American University Law Review
February 2000

COMMENT

Nikita Malhotra Pastor*

INTRODUCTION

Barring litigation, the "settlement class action" is one of the most realistic and efficient means available through which victims of mass torts receive compensation for their injuries. Defined as "a lawsuit certified as a class action solely for the purpose of settling the claims made in the complaint, rather than for litigating them," the settlement class action allows victims, as well as defendants, to escape the exorbitant costs and complicated issues involved with litigating a claim. Consequently, both lawyers and courts have fashioned the settlement class action as a catchall solution to the explosion of mass tort litigation and the crisis to which it has given birth.

The settlement class action is a judicial creation that evolved from the class action, which is governed and regulated by Rule 23 of the Federal Rules of Civil Procedure ("FRCP"). Although not explicitly provided for, courts construe Rule 23 to extend to settlement class actions. Other than Rule 23(e), a general provision that governs court approval of dismissal and settlement of class actions, no guidelines exist by which judges can determine the fairness, reasonableness, or suitability of a proposed settlement. Thus, with only judicial construction of Rule 23 and no clear procedural guidance, it is not surprising that the legal system struggles with the permissibility of settlement class actions in the mass tort context.

The debate over the advantages and disadvantages of class actions has been well versed over the past several decades. Many legal scholars and commentators have heralded the class action as a device that gives leverage to plaintiffs seeking resolution of their claims in the judicial system. Others have condemned the class action as a means used by self-serving corporations to wage a battle against less powerful plaintiffs. Nowhere is the debate more heated and complex than in the context of a settlement class action.

Although described by commentators as "cutting-edge judicial innovation," the continued existence of the settlement class action is in jeopardy. On June 22, 1998, the Supreme Court granted certiorari, for a second time, to review a Fifth Circuit decision that certified a settlement class action involving thousands of asbestos claims. In Flanagan v. Ahearn, the Fifth Circuit approved a settlement class action structure that established an administrative proceeding through which victims of asbestos exposure could receive compensation for their injuries. The principal issues before the Supreme Court in Ortiz v. Fibreboard are whether the settlement class action in Flanagan is properly certified as a limited fund under Rule 23(b)(1)(B) and whether using such a mandatory settlement class action device in the mass tort context violates due process. The outcome of the Supreme Court's decision in Ortiz will ultimately impact upon the viability of the settlement class action as an alternative to individual litigation.

This Comment explores pertinent issues raised by the judicial system's use of settlement class actions to resolve mass tort claims, including due process, ethical, and judicial management issues. For example, settlement class actions implicate victims' constitutional due process rights to retain individual control over their claims and not be bound to litigation without meaningful consent. Settlement class actions also provide fertile ground for collusion between defendants' and plaintiffs' counsel that can lead to a potential "sell-out" of the victims of the mass tort, as well as cause an inappropriate conflict of interest. Finally, settlement class actions raise the question of whether judges have exceeded their authority through active, rather than passive, involvement in the case. This Comment analyzes these issues in the context of the Fifth Circuit's decision in Flanagan. This Comment also compares and distinguishes the Flanagan settlement class action from the settlement class action rejected by the Supreme Court in Amchem Products, Inc. v. Windsor.

Part I of this Comment discusses the origin and development of the class action and, in particular, the evolution of the settlement class action from its equitable roots. Part II evaluates Amchem, a pivotal case in recent legal jurisprudence concerning settlement class actions. Part III summarizes the procedural and factual background of Flanagan and evaluates the structural attributes of that settlement class action. Part IV analyzes the Fifth Circuit's rationale in Flanagan and explores, among other issues, whether strict preservation of a plaintiff's due process rights impairs or benefits future victims of mass torts. Part V reflects on the impact and consequences of the Supreme Court's decision of Ortiz in the arena of mass tort litigation. This Comment recommends that the Supreme Court should preserve the settlement class action as a useful device to be used in mass tort litigation by providing clearer procedural guidelines to strengthen and sustain both the equity and integrity principles that support the settlement class action.

* Senior Note & Comment Editor, American University Law Review, Volume 49; J.D. Candidate, May 2000, American University, Washington College of Law; B.A., B.S.B.A., 1993, Boston University. I am forever grateful to my husband for his unwavering love, support and fresh insight throughout the Comment process and law school. This Comment is dedicated to the late Laxmi C. Khorana.

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