consent decree is efficacious because it "encourages informal resolution of disputes, thereby lessening the risks and costs of litigation." Id.
The facts in Randolph are similar to the facts of this case. The parties negotiated the settlement in that case before filing the complaint, but they needed court approval of the settlement for it to be binding as a judgment. Also, the consent decree called for prospective relief. The settlement agreement in this class action also requires judicial approval pursuant to Fed. R. Civ. P. 23 to become binding on the parties, and it calls for both prospective relief, including ongoing adversary claims and relationships. Indeed, if not for the Rule 23 requirement, this case would have been mooted by the settlement agreement, and, as the objectors claim, there would be no case or controversy. However, a case does not become moot when, as in this case and Randolph, the parties reach a proposed settlement that is contingent on the approval of the court. See Havens Realty Corp. v. Coleman, 455 U.S. 363, 371 n.10 (1982).
The objectors contend that there is no need to resort to the courts in this case to settle the claims of the named plaintiffs against the CCR defendants, i.e., there is no need for judicial approval. They claim that the parties can do so by contract. Instead, the objectors argue, this suit was brought by cooperating interests for the sole purpose of affecting the rights of others. The objectors find collusion in the presentation of this lawsuit as a class action. The class action form, they claim, is used solely for the purpose of "roping millions of future asbestos claimants into [the] settlement[.]" Baron Brief at 42. The objectors argue that when class actions are settled prior to filing the complaint, they are necessarily brought solely to enforce a settlement on others.
The objectors argument on this point is without merit. As I see it, all class actions are brought to affect the rights of class members. "The purpose of a class action is to dispose of the claims of numerous parties in one proceeding." King v. South Cent. Bell Tel. & Tel. Co., 790 F.2d 524, 528 (6th Cir. 1986); see also EEOC v. American Tel. & Tel. Co., 556 F.2d 167, 173-74 (3d Cir. 1977), cert. denied, 438 U.S. 915 (1978). It follows that class action settlements are reached for the same reason -- regardless of their timing. This is precisely why Rule 23 requires judicial scrutiny of class action settlements to determine whether they are fair to the class members. Presentation of this lawsuit as a class action, therefore, is not evidence of collusion.
Looking to the nature of the controversy, and not the timing of the settlement agreement, it is clear that the plaintiffs and the CCR defendants are true adversaries. The proposed settlement simply represents a compromise of a genuine dispute. See, e.g., In re Joint E. & S. Dist. Asbestos Litig., 982 F.2d 721, 739 (2d Cir. 1992), modified in other respects, 993 F.2d 7 (2d Cir. 1993) (asbestos claimants and defendant companies cannot be put in same subclass because their interests are "profoundly adverse to each other."). This Court's reasoning in Pennsylvania Ass'n for Retarded Children does not require a contrary ruling. Just as the plaintiffs and the Commonwealth of Pennsylvania began as adversaries in that case, so did the parties to this dispute. And, the settlements in both cases were reached only after long negotiations.
I conclude that this case is one involving genuinely adverse interests, but, because of the settlement, it lacks a dispute as to the remedy. I conclude, therefore, that the simultaneous filing of the complaint and the proposed settlement does not require a conclusion that the case is collusive or lacks a genuine dispute. A contrary rule would unwisely discourage pre-litigation negotiations and, by encouraging parties to wait an "appropriate" period of time after filing suit to file a proposed settlement, elevate form over substance.
The objectors second collusion argument is that the CCR defendants' agreement in the settlement to pay class counsel's fees is evidence that this lawsuit is "friendly." A review of class action cases, however, quickly reveals that such agreements are standard practice. Malchman v. Davis, 761 F.2d 893, 904 (2d Cir. 1985), cert. denied, 475 U.S. 1143 (1986); Brown v. Pro Football, Inc., 1991 U.S. Dist. LEXIS 11854, at *9 (D.D.C. 1991); Seagoing Uniform Corp. v. Texaco, Inc., 1989 U.S. Dist. LEXIS 12579, at *1 (S.D.N.Y. Oct. 23, 1989); M. Berenson Co. v. Faneuil Hall Marketplace, Inc., 671 F. Supp. 819, 825 (D. Mass. 1987); Lurns v. Russell Corp., 604 F. Supp. 1335, 1345 (M.D. Ala. 1984); Dekro v. Stern Bros. & Co., 571 F. Supp. 97, 101 (W.D. Mo. 1983). Such a provision was expressly approved by the court as "preferable and proper" in In re A.H. Robins Co., 88 Bankr. 755, 761 (E.D. Va. 1988), aff'd, 880 F.2d 709 (4th Cir. 1989). Because in those cases, as in this case, the amount of class counsel's fees is to be fixed by the court, the fee agreements do not support an allegation of collusion.
In light of the foregoing, I conclude that this case is not a collusive or "friendly" suit.
To satisfy the Article III case or controversy requirement, the parties must not only present a "honest and actual antagonistic assertion of rights," Johnson, 319 U.S. at 305, but the controversy must continue to exist at all stages of the federal proceedings. If events subsequent to the filing of the complaint resolve the dispute, the case should be dismissed as moot. United States Parole Com. v. Geraghty, 445 U.S. 388, 397, 63 L. Ed. 2d 479, 100 S. Ct. 1202 (1980). Generally, if the parties reach a settlement, the case is no longer justiciable as an Article III controversy. There is, however, an exception to this rule: a case does not become moot when the parties reach a proposed settlement that is contingent on the approval of the court. Havens Realty Corp., 455 U.S. at 371 n.10; Coopers & Lybrand v. Livesay, 437 U.S. 463, 465 n.3, 57 L. Ed. 2d 351, 98 S. Ct. 2454 (1978). And, as discussed above in the context of collusion, a class action settlement requires judicial approval pursuant to Rule 23 to be binding on the class members. Thus, the objectors' first argument, that the proposed settlement moots the case, is without merit.
