$00:0100003325:B2A2BCDB00000CFD:<LNI='3X34-SSY0-0060-D00P-00000-00' MINREV='00002' ERPT=B2A2BCDB>$01:$=T1*=SS_#TOBACCO-TOC# Return to the Recent Tobacco Industry Cases TOC$%$?$%**********************************************************$03:$=N1298*8$10:Carol Fletcher, Retha Colclough, Betty Clark, Thomas Polydoros, Leo H. Headrick, William O. Parker and Preferred Health Alliance, Inc., on behalf of themselves and all others similary situtated, Plaintiffs v Brooke Group, Ltd., Liggett Group, Inc. and Liggett & Myers, Inc., Defendants$20:Civil Action No. CV97-913 Class Action$25:CIRCUIT COURT OF MOBILE COUNTY, ALABAMA$30:$T$=<$=V08576001999000038*1298 1999 Extra LEXIS 38$=>$40:July, 22, 1999, Decided$110:$=P1298*1 Robert G. Kendall, Circuit Judge$120:$T$=B$UORDER ON FINAL HEARING$O$=R$TPlaintiff class representatives (collectively "Plaintiffs") brought this action as a nationwide class action against Defendants Liggett & Myers Inc., Liggett Group Inc., ("Liggett") and Brooke Group Ltd. (collectively "Defendants") seeking compensation for damages allegedly caused by cigarettes manufactured by Liggett and its predecessors.$TPlaintiffs and Defendants submitted to the Court a nationwide class action settlement agreement designed to resolve all smoking-related claims against Defendants. This agreement was preliminarily approved, the Court finding that the proposed settlement fell "within the range of possible approval," and the matter was provisionally certified as a mandatory class action. Subsequently, Plaintiffs and Defendants filed an amended settlement agreement. On December 8, 1998, after a hearing in open court, the Court reaffirmed the provisional class certification and preliminarily approved the amended agreement.$TOn March 4, 1999, the case was assigned to the undersigned. Numerous parties have been allowed to intervene (collectively "Objectors") and have filed pleadings raising a number of issues, $=P1298*2 primarily lack of personal jurisdicition, the impropriety of a mandatory or non-opt-out class, the unfairness of the proposed agreement and the unsuitablility of the class for certification at all.$TThe hearing on the request for final approval was held on June 10, 1999, considerable discovery having been conducted in the interim by Plaintiffs, Defendants and Objectors. All parties wishing to present evidence, question witnesses or submit arguments were invited to do so, and many did. At the close of the hearing the matter was taken under submission pending the filing of briefs through, as extended, July 16, 1999. Based on the pleadings, the evidence, the arguments and the briefs, the Court finds and concludes as follows.$TThe proposed settlement represents a good faith effort of Plaintiffs and Defendants to achieve the goals of delivering maximum compensation to the class and of preventing the outright destruction of Liggett. Basically, in exchange for immunity of Defendants from suit for smoking-related claims by anyone over who this Court could exercise jurisdicition, Liggett would make a $ 10 million cash payment followed by payments of nine percent of Liggett's pretax income or$=P1298*3 $ 1 million, whichever is greater, over the next 25 years, plus additional costs, expenses and fees. Plaintiffs and Defendants assign a present value of $ 75 million to these payments, against a claimed current net worth of Liggett of approximately $ 200 million (Joint Post-Hearing Memorandum, p.12), which figures the Court accepts for the purposes of this order. Clearly, the existing and potential claims against Liggett exceed $ 200 millio n.$TThe parties to the agreement recognize the value of Liggett's historic cooperation with tobacco claimants, especially with the Attorneys General, in providing helpful documents and testimony. Liggett proposes to continue such cooperation by assisting in the discovery of further documents and by continuing to provide testimony voluntarily. There is no question that this cooperation, historic and prospective, has been and will be of great value to tobaccco claimants. n1 Liggett has, in this regard, substantial basis for its claim of acting as a good and responsible corporate citizen and deserves to be rewarded for it. Liggett presently has a market share in the two percent range.$T$F$%$?$%- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n1 Liggett has been rewarded handsomely in the settlement with the Attorneys General for its historic cooperation. $%$?$%- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -$E$=P1298*4 $TPlaintiffs and Defendants seek certification of the class as a "limited fund" mandatory settlement class under the provisions of Rule 23(b)(1)(B), $IA.R.Civ.P$N., which Rule provides, in pertinent part, that class actions may be maintained if the numberosity, commonality, typicality and adequacy requirements of Rule 23(a) are met and the prosecution of separate actions "would create a risk of adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interest." The Federal Rule is identical. Plaintiffs and Defendants claim, and the evidence indicates, that the fact that the net worth of Liggett is exceeded by the actual and potential claims against it means that adjudication in favor of some individual members of the class would consume the available funds and leave nothing for other members.