice of the near futures. Counsel, in negotiating such a settlement, had a clear conflict between the “near” futures whose recovery rights were secure and the “far” futures who had no such security. As explained above, our “near” future claimants without the Global Settlement Agreement are not assured of a priority payment and have no assurance that funds will be available or when funds can be obtained if they are required to litigate with Fibreboard. Next, intervenors argue that counsel could not repre- sent claimants who were exposed before 1959 and after 1959 in negotiating a global settlement. They contend that this conflict exists because a pre-1959 exposure claimant's case has a higher settlement value than a post-1959 exposure claimant's. This is premised on the argument that pre-1959 claimants have a greater likeli- hood of available insurance coverage because both Con- tinental and Pacific insurance policies covered only pre-1959 asbestos exposure. The Intervenors recognize that the Pacific Agreement gave Fibreboard $330 million to use in post-1959 claims. They argue however that Continental affords petential unlimited fund coverage to the pre-1959 claimants. Professors Hazard and Green both found no substan- tial conflict between pre- and post-1959 claimants. Both pre- and post-1959 claimants share the common class interests recited above. Neither the Substitute Ness Motley Agreement, the Trilateral Settlement Agreement, nor the Global Settlement Agreement distinguish between these two groups of claimants in any way. To distinguish between the two groups in the Global Settle- A-35 ment Agreement was impractical because the class had no chance of persuading Fibreboard to agree to a settle- ment that did not address the claims by both groups. Also, to maintain the distinction in the Global Settle- ment Agreement would have undermined the attempts to provide maximum compensation and an efficient, streamlined process to claimants. The district court made the following findings of fact: (1) all negotiations were vigorous and at arm’s length, often conducted under the auspices of Judge Higgin- botham; (2) common interests within the ciass over- whelmed minimal conflicts; (3) the settlement treated all class members the same; and (4) the Global Settle- ment Agreement was fair and reasonable, a finding that the intervenors have not appealed. The independent guardian ad litem also found that class counsel had no conflicts and that the Global Settlement Agreement was fair and reasonable and was the best alternative avail- able. The district court did not abuse its discretion in finding that the class was adequately represented and that subclasses were not required. B. CERTIFICATION UNDER 23(B)(1)(B) We turn next to the intervenors’ challenge to class certification under 23(b)(1)(B). Rule 23(b) states that where the prerequisites of 23(a) are met, a class action may be maintained if (1) the prosecution of separate actions by or against individual members of the class would create a risk of (B) adjudications with respect to indi- vidual members of the class which would as a practical matter be disposi- tive of the interests of the other mem- bers not parties to the adjudications A-36 or substantially impair or impede their ability to protect their interests. Fed.R.Civ.P. 23(b). The district court found that the prosecution of sepa- rate actions by members of the Global Health Claimant Class would substantially impair or impede the ability of other members of the ciass to receive full payment for their injuries from Fibreboard’s limited assets. This finding has strong support in the record and is not clearly erroneous. The district court heard expert testi- mony on the probable number, mix and timing of future asbestos personal injury claims against Fibreboard, the anticipated costs of defense relating to such claims, and the present value of Fibreboard's non-insurance assets. The experts agreed that Fibreboard faced enormous lia- bility and defense costs that would likely equal or exceed the amount of damages paid out. More impor- tantly, these experts testified that even under the Tri- lateral Settlement Agreement where Fibreboard is given $2 billion in insurance money to add to its own value of approximately $235 million, Fibreboard would be unable to pay all the valid claims against it within five to nine years. The district court credited the testimony of these experts and found that Fibreboard is a limited fund. I. Rule 23(b)(1)(B) and the Bankruptcy Code The intervenors argue that if the reason Fibreboard is a limited fund is because it will become insolvent before it pays all claims, then the Global Settlement Agreement is an impermissible attempt to circumvent bankruptcy proceedings and bankruptcy's absolute pri- ority rule.’ This argument fails to consider (1) deci- sions of other courts which have certified 23(b)(1)(B) 13 The absolute priority rule requires that more senior creditors (such as tort creditors) be paid in full before junior claimants (such as shareholders) receive any distribution from an insolvent company. A-37 classes because the claims of the class would bankrupt the defendant, (2) the significance of Fibreboard’s settle- ment with its insurers in driving the Global Settlement Agreement, (3) the plain meaning of Rule 23, and (4) the nonexclusivity of the Bankruptcy Code and its inferi- ority to a 23(b)(1)(B) class action in the instant case. Other courts have uniformly found that, in appro- priate and limited circumstances, potential or probable insolvency of a defendant can create a limited fund appropriate for adjudication under Rule 23(b)(1)(B). The Second Circuit, in /n re Joint Eastern and Southern District Asbestos Litigation (Findley), upheld the district court's conclusion that the likely insolvency of the Manville Trust rendered it a limited fund and qualified it for treatment under Rule 23(b)(1)(B). 982 F.2d 721, 739 (2d Cir. 1992) (cited with approval in /n re Joint Eastern and Southern District Asbestos Litigation (Findley), 78 F3d 764, 777-79 (2d Cir. 1996)). In Jn re Drexel Burnham Lambert Group, Inc., 960 F.2d 285 (2d Cir. 1992), the Second Circuit approved a 23(b)(1)(B) class action on the ground that individual litigation would reduce the recovery for all plaintiffs from Drexel’s limited assets. /d. at 292. See also, In re Joint Eastern and Southern District Asbestos Litigation (Eagle-Picher Industries), 134 FR.D. 32, 34 (E. & S.D.N.Y. 1990); Coburn v. 4-R Corporation, 77 ER.D. 43 (E.D. Ky. 1977). In fact, even courts that have refused to certify 23(b)(1)(B) classes have done so on the ground that the parties seeking class certification have failed to pre- sent sufficient evidence that the assets of the defendant are insufficient to pay the claims against it. See /n re Temple, 851 F2d 1269, 1272 (ilth Cir. 1988); /n re School Asbestos Litigation, 789 F2d 996, 999 (3d Cir. 1986); In re Bendectin Products Liability Litigation, 749 F2d 300, 305- 06 (6th Cir. 1984); In re Northern District of California Datkon Shield IUD Products Liability Litigation, 693 F.2d 847, 852 (9th Cir. 1982); Green v. Occidental Petroleum Co., 541 F2d 1335, 1340 n.9 (9th Cir. 1976); In re “Agent A-38 Orange” Product Liability Litigation, 100 ER.D. 718 (E.D. NY. 1983); Payton v. Abbott Labs, 83 F.R.D. 382, 389 (D. Mass. 1979). In support of their claim that any 23(b)(1)(B) limited- fund action based on a defendant’s insolvency is an improper circumvention of the Bankruptcy Code, the intervenors can rely only on dicta from /n re Joint East- ern and Southern District Asbestos Litigation (Keene), 14 F.3d 726 (2d Cir. 1993)." The intervenors’ conclusion is contrary to the overwhelming majority of court deci- sions on this issue, ignores crucial facts in both Ahearn and Keene and reads Keene in a way that creates an intra-circuit split in the Second Circuit. Ahearn’s Global Settlement Agreement was undisput- edly driven by insurance coverage litigation between Fibreboard and its insurers which created a serious risk for all parties to the agreement. The Global Health Claimant Class and Fibreboard faced the real possibility that Fibreboard would be insolvent simply on the basis of claims already settled. The Insurers, on the other hand, faced the possibility of virtually unlimited liability for damage caused by Fibreboard asbestos. This pres- sure, felt by all parties to the global settlement, is what finally brought them together on the eve of the cov- erage case appeal. The unique risks posed by the cov- erage cases distinguish Ahearn from a blatant attempt to circumvent the Bankruptcy Code such as occurred in Keene. The facts of Keene further distinguish it from our case. First, an already weak Keene attempted to avoid impending bankruptcy by asking the court to coerce its tort victims to settle claims in a court where no claims 14 Notwithstanding the Keene court’s gratuitous discussion of its concerns about use of a class action to circumvent bankruptcy laws, the court’s holding is that the case was properly dismissed because the plaintiff-manufacturer had no cognizable claim against the defendant class members. Keene, 14 F.3d at 733. A-39 were filed against Keene. Second, Keene attempted to utilize the 23(b)(1)(B) injunction to halt pending actions in other courts. Third, and most importantly, Keene's complaint was dismissed on the ground that it failed to present the court with any case or controversy because it requested only that the court compel all plaintiffs in suits against Keene to appear and negotiate. Ahearn by comparison, presents us with claims against a healthy company for personal injuries and a proposed settlement of those claims. Ahearn presents no danger that Fibreboard may simply be abusing this proceeding to delay other actions or to improve its negotiating position with present claimants because it only enjoins future proceedings, not those already pending. We agree with the Keene court that under the facts presented to it, a 23(b)(1)(B) action was not appropriate. We also agree that, in the vast majority of cases, the Bankruptcy Code should govern the distribu- tion of an insolvent entity's assets. However, where con- cerns such as the risk of an adverse judgment in the coverage litigation support an early resolution of the claims against an entity and all parties can benefit from a settlement under Rule 23(b)(1)(B), we see no legal or policy reason to deny the parties this benefit. The essential basis of any settlement is to avoid the uncer- tainty, risks, and expense of ongoing litigation. In our case, the risks facing Fibreboard, the Insurers, and the health claimants as a result of the California coverage litigation were real and enormous. Holding that the bankruptcy laws require the parties to wait until cata- strophe befalls one or more of them as a result of the California litigation would be a denial of justice to the parties before us and unwarranted by the law. The intervenors’ argument that all 23(b)(1)(B) limited- fund actions based on the insolvency of the