Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997)
Amchem Products, Inc. v. Windsor
No. 96-270
Argued February 18, 1997
Decided June 25, 1997
521 U.S. 591
CERTIORARI TO THE UNITED STATES COURT OF APPEALS
FOR THE THIRD CIRCUIT
Syllabus
This case concerns the legitimacy under Rule 23 of the Federal Rules of Civil Procedure of a class action certification sought to achieve global settlement of current and future asbestos-related claims. Never intending to litigate, the settling parties -- petitioners and the representatives of the plaintiff class described below -- presented to the District Court a class action complaint, an answer, a proposed settlement agreement, and a joint motion for conditional class certification. The complaint identifies nine lead plaintiffs, designating them and members of their families as representatives of a class comprised of all persons who had not previously sued any of the asbestos manufacturing companies that are petitioners in this suit, but who (1) had been exposed -- occupationally or through the occupational exposure of a spouse or household member -- to asbestos attributable to a petitioner, or (2) whose spouse or family member had been so exposed. Potentially hundreds of thousands, perhaps millions, of individuals may fit this description. All named plaintiffs alleged exposure; more than half of them alleged already manifested physical injuries; the others, so-called "exposure only" claimants, alleged that they had not yet manifested any asbestos-related condition. The complaint delineated no subclasses; all named plaintiffs were designated as representatives of the entire class.
The exhaustive agreement, inter alia, (1) proposed to settle, and to preclude nearly all class members from litigating, claims not previously filed against petitioners; (2) detailed an administrative mechanism and a schedule of payments to compensate class members who meet defined exposure and medical criteria; (3) described four categories of compensable cancers and nonmalignant conditions, and specified the range of damages to be paid qualifying claimants for each; (4) did not adjust payments for inflation; (5) capped the number of claims payable annually for each disease; and (6) denied compensation for family members’ loss-of-consortium claims, for exposure only plaintiffs’ claims for emotional distress, enhanced risk of disease, and medical monitoring, and for "pleural" claims involving lung plaques but no physical impairment, even if otherwise applicable state law recognized such claims.
The District Court approved the settling parties’ plan for giving notice to the class and certified the proposed class for settlement only. The court found, over numerous challenges raised by the objectors, that the settlement was fair, the court’s jurisdiction properly invoked, and representation and notice adequate. Pending the issuance of a final order, the District Court enjoined class members from separately pursuing asbestos suits in any federal or state court. The Third Circuit ultimately vacated the District Court’s orders. Although the objectors maintained that the case was not justiciable and that the exposure only claimants lacked standing to sue, the Court of Appeals declined to reach these issues, reasoning that they would not exist but for the class certification. The court acknowledged that a class action may be certified for settlement only, but held that the certification requirements of Rule 23 must be met as if the case were going to be litigated, without taking the settlement into account. The court nevertheless homed in on the settlement’s terms in examining aspects of the case under Rule 23 criteria. The Court of Appeals explained that certification was inappropriate because the class failed to satisfy, among other provisions, Rule 23(b)(3)’s requirement that questions common to the class "predominate over" other questions, and Rule 23(a)(4)’s adequacy of representation requirement. The court therefore ordered the class decertified.
Held:
1. The class certification issues are dispositive here, in that their resolution is logically antecedent to the existence of any Article III issues. This Court therefore declines to resolve objectors’ assertions that no justiciable case or controversy is presented and that the exposure only claimants lack standing to sue. Cf. Arizonans for Official English v. Arizona, 520 U.S. 43, 66-67. The Court follows this path mindful that Rule 23’s requirements must be interpreted in keeping with Article III constraints, and with the Rules Enabling Act’s instruction that procedural rules not abridge, enlarge, or modify any substantive right. Pp. 612-613.
2. The sprawling class the District Court certified does not satisfy Rule 23’s requirements. Pp. 613-629.
(a) Rule 23 gained its current shape in a 1966 revision. Its subdivisions (a) and (b) enumerate criteria that must be met for a class to be certified. Rule 23(b)(3) was the most adventuresome innovation of the 1966 Amendments, permitting judgments for money that would bind all class members save those who opt out. To gain certification under Rule 23(b)(3), a class must satisfy the requirements of Rule 23(a), among them, that named class representatives will fairly and adequately protect class interests; the class must also meet the Rule 23(b)(3) criteria that common questions "predominate over any questions affecting only individual members" and that class resolution be "superior to other available methods for the fair and efficient adjudication of the controversy." To alert Rule 23(b)(3) class members to their right to "opt out," Rule 23 requires "the best notice practicable under the circumstances." Rule 23(c)(2). Finally, Rule 23(e) specifies that a class action cannot be settled without the court’s approval, and that notice of the proposed compromise must be given to all class members in such manner as the court directs. Pp. 613-619.
