Jack B. Weinstein, Senior District Court Judge:
All the pending captioned tobacco cases are related as to fact and law. See Appendix A (memorandum and orders collected by the Clerk of the Court for delivery to the Clerk of the Court of Appeals for the Second Circuit, pursuant to this Court's order of March 2, 2000 in connection with Second Circuit Docket No. 00-3004 (mandamus petition)). The pretrial discovery, preparation for trial, and proposed trials in each of these cases are also related.
Together and independently these cases are complex. They have required and continue to require close management by the court "to secure the just, speedy, and inexpensive determination of . . . [these] actions." Fed.R.Civ.P. 1; see also Federal Judicial Center, Manual for Complex Litigation §§ 20-23 (3d ed. 1995) [Manual]; cf. Civil Justice Reform Act of 1990, 28 U.S.C. § 471-482.
The court has a duty to take affirmative action assisting the parties in all possible settlement options through direct intervention or through the use of alternative dispute resolution ("ADR") techniques. See, e.g., F.R.Civ.P. 16(c)(1), (5), (8) (16); Local R.Civ.P. 83.11 (court annexed mediation, designation by judge and mediation options); Manual §§ 23.1, 33.29. Among the court's powers in aid of ADR are appointment of liaison and lead counsel see Manual §§ 20.22, 21.21, special counsel for settlement purposes, see Manual § 23.13, and designation of special masters for settlement negotiations and other purposes, see Manual § 21.52 n. 311. The desirability of settlement has already been brought to the parties' attention. See Appendix B (transcript).
It is ORDERED:
1. All the captioned cases are consolidated for purposes of settlement and for no other purpose;
2. Plaintiffs in the cases are to select an individual or individuals to represent them in preliminary discussions designed to set a framework for settlement negotiations;
3. Defendants are to select an individual or individuals to represent them in preliminary discussions designed to set a framework for settlement negotiations;
4. All parties shall attempt to jointly select a mediator or mediators, or special master or masters to facilitate preliminary discussions. The court will, upon request of all parties, suggest one or more possible mediators or special masters. If agreement cannot be reached, one or more mediators or one or more special masters will be considered for appointment by the court for purposes of assisting the parties discussions.
5. Preliminary discussions may include consideration of whether the smokers class action,
Simon v. Philip Morris (Civ. No. 99-1988), should be restructured to broaden the class and provide possible subclasses so that the tobacco litigation may be fully resolved in a comprehensive fashion.
6. Notification shall be provided to the United States Government by the clerk of the court inviting it to participate with respect to any claims it may have arising from any federal program. It may intervene or engage in the discussions as a non-party.
The time for bringing a close to tobacco litigation is nigh. The parties shall report back to the court within 10 days.
In Re Tobacco Litigation Eastern District of New York APPENDIX B UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NEW YORK NATIONAL ASBESTOS WORKERS : CV 98-1492 FUND, : United States Courthouse Brooklyn, New York Plaintiff, : v. March 3, 2000 10:30 AM : PHILIP MORRIS, et al. : Defendants. — — — — — — — — — — — — — X
B/C B/S OF NEW JERSEY, : CV 98-3287 et al., : Plaintiffs, : v. : PHILIP MORRIS, et al. : Defendants. — — — — — — — — — — — — — X
FALISE, et al., :
Plaintiffs, CV 99-7392
v. : CV 99-1988
AMERICAN TOBACCO, et al., :
CV97-7658
CV 98-675
Defendants. — — — — — — — — — — — — — X
TRANSCRIPT OF CIVIL CAUSE FOR CONFERENCE BEFORE THE HONORABLE JACK B. WEINSTEIN UNITED STATES DISTRICT COURT JUDGE
APPEARANCES:
Simon Plaintiffs: WEITZ LUXENBERG 180 Maiden Lane New York, N.Y. 1038 BY: PERRY WEITZ, ESQ. ROBERT GORDON, ESQ. RICHARD L. AKEL, ESQ. JERRY KRISTAL, ESQ.