defendant are improper ignores the special circumstances pre- sented by Ahearn and certifications by other courts. In light of the Findley and Drexel decisions, also from the AAO Second Circuit, which allow 23(b)(1)(B) actions where the defendant's insolvency creates a limited fund, we decline to read Keene so broadly as to bar all such 23(b)(1)(B) settlements. The plain meaning of Rule 23 also supports a finding that the insolvency of a defendant can support a 23(b)(1)(B) class action. The rule clearly does not dis- tinguish between limited funds which assume insol- vency of the defendant and limited funds such as proceeds of an insurance policy which constitute the entire fund from which plaintiffs may recover. It allows class actions whenever “the prosecution of separate actions by or against individual members of the class would create a risk of ... (B) adjudications with respect to individual members of the class which would as a practical matter ... substantially impair or impede their ability to protect their interests.” Fed.R.Civ.P. 23(b)(1). Insolvency of the defendant undoubtedly impairs the ability of latecomers to receive full payment for their claims and was explicitly considered by the Advisory Committee in proposing the rule in its current form. In its Note to the 1966 Amendment to Rule 23, the Advi- sory Committee concludes that a limited-fund class action is appropriate in actions by creditors “when the debtor's assets are insufficient to pay all creditors’ claims.” Fed.R.Civ.P. advisory committee's note. This explicit reference to use of a 23(b)(1)(B) action when the debtor is insolvent offers further support for the proposition that insolvency is an appropriate basis for a limited-fund class action. Further, the express language of the Rule compels a flexible construction. Rule 23(b)(1)(B) authorizes class certification where there is a “risk” that separate adjudi- cations “as a practical matter” would “substantially impair or impede” the interests of the class. The rule does not require proof to a certainty that the defendant faces insolvency. AAl The Bankruptcy Code allows courts to dismiss or sus- pend bankruptcy proceedings where superior alterna- tives to the code are available. See 11 USC. § 305(a)(1). This concession to the possibility of other proceedings to distribute an insolvent debtor's assets reveals that Congress understood that, at least some of the time, the terms and principles of the Bankruptcy Code would be circumvented by debtors and creditors who found superior methods of asset distribution. See also H.R. Rep. No. 95-595, 95th Cong., Ist Sess. 325 (1977); S.Rep. No. 95-989, 95th Cong., 2d Sess. 35 (1978), U.S. Code Cong. & Admin.News 1978, pp. 5787, 6281. Ahearn presented the district court with a superior alternative to the Bankruptcy Code and did so long before any bankruptcy court would have had jurisdic- tion over Fibreboard’s assets. Indeed, one of the most important facts of this case is that, in spite of the threat posed by future personal injury litigation, Fibreboard is currently solvent and healthy. In the short term, no trade or tort creditor has the ability or the incentive to force Fibreboard into a Chapter 11 reorganization. It is also clear that shareholders and management, who stand to lose equity and/or employment if Fibreboard enters bankruptcy proceedings, will refuse to file a vol- untary petition at least until the coverage dispute is resolved against it. That, of course, would be too late for the Global Health Claimant Class. Even in the unlikely event that Fibreboard could be persuaded to file a voluntary bankruptcy petition, the Global Health Claimant Class would be worse off than it is under the Global Settlement Agreement. Under the Bankruptcy Code, representation for the class may not be available at all and courts that have allowed repre- sentation of future tort claimants have left them in an uncertain position that falls short of full “creditor” status. Additionally, full-blown bankruptcy proceedings 15 See In re Amatex Corp., 755 F.2d 1034, 1042 (3d Cir. 1985); in re Johns-Manville Corp., 36 B.R. 743 (Bankr. S.D.N.Y. 1984); In re (concluded on page A42) A-A2 would bring in all of Fibreboard’s other creditors and impose large transactions costs on Fibreboard that, ulti- mately, would come out of any distribution. See Edward I. Altman, A Further Empirical Investigation of the Bank- ruptcy Cost Question, 39 J.Fin. 1067, 1077 (1984). In stark contrast to the uncertain and weak position afforded future tort claimants under the Bankruptcy Code, the plaintiff class and its representatives in Ahearn had center stage and ran no risk of encountering a cram-down reorga- nization approved only by trade creditors and rammed through over the objections of class representatives. To the extent intervenors are arguing that certifica- tion is improper because Fibreboard fares better under the class action settlement than under a bankruptcy proceeding, we find their focus misplaced. The inquiry instead should be whether the class is better served by avoiding impairment of their interests. Fibreboard is clearly acting in its own interest in consummating the Global Settlement Agreement and thereby avoiding future insolvency. But the Global Settlement Agreement also serves the interests of the Global Health Claimant Class. Early settlement allows the class to recover far more as a group than it could if it was forced to wait until Fibreboard enters bankruptcy on its own and encounters the high transaction costs of insolvency. See Mark J. Roe, Bankruptcy and Mass Tort, 84 Colum. L.Rev. 8846, 851-64, 905-17 (1984) (advocating early reorganiza- (continued from page A41) UNR Indus., 29 B.R. 741, 745 n.4 (Bankr. N.D. Ill. 1983). The inability or refusal of the bankruptcy courts to place Global Health Claimant Class members on equal footing with other creditors of Fibreboard and the indeterminance of the “party in interest” cate- gorization that the class would receive if its claims were at all in bankruptcy have been widely criticized. See e.g. Anne Hardiman, ee ea te ce ee ye tga Future Claims, 38 Vand. L.Rev. 1369, 1395-96 (October 1985); Kevin H. Hudson, Catch-23(b)(1)(B): The Dilemma of Using the Mandatory Class Action to Resolve the Problem of the Mass Tort Case, 40 Emory L.J. 665, 693-95 (Spring 1991). AA3 tions because they avoid the waste of insolvency and distribute more to victims, but noting that no one with the ability to push the mass tortfeasor into an early reorganization has the incentive to do so). Precisely because it avoids the enormous transactions costs of litigation and insolvency, the Global Settlement Agree- ment can offer a deal from which all parties gain. Mem- bers of the Global Health Claimant Class receive more money in payment for their injuries and Fibreboard’s shareholders keep their stake in a viable entity. The only loser under the Global Settlement Agreement is the asbestos litigation industry. For all of these reasons, we find that the district court's decision to certify Ahearn as a 23(b)(1)(B) class action is an appropriate interpretation of Rule 23 that does not conflict with the Bankruptcy Code and upholds the principles of equity and fairness. 2. Jurisdictional and due process considerations in 23(b)(1)(b) class actions The intervenors next argue that the district court cannot exercise jurisdiction over class members who do not have minimum contacts with the Eastern District of Texas and that due process requires that Global Health Claimant Class members be allowed to opt out of the class. Both of these arguments are based on language from the Supreme Court decision Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 105 S.Ct. 2965, 86 L.Ed.2da 628 (1985). In Shutts, the Supreme Court held that a Kansas state court could bind absent plaintiff members of the class in a “common question” class action brought under a state rule virtually identical to 23(b)(3) only if the plaintiffs were provided with “minimal procedural due process protection,” including the right to opt out. Id. at 811-12, 105 S.Ct. at 2974. However, the Court specifi- cally limited its holding to class actions which seek to bind known plaintiffs concerning claims wholly or predominantly for money judgments. We intimate no view concern- A-44 ing other types of class actions such as those seeking equitable relief. id. at 811 n.3, 105 S.Ct. at 2974 n.3 (emphasis added). The limitation of Shutts to claims of known plaintiffs that are predominantly for money damages forecloses application of its holding to 23(b)(1)(B) actions which have always been equitable and often involve unknown plaintiffs. See Newberg & Conte, ] Newberg on Class Actions § 1.18. Class actions date back to the English common law where chancery courts used bills of peace to bind entire classes. Chafee, Bills of Peace with Multiple Parties, 45 Harv. L.Rev. 1297 (1932). The traditional lim- ited-fund class action is an equitable and unitary dispo- sition of a fund too small to satisfy all claims. See Fed.R.Civ.P. 23 advisory committee's note. Unitary adju- dication of a limited fund is crucial because allowing plaintiffs to sue individually would make the litigation “an unseemly race to the courtroom door with mone- tary prizes for a few winners and worthless judgments for the rest.” Coburn v. 4-R Corp., 77 ER.D. 43, 45 (E.D. Ky. 1977). Limited-fund class actions effect a pro-rata reduc- tion of all claims in order to treat all claimants fairly. Thus, they sound in equity even though the relief they provide necessarily affects the amount of money dam- ages that claimants can ultimately receive. /n re Joint Eastern & Southern Dist. Asbestos Litigation (Findley), 78 F.3d 764, 776-77 (2d Cir. 1996); Newberg and Conte, 1 Newberg on Class Actions § 1.18. Due process standards for suits seeking equitable relief are set forth in Hansberry v. Lee, 311 US. 32, 61 S.Ct. 115, 85 L.Ed. 22 (1940) where the Supreme Court stated: this Court is justified in saying that there has been a failure of due process only in those cases where it cannot be said that the procedure adopted, fairly insures the protection of the A-45 interests of absent parties who are to be bound by it. Id. at 42, 61 S.Ct. at 118. See also Shutts, 472 US. at 808, 105 S.Ct. at 2972-73 (citing Hansberry in its description of due process requirements for traditional class actions). The rule that adequate representation is all that due process requires for the traditional mandatory class action in equity was not challenged by Shutts. Sub- sequent decisions have made it clear that, consistent with due process, absent parties can be bound by a judgment where they were adequately represented in a prior action. Martin v. Wilks, 490 U.S. 755, 762 n.2, 109 S.Ct. 2180, 2184 n. 2, 104 L.Ed.2d 835 (citing Hansberry and Fed.RCiv.P. 23). Actions under Rule 23(b)(1)(B) are precisely the type of limited circumstances noted by Martin where “equi- table circumstances dictate the need for a unitary adju- dication regardless of the individual consent of the parties affected.” Newberg and Conte, / Newberg on Class Actions § 1.22 at 1-51. As a result, due process requires only that all parties bound by the Global Set- tlement Agreement were adequately represented. We have already concluded that they were.