The objectors also argue, however, that certain "side agreements" between class counsel and the CCR defendants effectively settle the claims of the named or representative plaintiffs. The objectors claim that because of these side agreements, the individual claims of the named plaintiffs and the entire class action are moot.
The objectors point to the existence of certain side agreements between the CCR defendants and various law firms who represent asbestos victims, including class counsel, as requiring a finding that this lawsuit is moot. See Plaintiffs' Proffer on Preliminary Evaluation of Fairness (example attached as part of Exhibit 3). The agreements are an attempt by the CCR defendants to provide an alternative dispute resolution ("ADR") procedure with respect to future asbestos claims in the event that the proposed settlement in this case fails to be approved and implemented. Under the terms of the side agreements, the signatory law firms will recommend to their future asbestos clients that they defer filing suit against the CCR defendants until any asbestos-related disease is manifested. By deferring their claims, these clients would be accepting the criteria in the CCR defendants' ADR procedure which is virtually identical to the criteria in the proposed settlement. The clients are free to reject the recommendation of counsel, however, and sue the CCR defendants at any time. If the clients accept class counsel's recommendation, the statute of limitations is, by the terms of the agreement, tolled.
These side agreements superseded a prior agreement with one of the two law firms representing the plaintiff class. In the original agreement, if a future asbestos client did not wish to defer filing suit against the CCR defendants until an asbestos-related condition is manifested, the law firm could not represent him or her in a suit against the CCR defendants. However, in light of the recent opinion of the American Bar Association Standing Committee on Ethics and Professional Responsibility (Formal Opinion 93-371), the parties changed this agreement so as to avoid a possible violation of Model Rule of Professional Conduct 5.6(b) which prohibits restrictions on a lawyer's right to practice law.
The objectors claim that these side agreements require dismissal of this class action as moot under the recent Third Circuit case of Lusardi v. Xerox Corp., 975 F.2d 964, 983 (3d Cir. 1992). In Lusardi, former employees brought an age discrimination class action case against their employer. After the case was filed and while no class certification motion was yet pending, the named plaintiffs fully and unconditionally settled their own claims against their employer. The claims of the rest of the putative class remained unsettled, and the named plaintiffs wished to reserve their right to act as class representatives. The Third Circuit held that because the named plaintiffs settled their claims before class certification, the class action was moot. Id. at 974. The court stated:
In such a situation, "there is no plaintiff (either named or unnamed) who can assert a justiciable claim against any defendant and consequently there is no longer a 'case or controversy' within the meaning of Article III of the Constitution."
Id. (quoting Zeidman v. J. Ray McDermott & Co., 651 F.2d 1030, 1041 (5th Cir. 1981)).
The objectors claim that, as in Lusardi, the named plaintiffs in this case have, through the existence of the side agreements, effectively settled their claims against the CCR defendants whether or not the proposed settlement is approved. Baron Brief at 45. This statement is factually untrue. The side agreements do not settle any claims with any asbestos victims. The side agreements only bind the signatory law firms, not their individual clients. Thus, in the event that the proposed settlement is not approved, the claims of the named plaintiffs are not settled. They, and all future asbestos claimants, remain free to sue the CCR defendants, and the various signatory law firms can still represent them in their suit.
Therefore, Lusardi is inapplicable here because, unlike the named plaintiffs in that case, the named plaintiffs in this class action have not definitively settled their claims.
The objectors further claim that the obvious intent of the parties was to have class counsel agree, on behalf of all their clients (i.e., the named plaintiffs), to process claims using the same criteria and procedures as those detailed in the proposed settlement in the event that the settlement is not approved. However, I find that if the claims of the named plaintiffs are not actually settled by the side agreements because these individual plaintiffs themselves are not bound by the side agreements, then the "true" intention of the parties is not important. Cf. Parks v. Pavkovic, 753 F.2d 1397, 1404 (7th Cir.), cert. denied, 473 U.S. 906 (1985) (case does not become moot because one of the parties, while continuing to take all the steps that a live adversary would take to assert his rights, has secretly concluded that come what may he will give his opponent everything the opponent seeks). In other words, whether or not the named plaintiffs have, as the objectors state, committed themselves to the Carlough criteria and procedures, is irrelevant if their current claims are not yet settled and thus are not moot.
I conclude, therefore, that this class action is not moot.
Federal courts are under a continuing duty to satisfy themselves of their jurisdiction before proceeding to the merits of any case. Having done so here, I find that this Court has subject matter jurisdiction over this case. For the reasons discussed above, I find that this class action is a non-collusive justiciable case or controversy in which plaintiffs have standing pursuant to Article III of the Constitution. I also find that it cannot be concluded to a legal certainty that the amount in controversy for each class member does not exceed $ 50,000 in accordance with 28 U.S.C. § 1332. Accordingly, the objections to this Court's subject matter jurisdiction are overruled.
LOWELL A. REED, JR., J.