This is the first of nine opinions, all filed this date, deciding appeals from various orders of the United States District Court for the Eastern District of New York, Jack B. Weinstein, Chief Judge, in multidistrict litigation No. 381, In re "Agent Orange" Product Liability Litigation. This opinion begins with a section that summarizes the entire litigation and all of our rulings. It also sets out in detail the procedural history and general background of all the appeals, familiarity with which may be necessary to understand the other opinions. It then goes on to affirm the certification of a class action and approval of the settlement. The other opinions deal seriatim with appeals from the establishment of a distribution scheme for the resultant settlement fund, the grant of summary judgment against plaintiffs who opted out of the class action, the dismissal of an action brought against the United States by veterans and derivatively by their families, the dismissal of a third-party action against the United States by the chemical companies, the dismissals of actions against the United States and the chemical companies by civilian plaintiffs, the dismissal of a "direct" action against the United States by wives and children of veterans, the upholding of a fee agreement among members of the Plaintiffs' Management Committee, and the award of attorneys' fees by the district court.
Before: VAN GRAAFEILAND, WINTER, and MINER, Circuit Judges.
This is the first of nine opinions, all filed on this date, dealing with appeals from Judge Pratt's and Chief Judge Weinstein's various decisions in this multidistrict litigation and class action. This opinion begins with a section entitled "Overview and Summary of Rulings" that summarizes the entire case and all of our decisions. The next section, "Detailed History of Proceedings," gives the background for all of the appeals. Familiarity with this section may be necessary to understand the various opinions that follow. The present opinion also contains our rulings regarding the certification of a class action and the approval of the settlement between the plaintiff class and the defendant chemical companies. Two other opinions by this author review the propriety of the distribution scheme for the resultant fund and the grant of summary judgment against those plaintiffs who opted out of the class action. Three opinions by Judge Van Graafeiland resolve issues concerning the liability of the United States to veterans, their families, and the chemical companies. A fourth opinion by Judge Van Graafeiland reviews the dismissal of actions brought by civilian plaintiffs against the United States and the chemical companies. Two opinions by Judge Miner resolve issues concerning the validity of a fee agreement among the members of the Plaintiffs' Management Committee ("PMC") and the district court's award of attorneys' fees.
Most of the appeals in this litigation were argued on April 9-10, 1986. The appeal from the adoption of the distribution scheme, however, was not taken until August 19, 1986 and was not argued until October 1. Because the issues raised by the latter appeal were in many ways interrelated with those argued in April, the panel had to suspend consideration of these matters until it heard the arguments in October.
I. OVERVIEW AND SUMMARY OF RULINGS
By any measure, this is an extraordinary piece of litigation. It concerns the liability of several major chemical companies and the United States government for injuries to members of the United States, Australian, and New Zealand armed forces and their families. These injuries were allegedly suffered as a result of the servicepersons' exposure to the herbicide Agent Orange while in Vietnam.
Agent Orange, which contains trace element of the toxic by-product dioxin, was purchased by the United States government from the chemical companies and sprayed on various areas in South Vietnam on orders of United States military commanders. The spraying generally was intended to defoliate areas in order to reduce the military advantage afforded enemy forces by the jungle and to destroy enemy food supplies.
We are a court of law, and we must address and decide the issues raised as legal issues. We do take note, however, of the nationwide interest in this litigation and the strong emotions these proceedings have generated among Vietnam veterans and their families. The correspondence to the court, the extensive hearings held throughout the nation by the district court concerning the class settlement with the chemical companies, and even the arguments of counsel amply demonstrate that this litigation is viewed by many as something more than an action for damages for personal injuries. To some, it is a method of public protest at perceived national indifference to Vietnam veterans; to others, an organizational rallying point for those veterans. Thus, although the precise legal claim is one for damages for personal injuries, the district court accurately noted that the plaintiffs were also seeking "larger remedies and emotional compensation" that were beyond its power to award. In re "Agent Orange" Product Liability Litigation, 597 F. Supp. 740, 747 (E.D.N.Y. 1984).
Central to the litigation are the many Vietnam veterans and their families who have encountered grievous medical problems. It is human nature for person who face cancer in themselves or serious birth defects in their children to search for the causes of these personal tragedies. Well-publicized allegations about Agent Orange have led many such veterans and their families to believe that the herbicide occurred while they were serving their country in circumstances that were unpleasant at best, excruciating at worst.
