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United States Supreme Court Hears Challenge to Twenty-Year Old Agent Orange Class Action Settlement

On February 26, the United States Supreme Court heard argument in a case with far-reaching implications for any company that has been a party to a mass tort class action settlement or may in the future be a party to mass tort litigation. The Court's decision, expected to be announced by the end of the 2002-03 term, will address whether a plaintiff may challenge a twenty-year old class action settlement which was challenged twice before on the same ground, and where the challenge was rejected twice before both by the district and appellate courts. This decision will determine whether finality can ever be achieved through the class action settlement of mass tort litigation. It will address issues left open in Amchem Products v. Windsor, 521 U.S. 591 (1997), and Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999), the two cases decided by the Court in recent years in which asbestos personal injury class action settlements were overturned.

Stephenson v. Dow Chemical involved a collateral attack on the $180 million Agent Orange class action settlement approved by United States District Judge Jack Weinstein in 1984 and largely affirmed by the Second Circuit Court of Appeals in 1987. Except for those who opted out of the settlement (whose claims were quickly dismissed on the ground that there was no reliable proof that Agent Orange caused their alleged injuries), the class action judgment was intended to bar any future litigation against the participating defendants involving claims of personal injury resulting from the use of Agent Orange in the Vietnam War.

In 1989 and 1990, Vietnam veterans who had no or symptoms of illness or injury at the time of the 1984 settlement brought suit against the same defendants asserting state law personal injury claims relating to their exposure to Agent Orange in the Vietnam War. They claimed, among other things, that because the class representatives were all symptomatic at the time the 1984 settlement was approved, the interests of so-called "future claimants," that is, those who were then asymptomatic, were not adequately represented and, as a result, binding them to a such a judgment would violate their constitutional due process rights. Judge Weinstein, to whom the cases were transferred, rejected their arguments. The plaintiffs appealed, and in Ivy v. Diamond Shamrock, 996 F.2d 1425 (2d Cir. 1993), the Second Circuit affirmed, thereby vindicating the binding effect of the class action judgment.

In 1998 and 1999, the Stephenson plaintiffs – who developed conditions in the 1990s they claim were related to their exposure to Agent Orange during the Vietnam War – filed suit against the same settling Agent Orange defendants in state court. As in the 1989-90 cases, the cases were transferred to Judge Weinstein who dismissed their claims. This time, however, the Second Circuit reversed based upon the intervening Supreme Court decisions in Amchem and Fibreboard. In those cases, the Court rejected class action settlements on the ground, among other things, that the interests of future claimants were not adequately represented. Neither Amchem nor Fibreboard, however, were collateral attacks. That is to say, the issues there were raised on direct appeal from the class action judgment. In contrast, the Stephenson case raised the issue of adequate representation of future claimants after it was previously litigated twice, previously decided twice, and previously affirmed on appeal twice.

It was a lively argument. Justice Ginsburg, who wrote the Amchem opinion, was plainly skeptical of whether an asymptomatic claimant could ever be bound to a class judgment since the claimant would have had no injury, no damage, and no right to sue at the time of the class settlement. Rights did not accrue until manifestation of injury, she said. None of the class representatives were asymptomatic at the time of the settlement, and no one represented the interests of the asymptomatic claimants in the settlement negotiations. In fact, some money was set aside for asymptomatic claimants, but that fund ran out in 1994. Justice O'Connor asked why there was no money for long latency claims.

Justice Breyer expressed institutional concerns about mass tort litigation, its costs both to litigants and the judicial system. He expressed the concerns of defendants who seek finality in settling cases, and asked how any mass tort can be resolved in its absence. He wanted to know how many times adequacy must be determined.

Justice Kennedy was interested in the standard of review to be used in collateral attack. George Smoger of Oakland, California, who argued for the plaintiffs-respondents, said review should be de novo, a view met with considerable skepticism by Justice Kennedy, since the standard of review of a class judgment on direct appeal is abuse of discretion. Justice Kennedy could not see how de novo review on collateral attack could be governed by a higher standard than the deference afforded on direct appeal.

Seth Waxman, a former solicitor-general, argued for the defendants. Justice Stevens recused himself and will not participate in the decision. Justice Scalia was not present but will participate in the decision. In Amchem, Justice Ginsburg wrote the decision of the Court, joined by Chief Justice Rehnquist and Justices Scalia, Kennedy, Souter, and Thomas. Justice Breyer dissented, in part, joined by Justice Stevens. Justice O'Connor did not participate. In Ortiz, Justice Souter wrote the opinion, joined by Chief Justice Rehnquist, Justices O'Connor, Scalia, Kennedy, Thomas and Ginsburg. Chief Justice Rehnquist also wrote a concurring opinion, joined by Justices Scalia and Kennedy. Justice Breyer dissented, joined by Justice Stevens.

The ramifications of the decision can be considerable.

If the Supreme Court affirms the decision of the Second Circuit, the case could loosen the bar in any class action settlement involving so-called "futures" claimants whose interests were not separately represented in the original class proceedings. It would not matter how old the settlement is, or how many times similar challenges were considered and rejected in the past. An affirmance might also question whether any settlement involving "futures" could ever be reached, and if it could, what protections must be built in to make it work. The Court may also clarify the standard to be employed in reviewing a collateral challenge that raises due process issues.

We will provide further information once the Court's decision is announced. This alert was prepared by Jerry P. Sattin. If you have any questions about these issues, contact Mr. Sattin at 973-639-2022.

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