(b) Because settlement is relevant to the propriety of class certification, the Third Circuit’s statement that Rule 23(a) and (b)(3) "must be satisfied without taking into account the settlement" bears modification. But the Third Circuit did not, in fact, ignore the settlement. The court homed in on settlement terms in explaining why it found absentees’ interests inadequately represented. The Third Circuit’s inspection of the settlement agreement in that regard was altogether proper. Whether trial would present intractable management problems, see Rule 23(b)(3)(D), is not a consideration when "settlement only" certification is requested, for the proposal is that there be no trial. But other specifications of the rule designed to protect absentee class members by blocking unwarranted or overbroad class definitions are of vital importance in the settlement context, for the court in such a case will lack the opportunity to adjust the class as litigation unfolds. See Rule 23(c) and (d). And, of overriding importance, courts must be mindful that they are bound to enforce the rule as now composed, for Federal Rules may be amended only through the extensive deliberative process Congress prescribed. Rule 23(e)’s settlement prescription was designed to function as an additional requirement, not a superseding direction, to the class-qualifying criteria of Rule 23(a) and (b). Cf. Eisen v. Carlisle & Jacquelin, 417 U.S. 156, 176-177. The dominant concern of Rule 23(a) and (b) -- that a proposed class have sufficient unity so that absentees can fairly be bound by class representatives’ decisions -- persists when settlement, rather than trial, is proposed. Those subdivisions’ safeguards provide practical checks in the settlement context. First, their standards serve to inhibit class certifications dependent upon the court’s gestalt judgment or overarching impression of the settlement’s fairness. Second, if a Rule 23(e) fairness inquiry controlled certification, eclipsing Rule 23(a) and (b), and permitting certification despite the impossibility of litigation, both class counsel and court would be disarmed. Class counsel confined to settlement negotiations could not use the threat of litigation to press for a better offer, and the court would face a bargain proffered for its approval without benefit of adversarial investigation. Federal courts, in any case, lack authority to substitute for Rule 23’s certification criteria a standard never adopted by the rulemakers -- that, if a settlement is "fair," then certification is proper. Pp. 619-622.
(c) Rule 23(b)(3)’s predominance requirement is not met by the factors relied on by the District Court and the settling parties: class members’ shared experience of asbestos exposure; their common interest in receiving prompt and fair compensation, while minimizing the risks and transaction costs inherent in the tort system’s asbestos litigation process; and the settlement’s fairness. The benefits asbestos-exposed persons might gain from a grand-scale compensation scheme is a matter fit for legislative consideration, but it is not pertinent to the predominance inquiry. That inquiry trains on the legal or factual questions that qualify each class member’s case as a genuine controversy, questions that preexist any settlement, and tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation. In contrast, the Rule 23(e) inquiry protects unnamed class members from unjust or unfair settlements agreed to by faint-hearted or self-interested class representatives; the Rule 23(e) prescription was not designed to assure the class cohesion that legitimizes representative action in the first place. If a common interest in a fair compromise could satisfy Rule 23(b)(3)’s predominance requirement, that vital prescription would be stripped of any meaning in the settlement context. The predominance criterion is not satisfied by class members’ shared experience of asbestos exposure, given the greater number of questions peculiar to the several categories of class members, and to individuals within each category, and the significance of those uncommon questions. No settlement class called to the Court’s attention is as sprawling as the one certified here. Although mass tort cases arising from a common cause or disaster may, depending upon the circumstances, satisfy the predominance requirement, the Advisory Committee for the 1966 Rule 23 revision advised that such cases are ordinarily not appropriate for class treatment, and warned district courts to exercise caution when individual stakes are high and disparities among class members great. The certification in this case does not follow the counsel of caution. That certification cannot be upheld, for it rests on a conception of Rule 23(b)(3)’s predominance requirement irreconcilable with the rule’s design. Pp. 622-625.
(d) Nor can the class approved by the District Court satisfy Rule 23(a)(4)’s adequate representation inquiry. That inquiry serves to uncover conflicts of interest between named parties and the class they seek to represent. See General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 157-158, n. 13. Representatives must be part of the class and possess the same interest and suffer the same injury as the class members. E.g., East Tex. Motor Freight System, Inc. v. Rodriguez, 431 U.S. 395, 403. In this case, named parties with diverse medical conditions sought to act on behalf of a single giant class, rather than on behalf of discrete subclasses. In significant respects, the interests of those within the single class are not aligned. Most saliently, for the currently injured, the critical goal is generous immediate payments. That goal tugs against the interest of exposure only plaintiffs in ensuring an ample, inflation-protected fund for the future. Cf. General Telephone Co. of Northwest v. EEOC, 446 U.S. 318, 331. The disparity between the currently injured and exposure only categories of plaintiffs, and the diversity within each category, are not made insignificant by the District Court’s finding that petitioners’ assets suffice to pay settled claims. Although this is not a Rule 23(b)(1)(B) "limited fund" case, the settlement’s terms -- e.g., no inflation adjustments, only a few claimants per year permitted to opt out at the back end, and loss of consortium claims extinguished-reflect essential allocation decisions designed to confine compensation and to limit defendants’ liability. Thus, the settling parties achieved a global compromise with no structural assurance of fair and adequate representation for the diverse groups and individuals affected. The Third Circuit found no assurance here that the named parties operated under a proper understanding of their representational responsibilities. That assessment is on the mark. Pp. 625-628.
(e) In light of the conclusions that the class does not satisfy the requirements of common issue predominance and adequacy of representation, this Court need not rule, definitively, on the adequacy of the notice given here. The Court recognizes, however, the gravity of the question whether class action notice sufficient under the Constitution and Rule 23 could ever be given to legions so unselfconscious and amorphous as the class certified by the District Court. Pp. 628.
(f) The argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure. Congress, however, has not adopted such a solution. Rule 23, which must be interpreted with fidelity to the Rules Enabling Act and applied with the interests of absent class members in close view, cannot carry the large load the settling parties and the District Court heaped upon it. P. 628-629.
83 F.3d 610 affirmed.
GINSBURG, J., delivered the opinion of the Court, in which REHNQUIST, C.J., and SCALIA, KENNEDY, SOUTER, and THOMAS, JJ., joined. BREYER, J., filed an opinion concurring in part and dissenting in part, in which STEVENS, J., joined, post, p. 629. O’CONNOR, J., took no part in the consideration or decision of the case.