When the case is viewed as a legal action for personal injury sounding in tort, however -- and we are bound by our oaths to so view it -- the most noticeable fact is the pervasive factual and legal doubt that surrounds the plaintiffs' claims. Indeed, the clear weight of scientific evidence casts grave doubt on the capacity of Agent Orange to injure human beings. Epidemiological studies of Vietnam veterans, many of which were undertaken by the United States, Australian, and various state governments, demonstrate no greater incidence of relevant ailments among veterans or their families than among any other group. To an individual plaintiff, a serious ailment will seem highly unusual. For example, the very existence of a birth defect may persuade grieving parents as to Agent Orange's guilt. However, a trier of fact must confront the statistical probability that thousands of birth defects in children born to a group the size of the plaintiff class might not be unusual even absent exposure to Agent Orange. A trier of fact must also confront the fact that there is almost no evidence, even in studies involving animals, that exposure of males to dioxin causes birth defects in their children.
Both the Veterans' Administration and the Congress have treated the epidemiological studies as authoritative. Although such studies do not exclude the possibility of injury and settle nothing at all as to future effects, they offer little scientific basis for believing that Agent Orange caused any injury to military personnel or their families. The scientific basis for the plaintiffs' case consists of studies of animals and industrial accidents involving dioxin. Differences in the species examined and nature of exposure facially undermine the significance of these studies when compared with studies of the veterans themselves.
Proving that the ailments of a particular individual were caused by Agent Orange is also extremely difficult. Indeed, in granting summary judgment against those plaintiffs who opted out of the class action (the "opt-outs"), the district court essentially held that such proof was presently impossible. The first evidentiary hurdle for such an individual is to prove exposure to Agent Orange, an event years past that at the time did not carry its current significance. Such evidence generally consists only of oral testimony as to an individual's remembering having been sprayed while on the ground and/or having consumed food and water in areas where spraying took place. The second and, in the view of the district court, insurmountable hurdle is to prove that the individual's exposure to Agent Orange caused the particular ailment later encountered. Plaintiffs do not claim that Agent Orange causes ailments that are not found in the population generally and that cannot result from causes known and unknown other than exposure to dioxin. Plaintiffs' proof of causation would consist largely of inferences drawn from the existence of an ailment, exposure to Agent Orange, and medical opinion as to a causal relationship. However, the difficulties in excluding known causes, such as undetected exposure to the same or similar toxic substances in civilian life, and the conceded existence of unknown causes might make it difficult for any plaintiff to persuade a trier of fact as to Agent Orange's guilt. Causation is nevertheless an absolutely indispensable element of each plaintiff's claim.
The plaintiffs' claims are further complicated by the fact that an individual's exposure to Agent Orange cannot be traced to a particular defendant because the military mixed the Agent Orange produced by various companies in identical, unlabeled barrels. No one can determine, therefore, whether a particular instance of spraying involved a particular defendant's product. In addition, the Agent Orange produced by some defendants had a considerably higher dioxin content than that produced by others. Because the alleged ailments may be related to the amount of dioxin to which an individual was exposed, it is conceivable that if Agent Orange did cause injury, only the products of certain companies could have done so.
Difficult legal problems also arise from the considerable uncertainty as to which product liability rules and statutes of limitations apply to the various plaintiffs. The plaintiffs come from throughout the United States, Australia, and New Zealand, and each would face difficult choice of law problems that might be resolved adversely to their claims.
Finally, doubt about the strength of the plaintiffs' claims exists because of the so-called military contractor defense. The chemical companies sold Agent Orange to the United States government, which used it in waging war against enemy forces seeking control of South Vietnam. It would be anomalous for a company to be held liable by a state of federal court for selling a product ordered by the federal government, particularly when the company cold not control the use of that product. Moreover, military activities involve high stakes, and common concepts of risk averseness are of no relevance. To expose private companies generally to lawsuits for injuries arising out of the deliberately risky activities of the military would greatly impair the procurement process and perhaps national security itself.
An illustration of the many factual and legal difficulties facing the plaintiffs is the dispute among their counsel as to how many "serious" or "strong" claims there are. The Plaintiffs' Management Committee ("PMC") estimates a much smaller number than do counsel for the class members who object to the settlement. Neither group has hard evidence to support its estimates. If by "serious" or "strong" one means a case likely to prevail on liability and to result in a substantial damage award, then we believe that every plaintiff would encounter difficulties in proving causation and even graver problems in overcoming the military contractor defense. If a case is considered "serious" or "strong" because the plaintiff has grave ailments or had died, then such cases doe exist although their numbers remain in doubt. What is not in doubt is that the widespread publicity given allegations about Agent Orange have led to an enormous number of claims allegation a large variety of highly common ailments. The illnesses claimants now attribute to Agent Orange include not only heart disease, cancer, and birth defects, but also confusion, fatigue, anxiety, and spotty tanning.
