Landmark Tobacco Case Decertified

Todd J. Zywicki and William H. Jordan*

The explosion of mass tort class actions has presented courts with increasingly complicated and massive cases. Many of these cases are based entirely upon "junk" science, such as the breast implant cases, or upon claims presenting uniquely individual factual issues, such as the asbestos cases. See, e.g., Georgine v. Amchem Prods., 83 F.3d 610 (3d Cir. 1996) (rejecting a settlement class of asbestos claimants); Dante v. Dow Corning Corp., 143 F.R.D. 136 (S.D. Ohio 1992) (certifying silcone breast implant class). Signaling an encouraging trend toward greater judicial scrutiny of large class actions, the Fifth Circuit, in Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996) ("Castano II"), recently reversed the decision of the United States District Court for the Eastern District of Louisiana, which had certified a huge, potentially unmanageable class of virtually all nicotine-dependent persons, and their heirs or survivors, who have smoked cigarettes in the United States since 1943. Id. at 738 (reversing Castano v. American Tobacco Co., 160 F.R.D. 544, 560-61 (E.D. La. 1995) ("Castano I")). In so doing, the Fifth Circuit established an effective methodology by which courts may grapple with the difficult and important issue of class certification in mass tort suits.

I. Background of the Castano Case.

Seeking certification of a nationwide class of individuals injured through nicotine addiction, the plaintiffs in Castano I alleged nine causes of action under various state tort and consumer protection statutes against eight cigarette manufacturers. Castano II, 84 F.3d at 737. The Castano plaintiffs' "novel and wholly untested theory" was that "the defendants fraudulently failed to inform consumers that nicotine is addictive and manipulated the level of nicotine in cigarettes to sustain their addictive nature." Id. The district court certified a Rule 23(b)(3) damages class on certain "core liability issues," such as the "common factual issues" of "whether defendants knew cigarette smoking was addictive, failed to inform cigarette smokers of such, and took actions to addict cigarette smokers," and "common legal issues" of "fraud, negligence, breach of warranty (express or implied), strict liability, and violation of consumer protection statutes." Castano I, 160 F.R.D. at 553. The district court also certified a class on the issue of punitive damages, establishing a procedure whereby the class jury would develop a ratio of punitive damages to actual damages, and the court would apply that ratio in individual cases. Castano II, 84 F.3d at 740.

Under Rule 23(b)(3), a class action may be maintained if "the court finds [1] that the questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and [2] that a class action is superior to other available methods for the fair and efficient adjudication of the controversy." The Fifth Circuit held that the class of plaintiffs in Castano failed both the predominance and superiority tests of Rule 23(b)(3), and therefore reversed, decertified the class, and remanded the case.

II. The Problems of an Immature Tort.

Judge Jerry E. Smith's opinion in Castano II analyzed the predominance and superiority prongs of the certification process by examining the inherent difficulties of certifying a class whose claims are based upon an "immature" tort. A "mature" tort is one where there has been a sufficient number of individual trials to provide a track record to guide the court in making the predominance and superiority analysis required by Rule 23, such as asbestos or Dalkon Shield. Castano II, 84 F.3d at 748.

The Fifth Circuit directs a certifying court to consider first whether the mass tort has matured to the point where an accurate determination can be made as to whether superiority and predominance exist. If the tort is not yet mature, the certifying court is to take a subsequent step and determine whether there are any barriers to an expeditious and cost-effective means of bringing the mass tort to maturation. Only if it is impossible to bring the mass tort to maturation should the court consider certifying an immature mass tort. Id.

By forcing the tort to mature, the Fifth Circuit established an effective methodology for determining class certification questions that balances the goals of Rule 23 with other policy concerns. Through the initial litigation of actions in individualized adjudications, courts in cases involving mature mass torts can establish reliable findings as to issues such as general causation, typical injuries, and levels of damages. Id. For an "immature" class action, especially one of the size and complexity as Castano, the absence of any track record on any of the important issues in the case makes any determinations as to superiority or predominance mere speculation. Id. at 747.

