Opinion ID: 469369
Heading Depth: 1
Heading Rank: 3

Heading: THE 23(b)(1)(B) CERTIFICATION

Text: 36 All class actions must meet the prerequisites of Rule 23(a): numerosity, existence of questions of law or fact common to the class, typicality of claims or defenses, and adequacy of representation. Assuming the existence of these factors for present purposes, we proceed to the special elements of the (b)(1)(B) class, mindful that the most significant aspect of such a class is its mandatory character. All those who come within the description in the certification become, and must remain, members of the class because no opt-out provision exists. 37 In a diversity action such as this, certification of a mandatory class raises serious questions of personal jurisdiction and intrusion into the autonomous operation of state judicial systems. Another complicating factor is the Anti-Injunction Act, 28 U.S.C. Sec. 2283, which prohibits a federal court from enjoining proceedings in a state court except with express Congressional authorization or where necessary in aid of its jurisdiction or to protect or effectuate its judgment. By contrast, inclusion of the opt-out provision in 23(b)(3) class actions removes many of the problems raised by a mandatory procedure. Use of a voluntary class assures that only willing plaintiffs are before the court. 38 Rule 23(b)(1)(B) applies where there is a risk that adjudications with respect to individual members of the class ... would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests. 39 Because plaintiffs had presented no evidence that the defendants' available assets would be insufficient to pay all claims, the district court did not rely on a limited fund theory as a basis for class certification. The proponents of the mandatory class, however, asserted the very real possibility that late-coming plaintiffs would be unable to receive punitive damages if a court decided in the future that defendants had been punished enough. In short, at some point punitive damages might be prohibited because they would amount to overkill, a proposition advanced in Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832, 839 (2d Cir.1967). Finding a substantial possibility of the overkill scenario, the district court determined that creation of a (b)(1)(B) class was warranted as a measure to promote equality of treatment for all litigants. 40 The demands for punitive damages have propelled this action into the controversy over awarding exemplary damages in successive mass tort cases arising from the same wrongful act. Problems in this area have been created by the failure of some courts to recognize the reasons underlying punitive damages. 41 Exemplary damages are said to date back to the Code of Hammurabi of 2000 B.C. See Owen, Problems in Assessing Punitive Damages Against Manufacturers of Defective Products, 49 U.Chi.L.Rev. 1, 10 (1982). 6 In a 1763 case, Huckle v. Money, 2 Will.K.B. 206, 95 Eng.Rep. 768, the court approved a punitive damage verdict where the the small size of the actual loss resulting from an illegal entry justified the jury verdict in excess of that amount. See Roginsky v. Richardson-Merrell, Inc., 378 F.2d at 836. Since then punitive awards have generally been available when the defendant's conduct was either intentional or so reckless as to be considered outrageous. 42 In this country, most jurisdictions have adopted the doctrine in one form or another. The Restatement (Second) of Torts Sec. 908 and the majority of states endorse exemplary damages for punishment and deterrence. As such, these awards act almost as a form of criminal penalty administered in a civil court at the request of a plaintiff who serves somewhat as a private attorney general. 43 Consistent with this scheme, punitive damages form no part of the compensatory award--in theory the plaintiff's losses are fully redressed before consideration is given to exemplary damages. 7 Because the intent is to inflict punishment on a culpable defendant, in many jurisdictions insurance against such awards is contrary to public policy. Compare Northwestern Nat'l. Cas. Co. v. McNulty, 307 F.2d 432 (5th Cir.1962), with Lazenby v. Universal Underwriters Ins. Co., 383 S.W.2d 1 (Tenn.1964). See Ghiardi & Kircher, Punitive Damages Law & Practice, Sec. 6.11 (1984). Cf. Shaumaier & McKinsey, The Insurability of Punitive Damages, 72 A.B.A.J. 68 (1986). 44 In the era when most tort suits were one-against-one contests, a single act triggered a single punishment. The increasingly prevalent mass tort situation, however, exposes a defendant to repetitious punishment for the same culpable conduct. The parallels between the assessment of exemplary damages and a fine levied in criminal courts have led to suggestions that the concepts of double jeopardy and excessive punishment should be invoked in the civil field as well. See Aetna Life Ins. Co. v. Lavoie, 46 C.C.H.S.Ct.Bull.P. B1945 (Apr. 22, 1986); see also Morris, Punitive Damages in Tort Cases, 44 Harv.L.Rev. 1173 (1931); cf. Comment, Criminal Safeguards and the Punitive Damages Defendant, 34 U.Chi.L.Rev. 408 (1967). 