The procedural aspects of this litigation are also extraordinary. Chief Judge Weinstein certified it as a class action at the behest of most of the plaintiffs and over the objections of all of the defendants. Certain issues, such as the damage suffered by each plaintiff, were not, of course, to be determined in the class action. Instead, they were to be left to individual trials if the outcome of the class action proceedings was favorable to the plaintiffs. Some plaintiffs opted out of the class action, but their cases remained in the Eastern District of New York as part of a multidistrict referral.
The class certification and settlement caused the number of claimants and the variety of ailments attributed to Agent Orange to climb dramatically. It also has caused disunity among the plaintiffs and increased the controversy surrounding this case. Correspondence to this court indicates that many of the original plaintiffs, most of whom joined the motions for class certification, were never advised that use of the class action device might lead to their being represented by counsel whom they did not select and who could settle the case without consulting them. In the midst of this litigation, original class counsel, Yannacone & Associates, asked to be relieved for financial reasons. Control of the class action soon passed to the PMC. Six of the nine members of the PMC advanced money for expenses at a time when the plaintiffs' case, already weak on the law and the facts, was near collapse for lack of resources. This money was furnished under an agreement that provided that three times the amount advanced by each lawyer would be repaid from an eventual fee award. These payments would have priority, moreover, over payments for legal work done on the case.
The trial date set by Chief Judge Weinstein put the parties under great pressure, and just before the trial was to start, the defendants reached a $180 million settlement with the PMC. The size of the settlement seems extraordinary. However, given the serious nature of many of the various ailments and birth defects plaintiffs attributed to Agent Orange, the understandable sympathy a jury would have for the particular plaintiffs, and the large number of claimants, 240,000, the settlement was essentially a payment of nuisance value. Although the chances of the chemical companies' ultimately having to pay any damages may have been slim, they were exposed potentially to billions of dollars in damages if liability was established and millions in attorneys' fees merely to continue the litigation.
The district judge approved the settlement. It is clear that he viewed the plaintiffs' case as so weak as to be virtually baseless. Indeed, shortly after the settlement, he granted summary judgment against the plaintiffs who opted out of the class action on the grounds that they could not prove that a particular ailment was caused by Agent Orange and that their claims were barred by the military contractor defense.
In addition, Chief Judge Weinstein awarded counsel fees in an amount that was considerably smaller than had been requested by the attorneys involved. The size of the award was clearly influenced by this skepticism about whether the case should ever have been brought.
The final extraordinary aspect of this case is the scheme adopted by Chief Judge Weinstein to distribute the class settlement award. That scheme, which is described as "compensation-based" rather than "tort-based," allows veterans who served in areas in which the herbicide was sprayed and who meet the Social Security Act's definition of disabled to collect benefits up to a ceiling of $12,000. Smaller payments are provided to the survivors of veterans who served in such areas. No proof of causation by Agent Orange is required, although benefits are available only for non-traumatic disability or death. The distribution scheme also provides for the funding of a foundation to undertake projects thought to be helpful to members of the class.
Many of the decisions of the district court were appealed, and we summarize our rulings here. In this opinion, we reject the various challenges to the certification of a class action. Although we share the prevalent skepticism about the usefulness of the class action device in mass tort litigation, we believe that its use was justified here in light of the centrality of the military contractor defense to the claims of all plaintiffs. We also approve the settlement in light of both the pervasive difficulties faced by plaintiffs in establishing liability and our conviction that the military contractor defense absolved the chemical companies of any liability. In a second opinion by this author, No. 86-3039, we affirm the distribution scheme's provision for disability and death benefits to veterans exposed to Agent Orange and their survivors. We reverse the scheme's establishment of a foundation; however, the district court may on remand fund and supervise particular projected it finds to be of benefit to the class. A third opinion by this author, No. 85-6163, affirms the grant of summary judgment against the opt-out plaintiffs based on the military contractor defense. On two grounds we hold that the chemical companies did not breach any duty to inform the government of Agent Oranges' hazardous properties. First, at the times relevant here, the government had as much information about the potential hazards of dioxin as did the chemical companies. Second, the weight of present scientific evidence does not establish that Agent Orange caused injury to personnel in Vietnam. The chemical companies did not breach any duty to inform the government and are therefore not liable to the opt-outs.
