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Ortiz v. Fibreboard Corp. - 527 U.S. 815, 119 S. Ct. 2295 (1999)

Rule:

Fed. R. Civ. P. 23(b)(1)(B), read with subdivision (c)(2), provides for certification of a class whose members have no right to withdraw, when 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 interests.

A fairness hearing under Fed. R. Civ. P. 23(e) is no substitute for rigorous adherence to those provisions of the Rule "designed to protect absentees," among them subdivision (b)(1)(B). Thus, the settling parties must present not only their agreement, but evidence on which the district court may ascertain the limit and the insufficiency of the fund, with support in findings of fact following a proceeding in which the evidence is subject to challenge. The district court, as a matter of law, must have a fact-finding inquiry on this question and allow the opponents of class certification to present evidence that a limited fund does not exist.

Facts:

From 1967 onward, petitioners, Esteban Ortiz and others filed a stream of personal injury claims against respondent Fibreboard Corporation, an asbestos manufacturer that swelled to thousands of new claims for compensation each year. The trial court entered judgment certifying a mandatory settlement class on a limited fund theory under Fed. R. Civ. P. 23(b)(1)(B). The court of appeals affirmed. Petitioners contested the certification.

Issue:

Was the certification proper?

Answer:

No.

Conclusion:

The  Court reversed and remanded the judgment that affirmed a grant of class certification for the purpose of a global settlement. The Court found that petitioners failed to demonstrate that the fund was limited except by the agreement of the parties and that the fund showed exclusions from the class and allocations of assets at odds with the concept of limited fund treatment and the structural protections of the Federal Rules of Civil Procedure.

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