45 Similar concerns have prompted highly respected judges to comment on the possibility that the due process clause might contain some constitutional limitation on the amount of exemplary damages to be awarded. Unlimited multiple punishment for the same act determined in a succession of individual lawsuits and bearing no relation to the defendants' culpability or the actual injuries suffered by victims, would violate the sense of 'fundamental fairness' that is essential to constitutional due process. In re Federal Skywalk Cases, 680 F.2d 1175, 1188 (8th Cir.1982) (Heaney, J. dissenting). There must, therefore, be some limit, either as a matter of policy or as a matter of due process, to the amount of times defendants may be punished for a single transaction. In re Agent Orange Product Liability Litigation, 100 F.R.D. 718, 728 (1983). 46 In addition to a possible federal constitutional limitation, state substantive tort law could place restraints on repetitive punitive damage awards. This concept, aimed at the prevention of overkill as discussed in Roginsky, has been labeled the limited generosity theory by some of the parties to this case. 47 In Roginsky, Judge Friendly speculated on the possibility of having one court assess a single punitive damage award for distribution to all successful plaintiffs. 378 F.2d at 839 n. 11. See also Seltzer, Punitive Damages in Mass Tort Litigation: Addressing the Problems of Fairness, Efficiency and Control, 52 Fordham L.Rev. 37 (1983). The district court's (b)(1)(B) certification in this case is a variation on that same theme. 48 In a thoughtful dissertation prepared in the course of the LL.M. program for judges conducted at the University of Virginia Law School, Judge R. Barclay Surrick thoroughly reviewed the doctrine of punitive damages. He concluded that in the field of asbestos litigation, [b]alancing the benefits to be derived from continued imposition of punitive damages against the social and economic consequences of such a course of action, it appears that the continued imposition of punitive damages cannot be justified. Surrick, Punitive Damages and Asbestos Litigation in Pennsylvania: Punishment or Annihilation?, 87 Dick.L.Rev. 265, 296 (1983). 49 Cognizant of these concerns, two federal courts of appeals have nevertheless allowed awards of punitive damages in asbestos cases on the ground that they were permitted by state law. Jackson v. Johns-Manville, 781 F.2d 394 (5th Cir.1986); Cathey v. Johns-Manville Sales Corp., 776 F.2d 1565 (6th Cir.1985). In the latter case, the court rejected the defendant's due process contention, stating that As a matter of federal constitutional law we believe that the presence of a judicial tribunal before which to litigate the propriety of a punitive damages award provides Johns-Manville with all the procedural safeguards to which it is due. 776 F.2d at 1571. 50 Cathey treated the defendant's argument on punitive damages as raising only a procedural due process issue. But the concerns recited by a number of courts and commentators are centered on the substantive component of due process. Cf. Daniels v. Williams, --- U.S. ----, ----, 106 S.Ct. 662, 667, 88 L.Ed.2d 662 (1986) (Stevens, J., concurring) (Substantive due process prohibits a State from taking certain action[s] 'regardless of the fairness of the procedures used to implement them.' ). 51 Thus powerful arguments have been made that, as a matter of constitutional law or of substantive tort law, the courts shoulder some responsibility for preventing repeated awards of punitive damages for the same acts or series of acts. Preliminarily we will assume, without deciding, that these arguments might provide a threshold justification for the exercise of discretion in certifying a nationwide (mandatory) Rule 23(b)(1)(B) class for punitive damages. We nonetheless hold that the district court abused its discretion in certifying the 23(b)(1)(B) class here because neither the record nor the court's findings are adequate to support the procedure. 52 The district court made no factual findings at all as to the potential amount and scope of punitive damages. This is in sharp contrast to the detailed findings on the subject in In re Agent Orange Product Liability Litigation, 100 F.R.D. 718 (E.D.N.Y.1983), mandamus denied, 725 F.2d 858 (2d Cir.), cert. denied, 465 U.S. 1067, 104 S.Ct. 1417, 79 L.Ed.2d 743 (1984). The most the district court mustered here was its conclusion that: 53 It is apparent that there is a substantial possibility that early awards of punitive damages in individual cases will impair or impede the ability of future claimants to obtain punitive damages. The reality of such impairment has been recognized by commentators and courts. (citations omitted). 54 104 F.R.D. at 437. 