In an opinion by Judge Van Graafeiland, No. 85-6091, we affirm the district court's dismissal of actions against the United States by veterans on the grounds that they are barred by the Feres doctrine and the discretionary function exception to the Federal Tort Claims Act. A second opinion by Judge Van Graafeiland, No. 85-6153, affirms the dismissal of an action against the United States by the chemical companies seeking contribution or indemnity for the $180 million they paid in settling with the plaintiff class. A third opinion, No. 85-6161, affirms the dismissal of civilian actions against the United States on discretionary function grounds and of similar actions against the chemical companies on statute of limitations and military contractor defense grounds. A final opinion by the same author, No. 86-6127, affirms the dismissal of the so-called "direct" claims by families of veterans against the government on Feres and discretionary function grounds.
An opinion by Judge Miner, No. 85-6365, invalidates the PMC members' agreement to repay on an "up front" basis treble the expenses that any of them advanced. We hold that this agreement creates a conflict of interest between the attorneys and the class by generating impermissible incentives to settle. A second opinion by Judge Miner, No. 85-6305, affirms the district court's award of counsel fees except with regard to the abrogation of one fee award.
II. DETAILED HISTORY OF PROCEEDINGS
Plaintiffs allegedly were exposed to the herbicide Agent Orange as a consequence of efforts undertaken by the United States military forces to defoliate the jungle in Vietnam. One purpose of this defoliation project, known as "Operation Ranch Hand," was to clear away foliage near supply transport lines, power lines, and military bases, and thus deprive enemy forces of protective cover. The herbicide was also used to destroy crops available to the enemy. Some plaintiffs claim to have been directly exposed to the herbicide, while others claim that it contaminated the food and water they consumed or the ground on which they slept.
Although various herbicides were used during the war, Agent Orange was thought to be best suited for the military's purposes and was used most frequently. Agent Orange was a mixture of the herbicides known as 2,4-D and 2,4,5-T.*fn1 The manufacture of 2,4,5-T is said inevitably to result in the production of dioxin, which is alleged to be a highly toxic substance. Whether the trace elements of dioxin in Agent Orange were hazardous to persons in sprayed areas is sharply disputed. Indeed, the toxicity of dioxin itself remains a controversial issue. See generally P. Schuck, Agent Orange on Trial 16-24 (1986); M. Gough, Dioxin, Agent Orange (1986).
The Agent Orange litigation began in July 1978, with the filing of a lawsuit by Vietnam veteran Paul Reutershan, now deceased, in Supreme Court, New York County. The defendants were several chemical companies alleged to have manufactured Agent Orange. That case was removed to federal court and then transferred to the Eastern District of New York. On January 8, 1979, Reutershan's estate filed an amended complaint seeking relief on behalf of a class of veterans and their families injured by Agent Orange. Several other complaints alleging similar class claims were filed in late 1978 and early 1979. In March 1979, counsel for Reutershan's estate and for defendant Dow Chemical Co. jointly petitioned pursuant to 28 U.S.C. § 1407(c) (1982) for the establishment of a multidistrict litigation proceeding. The Judicial Panel on Multidistrict Litigation established In re "Agent Orange" Product Liability Litigation, MDL No. 381, in the Eastern District of New York. The first cases were transferred to the Eastern District on May 8, 1979, and nearly 600 cases have since been transferred. MDL No. 381 was assigned to then District Judge Pratt.
The third amended class complaint in the case designated by the court as the lead action alleged federal question jurisdiction under the "common law and/or the statutory laws of the United States." Defendants moved to dismiss this complaint for want of subject matter jurisdiction. judge Pratt adopted the federal common law theory and accordingly denied the motion. In re "Agent Orange" Product Liability Litigation, 506 F. Supp. 737, 743-49 (E.D.N.Y. 1979). However, a divided panel of this court reversed. In re "Agent Orange" Product Liability Litigation, 635 F.2d 987 (2d Cir. 1980), cert. denied, 454 U.S. 1128, 102 S. Ct. 980, 71 L. Ed. 2d 116 (1981). The class action thereafter proceeded in federal court solely on the basis of diversity jurisdiction under 28 U.S.C. § 1332 (1982).
Defendants next moved for summary judgment based on the so-called military contractor defense. The motion contended that the plaintiffs' claims against the chemical manufacturers were barred on the grounds:
(1) that they merely manufactured and supplied Agent Orange to the government pursuant to validly authorized contracts[;] (2) that Agent Orange was to manufactured before and has not been manufactured since; (3) that they completed their compelled manufacture of Agent Orange in strict compliance with the specifications supplied by the government, specifications that contained no obvious or "glaring" defects that would have alerted the defendants of any impending danger in following them; and (4) that they manufactured Agent Orange without any negligence on their part.
In re "Agent Orange" Product Liability Litigation, 506 F. Supp. 762, 795 (E.D.N.Y. 1980).
