175 F.R.D. 226 | S.D.W. Va | 1997
MEMORANDUM OPINION AND ORDER
Pending are (1) Intervenor Cydne Anne Westmoreland’s motion to vacate preliminary approval of the class action settlement and preliminary certification of the mandatory settlement class; and (2) Plaintiffs’ motion for class certification.
Accordingly, the Court (1) GRANTS the Intervenor’s motion and WITHDRAWS its preliminary approval and certification of the settlement and settlement class; and (2) DENIES Plaintiffs’ motion for class certification.
I. BACKGROUND
Plaintiff Earl W. Walker filed this lawsuit on February 3, 1997. In early April, he moved for class certification, claiming to represent a class of persons injured by, inter alia, the alleged defectiveness of cigarettes manufactured by the Liggett Group, Incorporated (Liggett) and its predecessors. The Defendants are Liggett and Liggett & Myers, Incorporated (L&M).
Liggett is the smallest of the “Big Five” cigarette manufacturers, accounting for about two (2) percent of the domestic cigarette market. While denying many of Plaintiffs’ allegations, practical considerations ultimately intervened for Defendants. Affidavits assert Liggett is in dire financial condition and facing a crush of pending litigation.
Faced with little in the way of desirable options, Liggett chose what was, at the time, the road less traveled in the prolific tobacco litigation sweeping the nation. It entered into a comprehensive settlement agreement with Plaintiff and the putative class.
The settlement has three major components. The terms, while slightly oversimplified, roughly are as follows: (1)'termination of costly litigation in exchange for twenty-five (25) percent of Liggett’s annual pretax income for 25 years to a fund benefitting class members;
The parties requested three forms of relief: (1) preliminary approval of a class action settlement agreement; (2) preliminary certification of a mandatory settlement class; and (3) a preliminary injunction enjoining all members of the settlement class from commencing, continuing or taking any action in any judicial proceeding against Defendants with respect to any smoking-related claims. The Court previously granted the first two elements of relief after a brief hearing held May 15,1997.
The proposed class consists of the following: (a) all past and present smokers of cigarettes or users of tobacco products manufactured by Liggett or its predecessors who reside in the United States, its territories, possessions and the Commonwealth of Puerto Rico and who, prior to or during the term of the proposed Agreement, have suffered or claim to have suffered injury as a consequence thereof (“smokers”); (b) the estates, representatives, and administrators of these smokers; (c) the spouses, children, relatives and “significant others” of these smokers as their heirs or survivors; (d) all persons who reside in the United States, its territories, possessions and the Commonwealth of Puerto Rico who, prior to or during the term of the proposed. Agreement, have been exposed to or claim to have been exposed to (including, through market share theory) environmental or second-hand smoke from tobacco products manufactured by Liggett or its predecessors and have suffered or claim to have suffered injury as a consequence thereof, (e) all persons or entities (including, without limitation, any territory, city, county, state, parish, possession or any other political subdivision thereof, or any agency or instrumentality of any of the foregoing, or any insurance company) in the United States, its territories, possessions and the Commonwealth of Puerto Rico, which, prior to or during the term of the proposed Agreement, have incurred or claim to have incurred losses as a result of, based on, or by reason of paying for or providing treatment for diseases, illnesses, or medical conditions allegedly caused by tobacco products (or exposure thereto, including by way of environmental or second-hand smoke) to the persons defined in (a) through (d) above; and (f) all persons who reside in the United States, its territories, possessions and the Commonwealth of Puerto Rico, who, prior to or during the term of the proposed Agreement, have either smoked or used tobacco products (or have been exposed thereto, including by way of environmental or secondhand smoke) and claim (i) to have suffered injury as a consequence thereof, and (ii) in connection with such claim, allege that Defendants or any of them engaged in a fraud, conspiracy, or any concerted activity with one or more other tobacco product manufacturers in the manufacturing, sale or marketing of tobacco products. The class is nothing short of enormous, including potentially tens of millions of Americans within its scope. In short, final certification would be unprecedented.