® The intervenors object that some members of the class may not have minimum contacts with the Eastern District of Texas and have not otherwise consented to the district court’s jurisdiction. They also claim that the 16 Opt-out class actions were unheard of before the 1966 amendments to the Federal Rules of Civil Procedure created the Rule 23(b)(3) opt-out class action. The intervenors would have us read Shutts to mean that all class actions involving money claims under Rule 23(b)(1) or (2) are unconstitutional. If the Supreme Court had intended to so hold, it surely would have been more explicit given the ancient history of the mandatory class action, over a hundred years of precedent upholding the constitutionality of such classes, the relatively recent development of the “opt-out” class action, and the strong presumption that the Federal Rules of Civil Procedure are constitutional. A-46 Global Settlement Agreement is without authority to release future claims that have not yet accrued. These objections again ignore the equitable nature of this action. Due process requires adequate representation in a 23(b)(1)(B) case but, as Shutts expressly cautioned, min- imum contacts or consent to jurisdiction are not neces- sary in equitable class actions. Newberg and Conte, / Newberg on Class Actions, § 1.20 (“Minimum Contacts Jurisdiction Not Required for Members of Equitable Class Suits”) and § 1.21 (“Opt-Out Rights or Implied Con- sent of Members Not Required for Jurisdictional Due Process in Equitable Class Suits”). It is also well settled that a unitary adjudication of a limited fund binds future, contingent, and unknown claimants who, by defi- nition, could not give consent to jurisdiction. Mullane v. Central Hanover Bank & Trust Co., 339 US. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950). Rule 23(b)(1)(B) actions closely resemble actions for interpleader, or for the accounting of a trustee. See Mullane, 339 US. at 311-13, 70 S.Ct. at 655-57; /n re Joint Eastern and Southern Dist. Asbestos Litigation (Findley), 878 FSupp. 473, 478, 562 (E. & S.D.NY. 1995); Jn re Joint Eastern and Southern Dist. Asbestos Litigation (Eagle- Picher), 134 ER.D. 32, 38 (E. & S.D.NY. 1990). Cf. In re Fed- eral Skywalk Cases, 680 F2d 1175, 1182-83 (8th Cir. 1982). This is because all claimants will recover from the fund or not at all. This view of a limited-fund class action as similar to an action in rem makes particular sense because, although limited-fund actions often involve unknown or unavailable claimants who cannot expressly consent to jurisdiction, the court in such an action has before it for disposition all the assets in which class members could claim an interest. See e.g., Jn re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 292 (2d Cir. 1992); In re Joint Eastern and Southern Dist. Asbestos Liti- gation (Eagle-Picher), 134 F.R.D. 32, 38 (E. & S.D.NY. 1990); Coburn v. 4-R Corp., 77 ER.D. 43 (E.D. Ky. 1977). A-47 The court can appropriately adjudicate all claims against the fund because of its jurisdiction over the fund and the fact that all potential claimants are ade- quately represented before it. Smith v. Swormstedt, 57 US. (16 Howard) 288, 302, 14 L.Ed. 942 (1853). Finally, the intervenors complain that the Global Set- tlement Agreement purports to release claims which do not present “a case or controversy.” This misconstrues the nature of the settlement which does not purport to make any determination of the validity or amount of individual personal injury claims against Fibreboard. What the settlement does is address the immediate and important controversy of whether future claimants will be able to receive compensation for their injuries before Fibreboard runs out of money. It resoives this controversy by settling the insurance coverage litiga- tion, capping the amount recovered by individual plain- tiffs at $500,000, prohibiting punitive damage awards, and limiting the amount that the Global Trust can pay out in any given year. These provisions are designed to ensure that latecomers do not find their claims impaired because the winners of the race to the court- house have claimed all of Fibreboard’s assets in the early rounds of individual litigation. The argument that plaintiffs who have already been exposed to asbestos have no justiciable interest in ensuring that funds remain available to compensate them when they con- tract asbestos-related diseases is not supportable and has been widely rejected. See /n re Johns-Manville Corp., 36 B.R. 743, 749 (Bankr. S.D.N.Y. 1984); Carlough v. Amchem Products, Inc., 10 F3d 189, 196 n.4 (3d Cir. 1993). The intervenors’ objection is meritless. The district court properly found that Fibreboard is a limited fund which will be depleted to the detriment of latecomers if claims are litigated on an individual basis. Due process requires that class members in Ahearn, an equitable class action for a pro-rata distribution of a limited fund, receive adequate representation by class A-48 representatives with similar interests. The district court did not abuse its discretion in finding that these requirements were met and certifying this suit as a Rule 23(b)(1)(B) class action. C. OTHER OBJECTIONS 1. “Friendly” suit The intervenors assert that Ahearn was a collusive or “friendly” suit in contravention of the “case or contro- versy” requirement of Article Ill in the Constitution. Specifically, the intervenors allege that (1) there was no real conflict between the parties because the complaint and settlement were filed the same day and class repre- sentatives never intended to litigate the claims alleged in the complaint, and (2) the defendants handpicked the plaintiffs’ attorneys. These arguments fail because they conflict with relevant caselaw and do not address the district court’s findings of fact regarding the non- collusive nature of the settlement negotiations. The intervenors also ignore the adversarial positions which the parties occupied before settlement negotiations and the positions to which they will return if the settlement is not approved. A “case or controversy” under Article Ill requires that the parties be truly adverse. United States v. Johnson, 319 US. 302, 63 S.Ct. 1075, 87 L.Ed. 1413 (1943). This re- quires a continuing controversy, Preiser v. Newkirk, 422 US. 395, 401, 95 S.Ct. 2330, 2334, 45 L.Ed.2d 272 (1975), and an “honest and actual antagonistic assertion of rights.” Johnson, 319 US. at 305, 63 S.Ct. at 1076 (quoting Chicago & Grand Trunk Ry. Co. v. Wellman, 143 US. 3339, 345, 12 S.Ct. 400, 402, 36 L.Ed. 176 (1892)). The parties in Ahearn filed their proposed settlement agreement on the same day as the plaintiff class filed its complaint so they clearly did not intend to litigate the complaint. However, this does not change the adver- sarial nature of the disputes which the settlement A-49 resolves and does not contradict the district court’s finding that settlement negotiations were heated, diffi- cult and conducted at arm’s length. The intervenors are apparently asking us to hold that the suit is either moot or collusive simply because it was filed at the same time as a settlement requiring court approval. Neither of these conclusions is supportable. The Supreme Court has stated that the existence of a proposed settlement does not render an action moot where judicial approval of the settlement is required before the settlement will bind the parties. Havens Realty Corp. v. Coleman, 455 US. 363, 371 n.10, 102 S.Ct. 1114, 1120 n.10, 71 L.Ed.2d 214 (1982). Ahearn was a class action that could not be settled without court approval so the parties’ agreement to settle the case did not make it moot. The other finding suggested by the intervenors, that the suit is collusive simply because the parties have resolved their differences and seek only the judicial approval required by Rule 23(e), is equally unsupport- able and has also been rejected. See Carlough v. Amchem Products, 10 F.3d 189, 201 (3d Cir. 1993) (adopt- ing the reasoning of the district court’s October 6, 1993 opinion in Carlough v. Amchem Products, Inc., 834 FSupp. 1437, 1465 (E.D. Penn. 1993)); In re Joint Eastern and Southern District Asbestos Litigation (Findley), 982 F.2d 721, 728 (2d Cir. 1992) (complaint and settlement filed the same day); S.E.C. v. Randolph, 736 F.2d 525 (9th Cir. 1984) (controversy exists even though settlement and complaint were filed the same day). The district court found that the Ahearn complaint and proposed settlement were not collusive. The inter- venors’ assertions to the contrary have no support in the record. The district court found that the negotiation process was slow, contentious and fraught with dis- agreements on serious issues. Its exhaustive findings of fact detail the parties’ initial positions and their slow A-50 movement toward a settlement that offers a fair com- promise of their various claims. The complaint that Fibreboard handpicked the plain- tiffs’ attorneys is equally without merit and tells only part of the story. The record shows that Fibreboard did approach the attorneys to negotiate a global settlement but the intervenors fail to include important details such as (1) the plaintiffs’ lawyers involved in the negoti- ations have extensive experience in asbestos litigation, and (2) the district court found that the plaintiffs’ lawyers vigorously represented their clients’ position. We have already concluded that the Global Health Claimant Class was adequately represented by qualified attorneys. The fact that Fibreboard initiated negotia- tions with a group of highly experienced, top-notch plaintiffs’ attorneys in order to craft a global settlement suggests that Fibreboard warited a fair settlement that a court was likely to approve. 2. Recusal of Judge Parker The Flanagan intervenors appeal from Judge Steger’s order in the district court denying their motion to recuse Judge Parker. They argue that Judge Parker should not have mediated the settlement and then con- ducted a fairness hearing on the same settlement. We review Judge Steger’s decision for abuse of discretion. In re Hipp, 5 F3d 109, 116 (Sth Cir. 1993). A judge must disqualify himself under § 455 if his impartiality “might reasonably be questioned.” 