Opinion ID: 714797
Heading Depth: 2
Heading Rank: 2

Heading: The D.C. Opt-Out Issue

Text: 49 The D.C. Plaintiffs represent approximately 150 of the more than 300 health claimants who have filed or will file claims for asbestos-related injuries in the District of Columbia. The law of that jurisdiction subjects joint tortfeasors to joint and several liability. Thus, if a plaintiff has not settled with any of the defendants, he is entitled to recover in full from any or all against whom a judgment is entered. If he has settled with a defendant, however, that settlement will lead to a reduction in any judgment against the remaining defendants. If the settling defendant is determined to be a joint tortfeasor, the reduction will be pro rata; if there is no such determination, the reduction will be pro tanto. Because under the Settlement Agreement the Trust is deemed to be a settling joint tortfeasor, any judgment a Trust beneficiary health claimant obtains in the District of Columbia against defendants other than the Trust will be reduced pro rata. The D.C. Plaintiffs prefer not to be bound by the Settlement because it will cost them the opportunity under District of Columbia law to recover fully from defendants other than the Trust. They contend principally, relying on Phillips Petroleum Co. v. Shutts, 472 U.S. 797, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985) (Shutts ), that considerations of due process require that they be allowed to opt out of the Plaintiff Class. We conclude that the Trial Courts properly denied the motion to opt out. 50 In Shutts, the Supreme Court considered a class action that purported to adjudicate the royalty rights of a number of persons who lacked the requisite contacts with the forum state to give the state court personal jurisdiction over them. The Shutts Court stated that due process requires at a minimum that an absent plaintiff [in a class action] be provided with an opportunity to remove himself from the class by executing and returning an 'opt out' or 'request for exclusion' form to the court. Id. at 812, 105 S.Ct. at 2974. The Court limited its ruling, however, to those class actions which seek to bind known plaintiffs concerning claims wholly or predominantly for money judgments, and it expressly declined to state a view concerning other types of class actions, such as those seeking equitable relief. Id. at 811 n. 3, 105 S.Ct. at 2974 n. 3. 51 In Findley II, we rejected a Shutts-based jurisdictional challenge similar to the D.C. Plaintiffs' contention on this appeal. We pointed out two significant differences between this case and Shutts. First, we noted that the present action, though it ultimately will affect the amount of damages that each member of the plaintiff class will be entitled to receive, is not an action for money damages but is rather an action in equity for the restructuring of the Trust. Findley II, 982 F.2d at 735. Thus, the holding in Shutts did not extend to this action. 52 Second, we noted this Court's ruling in In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285 (2d Cir.1992) (Drexel ), cert. dismissed, 506 U.S. 1088, 113 S.Ct. 1070, 122 L.Ed.2d 497 (1993), that the Shutts holding as to what due process requires where a court lacks personal jurisdiction over some class members does not apply where the court has an independent basis for jurisdiction, see 960 F.2d at 292. In Findley II, we found that, for this reason as well, Shutts did not apply to the present action, 53 agree[ing] with the appellees and with the Trial Courts that in rem and quasi in rem jurisdiction is available.... The Trial Courts are fully entitled to exercise jurisdiction over the beneficiaries of a trust created in New York, pursuant to the authority of a Southern District bankruptcy court. 54 Findley II, 982 F.2d at 735. 55 Accordingly, in Findley II, we concluded that the question of whether a given group of plaintiffs should be allowed to opt out of a settlement of this litigation would depend on whether they received the protections accorded by Fed.R.Civ.P. 23. If the procedural requirements of that Rule were satisfied, the Trial Courts would be entitled to approve a settlement over the objection of those who were denied the opportunity to opt out of the class. Findley II, 982 F.2d at 735. We were 56 not persuaded that the need to insist on bankruptcy law protections is greater in this case than it was in Drexel, and the reasonableness of using a [Rule 23](b)(1)(B) non-opt-out class is at least as compelling in this case as in Drexel. 57 We are ... willing to permit the use of [a non-opt-out] class action in the pending case, so long as there exists ... appropriate designation of subclasses to provide assurance that the consent of groups of claimants who are being treated differently by the settlement is being given by those who fairly and adequately represent only the members of each group. 58 Findley II, 982 F.2d at 739. 59 Accordingly, the Trial Courts were not required to allow the D.C. Plaintiffs to opt out, so long as their rights were fairly and adequately represented. 60 Though the D.C. Plaintiffs contend that their rights were not so represented, we disagree. Under Rule 23, the district court may not properly certify an action as a class action unless it is satisfied that, inter alia, the representative plaintiffs will fairly and adequately protect the interests of the class. Fed.R.Civ.P. 23(a)(4). To be fair and adequate, representation must meet two basic standards under Rule 23: 61 First, class counsel must be qualified, experienced and generally able to conduct the litigation. Second, the class members must not have interests that are antagonistic to one another. 62 Drexel, 960 F.2d at 291 (internal quotation marks omitted). Even where the requirements of Rule 23 have been met, the district court retains some discretion to allow a class member to opt out of a limited fund class action ... in order to facilitate the fair and efficient conduct of the action. County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1304-05 (2d Cir.1990) (internal quotation marks omitted). 63 In the present case, the D.C. Plaintiffs have not suggested that counsel or the class representatives lacked the requisite qualifications to represent them in particular or the Plaintiff Class in general, or that class counsel neglected their duties toward their clients. Nor does the record suggest that any such contention would be meritorious. The record demonstrates that the interests of the D.C. Plaintiffs as members of the subclass of present claimants were vigorously defended before the Trial Courts by attorneys who were experienced in mass tort litigation. And there is no indication that the claims of the D.C. Plaintiffs are antagonistic to the claims of any other class member. Indeed, there are a greater number of identically situated class members, i.e., other health claimants suing in the District of Columbia, who do not seek to opt out. Nor have the D.C. Plaintiffs indicated any way in which their claims are distinguishable from those of the thousands of health claimants residing in other pro rata jurisdictions, or any way in which the Settlement treats them differently from those claimants. 64 Instead, the D.C. Plaintiffs argue that since the TDP allows health claimants in apportionment states to forgo their claims against the Trust in order to seek full compensation from the Trust's codefendants, the TDP gives all health claimants who reside in pro rata jurisdictions less favorable treatment. This difference in treatment, however, was supported by evidence that the Trust's share of liability in apportionment states is likely to be twice as high as its share of liability in pro rata jurisdictions. It was not an abuse of discretion for the Trial Courts to view that factor as a reason for approving the TDP's proposed different treatments of health claimants in the different categories of states in order to facilitate a fair and efficient reorganization of the Trust. 65 The Trial Courts found no special circumstances justifying the D.C. Plaintiffs' motion to opt out, and they concluded that the Settlement was a fair one founded on a delicate balancing of interests, and that the balance would be upset by permitting the D.C. Plaintiffs to opt out. Given these considerations, and given that the record indicates that the D.C. Plaintiffs received fair and adequate representation of their rights, we conclude that the Trial Courts' denial of their motion to opt out was not an abuse of discretion.