At a Preliminary Injunction hearing held May 30, the Court denied the requested Injunction without prejudice for the parties’ failure to adduce evidence supporting a limited fund under Rule 23(b)(1)(B). Since that time, the parties have renewed their request for injunctive relief and a second hearing is scheduled for August 26, 1997. In the interim, the Supreme Court decided Amchern and vacated In re Asbestos Litigation, 90 F.3d 963 (5th Cir.1996). Based on these recent decisions, Ms. Westmoreland seeks vacatur of the Court’s prior preliminary approval of the settlement and certification of the class.
II. DISCUSSION
A. The Amchern Decision
This Memorandum Opinion, no doubt, is one of the first of many that will interpret Amchern.
1. Factual and Procedural Background
Amchern involved a district court’s certification, for settlement purposes only, of a class of persons adversely affected by past exposure to asbestos products. Counsel for the plaintiffs represented scores of persons with pending lawsuits, as well as ultimately masses of anticipated future claimants with
The complaint identified nine lead plaintiffs who were designated, along with their respective families, as representatives of a class of persons who had not filed suit but (1) who had been exposed — occupationally or through the occupational exposure of a spouse or household member — to asbestos attributable to a defendant, or (2) whose spouse or family member had been so exposed. As observed by the Court:
Untold numbers of individuals may fall within this description. All named plaintiffs alleged that they or a member of their family had been exposed to asbestos-containing products of CCR defendants. More than half of the named plaintiffs alleged that they or their family members had already suffered various physical injuries as a result of the exposure. The others 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 class as a whole.
Amchem, — U.S. at —, 117 S.Ct. at 2239-40.
The district court certified the class conditionally, and then finally, pursuant to Rule 23(b)(3) and entered an anti-suit injunction.
With this background, and a comprehensive discussion of the policy behind Rule 23 and its correct application, the Supreme Court explained “why ... [the Rule 23] requirements [could not] be met for a class so enormously diverse and problematic as the one ... certified.” Id. at - n. 17, 117 S.Ct. at 2249 n. 17.
2. Legal Analysis
The precise question faced in Amchem was the role settlement may play under Rule 23 in judging the propriety of class, certification. On that precise issue, the Supreme Court’s less-than-enthusiastic observation that “settlement is relevant to a class certificationf,]” Id. at -, 117 S.Ct. at 2248, has likely circumscribed the more generous view of our Court of Appeals, first espoused in In re A.H. Robins Co. Inc., 880 F.2d 709 (4th Cir.), cert. denied, 493 U.S. 959, 110 S.Ct. 377, 107 L.Ed.2d 362 (1989), that settlement “should be a factor, and an important factor, to be considered when determining certification.” Id. at 740. Further, Amchem decimated the notion of some circuits that Rule 23 requisites were relaxed in the settlement context by stating “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.” Amchem, — U.S. at —, 117 S.Ct. at 2248 (stating also “proposed settlement classes sometimes warrant more, not less caution on the question of certification.”).
While the Supreme Court’s resolution of this issue is important, its discussion of two Rule 23 factors, one relevant here and one not,
The bedrock consideration for the Court in any certification decision is “whether a proposed class has sufficient unity so that absent members can fairly be bound by decisions of class representatives.” Id. A principal way of ascertaining unity is by carefully examining whether, pursuant to Rule 23(a)(4), “the representative parties will fairly and adequately protect the interests of the class.” Fed.R.Civ.P. 23(a)(4); see also Amchem, — U.S. at—, 117 S.Ct. at 2250-51 (stating “ ‘[A] class representative must be part of the class and “possess the same interest and suffer the same injury” as the class members.’ ”). One necessary element in the Rule 23(a)(4) equation is whether there are “conflicts of interest between named parties and the class they seek to represent.” Amchem, — U.S. at—, 117 S.Ct. at 2250.
The conflicts between the representatives and the class in Amchem were significant, and the Supreme Court’s observations are worth quoting at length:
As the Third Circuit pointed out, 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, 100 S.Ct. 1698, 1707, 64 L.Ed.2d 319 (1980) (“In employment discrimination litigation, conflicts might arise, for example, between employees and applicants who were denied employment and who will, if granted relief, compete with employees for fringe benefits or seniority. Under Rule 23, the same plaintiff could not represent these classes.”).