LIEFF, CABRASER, HEIMANN BERNSTEIN, LLP 275 Battery Street San Francisco, California 94111 BY: RICHARD M. HEIMANN, ESQ. STEVEN FINEMAN, ESQ.
BROWN RUDNICK FREED GESMER One Financial Center Boston, Massachusetts 02111 BY: THOMAS M. SOBOL, ESQ.
BARRETT LAW OFFICE, P.A. 404 Court Square North Lexington, Mississippi 39095 BY: DON BARRETT, ESQ.
For the Plaintiff: LAW OFFICES OF National Asbestos PETER G. ANGELOS, P.C. Workers Medical Fund One Charles Center 100 N. Charles Street Baltimore, Maryland 21201 BY: JOSHUA KASSNER, ESQ.
O'DONOGHUE O'DONOGHUE 4748 Wisconsin Avenue, N.W. Washington D.C. 20016 BY: LOUIS P. MALONE, ESQ.
Blue Cross/Blue Shield DEWEY BALLANTINE, LLP 1301 Avenue of the Americas New York, New York 10019-6092 BY: HEATHER K. McDEVITT, ESQ. PAUL J. BSCHORR, ESQ.
For the Defendant DECHERT PRICE RHOADS Philip Morris: 30 Rockefeller Plaza New York, N.Y. 10112 BY: ROBERT A. COHEN, ESQ.
Brown Williamson: KIRKLAND ELLIS, ESQS. National Asbestos Case Only Citicorp Center 153 East 53rd Street New York, New York 10022-4675 BY: PETER A. BELLACOSA, ESQ.
Lorillard Tobacco Co.: SHOOK, HARDY BACON, LLP One Kansas City Place 1200 Main Street Kansas City, Missouri 64105-2118 BY: GARY R. LONG, ESQ.
Lorillard Tobacco Co. GREENBERG TRAURIG, LLP Reynolds: Met Life Building 200 Park Avenue New York, New York 10166 BY: STEPHEN L. SAXL, ESQ.
B.A.T.: SIMPSON THACHER BARTLETT, ESQS. 425 Lexington Avenue New York, New York 10017-3954 BY: RONALD M. NEUMANN, ESQ.
RJ Reynolds JONES, DAY, REAVIS POGUE Nat'l Asbestos 901 Lakeside Avenue Cleveland, Ohio 44114 BY: HUGH R. WHITING, ESQ.
Liggett Group, Inc. KASOWITZ, BENSON, TORRES Brook Group Ltd: FRIEDMAN LLP 1301 Avenue of the Americas New York, N.Y. 10019 BY: MARC E. KASOWITZ, ESQ. AARON H. MARKS, ESQ.
For Plaintiffs ORRICK HERRINGTON in Falise: SUTCLIFFE LLP 666 Fifth Avenue New York, N.Y. 10103 BY: JAMES L. STENGEL, ESQ. GINO D. VISSICCHIO, ESQ.
Court Reporter: Gene Rudolph 225 Cadman Plaza East Brooklyn, New York 718-254-7215
Proceedings recorded by mechanical stenography, transcript produced by CAT.
THE CLERK: Civil cause for status conference, Ellis Simon, et al versus Philip Morris, et al.
THE COURT: Yes? Who wishes to be heard?
MR. HEIMANN: Good morning, Your Honor.
My name is Richard Heimann. I speak on behalf of plaintiffs.
THE COURT: Good morning.
MR. HEIMANN: This status conference, Your Honor, was precipitated by a letter that we addressed to you together with counsel for Liggett advising you of the fact that we have had very preliminary discussions on behalf of plaintiffs with counsel for Liggett about the possibility of a resolution of the claims against that defendant in the case.
The point at which we reached really is an exchange of concepts, but the exchange of concepts together with the general circumstances of the allegations in the case suggested the strong possibility to us under the Supreme Court's recent decisions in the Amchem case and in the Ortiz case, that possibility of conflicts among subgroups in the overall class that could be affected by the proposed settlement might necessitate subclassing with subclass representation for purposes of the negotiations, further negotiations themselves.
