In this 6/23/99 decision, the Supreme Court restricted the use of "limited fund" settlement classes in mass tort cases. The Federal Rules of Civil Procedure authorize courts to certify mandatory classes of individuals with claims against a fund that is inadequate to pay them all.
In this case, which involved the settlement of massive asbestos litigation, and in many other large tort class actions, the parties sought to certify a mandatory class (and avoid the problem of absent class members opting out of the settlement) on the theory that the defendant and its insurers could not satisfy all of the claimants. In reversing the certification of a mandatory limited fund class and entry of a multi-billion dollar settlement, the Court held that limited fund settlement classes may only be certified where (1) the funds available are inadequate to satisfy all the outstanding claims; (2) absent claimants are treated equitably; and (3) the whole of the inadequate fund is devoted to satisfying the claims of class members.
The Court found the class certification in this case lacking because the extent of the funds available had not been established, because the settlement procedures did not meet the rigorous requirements of Amchem v. Windsor, 521 U.S. 591, and because most of the assets of one of the defendants were apparently not included in the limited fund.
Chief Justice Rehnquist, joined by two other justices, concurred but urged Congress to pass legislation reducing the transactions costs in settling class actions. Justice Breyer, joined by Justice Stevens, dissented, arguing that the requirements for limited fund class actions should be applied with more flexibility in the a context of the asbestos litigation crisis.