Intervenor/class member Cydne Anne Westmoreland hereby moves this Court to vacate its order of May 15, 1997, preliminarily approving the proposed class action settlement in this case and preliminarily certifying a mandatory settlement class. Since this order was issued, the U.S. Supreme Court announced its decision in Amchem Products, Inc., et al., v. George Windsor, et al., 1997 WL 345149 (June 25, 1997) ("Amchem"). As explained in further detail below, Amchem makes clear that the proposed settlement of this case cannot, under any circumstances, meet the certification requirements of Fed. R. Civ. P. 23. Permitting any further proceedings in this case would be a waste of time and resources, since no evidence exists that could justify approval of the settlement and class certification under any provision of Rule 23.
The facts underlying this case are fully set forth in earlier filings in this case, and we do not repeat them here. In brief, this case goes beyond anything ever attempted in any federal or state court in this country. It involves an attempt by The Liggett Group and related companies ("Liggett") to extinguish all tobacco-related claims against them in one fell swoop by settling a massive class action that encompasses literally everyone in the country. As defined in this Court's May 15 order, the class includes everyone in the country who has ever been exposed to smoke from any cigarette, whether manufactured by Liggett or not -- either by smoking or via second-hand exposure -- and everyone who may suffer from such exposure anytime within the next 25 years. The class not only includes "exposure-only" victims who have not yet gotten sick from tobacco smoke, but it also includes individuals who have not yet been exposed to Liggett's tobacco products.
The proposed settlement pits this enormous group of future victims against a host of others -- including present personal injury victims, anyone who has a tobacco-related economic-loss claim against Liggett, and 17 states who have already settled their Medicaid recoupment claims against Liggett -- in a battle to obtain some portion of a so-called "limited fund" that arbitrarily includes 25% of Liggett's pretax income. Despite the conflicting interests of these various class members, all are represented by one class representative and one set of counsel, who -- to avoid "distracting the parties and the Court" (Settlement Agreement Par. 7.11) -- have declined to provide any details about how much money the fund will actually contain or how its proceeds will be distributed. It hardly matters, however, since class members will not be permitted to opt out of the class in any event -- they simply must accept what is given to them, even if that amounts to nothing. Meanwhile, all other entities with claims against Liggett -- including trade creditors and all states who have not settled their claims against Liggett -- will be permitted to pursue their cases outside the class, with full access to Liggett's remaining assets.
On May 15, this Court preliminarily approved the proposed settlement, preliminarily certified a mandatory settlement class, and granted a temporary restraining order staying all litigation against Liggett pending a hearing on the settling parties' motion for a preliminary injunction. At a May 30th hearing, this Court dissolved the TRO and denied the motion for a preliminary injunction. The Court indicated, however, that the settling parties could renew their motion in order to present further evidence of a "limited fund" that needs protection pending a final decision on the settlement. The settling parties have since renewed their motion for a preliminary injunction, but this Court has not yet ruled on the request or set any hearing date on the renewed motion.
As we now explain, the Supreme Court's recent decision in Amchem definitively demonstrates that this class is not certifiable in any form under Rule 23. Thus, there is no reason for any further proceedings in this case. Instead, the Court should vacate its May 15 order in its entirety and deny the settling parties' renewed motion for a preliminary injunction as moot.
A. Overview of Amchem.
Before explaining why Amchem disposes of this case in its entirety, it is worth reviewing the Supreme Court's holding in some detail. The proposed class in Amchem included millions of individuals who had been exposed to asbestos products manufactured by one or more of 20 companies. The companies attempted to limit their exposure for tort damages by filing a settlement that not only included presently-injured victims, but also sought to extinguish the claims of "exposure only" asbestos victims with no present injury. In a 6-to-2 decision authored by Justice Ruth Bader Ginsburg, the Court held that the "sprawling class" could not possibly meet the various certification criteria of Federal Rule of Civil Procedure 23.
Amchem begins by rejecting the argument that Rule 23's requirements should be applied in a more relaxed fashion in the context of a "settlement-only" class action, with the settlement itself supplying the sole basis for determining whether the requirements of the Rule have been met. The Court held that, although a settlement may be taken into account in determining whether a class action would be "superior" to other methods of litigation, see Fed. R. Civ. P. 23(b)(3)(D), other requirements of Rule 23 actually require heightened scrutiny in the context of a settlement-only class action. Specifically, the Court wrote:
Confronted with a request for settlement-only class certification, a district court need not inquire whether the case, if tried, would present intractable management problems, . . . for the proposal is that there be no trial. But other specifications of the rule -- those designed to protect absentees by blocking unwarranted or overbroad class definitions -- demand undiluted, even heightened, attention in the settlement context. Such attention is of vital importance, for a court asked to certify a settlement class will lack the opportunity, present when a case is litigated, to adjust the class, informed by the proceedings as they unfold.
1997 WL 345149 at 16 (emphasis added).
Applying that test to the settlement before it, the Supreme Court held that the mammoth proposed class of present and future asbestos victims failed to pass muster under Rule 23. First, it held that the class did not satisfy Rule 23(b)(3)'s predominance requirement in light of the "myriad disparate questions" of fact and law underlying the class members' claims, including class members' different levels of exposure to different asbestos-containing products, different injuries and smoking histories, and differences in applicable state law. See id. at 17-18.