55 We are aware of the inherent limitations on any factual inquiry undertaken at such an early stage of the litigation, and we recognize that any record that could be developed would be inevitably predictive. Nonetheless, in our view these findings fall short of the mark. 56 Moreover, some basic considerations expose a critical flaw in the district court's analysis. The class certified does not even include all property damage claimants. Claims for repair of municipal buildings, for instance, are omitted, as are those of homeowners. Within a few weeks after oral argument in this appeal, a jury awarded $6 million in a property damage case brought as a result of the presence of asbestos products in a city hall. Added to the recovery was $2 million in punitive damages. City of Greenville v. W.R. Grace & Co., No. 6:85-1693-3 (D.S.C.). 57 There is some evidence that the school claims make up a significant portion of the total property damage alleged. See Asbestos Litigation Reporter at 10,243-44 (June 21, 1985). Clearly, however, this aspect of the litigation transcends the nation's classrooms and extends to municipal buildings, homes, and other structures. 58 Far more significant are the tens of thousands of personal injury suits in which punitive damage verdicts have been and continue to be assessed. These claims are satisfied from the same pool of assets to which the school districts now look. If a limit is ever placed on the total punitive damages to be imposed on the asbestos defendants, then that limit probably would apply to all claims whether they arise in property damage or personal injury suits. The school claims would be but a small portion of this total. 59 The circumstances in this case are again a decided contrast to those in the Agent Orange litigation where all of the claims against the defendants were concentrated in one case. In that circumstance, the court had control over all those affected and could hope to carry out the basic premise justifying the class action--parity for all victims and reduction of litigation expenses for all parties. 60 Assuming that the record supported the limited generosity theory, we would nonetheless decertify the class on the ground that it is under-inclusive. The limited generosity theory is a variation of the limited fund situation mentioned in the advisory committee note to Rule 23, the situation in which claims are made by numerous persons against a fund insufficient to satisfy all claims. Fed.R.Civ.P. 23 advisory committee note. More precisely, limited generosity (or punitive damages overkill, as some class members call it) is the functional equivalent of the limited fund in that, by operation of the limited generosity principle, only a limited amount of punitive damage funds will be available, regardless of the ability of the defendants to pay. Since the purpose of a 23(b)(1)(B) class is to avoid a judgment that while not technically concluding the other members, might do so as a practical matter, id., all persons with claims upon the limited fund should be included in the 23(b)(1)(B) class. 61 Thus, because all awards must come from the same defendants, a mandatory class predicated on a potential legal limit to punitive damages would logically include all litigants who seek such awards. From that standpoint, the (b)(1)(B) class certified here is under-inclusive with the result that separate actions by those who should properly be included in the class will go forward. However, the suppression of such separate actions is described in the advisory committee note as the [reason] for and the principal key to the propriety and value of a 23(b)(1) class. 62 The committee notes further illuminate the problem of under-inclusiveness in this context by reference to Rule 19: The considerations stated under clauses (A) and (B) are comparable to certain of the elements which define the persons whose joinder in an action is desirable as stated in Rule 19(a). Rule 19 describes the procedure for Joinder of Persons Needed for a Just Adjudication. Section (b) of that Rule provides that a suit should be dismissed when joinder of a party is impossible, and the court determines that in equity and good conscience the action should not continue. 63 The considerations mentioned in Rule 19 counsel against maintenance of this mandatory class action in the absence of the other punitive damage claimants. 8 The primary factor lies in the prejudice to those already parties to this action. 64 The effect of the mandatory class has been to single out the school districts for special and possibly disadvantageous treatment. They have been forced to litigate in a jurisdiction and under a class procedure that many districts do not desire, and their punitive damage claims have been put on hold while the protracted class certification procedure runs its course. 9 Because of this delay, this class could end up in a detrimental position if punitive damage awards are precluded because of a future judicial ruling. 65 Since the thousands of other claimants who seek exemplary damages from the asbestos defendants need not operate within the confines of a mandatory class procedure, the quest for punitive damages remains for them a race to the courthouse door. Consequently, if the district court proves correct in its theory that at some point a limit on all punitive damage awards will be established, the school districts may be prejudiced in their opportunity to share in the available funds in the meantime. 