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In re School Asbestos Litigation. School District of Lancaster

May 1, 1986

IN RE SCHOOL ASBESTOS LITIGATION. SCHOOL DISTRICT OF LANCASTER, MANHEIM TOWNSHIP SCHOOL DISTRICT, LAMPETER-STRASBURG SCHOOL DISTRICT, AND NORTHEASTERN SCHOOL DISTRICT
v.
LAKE ASBESTOS OF QUEBEC, LTD., THE CELOTEX CORP., RAYMARK INDUSTRIES, INC., UNION CARBIDE CORP., ASBESTOSPRAY CORP., SPRAYO-FLAKE CO., NATIONAL GYPSUM CO., SPRAYED INSULATION, INC., ASBESTOS FIBRES, INC., DANA CORP., U.S. GYPSUM, U.S. MINERAL PRODUCTS CO., SPRAYON INSULATION & ACOUSTICS, INC., SPRAYON RESEARCH CORP., KEENE CORP., WORBEN CO., INC., WILKIN INSULATION CO., W.R. GRACE & CO., OWENS-CORNING FIBERGLAS CORP., STANDARD INSULATIONS, INC., NORTH AMERICAN ASBESTOS CORP., CASSIAR RESOURCES LTD., BELL ASBESTOS MINES, LTD., ASBESTOS CORPORATION LIMITED, SOUTHERN TEXTILE CORP., OWENS-ILLINOIS, INC., TURNER & NEWALL LTD., THE FLINTKOTE CO., FIBREBOARD CORP., GAF CORP., UNIROYAL, INC., CAPE ASBESTOS, PFIZER, INC., KAISER CEMENT CORP., BES-TEX, INC., GEORGIA-PACIFIC CORP. (D.C. CIVIL NO. 83-0268); BARNWELL SCHOOL DISTRICT NO. 45 V. U.S. GYPSUM, NATIONAL GYPSUM CO., W.R. GRACE & CO., ASBESTOSPRAY CORP., SPRAYO-FALKE CO., SPRAYED INSULATION, INC., ASBESTOS FIBRES, INC., DANA CORP., U.S. MINERAL PRODUCTS CO., SPRAYON INSULATION & ACOUSTICS, INC., SPRAYON RESEARCH CORP., KEENE CORP., WILKIN INSULATION CO., TURNER & NEWALL LTD., J.W. ROBERTS, LTD., PROKO INDUSTRIES, INC., RAYMARK INDUSTRIES, INC., OWENS-CORNING FIBERGLAS CORP., STANDARD INSULATIONS, INC., SOUTHERN TEXTILE CORP., OWENS-ILLINOIS, INC., THE FLINTKOTE CO., FIBREBOARD CORP., UNITROYAL, INC., ROCK WOOL MANUFACTURING CO., INC., EMPIRE ACE INSULATION MANUFACTURING CORP., EAGLE-PICHER INDUSTRIES, INC., FORTY-EIGHT INSULATIONS, INC., COMBUSTION ENGINEERING, INC., GAF CORP., LAC D'AMIANTE DU QUEBEC, LTEE., THE CELOTEX CORP., CAREY-CANADA, INC., UNION CARBIDE CORP., BRINCO MINING, LTD., FORMERLY KNOWN AS CASSIAR RESOURCES, LTD., BELL ASBESTOS MINES, LTD., ASBESTOS CORPORATION LIMITED, CAPE ASBESTOS, NORTH AMERICAN ASBESTOS CORP., TURNER ASBESTOS FIBRES, LTD., C. TENNANT & SONS, HUXLEY DEVELOPMENT CORP., ASTEN GROUP, INC., H.K. PORTER CO., NICOLET INDUSTRIES, ARMSTRONG CONTRACTING & SUPPLY CORP., BENJAMIN FOSTER CO., PITTSBURGH CORNING CORP., ARMSTRONG WORLD INDUSTRIES, INC., WORBEN CO., INC. (D.C. CIVIL NO. 83-1395); GAF CORP., APPELLANT IN 84-1642, 85-1272 & 85-1288; LOS ANGELES UNIFIED SCHOOL DISTRICT, APPELLANT IN 84-1643; FIBREBOARD CORP., APPELLANT IN 84-1649; THE CELOTEX CORP., AND CAREY-CANADA, INC., APPELLANTS IN 84-1651 & 85-1243; NATIONAL GYPSUM CO., U.S. GYPSUM CO., AND W.R. GRACE & CO., APPELLANTS IN 84-1652 & 85-1287; BOARD OF EDUCATION OF CLIFTON, APPELLANT IN 84-1670; LAC D'AMIANTE DU QUEBEC, LTEE., APPELLANT IN 84-1671; OWENS-CORNING FIBERGLAS CORP., APPELLANT IN 84-1672; BARNWELL SCHOOL DISTRICT NO. 45, APPELLANT IN 84-1692; BELL ASBESTOS MINES, LTD. AND U.S. MINERAL PRODUCTS CO., APPELLANTS IN 84-1693; ASBESTOS CORPORATION LIMITED, APPELLANT IN 84-1694; BOARDS OF EDUCATION OF ANDERSON COUNTY, JOHNSON COUNTY, LOUDON COUNTY, KNOX COUNTY, CITY OF KNOXVILLE, AND HAWKINS COUNTY, TENNESSEE, APPELLANTS IN 84-1695; H.K. PORTER CO., SOUTHERN TEXTILE CORP., AND FORTY-EIGHT INSULATIONS, INC., APPELLANTS IN 84-1696



APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA

Author: Weis

WEIS, Circuit Judge.