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 claims under the settlement. See [Georgine v. Amchem Products, Inc.,] 157 F.R.D., [246] at 291 [(E.D.Pa.1994)]. Although this is not a “limited fund” case certified under Rule 23(b)(1)(B), the terms of the settlement reflect essential allocation decisions designed to confine compensation and to limit defendants’ liability.18 ] For example, as earlier described, ... the settlement includes no adjustment for inflation; only a few claimants per year can opt out at the back end; and loss-of-eonsortium claims are extinguished with no compensation.
The settling parties, in sum, achieved a global compromise with no structural assurance of fair and adequate representation for the diverse groups and individuals affected. Although the named parties alleged a range of complaints, each served generally as representative for the whole, not for a separate constituency.
Amchem, — U.S. at-, 117 S.Ct. at 2251 (footnote added).
Given the breadth of the proposed settlement class, which dwarfs that considered by the Supreme Court, the Court has concerns similar to those identified in Am-chem. First, the current complaint presents the Court with a single representative Plaintiff for a class of persons numbering potentially in the millions or tens of millions. The amended complaint seeks to add only one additional representative, Sally Wilson, who smoked a brand of cigarette different from those used by Walker. Both of these representatives suffer from serious cancers and will no doubt argue their illnesses are obvious and present manifestations of injury from prolonged cigarette smoking.
In comparison, the proposed class encompasses not only smokers whose prolonged habits led to current injury, but presumably any one of the following as well: (1) those picking up a Liggett-manufactured cigarette for the first time today, who may have manifestations 10 years, 20 years or at no time in the future; (2) those who have smoked Liggett brands, with perhaps varying nicotine and carcinogen levels, different from those employed by the representative and with different consequences; (3) those who have smoked cigarettes but who also might have independent competing causal factors such as exposure to work-related chemicals or substances such as coal dust or asbestos; (4) those who do not have cancer now but who have, or may one day have, one of a host of other smoking-related illnesses;
Defendants’ lone relevant argument to forestall the result is that limited fund class actions are equitable proceedings that, like in rem or interpleader actions, necessarily bring before the Court all possible present and future claimants.
While the Intervenor raises other, weighty arguments, she has demonstrated adequately why certification, under either Rides 23(b)(1)(B) or (b)(3) cannot occur on these facts after Amchem. Accordingly, the Court (1) GRANTS the Intervenor’s motion and WITHDRAWS its preliminary approval and certification of the settlement and settlement class; and (2) DENIES Plaintiffs’ motion for ■ class certification.
III. CONCLUSION
While the parties differ in their reading of the Supreme Court’s intentions, the bedrock similarity between Amchem and the instant case is manifest: “The settling parties, in sum, achieved a global compromise with no structural assurance of fair and adequate representation for the diverse groups and individuals affected.” Amchem, — U.S. at -, 117 S.Ct. at 2251. Ultimately, by analogy to Amchem, “the establishment of a grand-scale compensation scheme” like that proposed here might be “a matter [better] fit for legislative consideration----” Amchem, — U.S. at-, 117 S.Ct. at 2249.
For the foregoing reasons, the Court (1) GRANTS the Intervenor’s motion and WITHDRAWS its preliminary approval and certification of the settlement and settlement class; and (2) DENIES Plaintiffs’ motion for class certification.
. Also pending are (1) Lee Dymits’ motion to intervene; (2) James Dunyan’s request to opt-in; (3) the parties’ renewed joint motion for a preliminary injunction; (4) the motion of Blue Cross and Blue Shield of Minnesota to opt out; and (5) motions by the Scott and Arch Intervenors (a) to strike class allegations; (b) to vacate preliminary approval of the settlement; (c) to dismiss the motion to approve the settlement; (d) to defer dissemination of the class notice; and (e) to
Plaintiffs have filed as well two motions to amend the complaint. The motions appear premised on Liggett's promise, now non-binding, "to actively assist class counsel in seeking relief on behalf of the class for the conspiratorial and related tortious conduct of the other tobacco manufacturer Defendants named in the First Amended Complaint." Memo in supp. of motion to amend at 3. The Court thus DENIES the motion without prejudice.