28 U.S.C. § 455. The standard for determining impartiality depends on the source of the judge's alleged prejudice. To the extent that a judge has become biased due to facts he has learned during a judicial proceeding, he must recuse himself only if fair judgment would be impossible. Liteky v. United States, 510 U.S. 540, __, 114 S.Ct. 1147, 1157, 127 L.Ed.2d 474 (1994). If the alleged par- tiality stems from a source other than a judicial pro- ceeding, a judge must recuse himself if “a reasonable VE a a" A-51 and objective person, knowing all of the facts, would harbor doubts concerning the judge’s partiality.” United States v. Jordan, 49 F3d 152, 155 (Sth Cir. 1995). Judge Parker's role in the negotiating process was insubstantial and stemmed from three cases filed in his court. His actions were limited to appointing Judge Patrick E. Higginbotham of this court as a settlement facilitator, appointing class counsel for the Global Health Claimant Class at the recommendation of Judge Higginbotham, receiving regular reports of the negotia- tions and mediating the global settlement negotiations personally for part of one evening. After the parties agreed to a settlement, Judge Parker held an extensive fairness hearing and appointed an independent guardian ad litem to report on the fairness of the settle- ment to the futures class. Judge Steger found that “[o]n the basis of the entire record and taking all of Mr. Jaques’ allegations as true, . no reasonable person would conclude that Judge Parker is biased and no reasonable person would harbor doubts about his impartiality."" Our review of the record confirms that Judge Parker carefully avoided any appearance of impropriety. The district court did not abuse its discretion in denying the motion to recuse. 17 The district court also rejected the intervenors’ motion under 28 U.S.C. § 144. This statute requires that a party submit an affi- davit alleging facts that, if true, would convince a reasonable person that bias exists. However, “{a] court may not grant relief under § 144 if a party’s counsel instead of the party executes an affidavit alleging personal bias or prejudice.” Pomeroy v. Merritt Plaza Nursing Home, Inc., 760 F.2d 654, 658-59 (5th Cir. 1985) (citations omitted). The only affidavit before the district court was submitted by counsel for the Flanagan intervenors, Leonard Jacques, and there- fore did not qualify for relief under § 144. The district court's error in considering the recusal motion under § 144 was harmless in any event because the court properly concluded that even if the facts in the affidavit were assumed true, a reasonable person would find that no bias exists. A-52 3. Plant Insulation Company Plant Insulation Company, a member of the Global Third-Party Claimant Class, argues that its due process rights were violated because it was not allowed to opt out of that class. Plant did not attempt to intervene in the proceeding before the district court so it has no standing to appeal the district court's ruling. The Fifth Circuit has held that “non-named class members do not have standing to appeal the final judgment in a class action ... .” Walker v. City of Mesquite, 858 F.2d 1071, 1074 (5th Cir. 1988). As a result, “we have no jurisdiction to consider an appeal by a class member who has not attempted to intervene as a named party.” Loran v. Furr’s/Bishop’s Inc., 988 F2d 554 (5th Cir. 1993). See also, Edwa. ds v. City of Houston, 78 F.3d 983 (Sth Cir. 1996) (en banc) (unions had no standing to appeal the court’s final judgment because they never became named par- ties or intervenors in the suit). Accordingly we dismiss Plant's appeal for lack of standing.” 4. Other objections of the Flanagan inter venors The Flanagan intervenors raise several more objec- tions common to Ahearn and Rudd. They argue that merchant mariners are differently situated from other members of the Global Health Claimant Class because of differences between admiralty law and the tort law of 18 Two other would-be appellants also lack standing under this rule. However, we need not dismiss their appeals for lack of standing because they are dismissed on other grounds. On March 25, 1996, Jeffrey Mack Chapin filed notices of appeal complaining of orders entered in Ahearn and Rudd. These notices of appeal which were consolidated into Ahearn and Rudd were untimely and are therefore dismissed. Kenneth Smith has also filed notices of appeal complaining of the orders in Ahearn and Rudd. Smith’s notices of appeal have also been consolidated into Ahearn and Rudd and are dismissed due to Smith’s failure to pay the docketing fee and failure to file an appel- late brief. A-53 some states. This argument ignores the fact that the Global Settlement Agreement allows claimants the same rights they would receive in the tort system (limiting only the amount of total damages and punitive dam- ages). Admiralty law will provide the backdrop for any maritime plaintiff's settlement because that law will govern the trials of maritime plaintiffs who choose the back-end opt-out provision. Finally, the Flanagan intervenors claim that the dis- trict court improperly used defendant classes. They argue that defendant classes are only appropriate in cases where defendants are guilty of egregious miscon- duct. This argument has no support in the language of Rule 23 and is contrary to a wide range of cases where courts have certified defendant classes without requiring a “widespread pattern of wrongful conduct.” See e.g., Blake v. Arnett, 663 F2d 906, 911-13 (9th Cir. 1981) (defendant class of Yurok Indians on counter- claims seeking declaration eliminating alleged Indian treaty rights in land held by lumber and mining com- pany); Board of Regents of University of Nebraska v. Dawes, 522 E2d 380, 381 (8th Cir. 1975) cert. denied, 424 US, 914, 96 S.Ct. 1112, 47 L.Ed.2d 318 (1976) (defendant class of employees allegedly discriminated against by plaintiffs); Garneau v. City of Seattle, 897 FSupp. 1318, 1320 (W.D. Wa. 1995) (defendant class of low-income tenants seeking relocation assistance from plaintiffs); Houston Chapter of the Int'l Ass'n of Black Professional Firefighters v. Houston, 1991 WL 340296, at *3, *28 (S.D. Tex. May 3, 1991) (defendant class of present and future non-black, non-Hispanic firefighters who will be eligible for certain ranks in the Houston Fire Department).” 19 The Flanagan intervenors also argue that claims which Fibre- board already knew about (those of Mr. Jaques’ clients) cannot be (concluded on page A-54) A-54 Ii RUDD In addition to the claims addressed above, the Flanagan intervenors make several objections specific only to Rudd.” A. FIBREBOARD AS AN INDISPENSABLE PARTY The Flanagan intervenors argue that the Rudd action must be dismissed for lack of an indispensable party, Fibreboard.”* Although they failed to raise this issue in (continued from page A-53) “future claims” simply because they were not filed before the set- tlement was reached. This objection is asserted without any basis in law and fails to explain how claims which have not yet been filed could be anything other than “future claims” in the eyes of a court. The Flanagan intervenors also claim that they are appealing the judgment entered in Ahearn which approves the Trilateral Settlement Agreement as a fair settlement of the coverage litiga- tion between Fibreboard and the Insurers. However, Flanagan failed to raise this issue in his initial brief and has not demon- strated that he has standing to challenge this judgment. On appeal, this court will not reach issues not raised in the initial brief. United Paperworkers Intern. U. v. Champion Intern., 908 F.2d 1252, 1255 (5th Cir. 1990). Additionally, Flanagan has failed to demonstrate (or make any argument) that he is a proper party to appeal the judgment approving the fairness of the settlement of the coverage litigation between Fibreboard and the Insurers. See Rohm & Hass Tex. v. Ortiz Bros. Insulation, 32 F.3d 205 (5th Cir. 1994). 20 The Flanagan intervenors argue that Rudd was inappropri- ately certified as a 23(b)(1)(B) class. We do not consider the merits of this argument because the district court found, and we agree, that the defendant class in Rudd could also be certified under 23(b)(2). None of the intervenors appeals the propriety of certifica- tion under this provision. 21 Rule 19(b) requires a district court deciding the question of indispensability to consider: (concluded on page A-55) A-55 the district court, we may still consider it on appeal. United States v. Sabine Shell, Inc., 674 E2d 480, 482 (Sth Cir. 1982). However, “failure to raise the issue of joinder until this appeal mitigates against a finding in their favor.” /d. at 483. We agree with the Ninth Circuit that “when the judgment appealed from does not in a practical sense prejudicially affect the interests of the absent parties, and those who are parties have failed to object to non-joinder in the trial court, the reviewing court will not dismiss an otherwise valid judgment.” Sierra Club v. Hathaway, 579 F2d 1162, 1166 (9th Cir. 1978), cited with approval in McCulloch v. Glasgow, 620 F2d 47, 51 (Sth Cir. 1980). See also Judwin Properties Inc. v. United States Fire Insurance Co., 973 F2d 432, 434 (Sth Cir. 1992) and Sabine Shell, 674 F2d at 483. Both the Trilateral Health Claimant Class and the Tri- lateral Third-Party Claimant Class agreed to a consent judgment sought by the Insurers declaring approval of the Trilateral Settlement Agreement and the release of the Insurers. Because Fibreboard has already consented to entry of a similar release of the Insurers in Ahearn, the Rudd judgment does not prejudicially affect Fibre- board. Thus, Rudd should not be dismissed for want of an indispensable party. (continued from page A-54) first, to what extent a judgment rendered in the person's absence might be prejudicial to the person or those already ; second, the extent to which, by protective provisions in the judgment, by the shaping of relief, or other measures, the prejudice can be lessened or avoided; third, whether a judgment rendered in the person's absence will be adequate; fourth, whether the plaintiff will have an adequate remedy if the action is dismissed for nonjoinder. Fed.Rule Civ.Proc. 19(b). A-56 B. JusticiaBitiry OF THE Rupp CLAm The Flanagan intervenors argue that the Rudd com- plaint fails to state a cause of action or a “case or con- troversy.” The Insurers in Rudd seek declaratory and injunctive relief determining that (1) the Trilateral Set- tlement Agreement is fair, reasonable, and negotiated at arm’s length in good faith; (2) the defendant classes approve of the Trilateral Settlement Agreement and the release of the Insurers; and (3) the defendant classes be enjoined from asserting future claims against the Insurers. The Declaratory Judgment Act does not expand the jurisdiction of the federal courts. See Skelly Oil Co. v. Phillips Petroleum Co., 339 U.S. 667, 671-72, 70 S.Ct. 876, 878-79, 94 L.Ed. 1194 (1950). Similarly, it does not create substantive rights; it is only a procedural device that enhances the remedies available in the adjudication of a case or controversy. See Aetna Life Ins. Co. v. Haworth, 300 US. 227, 240, 57 S.Ct. 461, 463-64, 81 L.Ed. 617 (1937). A justiciable case or controversy exists as long as the court's ruling will affect “tangible legal rights.” ASARCO Inc. v. Kadish, 490 U.S. 605, 619, 109 S.Ct. 2037, 2046-47, 104 L.Ed.2d 696 (1989). In Maryland Casualty Co. v. Pacific Coal & Oil Co., 312 US. 270, 61 S.Ct. 510, 85 L.Ed. 826 (1941), the Supreme Court stated that “[b]asically, the question in each case is