Proposals For Reform
| Author | Craig Jones |
| Pages | 213-246 |
CHAPTER
TEN
Proposals
For
Reform
A.
INTRODUCTION
This chapter looks
to the
future
to see
whether
and how
Canada's
emerging class
action
regime
can
more
fully
accommodate
the
pursuit
of
optimally aggregated
claims,
and
overcome some
of the
endemic problems
of
mass tort litigation.
I
focus
here
on
some
of the
ideas gaining currency
in the
United States, such
as
mandatory
class actions
and a
system that might provide economic advantages
of
aggregation
by
combining
classes,
as it
were, across claims rather than only
within
them. Such
an
idea raises
the
possibility that mass torts might
be
pursued
through
a
"superfund"
idea, combining
the
universally recognised advantages
of
insurance-based compensation with tort-based deterrence.
B.
THE
"MANDATORY
CLASS"
As
mentioned earlier
in
this book, U.S. courts have,
from
time
to
time, designed
so-called "mandatory
classes"
-
certifications which preclude potential class
members
from
opting out,
and
bind
all to the
decisions
of the
court.
Mandatory
classification
has
several obvious advantages. Most notably,
it
automatically maximises
the
aggregation
of
claims, thereby optimising litigation
scale efficiencies
for
plaintiffs.
It
also eliminates
the
innate problems
of
intra-
class
conflict
as
members with higher value claims (i.e. claims with either
a
larger recovery
or
stronger evidentiary
or
legal basis improving
the
chances
of
213
—
Theory
of
Class
Actions
—
that
recovery) bargain with
the
remainder
of the
class over
the
terms
of
their par-
ticipation.
As
such,
it has
gained substantial support
from
scholars like
Rosenberg,
who has
recently proposed
the
mandatory aggregation
of all
mass
tort
claims.1
On
the
face
of it,
Rule
23(b)(l)
mandatory classes
can be
employed whenever
allowing opt-outs would create
the
risk
of
systematic unfairness
to
other class
members, outweighing
the
interests
in
litigative autonomy
of
individual plain-
tiffs.
In
practice, however,
the
broad wording
of
Rule 23(b)(l)
has
been read
quite
restrictively,
and
U.S. courts' flirtation with
the
mandatory class
has
been
limited
to a
single type
of
case: that
in
which
the
judgment must
be
realised
from
a
defendant with
finite
available resources; this
is
known
as the
problem
of the
limited
fund.
In
other words,
a
mandatory class
has
been seen
to be
appropriate
in
cases where,
if the
absentee potential
plaintiffs
were
not
entitled
to
share
in the
settlement
or
judgment, there would
be
nothing
left
for
them when they
had
their
day in
court.
(1)
The
"Limited
Fund"
Doctrine
A
limited
fund
has
been defined
as a
readily identifiable, specific, limited
sum of
money
upon which numerous claims existed, when those claims exceeded
the
amount
of the
fund.2
It is
thought that mandatory
classes
might prevent
a
"race
1.
David
Rosenberg,
"Mandatory-Litigation
Class
Action:
The
Only Option
for
Mass
Tort
Cases"
(2001)
115
Harvard
L.
Rev.
831
[Rosenberg, "The Only
Option"].
2. See
e.g., Phillips Petroleum
Co. v.
Shutts,
[Shutts];
In Re
Dennis
Greenman
Sec. Litig.,
(llth
Cir.
1987);
In Re
Bendectin
Prods.
Liab.
Litig.,
305-06
(6th Cir. 1984); Green
v.
Occidental
Petroleum Corp., 541 F.2d 1335, 1340 n.9 (9th Cir. 1976); County of Suffolk v.
Long
Island Lighting Co.,
(E.D.N.Y.
1989);
Alexander
Grant
& Co. v.
McAlister,
590
(S.D. Ohio 1987); Bower
v.
Bunker
Hill
Co.,
587,595-96
(E.D. Wash. 1986).
A
mandatory class under sub-
division
(b)(l)(B)
is
appropriate
in
such
cases
because:
an
adjudication
as to one or
more members
of the
class will necessarily
or
prob-
ably
have
an
adverse practical
effect
on the
interests
of
other members
who
should therefore
be
represented
in the
lawsuit.
