Class Actions – Objections to Proposed Settlements
|Citation:||No. 99-20249 (5th Cir. Feb. 21, 2000).|
|Date Of Involvement:||10/16/2000|
Class counsel settled with a group of companies that caused arsenic, a known carcinogen, to be spewed from a factory in Texas, polluting the surrounding community. This caused economic damage to homes and increased risk of future diseases. The settlement provided for medical monitoring for people living in the area and some property damage relief. In addition, the settlement cut off all future personal-injury claims in court and forces everyone to file administrative claims on a relatively small fund. Originally, any class member who suffered an injury more than 7 years after the settlement was finalized would be forever precluded from any relief, even though the settling parties conceded that the latency periods for arsenic-related diseases can be up to 40 years! The settlement provided no opt-out right, so if the settlement were approved the class members' rights to go to court would be eliminated. Later, the settling parties amended the settlement, requiring people injured after 7 years to sue, but only if the district judge provided them first with some sort of certification that the case met the standard for showing causation under Texas law.
The federal magistrate handling the case approved the settlement and denied our clients the right to take discovery. We appealed to the federal district judge in September 1995, claiming that the magistrate was wrong in approving this non-opt-out personal-injury settlement. The district judge delayed ruling on the settlement for years because of the pendency of the Fibreboard settlement (case #12 above), which also concerned the propriety of non-opt-out damages class actions. However, while Fibreboard was pending, the Fifth Circuit issued its decision in Allison v. Citgo Petroleum Corp., 151 F.3d 402 (5th Cir. 1998), which held that class actions involving damages claims cannot generally be certified on a non-opt-out basis. Despite Allison, the district court thereafter certified the class under Rule 23(b)(2), which is available in injunctive relief cases, and under Rules 23(b)(1)(A) and (B), under which the settling parties had never even sought certification, and which did not appear to be remotely applicable. The district court's opinion did not even cite Allison. The court then certified the class certification issue for immediate appellate review under 28 U.S.C. 1292(b), and the Fifth Circuit accepted the interlocutory appeal.
After oral argument, the Fifth Circuit vacated and remanded in a per curiam unpublished opinion, holding that it was "unable to ascertain the basis for the district court's decision to certify a plaintiff class under existing Fifth Circuit law," and specifically directing the district court to "reconsider its certification" under Allison. Judge Jones, in a one-paragraph concurring opinion, provided "A word to the wise" that it was "highly doubtful" that the class could be certified under Rule 23(b)(2) under Allison, and noted that no party defended the district court's Rule 23(b)(1) certification.
We are representing objectors who once lived in the area and were exposed to the arsenic, but moved away and did not get notice of the action. They objected to having their future rights released with little or no right to litigate their claims if they become injured. We filed discovery to ascertain what the settling parties knew about the value of past personal injury claims and a few other issues. We were the principal drafters of the appellate briefs, with Steve Baughman Jensen of Baron & Budd in Dallas also substantially participating, and we argued the case to the Fifth Circuit.
After the Fifth Circuit's remand, we remained involved, as there is talk of a new opt-out settlement, which may also curtail "future" class members' rights. At the very least, it is clear that the non-opt-out settlement has been permanently defeated, which is a significant accomplishment.
After the February 2000 Fifth Circuit victory, the case is on remand in the district court. We will participate in any future settlement discussions.