whether the facts alleged, under all the circumstances, show that there is a sub- stantial controversy, between parties having adverse legal interests, of sufficient immediacy and reality to warrant the issuance of a declaratory judgment.” /d. at 273, 61 S.Ct. at 512. In Rudd, the Insurers seek a declaratory judgment that because the Trilateral Settlement Agreement is fair and negotiated in good faith, it cuts off all rights of both Trilateral Health Claimants and Trilateral Third- party Claimants to payments under the policies. The Insurers were justifiably concerned that after they A-57 spend $2 billion on the Trilateral Settlement with Fibre- board, the settlement could be challenged by asbestos victims and third-party claimants, particularly if Fibre- board becomes insolvent. The Insurers in Rudd sought to cut off this potential challenge by obtaining the declaratory and injunctive relief described above. Many states recognize that a tort victim injured during the policy period has sufficient legal interest in that policy to attack subsequent changes that affect the right to recover —- i.e., reformation, cancellation, or set- tlement of the policy. See, e.g., Maryland Casualty Co., 312 US. at 273-74, 61 S.Ct. at 512-13 (a tort victim has a potential financial interest in the insurer's insurance policy, and the impairment of this interest is an injury that will support standing under Article III; Bankers Trust Co. v. Old Republic Insurance Co., 959 F.2d 677, 682 (7th Cir. 1992) (“the victim of an insured’s tort, even though he is not a third-party beneficiary of his insurer’s insurance policy, has a legally protected interest in that policy before he has reduced his tort claim to judgment”). Some states even require the injured party to be included in any negotiations of policy changes that will affect their rights. See e.g., Smith & Wesson v. Birmingham Fire Ins. Co., 123 A.D.2d 135, 510 NYS.2d 606, 608 (Ist Dept. 1987); Maryland Cas. Co. v. Wilson, 6 Ariz.App. 470, 433 P.2d 650, 652 (1967); Shapiro v. Republic Indem. Co., 52 Cal.2d 437, 341 P.2d 289, 290 (1959); Womack v. Allstate Ins. Co., 156 Tex. 467, 296 SW.2d 233, 236 (1956). Thus, the Insurers faced a substantial threat of collateral attacks from members of both the Trilateral Health Claimant Class and the Tri- lateral Third-party Claimant Class asserting that the Tri- lateral Settlement was unfair or fraudulent. A true controversy existed. The Flanagan intervenors also argue that the Trilat- eral Settlement Agreement is effective only if the Ahearn settlement is rejected. Flanagan argues that this contin- gency precludes a finding that Rudd is an adjudication A-58 of a “present right upon established facts.” Brown & Root, Inc. v. Big Rock Corp., 383 F.2d 662, 665 (Sth Cir. 1967). The Trilateral Settlement Agreement contains provi- sions that become operative regardless of whether the Global Settlement Agreement is ultimately approved or disapproved; for example, the parties agree in the Trilat- eral Settlement Agreement to compromise all Fibre- board’s claims under the insurance policies not previously released, including claims for property dam- ages. The Global Settlement Agreement only refers to personal injury claims filed against Fibreboard after August 27, 1993. Therefore, the effectiveness of the Tri- lateral Settlement Agreement is not wholly contingent on the outcome in Ahearn. Moreover, the case would be ripe even if the effective- ness of the Trilateral Settlement Agreement were wholly contingent upon the disapproval of the Global Settle- ment Agreement. In Chevron U.S.A., Inc. v. Traillour Oil Co., 987 F2d 1138 (5th Cir. 1993), we found a case would be ripe for adjudication notwithstanding the existence of some contingency to the claim if either (1) there is “a substantial possibility” that the contingency will occur, or (2) the only questions being presented “are purely legal ones.” /d. at 1154. We found judicial resolution of contingent claims is consistent with the purpose of the Declaratory Judgment Act which is “to settle actual con- troversies before they ripen into violations of law or breach of some contractual duty.” /d. (quoting Hardware Mutual Casualty Co. v. Schantz, 178 F2d 779, 780 (Sth Cir. 1949)). In Rudd, the contingency that the global settlement might not receive court approval or might be success- fully attacked was a substantial possibility; the global settlement was an innovative approach to unique cir- cumstances. The parties to Ahearn had no assurance that a court would accept this settlement which is the reason the Ahearn plaintiffs insisted on a back-up agree- A-59 ment to settle the coverage issue. Thus, we agree with the district court that the Rudd complaint presented a justiciable claim. CONCLUSION Although appellants’ arguments challenging the approval of the global settlement are not insubstantial, on the unique facts presented here they do not carry the day. The global settlement was driven by insurance coverage litigation between Fibreboard and the Insurers which would have been catastrophic for whomever was on the losing side. None of the parties was prepared to take the enormous risk inherent in that litigation. The global settlement offers all sides the best solution pos- sible by eliminating costly disputes between Fibreboard, its insurers, and asbestos claimants and ensuring an equitable distribution to asbestos claimants. The $1.5 billion global settlement was a major accomplishment by all parties concerned and no one seriously chal- lenges its adequacy or the desirability of avoiding another bankruptcy of a vigorous American company. For the reasons stated above, we conclude that in this case none of the legal impediments argued by appellants precluded the district court from approving the global or trilateral settlements. Both settlements were legally sound resolutions of serious disagreements. The judgment of the district court is AFFIRMED. JERRY E. SMITH, Circuit Judge, dissenting: I INTRODUCTION. The district court and the majority undoubtedly are driven by a commendable desire to resolve voluminous personal injury claims against an otherwise strong American company and to ensure an orderly transfer of A-60 funds from the company’s insurers to its victims. In order to accomplish this result, however, they have extinguished claims over which they have no jurisdic- tion and deprived thousands of asbestos victims of basic constitutional rights. The result is the first no-opt- out, mass-tort, settlement-only, futures-only class action ever attempted or approved. Ironically, the willingness to jettison centuries-old legal precepts hurts the very victims they intend to help: The settlement forces asbestos victims to sur- render their claims in exchange for a meager $10 mil- lion of Fibreboard’s $225-250 million net worth. They also benefit from Fibreboard’s settlement with its insurers, but Fibreboard and the insurers had powerful incentives to settle that dispute by themselves; in fact, they did so for $2 billion. There was no need even to involve the class in those negotiations, much less to sacrifice its interests. “Thus, the class members appear to have traded Fibreboard’s liability for nothing to which they did not already have a right.” On the other hand, the district court and the majority have bailed Fibreboard’s shareholders out of a mam- moth liability and awarded $43.7 million to class counsel. This suit was supposedly brought on behalf of Fibreboard’s victims, but of the four entities directly affected by the settlement — Fibreboard, class attor- neys, courts, and asbestos victims — the victims were the only entity absent from the bargaining table. Per- haps for that reason, they also were the only losers. How could well-intentioned judges sanction — indeed, compel — such an untoward result? Apparently this is simply a case of judges — both trial and appellate — trying too hard to solve the vexing problems posed by 1 John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 95 COLUM. L.REV. 1343, 1420 (1995). A61 unending asbestos litigation. Having certified at least two other high-profile asbestos class actions,” then- Chief District Judge Parker was acutely aware of the problems posed by asbestos litigation. In the end, he appears to have become too close to both the overall problem and the instant settlement to continue to act in a judicial capacity in this case.’ When Fibreboard and class counsel announced at a court hearing that they had reached a settlement, Chief Judge Parker referred to “extensive negotiations between counsel that the Court has participated in.” Also at that time, and long before the fairness hearing, he said, “We will trust in the scholarship, the good judg- ment and common sense of the ... courts of appeal in the event this comes to their attention.” In short, Chief Judge Parker tried his best to solve a perplexing problem, and it is our task to figure out whether that solution is legally sustainable. There are two primary problems: (1) Fibreboard, class counsel, and Fibreboard’s other creditors have combined to profit at the expense of absent class mem- bers; and (2) this case is an affrcnt to the integrity of the judicial system. As we observed when reversing Chief Judge Parker's certification of another class action against Fibreboard: “The Judicial Branch can offer the trial of lawsuits. It has no power or competence to do more.” Fibreboard, 893 F.2d at 712. 