Although Judge Pratt stated that this defense might be available to the defendants, id. at 796, he denied defendants' motion on the ground that their own descriptions of their contract performance and their relationship to the government raised issues of fact requiring a trial. Id.
Judge Pratt planned to hold an initial trial on the military contractor defense and allowed discovery on this issue. He stated:
The elements of the defense will be uniquely adapted to consideration and adjudication, separate and apart from the issues of liability, causation and damages. As a practical matter, discovery as to these discrete issues will be rather narrow compared to the discovery that some of the other fact issues presented by this action may require.
In addition, Judge Pratt stated his intention to certify a class pursuant to Fed. R. Civ. P. 23(b)(3) of "persons who claim injury from exposure to Agent Orange and their spouses, children and parents who claim direct or derivative injury therefrom." Id. at 788. He noted that "it may later prove advantageous to create subclasses for various purposes." Id. Judge Pratt rejected plaintiffs' request for certification of a "limited fund" class action pursuant to Fed. R. Civ. P. 23(b)(1)(B), on the ground that plaintiffs had failed to offer evidence that the defendants were likely to become insolvent if held liable for plaintiffs' injuries. Id. at 789-90.
Following eleven months of discovery, defendants Hercules, Thompson Chemical, Riverdale Chemical, Hoffman-Taft, Dow Chemical, TH Agriculture and Nutrition, and Uniroyal again moved for summary judgment on the military contractor defense. Defendants Monsanto and Diamond Shamrock did not join in the motion. Judge Pratt granted summary judgment to Hercules, Thompson Chemical, Riverdale Chemical, and Hoffman-Taft, but denied the motions of Dow Chemical, TH Agriculture and Nutrition, and Uniroyal. In re "Agent Orange" Product Liability Litigation, 565 F. Supp. 1263 (E.D.N.Y. 1983). He also concluded that the planned separate trial on the military contractor defense was no desirable. He noted that discovery and argument of motions on the military contractor defense had revealed that the defense implicated factual issues also central to both liability and causation and thus should not be tried separately. Subsequently, defendants Hercules and Thompson Chemical were reinstated as defendants.
In 1980, Yannacone & Associates, a consortium of lawyers who banded together for purposes of this litigation, was designated lead counsel for the representatives of the plaintiff class. See 506 F. Supp. at 788 n.32. In 1983, the firm of Ashcraft & Gerel and attorneys Benton Musslewhite, Steven Schlegel, and Thomas Henderons joined Yannacone & Associates as lead counsel for the representatives of the class. In September 1983, Yannacone & Associates moved to be relieved of its duties as class counsel, citing an inability to bear the costs associated with the litigation. This motion was granted. Ashcraft & Gerel sought to gain control of the case but failed to do so and withdrew as class counsel. As we describe infra, Musslewhite, Schlegel, and Henderson then recruited additional attorneys to the PMC. See generally Schuck, Agent Orange on Trial at 73-77, 94-95, 102-110. Although not a member of the PMC, Ashcraft & Gerel has continued to represent plaintiffs who have opted out of the class action, certain civilian plaintiffs, and certain class members who object to the settlement.
Judge Pratt's duties as a newly-appointed member of this court precluded him from continuing as trial judge, and in October 1983, Chief Judge Weinstein assumed responsibility for MDL No. 381. After conferring with the parties, he ordered the trial of the class claims to begin on May 7, 1984. He formally certified a Rule 23(b)(3) class, finding
(1) that the affirmative defenses and the question of general causation are common to the class, (2) that those questions predominate over any questions affecting individual members, and (3) given the enormous potential size of plaintiffs' case and the judicial economies that would result from a class trial, a class action is superior to all other methods for a "fair and efficient adjudication of the controversy."
In re "Agent Orange" Product Liability Litigation, 100 F.R.D. 718, 724 (E.D.N.Y. 1983) ("Class Certification Opinion").
Chief Judge Weinstein defined the plaintiff class as
those persons who were in the United States, New Zealand or Australian Armed Forces at any time from 1961 to 1972 who were injured while in or near Vietnam by exposure to Agent Orange or other phenoxy herbicides, including those composed in whole or in part of 2,4,5-trichlorophenoxyacetic acid or containing some amount of 2,3,7,8-tetrachlorodibenzo-p-dioxin. The class also includes spouses, parents, and children of the veterans born before January 1, 1984, directly or derivatively injured as a result of the exposure.
