## Facts

- In 1984, a nationwide Rule 23(b)(3) class action settlement resolved claims by Vietnam veterans (and certain family members) alleging injuries from exposure to Agent Orange.
- The settlement created a $180 million fund administered through a payment program with a fixed end date, providing that no payments would be made for death or disability occurring after December 31, 1994.
- The settlement judgment included a release and an injunction barring future suits by class members against the defendant manufacturers.
- Joe Isaacson was diagnosed with non-Hodgkin’s lymphoma in 1996, and Daniel Stephenson was diagnosed with bone marrow cancer in 1998; both attributed their conditions to Agent Orange exposure during Vietnam service.
- Isaacson and Stephenson filed separate actions that were removed to federal court and transferred to the same multidistrict litigation court that had overseen the 1984 settlement.
- By the time their injuries manifested, the settlement payment program had expired and the fund had largely been depleted.
- The district court dismissed their suits as barred by res judicata based on the 1984 settlement and judgment.

## Issues

1. Whether due process permitted binding post-1994 latent-injury claimants to the 1984 class settlement when their interests diverged from earlier-manifesting claimants and they allegedly lacked adequate representation.
2. Whether plaintiffs could collaterally attack the preclusive effect of the 1984 class judgment on the ground of inadequate representation.
3. How Amchem Products, Inc. v. Windsor and Ortiz v. Fibreboard Corp. affected the validity and preclusive reach of a pre-Amchem, settlement-only mass-tort class action involving future-manifesting injuries.

## Decision

- The Second Circuit vacated the district court’s dismissal and remanded for further proceedings.
- The court held that the 1984 Agent Orange settlement could not be applied to bar these plaintiffs’ claims because they were not adequately represented in the prior class action under due process standards reflected in Amchem and Ortiz.
- The court concluded that applying res judicata would be improper where the earlier class structure created a conflict between presently injured claimants seeking near-term payments and future claimants whose injuries would arise after the settlement’s payment cutoff.
- In subsequent Supreme Court proceedings, the Second Circuit’s judgment as to Stephenson was affirmed by an equally divided Court, while the Isaacson portion was vacated and remanded for jurisdictional reconsideration in light of Syngenta Crop Protection, Inc. v. Henson.

## Legal Principles

- An absent class member may be bound by a class judgment only if the class representation satisfied due process; inadequate representation defeats the binding effect of the judgment.
- Structural conflicts between subgroups (such as currently injured claimants and future-manifesting claimants) can render representation inadequate unless the class is structured to protect divergent interests, including through subclasses and separate counsel where necessary.
- Res judicata presupposes a constitutionally valid, binding prior judgment; when due process is lacking in the prior class proceeding, claim preclusion cannot bar later suits by inadequately represented class members.
- Collateral attack on a class settlement’s preclusive effect is available when a class member shows constitutionally deficient representation in the original action, even where finality interests are substantial.

## Conclusion

The Second Circuit held that Vietnam veterans whose Agent Orange-related injuries manifested only after the settlement fund’s payment window closed were not adequately represented in the 1984 class settlement and therefore could not be barred by res judicata from pursuing their individual claims.


Stephenson v. Dow Chem. Co., 273 F.3d 249 (2d Cir. 2001)