Second, the Court held that the class failed to meet the adequacy-of-representation requirement of Rule 23(a)(4) in light of serious conflicts between class members -- including conflicts between those who have already suffered an injury and those who may only become ill at some future point in time. It pointed out that, whereas the presently-injured have an interest in maximizing "generous immediate payments" under the settlement, the future victims want to ensure an "ample, inflation-protected fund for the future." Id. at 19. This irreconcilable conflict of interest between present and future victims, the Court concluded, rendered the class representatives incapable of fairly and adequately representing the interests of the entire class. Id.
Finally, with respect to the adequacy of class notice, the Court noted that the inclusion of future victims in the class "rendered highly problematic any endeavor to tie to a settlement class persons with no perceptible asbestos-related disease at the time of the settlement." Id. at 20. It echoed the Third Circuit's observations that many of the future victims in the class may not even know of their asbestos exposure, or realize the extent of the harm they might incur. Even those who do fully understand that the class notice applies to them, the Court added, "may not have the information or foresight needed to decide, intelligently, whether to stay in or opt out." Id. Although the Court did not ultimately rule on the adequacy of class notice, it "recognize[d] the gravity of the question whether class action notice sufficient under the Constitution and Rule 23 could ever be give to legions so unselfconscious and amorphous." Id.
Applying the teachings of Amchem to this case, it becomes clear that this class and proposed settlement cannot pass muster under Rule 23. First, in their various briefs requesting preliminary class certification and settlement approval, the settling parties attempted to justify this unprecedented action by arguing that the criteria set forth in Rule 23 "are relaxed or more readily satisfied in the settlement context." As explained above, however, Amchem rejected this notion that "settlement-only" class actions should be afforded some form of "relaxed" scrutiny under Rule 23, holding, instead, that "undiluted" or perhaps even "heightened" scrutiny must be applied to those criteria "designed to protect absentees by blocking unwarranted or overbroad class definitions" to ensure that absent class members' rights are not compromised in the settlement context. 1997 WL 345149 at 16.
Second, Amchem destroys any claim that Rule 23(a)(4)'s adequacy-of-representation requirement could ever be met in a case of this sort. Like Amchem, this class encompasses a huge number of present and future personal injury victims who have conflicting claims on the settlement proceeds. As in Amchem, the presently-injured class members have a strong interest in maximizing current payouts under the fund, whereas the future victims -- as the name implies -- want to insure an inflation-protected fund for the future. The interests of these two groups are flatly in conflict, yet -- as in Amchem -- they are represented by one set of counsel and do not have the benefit of separate representative plaintiffs. In Amchem, the Supreme Court wrote that this situation might only be tolerable only if the settlement includes some "structural assurance of fair and adequate representation," such as separately represented subclasses. Id. at 19. No such structural protections have been erected in this case, thereby rendering the class representation inadequate on its face.
The representational problems are even worse in this case than in Amchem in three critical respects. First, because Amchem was not a "limited fund" class, there was no cap on the amount of aggregate damages available to class members. In fact, the District Court specifically found that the asbestos companies' assets would be sufficient to pay all claims under the settlement. See 1997 WL 345149 at 19 (citing 157 F.R.D. at 291). Despite the alleged abundance of assets available to pay all class claims, the Supreme Court held that the intra-class conflicts between the present and future victims rendered the class incapable of meeting Rule 23(a)(4)'s adequacy-of-representation requirement. In this case, in contrast, there is no dispute that the "limited fund" is woefully inadequate to satisfy all claims against Liggett -- in fact, the inadequacy of Liggett's assets to pay all claims against it is the primary justification asserted for certifying a mandatory class in the first place. Under these circumstances, where class members must battle it out for some meager slice of a concededly inadequate pie, the intra-class conflicts between present and future victims are even more serious than in Amchem.
Second, unlike Amchem, this class is not limited to present and future personal injury victims; it also includes "economic loss" entities -- like Blue Cross/Blue Shield of Minnesota -- who have their own claims on the settlement fund. It is impossible to conclude that one set of counsel, and one class representative, could adequately represent all present and future personal injury victims, on the one hand, and economic loss entities, on the other, all seeking to maximize their recovery under one limited fund.
Third, unlike Amchem, where at least there were various class representatives with different sorts of asbestos-related injuries, see 1997 WL 345149 at 7, in this case there is only one class representative -- Mr. Earl William Walker, Jr. As well meaning as Mr. Walker may be, there is no way he could even purport to represent the interests of class members whose claims do not remotely resemble his own.
Thus, the intra-class conflicts in this case are even more fundamental and incurable than in Amchem. The teaching of that decision is that Rule 23(a)(4)'s adequacy-of-representation requirement could never be met under these circumstances.
Finally, putting aside the specific requirements of Rule 23(a), Amchem suggests that there are fatal impediments to the provision of adequate notice in this case. Under Fed. R. Civ. P. 23(e), all class members are entitled to adequate notice of a proposed class settlement. The Supreme Court has recognized, moreover, that adequate notice is a minimal element of due process. See Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 810-13 & n.3 (1985). In a case where, as here and as in Amchem, the class includes future victims who may not even know that they have been exposed to the defendant's product (or, as in this case, may not have even been exposed yet), there is a "grave" question "as to whether class action notice sufficient under the Constitution and Rule 23 could ever be given to legions so unselfconscious and amorphous." 1997 WL 345149 at 21. For this reason, too, this class could never satisfy the requirements of Rule 23.
Amchem is so clear on these points that there is no reason to
postpone any ruling pending further proceedings in this case. The Court
should vacate its May 15 Order preliminarily approving the settlement and
certifying the class and deny the pending motion for a preliminary injunction
as moot.