With that as a possibility, we thought it important at the outset of the discussions to deal with that issue, and further than that, it occurred to us that it would be appropriate to bring the matter to the Court's attention at an early stage so that Your Honor would have an opportunity to, either directly or otherwise, review the subclassing, assuming that we think that's appropriate after we have had a chance to give it further study and after we've had a chance to discuss it further, to review the subclassing structure before we get into substantive negotiations.
The one thing we are a little concerned about is we don't want to be put in a position where we, the lawyers and the parties themselves, devise a structure that we think is appropriate, negotiate the settlement to a successful conclusion, we would hope, only to find that in the eyes of the Court the subclassing is inappropriate and we have to go back to square one. It is our concern under the Supreme Court's cases that it appears that if subclassing is necessary, it is something that ought to be done at the outset before substantive negotiations get too far down the line.
So this was basically the reason that we informed Your Honor at this point of where we stood and suggested that perhaps Your Honor would entertain us to give us some guidance at this stage. That's essentially what the status of the matter is at the moment.
THE COURT: Does anybody else wish to be heard?
MR. WEITZ: Your Honor, we were thinking that perhaps forming a committee of whatever plaintiffs' lawyers have cases pending before this Court or in other jurisdictions, along with Liggett, to make suggestions to the Court on the various subclasses and possible subclass representatives for the Court's review, that that might be of some assistance and would advance the process.
Along with that, in our letter we wrote that we thought that it might be helpful, I think we said extremely helpful, to have a special master involved who could facilitate discussions amongst the parties, make sure that we are consistent with some of the Court's views and be a facilitator with respect to these discussions and a liaison between the different parties and the Court. So that when we do reach some conclusions that we think that might make a good recommendation, the special master could facilitate that discussion to the Court and we can get some input.
THE COURT: Does anybody else wish to be heard?
I don't think it would be appropriate at this early stage to appoint a special master, although I will certainly reconsider the matter as we go along. For one thing, there are too few in terms of percentage of product, as I understand it, of the defendants to warrant taking action that might affect the position of other defendants in the case. Were this an application from all defendants, of course, it would present a different kind of problem to the Court. But at this stage ex parte communications with a few of the parties to a special master would seem to me to be dubious.
There is nothing, however, that would prevent these two parties from designating anybody who would undertake the job to act, I suppose, as liaison to other possible parties. I see no general objection, although there may be some ethical problems that might arise were any kind of binding commitments made.
As I recall, the case has not been certified. Is that right?
MR. HEIMANN: That's correct, Your Honor.
THE COURT: And neither has it been in a posture where the Court denied certification. Correct?
MR. HEIMANN: That is correct, Your Honor.
THE COURT: Is it on appeal now to the Court of Appeals?
MR. HEIMANN: No, Your Honor.
We have a hearing, I think, on class certification scheduled for this summer.
THE COURT: The Courts always welcome settlement. They are always to be desired.
In these tobacco cases, the transactional costs have been immense. Both defendants' counsel and plaintiffs' counsel have reaped — and I don't say this critically, of course — very large fees. Courts have been burdened with difficult issues and time constraints. So settlement is always to be desired, particularly if it can be worked out consonant with Supreme Court and other Court's class action requirements, subclassing may be desirable or even required.
The Court notes that it has many cases with a variety of plaintiffs pending in the court. The first trial is scheduled in the not too distant future involving asbestos-smoking problems. That is a more easily settleable case, since the plaintiffs would appear as individuals or intervenors. There is a relatively small universe of those who have paid or are in the process of paying for alleged asbestos-smoking synergistic effects causing cancer and other diseases.
You would not have the class action problem there because you could, I would think, relatively easily include almost the entire universe of those who have been paying asbestos claims and allocate whatever the settlement value was on the basis of the proportion of asbestos claims paid by individual companies or trusts, or even paid and to be paid by them. The amounts paid by the variety of players in the asbestos field is relatively easily calculable. So that entire spectrum of claims could be settled relatively simply in terms of procedure with a fixed sum allocated in some way, perhaps as I have suggested, or in some other way, that would appeal to counsel and their clients. The sum would probably be, in terms of tobacco settlements, relatively modest. This process would close out that aspect of the litigation.