2 See In re Fibreboard Corp., 893 F.2d 706 (5th Cir. 1990) (grant- ing writ of mandamus); Jenkins v. Raymark Indus., 782 F.2d 468 (5th Cir 3 For example, certain of the appellants make much of a gath- ering Chief Judge Parker arranged at his house during which, allegedly, counsel — especially the insurers’ —- were hounded into A-62 A. IMPORTANCE AND UNIQUENESS. This case is extraordinarily important. Prior to the filing of this suit, no one had ever attempted a no-opt- out, mass-tort, settlement-only, futures-only class action. Ever since the district court's certification order, how- ever, corporate America has been “anxiously awaiting” a decision in this case. Richard B. Schmitt, The Deal Makers: Some Firms Embrace the Widely Dreaded Class- Action Lawsuit, WALL ST. J., July 18, 1996, at Al. The majority’s unequivocal approval of Fibreboard'’s litigation strategy undoubtedly will lead “other financially threat- ened companies throughout the nation [to] utilize it as a road map for sheltering their assets and improperly restricting the rights of their present and future victims.” Amicus Br. of Trial Lawyers for Public Justice at 2-3. Thus, the majority’s reliance upon the “unique facts” of this case, see maj. op. at 993 [A-59]* is ironic: The unique fact of the insurance dispute is simply irrele- vant, and the other unique facts — a corporate defen- dant’s hand-picking class counsel, cutting a side deal, reaching a “global settlement” affecting only “future” plaintiffs, and choosing a sympathetic judge to approve the settlement — likely will become far too common now that the majority has approved of them. “[W]hat was meant to provide a remedy for those who would otherwise lack one, enabling them to pool their voices and finances, will become a device to take away reme- dies from those who could otherwise invoke them.” John Leubsdorf, Co-Opting the Class Action, 80 CORNELL L.REV. 1222, 1223 (1995). B. THE NEED FOR PROCEDURAL PROTECTIONS. Two primary errors led the district court and the majority astray. These are, first, underestimating the * [Printer’s Note]: Reference to the majority opinion’s published pagination will be followed by bracketed reference to the pagination of this Appendix. A-63 importance of jurisdictional and procedural protections for absent class members, and second, departing from the judiciary’s exclusive area of authority and compe- tence — the resolution of lawsuits. We must keep in mind that it was the defendant — Fibreboard — who selected the class that was to “sue” it and the class action lawyers who were to do the dirty work. Fibreboard hand-picked a class that was uniquely vulnerable to exploitation, class counsel who were widely reported to have sotd out-a similar class, and a court with a reputation for favoring a global settlement. Class counsel then cut a side deal with Fibreboard before agreeing to the class setilement, and the district judge presided at the fairness hearing on the very set- tlement he had helped to craft. The settlement extinguishes claims of people over whom we lack jurisdiction, some of whom have not yet been injured and others of whom have not even been born. It also prevents such future claimants from opting out, because of a supposed need to divide a limited fund among a large number of claimants, but it grants automatic opt-outs to all those who already had filed suit. Coincidentally or not, this gerrymandered class definition includes those most vulnerable to abuse while excluding those most likely to intervene, to mon- itor class counsel, and to oppose the settlement. It is fair to question for whom class counsel really worked. Fibreboard picked them, the district court approved them, the insurers paid them, and in exchange, they bailed out Fibreboard’s shareholders and relieved district courts of potentially thousands of cases — at the expense of the absent asbestos victims whom class counsel purportedly represent. If all that was at stake for individual class mem- bers was some nominal compensation for having been charged an extra five cents on a bag of potato chips, one might not be too concerned A64 with how the courts enforced class counsel's duties to these people. But often much more is at stake, such as whether a plaintiff will recover for a fatal illness caused by a defective product. and if so, how much. Today, such a person may have her rights adjudicated by a court without actual notice of the action and before she even knows she has been injured. Fantastic as this may seem ... , it is true.‘ But it need not be. Even rudimentary constitutional protections — such as according absent class members adequate representation and adjudicating only their presently-existing, legally cognizable injuries — would have prevented Fibreboard from perpetuating this unfortunate miscarriage of justice. C. LEGISLATED TORT REFORM. The district court legislated a bold and novel tort reform proposal thinly disguised as the settlement of a lawsuit. Of course, there never was a lawsuit: Fibre- board and its hand-picked class counsel agreed to file a suit only if they already had settled it. Thus, Chief Judge Parker began his opinion by stating, “This action was filed to obtain judicial approval of a class settle- ment.” Ahearn v. Fibreboard Corp., 162 F.R.D. 505, 507 (E.D. Tex. 1995). The class complaint alleges exposure-only claims for which the settlement provides no compensation. Class 4 Susan P. Koniak, the Looking Glass of Ethics and the with Rights We Find , 9 GEO. J. LEGAL ETHICS 1, 13 (1995). The Ahearn and Georgine settlements have received sig- nificant attention in the academic literature, most of it extreme negative. See, e.g., Coffee, supra note 1, at 1393-1404; Roger C. Crampton, Individualized , Mass Torts, and “Settlement Class Actions”: An Introduction, CORNELL L.REV. 811, 825-35 (1995); Susan P. Koniak, Feasting While the Widow : Georgine v. Amchem Products, Inc., 80 CORNELL L.REV. 1045 (1995); Richard L. Marcus, Can't Do That, Can ? Tort via Rule 23, 80 CORNELL LEN. 856, 096-900 (1988). eats A-65 counsel even conceded that, as a matter of practice, they do not pursue such claims on behalf of their own clients; instead, they wait and file suit after a plaintiff actually has suffered an injury. The only reason to include those claims in the complaint was to manufac- ture jurisdiction over class members who have not yet manifested symptoms of asbestosis or otherwise suf- fered a legally cognizable injury. Even that attempt to trump up jurisdiction should fail, however, as many states do not recognize an exposure-only cause of action. Moreover, the settlement does not resolve the rights of individual class members. The only genuinely judicial aspect of approving the settlement is the release of Fibreboard from liability to the class, or more specifi- cally, the transfer, from Fibreboard’s shareholders to its victims, of the risk that Fibreboard’s insurance assets are inadequate. The remainder of the settlement is purely legislative: Class members’ causes of action are repealed in favor of the equivalent of a workers’ compensation regime.5 The Association of Trial Lawyers of America summed up this point nicely in an amicus brief opposing the settle- ment: “The alchemy of the [instant] settlement ... had the effect of transforming the common law damage claims of asbestos victims, which were clearly safe- guarded by the right to trial by jury, into administrative claims without that right.” Amicus br. at 9. 5 The purported “back-end opt-out right” likely will prove to be no right at all. Before he may even file a lawsuit, a victim must (1) file a claim with the trust and wait for it to evaluate his claim; (2) engage in settlement discussions; (3) proceed to mediation; and (4) participate in non-binding arbitration. Even after securing a court judgment in his favor, the «.aimant may not enforce that judgment; instead, he must accept installment payments over a number of years. His recovery is capped at a pre— (concluded on page A-66) A-66 Even if exchanging state tort law for this private, alternative dispute resolution mechanism were the boon to class members that the majority holds it out to be — and | doubt that it is, see infra part IX — such a policy decision is “better addressed to the repre- sentative branches — Congress and the State Legisla- ture.” Fibreboard, 893 F.2d at 712. In addition, Fibreboard hardly deserves more than $200 million for drafting the legislation. “(T]raditional ways of proceeding reflect far more than habit.” Fibreboard, 893 F.2d at 710. As judges are trained and equipped to adjudicate, not legislate, it is understandable that the courts have fallen prey to pow- erful special interest groups — a wealthy defendant and the class action bar — and unwittingly disserved the very victims the courts were intended to help. D. CONSTRUCTIVE BANKRUPTCY. Nor does Fibreboard’s “constructive bankruptcy” jus- tify abridgment of absent class members’ substantive state law rights. In bankruptcy, the claims of all of Fibreboard’s creditors, not just its “future” personal injury victims, would be crammed-down. Permitting Fibredoard to effect a reorganization bankruptcy pro- ceeding in the guise of a futures-only class action cir- cumvents the detailed protections of the Bankruptcy Code for the express purpose of imposing the entire cost of the bailout on Fibreboard’s most vulnerable creditors, to the betterment of its shareholders. The Second Circuit decertified a similar settlement class for precisely that reason: (continued from page A-65) set dollar amount, and he is barred from receiving punitive dam- ages or pre- or post-judgment interest. In short, the settlement ensures that the trust can make trial an impracticable method of recovery, forcing class members to settle within the confines of the administrative procedure devised by Fibreboard and class counsel. A-67 Evasion of bankruptcy is ... not without costs or other perils ... . [C]lass members in cases such as this would have no say in the conduct of the court-appointed class representatives and, unlike creditors in bankruptcy, are not able to vote on a settlement. For them, it would be “cram-down” from start to finish. Keene Corp. v. Fiorelli (In re Joint E. & S. Dist. Asbestos Litig.), 14 F3d 726, 732 (2d Cir. 1993) (citation omitted). The amicus brief of the Trial Lawyers for Public Justice puts the point more forcefully: “[I]nstead of protecting class members from the risk that their ability to obtain relief from Fibreboard will be ‘substantially impaired, certification of the proposed settlement class here ensures that the class members’ ability to obtain relief from Fibreboard will be totally eliminated.” Amicus br. at 6. E. CREATING A Circuit SPLIT. Our sister circuits have rejected all other actions that came even close to attempting what Fibreboard has done here. The Ninth Circuit has squarely held that opt- out rights are available in all class actions seeking pre- dominantly monetary damages, regardless of the subsection under which they were certified. See Brown v. Ticor Title Ins. Co., 982 F.2d 386, 392 (9th Cir. 1992), cert. dismissed, 511 US. 117, 114 S.Ct. 1359, 128 L.Ed.2d 33 (1994). Two other circuits appear to agree with the Ninth, and none has expressly disagreed. See infra note 16. Without even citing that authority, however, the majority arbitrarily limits opt-out rights to actions certi- fied under FED.RCIV.P. 23(b)(3), see maj. op. at 987 [A- 45] n.16, exalting an irrelevant technicality over the underlying reality and creating a circuit split in the process. Earlier this year, the Third Circuit firmly held that class counsel cannot adequately represent both extant and latent claimants in a futures-only asbestos class A-68 action. Georgine v. Amchem Prods., 83 F.3d (10, 630-31 (3d Cir. 1996). The court explained that while extant claimants — those who have already incurred injuries — desire immediate, unlimited recovery from the trust, latent claimants — those who have yet to suffer an injury — desire that recovery be capped or delayed to ensure that extant claimants will not deplete the fund. Id. The majority mentions Georgine only in a brief foot- note, distinguishing it on the ground that the Georgine settiement provides a detailed claims resolution schedule, while the Ahearn settlement does not. See maj. op. at 976 [A-22] n.8. Class counsel still served conflicting interests, however, and postponing some dis- tributional issues until after certification and appeal hardly makes them disappear. The majority may prefer the devil it does not know to the devil it does, but | am loath to make that decision for an entire class of people