In an effort to reach an equitable result in these asbestos property damage cases brought by school authorities, the district court certified a nationwide mandatory class for punitive damages and an opt-out class for compensatory damages. We conclude that the mandatory class cannot be approved because of a lack of necessary findings and for the additional reason that the class, being under-inclusive, cannot in the circumstances here accomplish the objectives for which it was created. We will, however, affirm the denial of a (b)(2) class and despite misgivings on manageability, will affirm the district court's conditional certification of a Rule 23(b)(3) opt-out class on compensatory damages.

The district court invoked Fed.R.Civ.P. 23(b)(1)(B) in entering the certification order designating a mandatory class for school district seeking punitive damages and followed Rule 23(b)(3) in forming a class for those seeking compensatory damages. A request for class certification under Rule 23(b)(2) was denied.

Pursuant to 28 U.S.C. § 1292(b), the court certified that the order constituting the 23(b)(1)(B) class raised a controlling question of law respecting possible violation of the Anti-Injunction Act, 28 U.S.C. § 2283. Various parties have appealed, challenging not only that phase of the case but also the propriety of the (b)(3) certification as well as the denial of the (b)(2) request.*fn1

This litigation began with the filing of class action complaints in the Eastern District of Pennsylvania by several Pennsylvania school districts and the Barnwell, South Carolina School District. The cases were consolidated soon after filing. Defendants, numbering approximately fifty, are associated with the asbestos industry as miner, bulk suppliers, brokers, assemblers, manufacturers, distributors, and at least one contractor.

As a result of federal legislation and regulation, plaintiffs are required to test for the presence of asbestos in schools*fn2 The complaints seek compensatory and punitive damages as well as injunctive relief stemming from compliance with the federal legislation and the alleged need to remove or treat materials containing asbestos the claims are based on theories of negligence, strict liability, intentional tort, breach of warranty, concert of action, and civil conspiracy.

After a group of plaintiffs presented a motion for the formation of classes under sections (b)(1) and (b)(2) of Rule 23, the court issued an order certifying such classes but limited them to claims against three defendants which had agreed not to oppose that action. This ruling led to objections by various other plaintiffs and defendants, and the court later vacated the order in part. Arguments were then heard from all parties who split, not long the usual plaintiff-defendant lines, but into a number of unusual alignments as dictated by their perceived interests. The eventual certification order included the claims against all defendants.

In conditionally creating a mandatory class under (b)(1)(B) on the punitive damage claims, the court found "a substantial possibility that early awards of punitive damages in individual cases [would] impair or impede the ability of future claimants to obtain punitive damages." In re Asbestos School Litigation, 104 F.R.D. 422, 437 (E.D. Pa. 1984). Although plaintiffs had advanced the argument that the defendants' funds would be exhausted before all claimants were paid, no substantive evidence was presented demonstrating that those assets would be insufficient, and accordingly the district judge declined to address that issue. Id. at 434 n.15.

The court believed that a mandatory class would create an opportunity for parity of treatment by bringing all injured parties into the same forum. Nevertheless, any plaintiff who opted out of the (b)(3) class would be permitted to settle a punitive damage claim with defendants. Additional support for certification was found in the strong "federal interest inherent in asbestos abatement" and the minimal intrusion on the interests of the school districts.

Class certification under 23(b)(2), however, was denied. The court commented that "Despite the ingenuity of plaintiffs' claims for limited equitable remedies, this case remains at bottom, one for legal damages." 104 F.R.D. at 438. Although recognizing the possibility that at some point there might be "an incidental need for equitable relief," the court concluded that such a potential could not sustain certification under 23(b)(2).

The court directed the certification of a 23(b)(3) class, finding the numerosity requirement satisfied by estimates that friable asbestos is present in approximately 14,000 of the nation's schools, about 8,500 of which have an abatement problem. Commality existed in an underlying core of issues identified as:

"(a) The general health hazards of asbestos;

(b) defendants' knowledge or reason to know of the health hazards of asbestos;

(c) defendants' failure to warn/test; and

(d) defendants' concert of action and/or conspiracy involving formation of and adherence to industry practices."

104 F.R.D. at 429. Those elements could "be established by common proof, which, although it may be complex, does not vary from class-member school to class-member school."