In addition, Chief Judge Weinstein certified a Rule 23(b)(1)(B) mandatory class on the issue of punitive damages, though not on the ground, previously rejected by Judge Pratt, that the claims against the defendants could render them insolvent. Rather, he reasoned that because the purpose of punitive damages is not to compensate but to punish, some limits should be imposed on the amount of punishment meted out to the defendants for a single transaction. See Roginsky v. Richardson-Merrell, Inc., 378 F.2d 832, 838-42 (2d Cir. 1967) (Friendly, J.). Chief Judge Weinstein reasoned that punitive damages might be awarded, if at all, only to the first plaintiffs to receive a judgment. He concluded that
it would be equitable to share [a punitive damage award] among all plaintiffs who ultimately recover compensatory damages. Yet, if no class is certified under Rule (b)(1)(B), non-class members who opt out under Rule 23(b)(3) would conceivably receive all of the punitive damages or, if their cases are not completed first, none at all.
Chief Judge Weinstein also required that plaintiffs' counsel, at their own expense, provide notice to the members of the class as follows:
(1) Written notice was to be mailed to (a) all persons who had filed actions in the federal district courts, or had filed actions in state courts later removed to federal court, that were pending in or transferred to the Eastern District; (b) all person who had intervened or sought to do so; (c) each class member then represented by counsel associated with the PMC who had not yet commenced an action or sought to intervene; (d) all persons then listed on the United States Government's Veterans' Administration "Agent Orange Registry";
(2) Announcements were to be sent to the major radio and television networks, and to radio stations with a combined coverage of at least one half of the audience in each of the top 100 radio markets;
(3) Notice was to be published in certain leading national newspapers and magazines, in servicepersons' publications, and in newspapers in Australia and New Zealand;
(4) A toll-free "800" telephone number was to be obtained and staffed by persons who would provide callers with basic information about the litigation;
(5) Notice was to be sent to each state governor requesting that he or she refer the notice to any state agency dealing with the problems of Vietnam veterans.
The notice sent to individual veterans, reprinted in the appendix to this opinion, informed potential class members of the pendency of the class action and their right to opt out of the Rule 23(b)(3) class. The notice made clear that exclusion could be effectuated only by written request, and an "Exclusion Request Form" was attached to the notice for convenience.
Following certification of the two classes, the defendants petitioned this court for a writ of mandamus to compel the district court to vacate certification of the classes. See In re Diamond Shamrock Chemicals Co., 725 F.2d 858 (2d Cir.), cert. denied, 465 U.S. 1067, 104 S. Ct. 1417, 79 L. Ed. 2d 743 (1984). In denying the petition, we noted that "mandamus is an extraordinary remedy," id. at 859, and that "review of the many issues raised by the class certification will be available when the ramifications of each aspect of the ruling will be evidence." Id. at 862. We also stated that "it seems likely that some common issues, which stem from the unique fact that the alleged damage was caused by a product sold by private manufacturers under contract to the government for use in a war, can be disposed of in a single trial. The resolution of some of these issues in defendants' favor may end the litigation entirely." Id. at 860-61. We further observed that the notice required was at least arguably the best practicable under the circumstances. Id. at 862.
Various plaintiffs, as a means of challenging the settlement, now appeal from the class certification. They contend that the district court lacked subject matter jurisdiction, that there were insufficient common questions of law and fact to justify certification, and that the notice was inadequate.
In April 1984, Chief Judge Weinstein appointed three special masters -- Leonard Garment, Kenneth Feinberg, and David Shapiro -- to assist in negotiations over a settlement of the class action. These negotiations intensified during the weekend before trial. See Schuck, Agent Orange on Trial at 49-66. On May 7, 1984, the day the trial was to have begun, the class representatives and the chemical companies agreed to settle the class claims for $180 million. Thereafter, Chief Judge Weinstein conducted eleven days of hearings on the proposed settlement in New York, Atlanta, Houston, Chicago, and San Francisco. At these hearings, nearly 500 witnesses addressed the fairness of the settlement. Chief Judge Weinstein also considered "hundreds of written communications from veterans, members of their families, veterans' organizations and others . . . and read a large part of the relevant literature, taking judicial notice of its substance." In re "Agent Orange" Product Liability Litigation, 597 F. Supp. 740, 748 (E.D.N.Y. 1984) (" Settlement Opinion ").
By May 6, 1984, the day before the settlement was reached, some 2,440 class members had opted out of the Rule 23(b)(3) class action by filing requests for exclusion. The settlement agreement provided for a period during which persons who had opted out of the class could be reinstated as class members if they filed a request with the district court. Settlement Agreement par. 8, id. at 865. Some 600 such requests were received. Chief Judge Weinstein stated that he would consider late applications to rejoin the class "sympathetically." Id. at 757.