$TOn June 23, 1999, the Supreme Court of the United States released $=<$=T3*3 $=L01805000119002295*002295 $=L08305001999004373*004373 $=L04538001999412604*412604 $IOrtiz v. Fibreboard Corp.$N, 119 S. Ct. 2295, 1999 U.S. LEXIS 4373, 1999 WL 412604.$=>$=P1298*5 The applicability and impact of $IOrtiz$N have been briefed by the parties.$TLike $=<$=T3*1 $=L01917000521000591*000591 $IAmchem Products, Inc. v Windsor$N, 521 U.S. 591 (1997),$=> before it, $IOritiz$N concerns the effort by the litigants, lawyers and trial judge involved to deal with what the $IOrtiz$N Court calls the "elephantine mass of asbestos cases." The trial court had certified a mandatory "global" settlement class under Rule 23(b)(1)(B) of the Federal Rules and approved the proposed settlement, which actions were affirmed by the Fifth Circuit Court of Appeals.$TReversing, the Supreme Court reviewed the "limited fund" law predating the adoption of Rule 23(b)(1)(B) in order to ascertain the intent of the drafters of the Rule. The Court opined that they (the drafters) "did not contemplate that the mandatory class action codified in subdivision (b)(1)(B) would be used to aggregate unlimited tort claims on a limited fund rationale," and further opined and decided that if they had they "would have thought such an application surprising and $(we$) take this as a good reason to limit any surprise by presuming that the Rule's historical antecedents identify requirements." Those requirements were found$=P1298*6 to be (1) "that the totals of the liquidated claims and the fund available for satisfying them, set definitely at their maxi mums, demonstrate the inadequacy of the fund to pay all of the claims;" (2) that "the whole of the inadequate fund was to be devoted to the overwhelming claims;" and (3) that "the claimants identified by a common theory of recovery were treated equitably amoung themselves." n2$T$F$%$?$%- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n2 It would not be accurate to ascribe the $IOrtiz$N result soley to the restrictive construction of a rule of procedure. The Court was grappling as well with Constitutional protections - the jury trial rights of absent class members and the general due process principle that one is not bound by an in personam judgment in a proceeding to which one has not been made a party by service of process, to name two.$%$?$%- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -$E$THere, consideration of the insufficiencies urged by Objectors as to the proof of requirements (1) and (3) is obviated by a consideration of requirement (2). Clearly, the whole of the fund is not devoted to the claims. It is true that a greater percentage is so devoted than in $IOrtiz$N. Also, $=P1298*7 Liggett might be entitled to a credit for some saved transaction costs. $IOrtiz$N leaves this question, like other more central question, for later decision, but indicates (Footnote 35) that the settlement would have to provide "funds equal to, or greater than, what might have been recovered through individual litigation factoring out transactions costs." n3 Finally, Liggett cannot apply its claimed credit for cooperation against the requirement for exhaustion of the fund. While such credit goes to the question of the fairness of the settlement under Rule 23(3), to paraphase $IOrtiz$N, it does not dispense with the requirements of Rule 23(b)(1)(B). This Court cannot and does not find that the exhaustion requirement identfied in $IOrtiz$N has been met.$T$F$%$?$%- - - - - - - - - - - - - - - - - -Footnotes- - - - - - - - - - - - - - - - - - n3 The Court earlier quoted $IAmchem$N to the effect that " 'the benefits asbestos-exposed persons might gain from the establishment of a grand-scale compensation scheme is a matter fit for legislative consideration.' " $%$?$%- - - - - - - - - - - - - - - - -End Footnotes- - - - - - - - - - - - - - - - -$E$TThe Chief Justice, concurring in $IOrtiz$N, recognized "the near-heroic efforts of the District Court in this case to make the$=P1298*8 best of a bad situation." That aptly describes the efforts of Plaintiffs, Defendants and their counsel in this case. Those efforts have now been thwarted, in part by a requirement which not everyone might have anticipated.$TOne cannot but conclude from the dicta in $IOrtiz$N that the prospect for the use of Rule 23(b)(1)(B) for the aggregation of individual tort claims under any circumstances is dim indeed. Tobacco litigation has every likelihood of dwarfing the horrendous asbestos situation described in the $IOrtiz$N dissent. The wringing of hands and the calls for legislative action in the $IOrtiz$N majority and for amendment of the Federal Rules in the concurrence provide cold comfort to litigants searching for solutions. They deserve better.$TThe requests for final approval of the agreement for class certification are denied. The Court will issue such further orders as may be necessary or appropriate.$TDone at Mobile on this the 22nd day of July, 1999. $T/s/ Robert G. Kendall, Circuit Judge$200:#170501M0010K8010#$?#990802M0015BCD08#$?#LS990730LEmarciah#$?#LS990802LEudillrx#$?#990806PLXC0020002#$?#LS990802LEmarci ah#$?#LS990803LEmarciah#$?$220:#EXTR# #EXTRA-TOBACCO-FLETCHER#