## Facts

- Keene Corporation, a producer and seller of asbestos-containing products, faced extensive asbestos personal-injury exposure, including roughly 190,000 claims and about 2,000 new cases per month.
- Keene sought a federal-court proceeding to determine its obligations to all asbestos claimants and to obtain court-supervised negotiation and approval of a global resolution.
- Keene moved to certify a mandatory, non-opt-out “limited fund” class under Federal Rule of Civil Procedure 23(b)(1)(B) covering all persons with past, present, and future asbestos claims against Keene.
- Keene argued its assets and insurance were insufficient to satisfy all current and future claims and that ordinary litigation would produce unequal recoveries by allowing early claimants to exhaust available resources.
- The district court found a “limited fund,” certified the mandatory class (with subclasses), and entered a preliminary injunction barring class members from starting or continuing actions against Keene (with a narrow exception for cases already at trial) and restricting Keene from litigating elsewhere.
- Various claimants and other interested parties appealed, challenging class certification, federal jurisdiction, and the scope and legality of the injunction.

## Issues

1. Whether the district court properly certified a mandatory “limited fund” class under Rule 23(b)(1)(B) for all present and future asbestos claimants against Keene based on Keene’s alleged limited assets and insurance.
2. Whether the federal court had subject-matter jurisdiction over a nationwide aggregation of predominantly state-law tort claims where many class members lacked an independent basis for federal jurisdiction.
3. Whether the preliminary injunction staying other proceedings against Keene was permissible under the Anti-Injunction Act and related limits on federal interference with parallel litigation.
4. Whether Rule 23(b)(1)(B) may be used to implement a global, mandatory settlement structure functioning as an alternative to bankruptcy for a mass-tort defendant.

## Decision

- The Second Circuit vacated the order certifying the Rule 23(b)(1)(B) limited-fund class and vacated the preliminary injunction, remanding for further proceedings.
- The court held that the record did not adequately establish a clearly defined, actually limited fund sufficient to justify mandatory class treatment.
- The court concluded that procedural devices (Rule 23 and declaratory relief) could not supply or expand federal subject-matter jurisdiction over an otherwise non-federal mass of state-law claims.
- Because the class certification rationale was not adequately supported, the nationwide injunction premised on protecting the proceeding likewise could not stand under the Anti-Injunction Act on the record presented.

## Legal Principles

- A Rule 23(b)(1)(B) limited-fund class requires rigorous, non-speculative proof of a clearly defined fund that is insufficient to satisfy all claims, including reliable valuation of assets, liabilities, and available insurance.
- Inclusion of future claimants with no present injury raises serious due process concerns, including adequacy of representation and the practical limits of notice in a mandatory class.
- Rule 23 and the Declaratory Judgment Act do not create federal jurisdiction; each claim (or relevant aggregation permitted by law) must satisfy independent subject-matter jurisdiction requirements.
- The Anti-Injunction Act sharply limits federal injunctions against other proceedings; broad stays of state-court and other actions require a clear fit within a statutory exception and a showing tied to legitimate federal adjudicatory authority.
- Class action procedure cannot be used as a general substitute for bankruptcy to impose a nationwide, non-opt-out restructuring of mass-tort liability without satisfying jurisdictional, statutory, and constitutional constraints.

## Conclusion

The Second Circuit rejected, on the record presented, a court-created mandatory limited-fund class and nationwide litigation stay designed to centrally resolve all Keene asbestos claims, holding that limited-fund certification requires concrete proof and that federal jurisdiction and anti-injunction limits constrain mass-tort aggregation efforts.


In re Joint E. & S. Dist. Asbestos Litig., 14 F.3d 726 (2d Cir. 1993)