who are not even aware that we are “adjudicating” their rights. On the other hand, the majority is correct that Keene is easy to distinguish, for the defendant in that action was forthright: Instead of retaining plaintiffs’ counsel and having them file a complaint asserting claims they had no intention of pursuing (as occurred here), the asbestos manufacturer asked the court to oversee the negotiation of a settlement. See Keene, 14 F.3d at 728-29. The Second Circuit dismissed the action, finding that “it is a self-evident evasion” of the Bankruptcy Code, “the exclusive legal system established by Congress for debtors to seek relief.” /d. at 732. Future defendants pre- sumably will draw one of two conclusions: Involve the court as little as possible in settlement class actions, or file in the Fifth Circuit. In sum, the settlement fails either a customary legal analysis or a common-sense smell test. | respectfully but vehemently dissent from all but part Ill of the majority opinion. A-69 IL FACTS AND PROCEDURAL HISTORY. Though the background to this case is somewhat complicated, the key facts are hard to overlook. Fibre- board approached four plaintiffs’ lawyers, including Ron Motley and Joe Rice, and suggested that they negotiate a “global settlement” of all of Fibreboard’s asbestos lia- bilities. The negotiations initially failed, perhaps because of the massive scope of the undertaking. Fibreboard then adopted a risky strategy of assigning claims against its insurers in settiement of individual suits. The danger was that these settlements arguably violated the insurance policies. Fortunately for Fibre- board, a California court approved the deals. Then something odd happened: Fibreboard settled a large number of cases with Ness Motiey — Motley and Rice’s law firm — by assigning insurance assets, and brought an action in the Eastern District of Texas seeking approval of the settlement. Why would Fibre- board, a California company, roll the dice in Texas when it had already won in California? Because something important had happened in Pennsylvania. The Judicial Panel on Multidistrict Litigation had transferred all pending asbestos cases not yet on trial to a district court in Pennsylvania. See Georgine v. Amchem Prods., 83 F.3d 610, 619 (3d Cir. 1996). Then- Chief Judge Robert Parker of the Eastern District of Texas wrote a letter to the transferee judge, telling him that he (the Pennsylvania judge) was “the Eisenhower of this D-Day operation” and encouraging him to prod the parties to a global settlement. See Coffee, supra note 1, at 1390. When the plaintiffs’ steering committee rejected such a proposal, twenty defendants approached a minority faction of the committee — Motley and Gene Locks — and reached a global settlement with them. See /d. at 1391-92, 1457. Actually, they made a series of deals: a A-70 class action settlement for future asbestos victim claimants and separate settlements for the lawyers’ pre- existing, individual clients. The separate settlements were significantly more lucrative than the class one. See /d. at 1392-93; Koniak, Feasting, supra note 4, at 1052. In fact, Motley received fifty percent more for his own clients than he did for those in the class. See Coffee, supra note 1, at 1397; Koniak, Feasting, supra note 4, at 1067. The Third Circuit rejected the settlement, finding that class counsel — including Motley — were hopelessly conflicted. See Georgine, 83 F3d at 630-31. As the Georgine negotiations concluded, Fibreboard and Ness Motley settled a number of cases and, as noted above, filed an action in Chief Judge Parker's court. Fibreboard thereby secured class counsel with a track record of making global settlements and a judge with a demonstrated commitment to them. Following the Georgine pattern, class negotiations reached an impasse over the future of Ness Motley’s remaining cases against Fibreboard. The court- appointed “Settlement Facilitator,” Judge Patrick Higgin- botham, then suggested that they settle those cases before attempting further negotiation of a global settle- ment. After conciding the Ness Motley deal — which settled the individual claims for higher-than-average amounts, contingent upon successful completion of a global settlement — Fibreboard and class counsel resumed negotiation of such a settlement. As those negotiations drew to a close, Chief Judge Parker intervened, taking counsel to his house for a final mediation session. It appears that he was suc- cessful, for defense counsel eventually increased their offer to an amount that class counsel later accepted. Class counsel then filed a complaint in Chief Judge Parker’s court, along with motions to certify the class A-71 and approve the settlement. The judge certified the class and found that the settlement was fair. And Fibreboard’s stock soared.® Il THE FOREST FOR THE TREES. The majority commits two fundamental errors: first, treating justiciability, due process rights, and certifica- tion criteria as mere annoyances to be brushed aside in pursuit of what it believes to be the greater good; and second, failing to assess the aggregate effect of its restrictions on asbestos victims’ due process rights. Justiciability and certification requirements are indis- pensable in any class action. Justiciability looks, among other things, to whether a person has suffered a legally cognizable injury. If an individual has not been legally injured, it is unlikely that he would receive notice of the action or realize that he is a member of the class. Even if he became aware of the action’s potential effect on his legal rights, he would likely remain apathetic: Any effect on him is remote in time and contingent on the future development of a disease or other damage or injury. Thus, such class members are especially vulnerable to abuse by class counsel. Similarly, certification criteria such as commonality, typicality, and adequacy of representation ensure that representative litigation is truly representative. If class counsel stand to gain from selling out the class or from benefiting one subgroup of claimants over another, some or all class members are deprived of a meaningful opportunity to be heard — one of the most funda- mental of all due process rights. The majority addresses each class protection device in isolation, always finding that the protection does not 6 See Coffee, supra note 1, at 1402 & n. 232. A-72 apply because of a legal rule developed in a different context or an historical analogy that fails to recognize the novelty of this action. Such tunnel vision obscures the fact that while a particular protection might not always be necessary, some combination of protections is. When courts remove all meaningful safeguards — as the majority does here — class members suffer dramatically. A. THE DANGER INHERENT IN REPRESENTATIVE LITIGATION. “It is a principle of general application in Anglo-Amer- ican jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party ... .” Hansberry v. Lee, 311 US. 32, 40, 61 S.Ct. 115, 117, 85 L.Ed. 22 (1940). This “deep-rooted historic tradition that everyone should have his own day in court,” 18 CHARLES A. WRIGHT, ARTHUR R. MILLER, EDWARD H. COOPER, FEDERAL PRACTICE AND PROCEDURE (hereinafter “WRIGHT & MILLER”) § 4449, at 417 (1981), creates the core of due process: the rights to notice, to control one’s own case, and to an opportunity to be heard. The class action device is an equitable exception to this bedrock principle. See Hansberry, 311 US. at 41, 61 S.Ct. at 117-18. Not surprisingly, such a “funda- mental departure from the traditional pattern in Anglo- American litigation generates a host of problems.” Mars Steel Corp. v. Continental lil. Nat'l Bank & Trust Co., 834 F2d 677, 678 (7th Cir. 1987). More bluntly, “class actions are extraordinary proceedings with extraordinary potential for abuse.” General Motors Corp. v. Bloyed, 916 SW.2d 949, 953 (Tex. 1996). Accordingly, the Constitution’s guarantee of due process requires us to use this joinder device carefully: In exchange for losing the right to prosecute his own action, a class member must receive a variety of substi- tute protections. See Phillips Petroleum Co. v. Shutts, 472 A-73 U.S. 797, 811-12, 105 S.Ct. 2965, 2974-75, 86 L.Ed.2d 628 (1985); Hansberry, 311 U.S. at 45, 61 S.Ct. at 119-20. Though the Supreme Court has largely refrained from determining the scope of those protections, its scant jurisprudence establishes two related principles: First, the extent to which due process requires procedural protections necessarily depends upon the extent to which class members’ interests are infringed;’ and second, we must meet new uses of the device with new protections.® In short, the safeguards required by due process nec- essarily differ according to the type of action, and when confronted with a new animai, we must analyze those safeguards anew. Reliance on strained analogies to in- apposite traditional actions leaves us in what one com- mentator has aptly labeled a “due process quandary.”® Thus the irony: The majority eviscerates well- established due process protections because of 7 See Shutts, 472 U.S. at 808-11, 105 S.Ct. at 2972-74 (finding that opt-out right, rather than opt-in requirement, adequately pro- tects class members in light of burdens imposed on them). 8 See Mullanz v. Central Hanover Bank & Trust Co., 339 U.S. 306, 313-14, 70 S.Ct. 652, 656-57, 94 L.Ed. 865 (1950) (balancing interests of class members and efficient operation of modern investment trusts). The majority’s assertion that “(t]he rule that adequate rep- resentation is all that due process requires for the traditional mandatory class action in equity was not challenged by Shutts,” maj. op. at 986 [A-45], is erroneous. The Hansberry court reserved judg- ment on what other procedures might be required, see 311 U.S. at 43-44, 61 S.Ct. at 118-19, and the Court later found that members of mandatory classes have an additional due process right to adequate notice, see Mullane, 339 U.S. at 318-19, 70 S.Ct. at 659-60. Nor did Shutts construe Hansberry so narrowly. See Shutts, 472 U.S. at 808-09 n.1, 105 S.Ct. at 2972-73 n.1 (“The holding in Hansberry, of course, was that petitioners in that case had not a sufficient common interest with the parties to a prior lawsuit such that a decree against those parties in the prior suit would bind the petitioners.” ). 