. Plaintiffs also sought certification of their medical monitoring claims pursuant to other provisions of Rule 23(b). West Virginia does not recognize a cause of action for medical monitoring. See McClenathan v. Rhone-Poulenc, Inc., 926 F.Supp. 1272, 1281 (S.D.W.Va.l996)(stating "our Court of Appeals recently concluded there is no basis in West Virginia law for a separate cause of action for medical monitoring.”).
. L&M is an assetless corporate shell and a subsidiary of Liggett.
. Liggett has previously settled a number of Medicaid reimbursement lawsuits brought on behalf of certain states. Liggett also announced a settlement in a pending class action in Alabama styled Fletcher v. Liggett Group. Inc., No. CV 97-913 (Ala. Cir. Ct., Mobile Cty.), which is similar to the instant resolution, The instant proposal appears to be a slight renegotiation of the Fletcher settlement. Nonetheless, there remains pending litigation pursued by a number of states. None of these sovereigns are part of the proposed class, the Court having dismissed them earlier because of Eleventh Amendment objections to jurisdiction.
. While the ratio is unclear, the fund will be shared with several states that have also entered into settlements with Defendants.
. As stated recently by Professor John C. Coffee Jr., the Amchem decision "rests on two independent pillars: the 'predominance’ requirement of Rule 23(b)(3) and the adequacy-of-representation standard of Rule 23(a)(4).” John C. Coffee Jr., After the High Court Decision in Amchem Products Inc. v. Windsor. Can a Class Action Ever be Certified Only for the Purpose of Settlement?, Nat’l L.J., Jul. 21, 1997, at B4. The parties note correctly that in a proposed Rule 23(b)(1)(B) certification, the first pillar is not relevant. The second, however, is an absolute prerequisite. See, e.g., Lukenas v. Bryce's Mountain Resort, Inc., 538 F.2d 594, 595 (4th Cir. 1976)(stating "[t]o maintain a class action, one must satisfy all four of the provisions of [Rule 23] section (a) and one of the subdivisions of section (b).”)(emphasis added); see also Amchem, -U.S. at-, 117 S.Ct. at 2245; Black v. Rhone Poulenc, Inc., 173 F.R.D. 156, 158 (S.D.W.Va.1996); United Bhd. of Carpenters & Joiners of Am., Local 899 v. Phoenix Assocs., Inc., 152 F.R.D. 518, 521 (S.D.W.Va. 1994).
While the Court is not in the practice of utilizing news periodicals as secondary authority, a limited exception is warranted here. Professor Coffee is well-credentialed and enjoys substantial expertise in the area, demonstrated in part by the Amchem Court’s reliance on his writings. Am-
. As noted, Amchem examined both the predominance and adequacy-of-representation elements of Rule 23. Examination of the former would have sufficed for decertification of the Rule 23(b)(3) class at issue. Given the then-pending fate of In re Asbestos Litigation, 90 F.3d 963 (5th Cir.1996), a Rule 23(b)(1)(B) certification though, the Amchem Court intended the adequacy-of-representation discussion to extend its far-reaching policy analysis to Rules 23(b)(1) and (2). In re Asbestos was vacated two days after Amchem's issuance. See Flanagan v. Ahearn,-U.S.-, 117 S.Ct. 2503, 138 L.Ed.2d 1008 (1997) and Ortiz v. Fibreboard Corp.,-U.S.-, 117 S.Ct. 2503, 138 L.Ed.2d 1008 (1997).
. Plaintiffs assert "In this case, because of the limited availability of funds to pay potential claims, currently injured plaintiffs are put in the same position as future victims.” Pis.' resp. memo at 6. In reality, however, as demonstrated by this Amchem excerpt, the alleged limited fund exacerbates the apparent conflicts creating what has been described as a zero-sum game. While conflicts exist in this regard, the Court cannot determine their extent. Counsel has offered very little in the way of specifics as to fund size or distribution, truly critical considerations for certification. See infra note 13.
