Supreme Court Review: Court Nixes Latest Settlement Class

Abstract

Commentary and analysis of the Supreme Court decision in Ortiz v. Fibreboard Corp., and reversing two decisions from the Fifth Circuit Court of Appeals. In Ortiz, a 7-2 decision, the Court reversed the Fifth Circuit’s affirmation of a Rule 23(b)(1)(B) mandatory global settlement of asbestos claims. The decision, by Justice Souter, took the opportunity to articulate standards that apply to Rule 23(b)(1)(B) limited fund class actions. After a lengthy exegesis on the history of Rule 23(b)(1)(B), the Court issued two broad rulings. First, the proponents of a (b)(1)(B) limited fund class action (or class action settlement) must prove the existence of the limited fund on more evidence than the parties’ agreement. Second, any limited fund must be free from conflicts. In addition, the limited fund must be completely exhausted in pay-outs to class claimants, and the settlement fund must provide for equitable distribution among class members. Justices Breyer and Stevens, taking a more pragmatic approach to settlement classes, dissented from the majority’s opinion. The article discusses the Court’s rulings in Ortiz as a bookend companion case to its 1997 decision in Amchem Prods. Inc. v. Windsor, in which the Supreme Court invalidated a Rule 23(b)(3) global settlement of asbestos claims. The article examines the implications of these two decisions for resolving asbestos litigation and mass tort litigation generally, as well as other types of class action litigation.