The same would be true of the Blue Cross cases which also involve a finite number of claimants. Allocations could be made on roughly the same basis.
It might be desirable in terms of a total binding settlement to have intervention by the other Blue Cross or related organizations with full waivers.
The same could be done with respect to the so-called ERISA claims. You have a finite number, although possibly a larger number, of possible claimants, but the matter is resolvable without the complications of a class action. All the interested parties would become parties and agree to the settlement.
Those who would not agree, and it is unlikely there would be many of any substance, would be unlikely to press their claims, I would think, in the light of current legal developments, of the transactional costs involved, as well as their fiduciary obligations not to waste their assets.
When you come to the class actions, you have a different kind of problem. Here you are seeking to bind people who are not voluntarily coming in. It is on an opt out basis, not an opt in basis. I know of no procedure for an opt in basis for smokers. In any event, opt in would not be a procedure that could possibly, I would think, work effectively in a case like this. We have so many potential members of the class, some of whom would know of their rights, some of whom wouldn't know, and many wouldn't understand the nature of the legal situation.
The most difficult of all of the pending claims in this court are the class action claims. These are the actions you are addressing. It is serious problems that we face. Again, if here we had all, or essentially all, of the defendants participating, then I would have little doubt that an effective structure could be worked out that would give full credence to all of the Supreme Court's and intermediate appellate court's concerns about subclassing and other procedural matters.
The court is always available to discuss these matters and related matters. Obviously, we are at a stage in the total tobacco litigation where it would be desirable to close out all appreciable relevant claims so that the parties and the public could go on with their affairs. It does not seem to me to be beyond the scope of reasonable possibility at this stage to do that with relatively modest settlements which would be binding and would permit the tobacco companies, their employees, farmers and suppliers, and those who wish to continue smoking, or to start smoking, to proceed without this overhang cloud of expensive litigation.
These are just musings on my part, obviously. I think they result in the conclusion that as far as this class action is concerned, it is not sufficiently ripe for the Court to interject itself in settlement discussions.
I have before me the most eminent counsel in the country on these issues. I will be happy to listen and do whatever I can to assist everyone.
Do you wish to be heard further?
MR. HEIMANN: Your Honor, I appreciate, as I'm sure we all do, your thoughts on the matter and we are appreciative of the fact that we are in the very earliest stages of the discussions with only one of the defendants.
I think we would propose to proceed as Mr. Weitz had indicated, by first inviting plaintiffs' counsel for various and sundry in the cases to meet with us voluntarily, obviously, if they want to, and try out of that meeting to formulate what we think is an appropriate structure to go forward, then sit down with the defendant's counsel and the defendants and work through that with them as well, and once we are at that point it might be then appropriate to come back to Your Honor. We will see.
We will certainly keep Your Honor apprised of our progress and see if we can be of some good fortune in our efforts.
THE COURT: Well, I do think that you have taken the first steps on a high ethical road by revealing in public what you are doing, so that there will not be allegations later of underhanded deals and so on that sometimes are made, often without any justification. It does seem to me that what you have done is perfectly appropriate. I commend you for it, even though I do not feel that I am warranted in responding in any concrete way at this time.
Is there anybody else who wishes to be heard?
I see we have some representatives in the Falise case here. I have the Falise briefs which were delivered this morning and I am reading them.
Is there anybody here who is going to respond to those briefs?
MR. LONG: We will be responding. I think our brief should be on the 15th.
THE COURT: Good. All right. Fine.
Then we have a hearing, correct?
MR. LONG: Yes. The 31st.
THE COURT: All right. I find that helpful.
Does anybody else want any other musings or assistance or discussions?
Well, it's always very nice to see you all come to Brooklyn. Thanks so much for your help.
(Matter concludes.)