9 See Linda S. Mullenix, Class Actions, Personal Jurisdiction, and Plaintiffs’ Due Process: Implications for Mass Tort Litigation, 28 U.C. (concluded on page A-74) A-74 the “unique facts” of the case, see maj. op. at 993 [A-59], but fails to recognize that those novel facts may actu- ally call for enhanced, not lessened, protections for vul- nerable asbestos victims.” B. VULNERABILITY OF THE CLASS. This case is indeed such a new animal. The district court certified a class (1) including people who have not yet been injured or do not yet know that they have been injured; (2) excluding all present claimants; (3) for settlement purposes only; (4) in a mandatory action seeking predominately monetary damages. Certification of futures-only actions creates a massive potential for abuse. Many putative future claimants have manifested no symptoms and do not even know they were exposed. Others are the future spouses and chil- dren of asbestos victims, most of whom either do not exist or could not possibly know that they are class members. Thus, the due process standbys — notice and an opportunity to be heard — are meaningless to countless future claimants." (continued from page A-73) DAVIS L.REV. 871, 911-12 (1995); cf. William W. Schwarzer, Struc- turing Multiclaim Litigation: Should Rule 23 Be Revisited?, 94 MICH. L.Rev. 1250, 1255 (1996) (observing that appropriate accommoda- tion of competing interests differs according to nature of class and claims). 10 We need not consider the outer limits of due process in this case, however, as the district court failed to employ even basic pro- tections such as opt-out rights and adequate 11 See Ivy v. Diamond Shamrock Chems. Co. (In re Agent Orange Prod. Liab. Litig.), 996 F.2d 1425, 1435 (2d Cir. 1993) (observing (concluded on page A-75) A-75 Moreover, future claimants are, by definition, persons who have not yet developed a sufficient interest in their claims to file suit; thus, they are likely to be passive and particularly vulnerable to exploitation.” Finally, courts have a rotten track record with futures-only actions: Of the two largest such actions, one is Georgine, and the other settlement fell apart because the parties radically underestimated the number of claimants. See Coffee, supra note 1, at 1417-18 (discussing failure of Dow Corning settlement). These concerns are mitigated somewhat by the breadth of the “futures” class. Some members are presently injured and aware of their injuries, and some have even spoken with lawyers. While most of these claimants might not have retained counsel for the sole purpose of intervening, some might have, and others at least might have chosen to opt out, had that protection not been removed as well." Of course, any such inter- venors protect only their own interests, which differ dramatically from those of class members who are not presently injured. See infra part VI.A.2. Thus, futures- only classes are still highly vulnerable to abuse. This case also presents a radical extension of the mandatory class action. The class complaint seeks, and the settlement provides, predominately monetary relief. (continued from page A-74) that “providing individual notice and opt-out rights to persons who are unaware of an injury would probably do little good” ), cert. denied, 510 U.S. 1140, 114 S.Ct. 1125, 127 L.Ed.2d 434 and cert. denied, 510 U.S. 1140, 114 S.Ct. 1126, 127 L.Ed.2d 434 (1994); see generally Marcus, supra note 4, at 889 (explaining that the notice given to Ahearn class members was particularly hard for them to understand). 12 See Crampton, supra note 4, at 828. 13° Two groups of plaintiffs intervened in this action. Thus, while exclusion of present claimants appears to have limited the opposition, it did not completely eliminate it. A-76 While historically we have permitted mandatory actions when a class sought to litigate joint rights regarding a common fund, the only common fund in this case is the settlement proceeds. To the extent that there is a lim- ited fund, it is a contrived one, created by the litigation and settlement strategies of Fibreboard and its insurers. See infra note 17. The concept of a futures-only mandatory action is also self-contradictory. If we must bind victims in the class in order to protect their rights and ensure an equitable distribution, then we must bind all such vic- tims, not just some. Limiting the class to future claimants grants the equivalent of an automatic opt-out to present claimants, and there is simply no principled way of distinguishing the one group from the other." Arbitrariness in the class definition might not present a problem by itself, but future claimants, unlike present claimants, are particularly vul» erable. Exclusion of all present claimants has the effect uf not the purpose) of excluding all those who are likely to receive notice, monitor the class action, and oppose the class attor- neys’ conflicts and other inadequacies.® Finally, this is a settlement class action. Permitting such actions creates an unparalleled opportunity for collusion between defendants and class counsel, as both stand to gain from negotiating a deal providing generous fees for counsel and meager recovery for the class. See Jn re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F3d 768, 788 (3d Cir.), cert. 14 See Koniak, Feasting, supra note 4, at 1058; Crampton, supra note 4, at 829-30. 15 In addition, the settlement’s silence regarding the actual com- pensation that claimants can expect — other than various caps and limitations on recovery — makes it difficult for class members and courts to evaluate the settlement. That lack of information might be one of the reasons that the intervenors chose not to attack the set- tlement’s substantive fairness on appeal. A-77 denied, _. U.S. __, 116 S.Ct. 88, 133 L.Ed.2d 45 (1995); Crampton, supra note 4, at 826-27. Moreover, a defendant may pick his opposing counsel and then negotiate with absolutely nothing to lose from walking away from the deal; class counsel, on the other hand, work pro bono unless they consent to a settlement. If nothing else, use of a mandatory settlement action with an automatic opt-out for all those likely to inter- vene, and no opt-out for anyone else, raises a red flag. To the best of my knowledge, no one has ever attempted to do such a thing before: Even the now- discredited Georgine settlement permitted opt-outs. C. DIMINISHED PROTECTION FOR THE CLASS. A novel action laden with such an extreme potential for abuse certainly demands a close look, but the majority accepts the settling parties’ distortion of that background reality and actually ratchets down the degree of protection accorded absent class members. The Ahearn settlement is really two agreements: one between Fibreboard and the insurers to settle their policy disputes for $1.525 billion, and another between the futures class and Fibreboard to limit the class's recovery to insurance proceeds plus $10 million of Fibreboard’s $225-250 million net worth. Fibreboard and the insurers did not need class proceedings to reach the first agreement. Avoiding an all-or-nothing judgment in the California coverage litigation gave them a pow- erful incentive to settle, regardless of whether they could extinguish future claims at the same time. As the majority observes, “None of the parties was prepared to take the enormous risk inherent in that litigation.” Maj. op. at 993 [A-59] (emphasis added). In fact, Fibreboard and the insurers did reach such a settlement. See maj. op. part Ill (unanimously approving that agreement). With that cloak removed, the second half of the Ahearn settlement is wholly baseless. The class mem- A-78 bers surrendered their claims against Fibreboard, sub- mitted to an arbitration procedure, and agreed to a total cap on damages, individual caps on damages, an absolute ban on punitive damages, and other restrictive provisions. In exchange, Fibreboard gave the class a mere $10 million — less than five percent of its net worth. Fibreboard sought certification based upon a constructive bankruptcy theory, but it walked away with barely a scratch. Not surprisingly, Fibreboard’s stock skyrocketed when the settlement was announced. See Coffee, supra note 1, at 1402 & n. 232. Even accepting the settling parties’ mischaracteriza- tion of the settlement does little to justify certification, however, for traditional class protections still prevent it. lV. DUE PROCESS AND THE RIGHT TO OPT OUT. The majority's treatment of opt-out rights is a para- digmatic example of its erroneous reasoning. Though the Court plainly held in Phillips Petroleum Co. v. Shutts, 472 US. 797, 812, 105 S.Ct. 2965, 2974-75, 86 L.Ed.2d 628 (1985), that class members have a right to opt out of actions (such as this) seeking primarily monetary relief, the majority refuses to recognize that right, on the ground that it was not historically availabie in tradi- tional “common fund” litigation. The majority's holding that all rule 23(b)(1) class actions are immune from Shutts is in direct conflict with the holding of a sister circuit.” Moreover, this case pre- 16 The Ninth Circuit has held that a class action certified under rule 23(b)(1) and (b)(2) cannot bind absent plaintiffs unless they are allowed to opt out. Brown v. Ticor Title Ins. Co., 982 F.2d 386 (9th Cir. 1992) (holding that absent plaintiffs were not bound by a rule 23(l9)(1)-(b)(2) class action for money because the original class action court did not have personal “vias mp the plaintiffs and did not them with an dismissed as improvidenily granted, 511 U.S. 117, 114 S.Ct. 359, 128 (concluded on page A-79) ee A-79 sents anything but a traditional common fund,” and the majority's attempt to analogize it to an action to settle a (continued from page A-78) L.Ed.2d 33 (1994). See also In re Real Estate Title & Settlement Servs. Antitrust Litig., 869 F.2d 760 (3d Cir.) (reversing an injunction and allowing a collateral attack against a rule 23(b)(1)-(b)(2) class action to in a different jurisdiction), cert. denied, 493 U.S. 821, 110 S.Ct. 77, 107 L.Ed.2d 44 (1989). In dictum, the Second Circuit has eee ere ee ne ee ee legal remedies requires an opt-out right. In re Joint E. & S. Dist Asbestos Litig. (Findley 1), 982 F.2d 721, 735 (2d Cir. 1992) (up- holding a mandatory class action by beneficiaries of a trust but rec- ognizing that “[i]f the members x the plaintiff class were not all beneficiaries of the Trust, we would think that the applicable stan- dards for personal jurisdiction would be drawn more from Shutts than from Hansberry” ); In re Joint E. & S. Dist. Asbestos Litig. (Findley 11), 78 F.3d 764, 777-78 (2d Cir. 1996) (distinguishing the class action from that in Shutts because the restructuring of a trust is an equitable remedy). 17 The paradigmatic use of rule 23(b)(1)(B) is for a common (or limited) fund, which exists when a fixed asset or piece of property exists in which all class members have a preexisting interest, and an appor- tionment or determination of the interests of one class member cannot be made -vithout affecting the propor- tionate interests of other class members similarly situated. Classic illustrations include claimants to trust assets, a bank account, insurance proceeds, company assets in a liquida- tion sale, process of a ship sale in a maritime accident suit, and others. | HERBERT NEWBERG & ALBA CONTE, NEWBERG ON CLASS ACTIONS (hereinafter “NEWBERG ON CLASS ACTIONS”) § 4.09, at 4-32 through 4-33 (3d ed. 1992). The language of rule 23(b)(1)(B) is broad enough to encompass more than the traditional common fund, /d. at 4-31, and the fact that an action meets the requirements of rule 23(b) [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385017_1349%3A2. Public record. Not legal advice.