66 As noted by the district court, Rule 23(b)(1)(B) exists to protect potential claimants and provide equality of treatment. Certification of a punitive damage class under that provision here will not accomplish these objectives. In the court's pursuit of an end that is not attainable, the class designed to be protected will be burdened with hardships not imposed on any other litigants. 67 Nor do we see how, in the present posture of this litigation, the class could be expanded to confront effectively the punitive damage issue in the entire asbestos area. Whether a national class based on a federal constitutional challenge could accomplish that result is obviously not before us. Although we recognize and commend the district judge's attempt to grapple with the seemingly insoluble problems of punitive damages in these cases, we simply cannot find that the avenue he selected will lead to an appropriate and fair resolution. 68 We do not hold that under-inclusiveness is necessarily fatal to a class created under 23(b)(1)(B); 10 rather, each case requires a careful assessment of the factors mentioned in Rule 19. Courts should give particular attention to the possibility of prejudice either to those omitted from the class or to those within it. In the circumstances here, we conclude that under-inclusiveness does pose an obstacle. 69 A certain inherent prejudice exists when a litigant is forced to participate in an undesired mandatory class action. That result may be acceptable where the class device will serve the worthwhile goal of protecting the interests of all litigants to a potentially limited fund, but is hard to justify where only a small number of potential claimants can be included in the mandatory action. 70 A class action may promote efficiency by reducing repetitive testimony and evidence that otherwise would be required in individual trials. Those advantages, however, are secured at the price of delaying the disposition of individual cases that might be tried to conclusion in a number of state and district courts in the interim. In effect, a mandatory class action creates a bottleneck by concentrating the litigation, at least for a period, before one judge instead of spreading the individual cases out among many trial forums. 71 The limited generosity theory poses yet another concern. Because that concept is based on state law, the lack of uniformity creates difficulties in this diversity case. Federal courts are bound by the constraints of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1948), and the dictates of state law may not be buried under the vast expanse of a federal class action. The parties' rights under state substantive law must be respected, and if that is not possible in a class action, then that procedure may not be used. 72 It follows that if we cannot make a reasonable prediction that state courts will uniformly accept the limited generosity theory, a class may not be certified with that concept as its underlying justification. 73 No state has yet held that the goals of punishment and deterrence have been met in asbestos cases, nor has the availability of further punitive damages been significantly restricted. As noted earlier, parochial considerations would tend to discourage individual states from eliminating punitive damages in the absence of similar rulings by the others. Nor even if such a movement gets under way is it likely that most states would implement the concept within a reasonably contemporaneous period. 74 Nothing in the record supports the expectation that a substantial number of states will adopt the limited generosity theory in the foreseeable life of this class action. We are aware of the growing sentiment to have state legislatures revise existing tort law. But despite strong arguments favoring limitations on punitive damages and the increasing number of bankruptcies, the business as usual attitude still prevails. See, e.g., Jackson v. Johns-Manville; Cathey v. Johns-Manville; Moran v. Johns-Manville Corp., 691 F.2d 811 (6th Cir.1982); Martin v. Johns-Manville Corp., 322 Pa.Super. 348, 469 A.2d 655, (1983); Johns-Manville Sales Corp. v. Janssens, 463 So.2d 242 (Fla.App.1984), petition for review denied, 467 So.2d 999 (Fla.1985). A mandatory class should not be certified on the basis of a prospect so questionable at this time. The record before us is simply inadequate to support a (b)(1)(B) certification on a limited generosity theory. 75 Opponents of the mandatory class have also argued that its use here would be inconsistent with the due process considerations discussed in Phillips Petroleum Co. v. Shutts, --- U.S. ----, 105 S.Ct. 2965, 86 L.Ed.2d 628 (1985), and would violate 28 U.S.C. Sec. 2283. See In re Federal Skywalk Cases, 680 F.2d 1175 (8th Cir.1982). Our resolution makes consideration of those issues unnecessary. Following the lead of the courts in In Re Bendectin Products Liability Litigation, 749 F.2d 300, 306 (6th Cir.1984), and Dalkon Shield IUD Products Liability Litigation, 693 F.2d 847, 852 (9th Cir.1982), we hold open the possibility of a 23(b)(1)(B) punitive damage class in more appropriate circumstances.