. Michael K. Mahoney, Coughing the Cash: Should Medicaid Provide for Independent State Recovery Against Third-Party Tortfeasors Such as the Tobacco Industry?, 24 B.C. EnvtI. Aff. L.Rev. 233, 236 (1996)(stating "Though tobacco advocates likely would argue otherwise, the causal relationship between smoking and disease is as well established as any other in modern medicine. Most notable perhaps are the several forms of cancer found among smokers. Cigarette smoking causes more than eighty-five percent of all lung cancer, which now has surpassed breast cancer as the primary cause of death from cancer among American women. Smoking also induces cancers of the mouth, larynx, esophagus, stomach, pancreas, uterus, cervix, kidney, and colon. Along with cancer, smoking also gives rise to eighty percent of deaths from pulmonary diseases like emphysema and bronchitis. In addition, there are the thousands of heart attacks, strokes, and cases of both vascular disease and aortic aneurysm attributable to cigarette smoking.”); U.S. Dep't of Health & Human Servs., Reducing the Health Consequences of Smoking: 25 Years of Progress, A Report of the Surgeon General 11 (1989)(stating "Smoking is responsible for more than one of every six deaths in the United States.”).
. Mr. Hussein, because of his Lebanese citizenship, technically would not qualify for class membership. See At 135, He May Be World's Oldest Person, The Seattle Times, April 2, 1997, at A10.
. This statement is inaccurate, at least so far as the instant case is concerned. The settlement excludes states that refuse to submit to the jurisdiction of the federal court. While the Court's decertification is not based on the presence or absence of a limited fund, the exclusion of the states presents a large obstacle to certification under Rule 23(b)(1)(B). Certification and an anti-suit injunction would put class members' personal litigation efforts on hold pending notice and other class proceedings. This likely would allow the states to "leapfrog” class members in obtaining judgment and perhaps send Liggett into bankruptcy before the Plaintiffs here could effect resolution of their claims. In that instance, the only purpose of certification would have been to disadvantage those class members who would have otherwise bested the states in the race to judgment.
Also of concern to the Court is the fact that the fund here is much like sand moving through an
. Defendants assert the Settlement Agreement’s existing structures are sufficient to protect class members’ interests, given they all share a common interest in maximizing the limited fund available from Defendants. While this is indeed a common interest, it is wholly insufficient to vitiate the very real, substantial conflicts among class members relating to distribution of the fund and other key concerns.
Defendants would also burden the Court with the unenviable task of creating subclasses and appointing representatives. That burden, of course, rests with the parties at this early stage. Were such a redrawing of lines appropriate, however, it truly would be equivalent to "closing the barn door after the horses have escaped.” Intervenor’s reply memo at 11. The creation of proposed subclasses should have been done prior to the settlement to ensure that global resolution would address the interests of each subclass.
Further complicating the creation of subclasses and avoidance of conflicts in this nationwide class action is a problem identified by Professor Coffee:
A grayer issue involves any attempt to cover class members from jurisdictions having materially different applicable legal standards. For example, if jurisdiction A recognizes strict liability while jurisdiction B requires proof of negligence and accords special defenses to the defendants, this difference may again require subclasses because the residents of jurisdiction A have inherently stronger legal claims.
John C. Coffee Jr., supra note 5, at B6.
. Unlike the Amchem settlement, counsel have kept the details of fund size and proposed distribution close to the vest, in part, and inexplicably, “to avoid distracting the parties and the Court....” Settlement Agt. at 117.11. Rather creatively, the parties propose to lay before a settlement board the "equitable adjudication” of compensation claims, while seeking final certification prior to Board consideration of the claims. Id. The Board, and ultimately the Court (see id. at 117.6), thus is handed the herculean task of then considering "any and all comments, recommendations, requests and suggestions from Settlement Class members and their counsel, as to the appropriate and equitable allocation and distribution of the Settlement Fund ....” Id. First, the Court is left to ponder the particulars of how class members will offer input. Many class members, of course, would be disenfranchised practically during the comment period, e.g., children and incompetent persons. Second, from a class. numbering perhaps in the tens of millions, all with differing opinions about the smoking-related effects they have' suffered, the input process would devolve inevitably into a bewildering babble.