The typicality requirement was satisfied because the plaintiffs' theories of liability were harmonious, and the named plaintiffs stood in a position similarly to other members of the class. Some of the parties had obliquely questioned the adequacy of representation, but the court concluded that the class was represented by counsel "very experienced with class action litigation and thoroughly familiar with property damage and mass disaster litigation."

In considering the specific requirements for a (b)(3) certification, the court noted that the presence of asbestos in school buildings had a similar impact on each member of the class. Additionally, the question of proximate cause was a legal one which could be resoled on a class-wide basis without involving individualized member-by-member proof.

Addressing the requirement of superiority, the court emphasized that in resolving "at least some of the issues" on a class basis potential savings in expense would result, a consideration particularly important in asbestos litigation with its staggering costs. Moreover, because all claims were for property damage, the level of concern for the plaintiffs' right to choose individual forums and counsel was reduced.

The district judge conceded that the manageability aspect was not "wholly without difficulty," but stated "at this point I believe the management problems can be overcome." the court was convinced that although the substantive tort law of many jurisdictions might be applicable, the basic variations could be reduced to a reasonable number and subclasses could be created to accommodate those differences. Furthermore, plaintiffs represented to the trial judge that they would "direct discovery and trial briefs to meet the most stringent test of liability."

Notwithstanding the difficulties, the court determined that the class action was superior to the only existing alternative -- repetitious individual litigation.

I.

This appeal must be decided against the background of the asbestos scene, an unparalleled situation in American tort law. To date, more than 30,000 personal injury claims have been filed against asbestos manufacturers and producers. An estimated 180,000 additional claims of this type will be on court dockets by the year 2010. Added to those monumental figures are the claims for property damage -- the cost of removing or treating asbestos-based materials used in building construction. Some indication of the magnitude of that potential liability may be gleaned from the fact that the property damage claims filed in the Johns-Manville bankruptcy proceedings stood at $69 billion as of June 1985.

The procedures of the traditional tort system proved effective in unearthing the hazards of asbestos to workers and the failure of its producers to reduce the risk. However, the undeniable limitations of the "one-on-one" approach in coping with the massive onset of claims now in the courts have caused serious and justified concern.

A report compiled by the Rand Corporation, entitled Asbestos in the Court (1985), paints a gloomy picture. It points out the high cost and inefficiencies in handling these individual claims as well as the uneven, inconsistent, and unjust results often achieved. Perhaps the least flattering statistic is the high cost of processing these claims: "On the average, the total cost to plaintiffs and defendants of litigating a claim was considerably greater than the amount paid in compensation." Report at page 1.

Inefficiency results primarily from relitigation of the same basic issues in case after case. Since a different jury is empaneled in each action, it must hear the same evidence that was presented in previous trials. A clearer example of reinventing the wheel thousands of times is hard to imagine.

Apparent inconsistency of jury verdicts has often been a reflection of the ability of the system to sort out individual differences and tailored redress to precise circumstances. In the asbestos litigation field, however, the variation in jury awards had led to complaints that injustice rather than careful apportionment has resulted.

A Philadelphia Common Pleas Judge is quoted in the Rand Report:

"Results of jury verdicts are capricious and uncertain. Sick people and people who died a terrible death from asbestos are being turned away from the courts, while people with minimal injuries who may never suffer sever asbestos disease are being awarded hundreds of thousands of dollars, and even in excess of a million dollars, and even in excess of a million dollars. The asbestos litigation often resembles the casinos 60 miles east of Philadelphia, more than a courtroom procedure."*fn3

The problems are complicated by the variations and permutations of state law that govern tort liability. Most jurisdictions have continued, perhaps understandably, to treat the problem in a parochial and nearsighted manner. It may be that a state court does not wish to deny its litigants the benefits that are available in other jurisdictions. An attempts by a single state to impose some equitable form of apportionment to claims presently pending and to those inevitably arising in the future is discouraged because other jurisdictions are not required to adopt a similar enlightened viewpoint. A forum wishing to take the long-range view might find that its efforts were not only ineffective but unfair to its citizenry because claimants in the other states could drain off all the assets available for satisfaction of claims.

The national dimensions of the problem have led to calls for congressional action. Although the subject has attracted the attention of individual representatives and senators, no legislative response has garnered enough support to be enacted. Frustrated by the seemingly intractable problems inherent in the present situation, a thoughtful minority of the Court of Appeals of the Fifth Circuit would have certified to the United States Supreme Court the question of whether federal common law can apply to asbestos litigation. See Jackson v. Johns-Manville Sales Corp., 750 F.2d 1314 (5th Cir. 1985) (in banc), on rehearing, 781 F.2d 394 (5th Cir. 1986) (The original in banc majority certified certain questions to the state supreme court, which declined to rule on them).

Although necessarily brief, this sketch of the background of asbestos litigation is enough to show that this ...


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