In a lengthy opinion, reported at 597 F. Supp. 740 (E.D.N.Y. 1984), Chief Judge Weinstein approved the settlement subject to hearings on counsel fees and preliminary consideration of plans for distribution of the settlement proceeds. Various members of the class appeal from the approval of the settlement on the ground that the $180 million award is inadequate.
By late 1983, the three remaining members of the PMC -- Schlegel, Musslewhite, and Henderson -- found that they lacked the resources necessary to continue the litigation. In order to attract new members both to finance and staff the lawsuit, the members of the PMC entered into an agreement whereby those members who advanced money for expenses were to be repaid at three times the amount of money advanced "off the top" our of any award of counsel fees. The agreement also established a formula, later rescinded, by which the remainder of the fee award was to be distributed among the PMC members. As a result, those who had advanced money for expenses in return for a trebled repayment controlled six of the nine PMC votes. Chief Judge Weinstein was not informed of this agreement until after the case had been settled.
After the settlement, more than 100 applications for attorneys' fees and expenses were submitted to the district court. Hearings on these applications were held on September 26 and October 1, 1984. On June 18, 1985, Chief Judge Weinstein issued an amended order awarding a total of $10,767,443.63 in fees and expenses to 88 law firms and individual lawyers for their work on behalf of the class. In re "Agent Orange" Product Liability Litigation, 611 F. Supp. 1296, 1344-46 (E.D.N.Y. 1985). The district court followed the so-called "lodestar" approach to attorneys' fees awards, see City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974) (" Grinnell I "), and City of Detroit v. Grinnell Corp., 560 F.2d 1093 (2d Cir. 1977) (" Grinnell II "), using national hourly rates of $150 for partners, $125 for law professors, and $100 for associates. The court increased some fee awards by a quality multiplier, ranging from 1.50 to 1.75, to reward those who exhibited "exceptional or extraordinary skill" in the litigation. 611 F. Supp. at 1328. The court declined, however, to apply an overall risk multiplier to the lodestar amount. Appeals have been taken from these rulings.
As noted, the PMC agreement required a trebled return of funds advanced off the top of any fees awarded by the court. Some PMC members therefore stood to receive enormously greater fees than they were awarded by the court, while others stood to receive substantially less. For example, David J. Dean, who was to have served as lead trial counsel and was awarded $1,424,283 in fees by the district court, would receive only $542,310 under the fee-sharing agreement. In contrast, Newton Schwartz, who was awarded only $41,886 by the district court, would receive $513,026 under the agreement.
Chief Judge Weinstein denied a motion by Dean to set aside the fee-sharing agreement after concluding that the agreement had no adverse impact on the interests of the class. In re "Agent Orange" Product Liability Litigation, 611 F. Supp. 1452, 1458-62 (E.D.N.Y. 1985). However, he ordered that "in future cases, as soon as a fee-sharing arrangement is made its existence must be made known to the court, and through the court to the class." Id. at 1463. Dean has appealed from that ruling.
5) Distribution of the Settlement
A number of proposals for distribution of the settlement fund were presented to Chief Judge Weinstein. We focus on the plans submitted by the PMC, by Victor Yannacone, original lead counsel for the class, and by Special Master Feinberg.
The PMC proposed to compensate all class members who could prove that they suffered from any of 24 medical conditions that the PMC's experts associated with exposure to Agent Orange. These conditions included chloracne; peripheral and central neuropathy; various liver disorders, including cirrhosis, chronic hepatitis, and porphyria cutanea tarda; gastrointestinal conditions; hematological, endocrinal, and metabolic problems; benign and malignant tumors; birth defects; and miscarriages. The PMC proposal also suggested providing compensation to claimants with other medical problems, such as arthritis, heartburn, abdominal pain, and diarrhea, that "seem to have been reported in the literature as possibly accompanying Agent Orange exposure." The PMC would have adjusted each compensation award by a number of "individual discount factors" to reflect a claimant's financial needs and the legal and factual difficulties that the claimant would have encountered in proving his or her case in court. Accordingly, two claimants with similar medical conditions might have received different monetary awards depending, for example, on their collateral source payments, numbers of dependents, and ability to receive gratuitous services; the statutes of limitations and availability of a strict liability cause of action under the applicable state law; their levels of exposure to Agent Orange and/or dioxin, a factor the PMC has abandoned on appeal; their individual and family medical histories; "life style considerations"; and damages. The PMC suggested that the settlement fund might also be used to provide class-wide benefits such as "preventive and genetic counseling, health monitoring, research and [group life and health] insurance."
