Complex Litigation: Punitive Damages Class II, page 2

COMPLEX LITIGATION (contined)

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First, the court held that the parties had "failed to demonstrate that the fund was limited except by the agreement of the parties." Fibreboard, 527 U.S. at 2316. Settling parties, under Rule 23(b)(1)(B), "must present not only their agreement, but evidence on which the district court may ascertain the limit and the insufficiency of the fund, with support in findings of fact following a proceeding in which the evidence is subject to challenge." Id. Although, as to the sale value of Fibreboard, the district court had heard evidence and made independent findings, "[t]he same, however, [could not] be said for the value of the disputed insurance." Id. at 2317.

Second, the Supreme Court held that the settlement's unique, wholesale exclusions from the class and disparate treatment of those similarly situated were at odds with the traditional concept of the limited fund. "[T]here can be no question that such a mandatory settlement class will not qualify when in the very negotiations aimed at a class settlement, class counsel agree to exclude what could turn out to be as much as a third of the claimants that negotiators thought might eventually be involved, a substantial number of whom class counsel represent." Fibreboard, 527 U.S. at 2319. Third, in Fibreboard, treatment within the class failed to provide the Rule 23(a) structural protections elucidated in Amchem Products Inc. v. Windsor, 521 U.S. 591 (1997).

After Fibreboard, to frame properly a (b)(1)(B) mandatory class under a "limited fund" theory, class counsel must present a factual and legal record on which a court may enter detailed findings establishing the existence of a limited fund; must address the rationale for the class definition and structure and must ensure that any subclasses with truly divergent interests receive separate representation. These manageable challenges can be met to resolve mass tort litigation comprehensively and fairly.

Taking a close look at the (b)(1)(B) standard

The standard for a (b)(l)(B) punitive damages class set forth in the rule appears clear enough: The moving litigant must establish that "the prosecution of separate actions... would create a risk of... (B) adjudications... which would as a practical matter be dispositive of the interests of [others] or substantially impair or impede their ability to protect their interests." Fed. R. Civ. P. 23(b)(1) (emphasis added).

At one point, the U.S. Court of Appeals for the 9th Circuit appears to have adopted "a high standard" for limited fund determinations. See In re Northern District of California, Dalkon Shield IUD Products Liability Litigation, 693 F.2d 847, 851 (9th Cir. 1982) (a proponent must show that the disposition of earlier claims would "necessarily affect" later claims). But Dalkon Shield has been criticized and rejected by more recent decisions, such as In re A.H. Robins, 880 F.2d 709 (4th Cir.), cert. denied, 493 U.S. 959 (1989); and the Dalkon Shield court itself repeatedly emphasized that limited fund certification was quite possible. It seemed disenchanted with the record before it and the lack of any advocacy for the class.

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