This
is
plainly
the
case
when
claims
are
made
by
numerous persons against
a
fund
insufficient
to
satisfy
all
claims.
A
class action
by or
against representative members
to
settle
the
valid-
ity
of the
claims
as a
whole,
or in
groups, followed
by
separate
proof
of the
amount
of
each valid claim
and
proportionate distribution
of the
fund,
meets
the
problem.
Fed.
R.
Civ.
P. at
23(b)(l)(B)
(Advisory
Committee's
note).
214
—
Proposals
for
Reform
—
to the
courthouse"
in
which
the
first
claimants
could
recover
while
later
claimants
received
only
empty
judgments.3
In
Ortiz
v.
Fibreboard
Corp
et
al.
(1999),
the
U.S.
Supreme
Court
sum-
marised
the
three
necessary
characteristics
of a
"limited
fund"
mandatory
class:
first,
that
the
fund
be
limited
and
definitely
ascertained;
second,
that
all the
claims
upon
the
fund
must
be
based
on a
common
theory
of
liability;
and
third,
that
all of the
fund
must
be
distributed
to
satisfy
all
those
with
such
claims
on an
equitable,
pro
rata
basis.
The
mandatory
class
received
a
lukewarm
reception
in the
U.S.
appeal
courts,
with
many
certifications
being
reversed,4
even
though
some
appellate
courts
appeared
to
sympathise
with
the
reasoning
of the
judges
below.5
Some
did
per-
3.
Occasionally, courts seeking
to
create
a
mandatory class attempted
to
certify puni-
tive
damages
for a
single, mandatory treatment under
the
"punitive damages
overkill"
theory (The phrase
was
coined
in
Judge
Friendly's
opinion
in
Roginsky
v.
Richardson-Merrell,
Inc.,
839
n.ll
(2d
Cir.
1967)).
In
these cases,
punitive
damages
are
considered
akin
to a
limited
fund
because
state
law or
con-
stitutional
due
process requires that such damages
be
paid only once.
4. See In Re
School Asbestos Litig.,
Cir.
1986);
In Re
Bendectin
Prods.
Liab.
Litig.,
(6th Cir. 1984);
Dalkon
Shield,
(9th
Cir.
1982);
In Re
Federal
Skywalk
Cases,
(8th Cir.
1982).
See
also
Payton
v.
Abbott
Labs.,
389 (D.
Mass. 1979) (absent evidence
of
likely insolvency, "numerous
plaintiffs
and a
large
ad
damnum
clause should [not]
guarantee
(b)(l)(B) certification").
Courts reversing Rule
23(b)(l)
certifications also expressed concern over
the
Anti-Injunction
Act, which prohibits
a
federal court
from
enjoining
state court pro-
ceedings "except
as
expressly authorized
by Act of
Congress,
or
where necessary
in
aid of its
jurisdiction
or to
protect
or
effectuate
its
judgment."
(1994).
When state cases were already pending,
the
certification
of the
federal
action could
be
seen
as an
injunction
of
those state court proceedings.
See In Re
School
Asbestos Litig.
ibid,
at
1002;
In Re
Federal
Skywalk,
ibid,
at
1181-83.
Courts also noted that
in
diversity actions
"certification
of a
mandatory
class
raises
serious questions
of
personal jurisdiction
and
intrusion into
the
autonomous
oper-
ation
of
state judicial
systems."
School Asbestos Litig.
Ibid,
at
1002.
Concerns
about
personal jurisdiction reflect questions about
the
scope
of the
Supreme
Court's decision
in
Shutts,
above note
2.
5. See In Re
Bendectin,
ibid,
at 307 (
"[o]n
pure policy grounds,
the
district judge's
decision
may be
commendable");
In Re
Federal
Skywalk,
ibid,
at
1177
n.4,
1183
(noting
the
district court's "legitimate concern
for the
efficient
management
of
mass
tort litigation"
and
commending
the
court
for its
"creative
efforts
in
attempt-
ing
to
achieve
a
fair,
efficient
and
economical trial
for
victims");
Dalkon Shield,
ibid,
at
851
(recognising that mandatory classes might
be
appropriate
in
some mass
tort
cases).
215
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