The Yannacone proposal would have deferred any distribution of the settlement fund to individual claimants pending a survey of "who the Viet Nam veterans are, what their present state of health is, and how many have already died and from what causes." Yannacone urged that a portion of the settlement fund be used to establish a "Viet Nam Veterans Legal Assistance Foundation" to assist class members in obtaining disability benefits from the Veteran's Administration. Yannacone's proposal purported to speak for the thousands of veterans and their families who "reaffirm[ed] their original position that the purpose of the Agent Orange litigation was to establish a trust fund for the benefit of all the Agent Orange victims not to benefit any individual veteran at the expense of their [sic] comrades-in-arms."
Special Master Feinberg proposed that the greater part of the settlement fund be distributed to individual veterans and family members in the form of death and disability benefits. The difficulties of establishing a causal link between a claimant's injuries and exposure to Agent Orange were to be avoided by compensating all claimants who had been exposed to the defoliant and who later died or became disabled as a result of non-traumatic causes. The Special Master proposed that the remainder of the settlement fund be used to provide services to the class as a whole and in particular to children with birth defects.
Chief Judge Weinstein conducted a public hearing on the various distribution plans on March 5, 1985. More than 40 speakers, including members of the PMC, Yannacone, representatives of veterans organizations, and individual class members, participated in the hearing. The PMC and other interest person were allowed additional time following the hearing to submit written comments on the distribution proposals.
On May 28, 1985, Chief Judge Weinstein issued an order establishing a plan for distribution of the settlement fund. In re "Agent Orange" Product Liability Litigation (" Distribution Opinion "), 611 F. Supp. 1396 (E.D.N.Y. 1985). He adopted with slight modifications the Special Master's proposal, which he described as "an elegant solution [combining] insurance-type compensation to give as much help as possible to individuals who, in general, are most in need of assistance, together with a foundation run by veterans with the flexibility and discretion to take care of individuals and groups most in need of help." Id. at 1400. The plan provided that 75 percent of the $180 million settlement fund, including accrued interest, would be distributed directly "to exposed veterans who suffer from long-term total disabilities and to the surviving spouses or children of exposed veterans who have died." Id. at 1410-11. A claimant would qualify for compensation by establishing exposure to Agent Orange and death or disability not "predominantly caused by trauma, whether or not self-inflicted." Id. at 1412.
Chief Judge Weinstein offered four reasons for providing individual compensation payments only to disabled veterans and to survivors of deceased veterans. First, because the settlement fund was "not sufficient to satisfy the claimed losses of every class member," id. at 1411, it would be equitable to limit payments to those with the most severe injuries. Second, the payments would be made only to veterans or survivors, and not to children who had suffered birth defects and wives who had suffered miscarriages, because "however slight the suggestion of a causal connection between the veterans' medical problems and Agent Orange exposure, even less evidence supports the existence of an association between birth defects [or miscarriages] and exposure of the father to Agent Orange in Vietnam." Id. Third, claim processing costs would be minimized under the plan because claimants would not be required to prove that they suffered from any particular disease or that the disease was caused by exposure to Agent Orange; the court reasoned that any alternative eligibility criteria would require "creation of a costly new claims-processing bureaucracy" and "impose on the applicant the enormous burdens of producing volumes of medical records and paying expensive medical and legal fees for complicated processing and testing." Id. Finally, the distribution plan "obviate[s] the necessity for particularized proof' and is a 'fair response to the particular difficulties that this class would have in gathering and presenting evidence of damages.'" Id. (quoting In re Chicken Antitrust Litigation American Poultry, 669 F.2d 228, 240 & n.20 (5th Cir. 1982)).
Chief Judge Weinstein rejected as "essentially arbitrary," id. at 1409, the PMC's plan to provide compensation only for specified diseases. He reasoned that "no factual basis exists for choosing or excluding any disease, since causation cannot be shown for either individual claimants or individual diseases with any appropriate degree of probability." Id. In addition, he concluded that the costs of establishing the existence of particular diseases and applying individual discount factors would be burdensome and expensive for both the fund and the claimant. Id. at 1408-09.
Chief Judge Weinstein set aside most of the remainder of the settlement fund to support a "class assistance foundation" that would "serve as a national focus for Vietnam veterans who are class members to mobilize themselves and others to deal with their medical and related problems." Id. at 1432. The "broad mandates" of the foundation were defined as "to fund projects to aid children with birth defects and their families and alleviate reproductive problems" and "to fund projects to help meet the service needs of the class as a whole." Id. at 1437. The district judge reasoned that the foundation was "the most practicable and equitable method of distributing benefits" to class members who were neither disabled veterans nor survivors ...