## Facts

- Fibreboard Corporation faced extensive asbestos personal-injury claims, including claims by currently injured plaintiffs and people with latent or future asbestos-related injuries.
- A class of asbestos claimants—the “Global Health Claimant Class”—sued Fibreboard seeking damages for injuries allegedly caused by Fibreboard asbestos.
- Fibreboard, the class representatives, and Fibreboard’s insurers negotiated a comprehensive settlement known as the “Global Health Settlement Agreement.”
- The settlement was presented as a limited-fund resolution intended to cap Fibreboard’s exposure and distribute available resources among claimants through a mandatory (non-opt-out) mechanism.
- Under the settlement structure described in the record, class members would receive a contribution tied in part to Fibreboard’s assets, including an arrangement in which claimants received $10 million of Fibreboard’s approximately $250 million net worth, along with amounts connected to insurance coverage.
- The district court certified the settlement class as a mandatory class under Federal Rule of Civil Procedure 23(b)(1)(B) (limited fund) and approved the settlement.
- Various challengers (including intervening claimants and other interested parties) objected and appealed, arguing that the settlement’s mandatory class device functioned like a bankruptcy-style resolution without Bankruptcy Code safeguards.

## Issues

1. Whether the district court properly certified and approved a mandatory “limited fund” settlement class under Rule 23(b)(1)(B) based on Fibreboard’s assets and insurance-related resources.
2. Whether the settlement class satisfied Rule 23(a) and due process, including adequacy of representation in light of differing interests among more seriously injured claimants, less seriously injured claimants, and future/latent claimants.
3. Whether the mandatory class mechanism operated as an improper substitute for bankruptcy by binding claimants to a global resolution without the protections normally associated with insolvency proceedings.

## Decision

- The Fifth Circuit vacated the district court’s class certification and settlement approval and remanded for further proceedings.
- The court concluded that the record did not justify treating the settlement as a proper Rule 23(b)(1)(B) limited-fund class on the showing made.
- The court also found serious problems with the proposed class structure and settlement design, including conflicts among groups of claimants and questions about whether the class representatives and settlement framework adequately protected those differing interests.

## Legal Principles

- Rule 23(b)(1)(B) limited-fund classes are exceptional; a court must require a strong factual showing that the available fund is genuinely limited and that class treatment is necessary to prevent unfair or inconsistent depletion of the fund.
- A limited-fund settlement cannot rest on a fund defined mainly by negotiation choices or assumptions where key components (including insurance-related exposure and other variables affecting the fund) are uncertain in a way that defeats reliable limited-fund findings.
- Even in a settlement-only posture, Rule 23’s requirements apply; certification demands careful review of Rule 23(a), including adequacy of representation.
- When class members have materially different interests (for example, between currently severe injuries and future/latent claims), the court must address conflicts through appropriate structural protections, which may include subclasses and separate representation.
- A mandatory settlement class that broadly restrains individual litigation and channels claims into a single recovery scheme raises due process concerns and invites close scrutiny when it resembles an insolvency distribution without Bankruptcy Code protections.

## Conclusion

In *In re Asbestos Litigation*, the Fifth Circuit set aside certification and approval of Fibreboard’s mandatory limited-fund settlement class because the record did not support a proper Rule 23(b)(1)(B) limited-fund finding and because the settlement and class structure raised substantial adequacy and conflict concerns, requiring remand for reconsideration under stricter Rule 23 and due process standards.


In re Asbestos Litigation, 90 F.3d 963 (1996)