A. Predominance

The guesswork required in certifying an immature tort was obvious in the district court's predominance analysis. A court must undertake an independent inquiry in state law variations, especially in light of differing consumer protection, fraud, comparative or contributory negligence, and punitive damages standards. Id. at 741. The Fifth Circuit found that crucial differences in state law and the lack of any proven "track record" in tobacco cases militated against a finding of predominance. A potential nationwide tort class raises thorny conflict of laws and Erie problems that must be examined in detail. By allowing individual trials to proceed, "[s]tate courts can address the more novel of the plaintiffs' claims, making the federal court's Erie guesses less complicated . . . [and] allow state courts to apply and develop their own law." Id. at 750.

The predominance inquiry also requires a court to "look past the pleadings . . . [to] understand the claims, defenses, relevant facts, and applicable substantive law...." Id. at 741. Without having any trials to guide its analysis, the district court simply assumed that because individual trials would each have a common element - addiction - that common issues would be "significant." Id. at 744-45. Such an interpretation, however, would render the predominance requirement a mere nullity because "any common issue would predominate if common to all individual trials." Id. Moreover, if subsequent litigation demonstrates that individualized issues predominate over common issues, then the class ultimately will be decertified and years of litigation will have been wasted. Id. at 749.

B. Superiority

The certification of an immature tort also creates significant problems in determining whether a class action is superior to individual cases. Unlike the court-swamping caused by individual asbestos cases, there was no indication that the failure to certify the class in this case would create a "judicial crisis" that would overwhelm the legal system with individual suits. The novel nature of the plaintiffs' claim and the speculative nature of the supporting evidence makes it possible that only a limited number of suits will actually be filed. Id. at 747. Moreover, because individual damage claims are high, punitive damages are available in most states, and attorneys' fees may be recovered under many statutes, nicotine addiction cases do not represent "negative value suits." Id. at 748. Thus, if no class were certified at this stage of the litigation, a manageable number of individual claims would probably be filed and litigated, which suits could then serve as the basis for a later determination of whether the case had matured to a point where class certification was appropriate. This "positive value" of these cases is made all the more apparent by the recent $750,000 jury verdict in Florida state court against Brown & Williamson won by a single plaintiff. See "Jury's Tobacco Verdict Suggests Tough Times Ahead for the Industry," Wall St. J., Aug. 12, 1996, at A1.

The Fifth Circuit also found that there is no basis to conclude that there would be any savings in judicial efficiency that could support a finding of superiority. The issues to be established by the class proceeding are intertwined with issues such as comparative negligence and reliance, which will have to be litigated on a case-by-case basis. Because these individualized and common "core" liability issues are intertwined, any savings for judicial efficiency will be at best speculative and at worst non-existent. Id. at 749.

An additional substantive concern raised by class certification is the prejudice to the individual plaintiffs themselves. When a case is converted to a class action, the loyalties of the plaintiffs' counsel become uncertain, as the class action lawyers will face tension in attempting to balance the needs of their individual plaintiffs with their desires to certify a larger class of plaintiffs. Thus, although plaintiffs' counsel claimed that "time was running out" on the lives of the putative members of the class, the class certification issues alone would add multiple layers of complexity and delay into the time that would otherwise be required to prosecute these cases. Id. at 751.

III. Conclusion

The Fifth Circuit's opinion in Castano II is a significant addition to the law of class certification. The stakes are high in such cases; to certify a class is to "commit[] the fate of an entire industry or, indeed, the fate of a class of millions, to a single jury." Id. at 752. By channeling the analysis into issues of the maturity of the underlying tort, Judge Smith's opinion will hopefully force district courts to increase their scrutiny at the certification stage of all potential class actions. The result should be more accurate determination of when class certification is appropriate, an important contribution when the cost of inaccuracy is so high.

* Todd Zywicki is Assistant Professor of Law at Mississippi College School of Law.

William Jordan is an Associate at Alston & Bird in Atlanta.


2001 The Federalist Society