argued: September 19, 1990.
IN RE SCHOOL ASBESTOS LITIGATION; SCHOOL DISTRICT OF LANCASTER, MANHEIM TOWNSHIP SCHOOL DISTRICT, LAMPETER-STRASBURG SCHOOL DISTRICT, AND NORTHEASTERN SCHOOL DISTRICT, APPELLEES,
LAKE ASBESTOS OF QUEBEC, LTD., THE CELOTEX CORPORATION, RAYMARK INDUSTRIES, INC., UNION CARBIDE CORP., ASBESTOSPRAY CORP., SPRAYO-FLAKE COMPANY, NATIONAL GYPSUM CO., SPRAYED INSULATION, INC., ASBESTOS FIBRES INC., DANA CORPORATION, U.S. GYPSUM, U.S. MINERAL PRODUCTS COMPANY, SPRAYON INSULATION & ACOUSTICS, INC., SPRAYON RESEARCH CORP., KEENE CORP., WORBEN CO., INC., WILKIN INSULATION COMPANY, W.R. GRACE & CO., OWENS-CORNING FIBERGLAS CORPORATION, STANDARD INSULATION, INC., NORTH AMERICAN ASBESTOS CORPORATION, CASSIAR RESOURCES LTD., BELL ASBESTOS MINES, LTD., ASBESTOS CORPORATION LIMITED, SOUTHERN TEXTILE CORP., OWENS-ILLINOIS, INC., TURNER & NEWALL LIMITED, THE FLINTKOTE CO., FIBREBOARD CORPORATION, GAF CORP., UNIROYAL, INC., CAPE ASBESTOS, PFIZER, INC., KAISER CEMENT CORPORATION, BES-TEX, INC., GEORGIA-PACIFIC CORP., KAISER CEMENT CORPORATION, APPELLANT NO. 90-1247, UNITED STATES GYPSUM COMPANY, APPELLANT NO. 90-1248
Appeal from the United States District Court for the Eastern District of Pennsylvania; D.C. Civil No. 0313-2: 83-00268.
Scirica, Cowen, and Aldisert, Circuit Judges.
Here we are confronted with an appeal by two non-settling defendants in a nationwide class action asbestos action who unsuccessfully contested a settlement agreement entered into by another defendant in the district court. We conclude that these non-settling defendants lack standing to challenge the agreement. Accordingly, we affirm the judgment of the district court.
In 1984, the district court certified a nationwide opt-out class of school districts seeking to recover from approximately fifty defendants. Three defendants made offers to settle: Owens-Illinois, Inc., Proko Industries, and Lake Asbestos of Quebec, Ltd. ("LAQ"). The district court approved the OI/Proko settlement, over objections by certain defendants. The court ruled that such non-settling defendants lacked standing to object to a settlement with a co-defendant.
On November 27, 1989, the district court preliminarily approved a one million dollar settlement with LAQ; it also approved a corresponding form of notice submitted by the class plaintiffs, directing notice to be sent by first class mail. The district court concluded that the settlement with LAQ was fair, reasonable, adequate, and proper, and entered final judgment on the settlement as to the class defined in the settlement agreement. Two non-settling defendants, Kaiser Cement and United States Gypsum, appeal the LAQ settlement agreement.
In the underlying litigation a question was raised as to jurisdiction. We determined in In re School Asbestos Litig., 921 F.2d 1310 (3d Cir. 1990) (filed on this date) that the defendant petitioners had not met their burden of showing a "clear and indisputable lack of subject matter jurisdiction in the district court." Thus, jurisdiction in the trial court was proper based on 28 U.S.C. § 1332. Jurisdiction on appeal is proper based on 28 U.S.C. § 1291. Appeal was timely filed under F.R.A.P. 4(a).
Review of the essentially legal question of standing is plenary. PIRG of New Jersey v. E.P.A., 913 F.2d 64 (3d Cir. 1990).
The district court held that Kaiser and United States Gypsum lacked standing to contest the LAQ agreement:
As a general rule, a non-settling defendant is not prejudiced by the settlement and therefore has no standing to contest the settlement. In re Beef Industry Antitrust Litigation, 607 F.2d 167 (5th Cir. 1979). There are, however, two recognized exceptions to this general rule. A non-settling defendant can object to a settlement: 1) when the terms of the settlement preclude the non-settling defendant from seeking indemnification from the settling defendant, and 2) when the settlement affects the rights of the non-settling defendant. In re Beef Industry Antitrust Litigation, 607 F.2d 167 (5th Cir. 1979); In re Fine Paper Litigation, 632 F.2d 1081 (3d Cir. 1980).
Pretrial Order No. 66; Appellees' Brief at 7. The court recognized the general exception to the rule denying standing when "non-settling defendants are precluded from seeking indemnification from settling defendants" and rejected appellant Kaiser Cement's claim that its right to indemnification or contribution was compromised. Memorandum and Order of February 16, 1990 at 6; App. at 809.
Kaiser and U.S. Gypsum argue on appeal that their rights are not adequately protected by the settlement agreement and that they have standing to raise issues arising from the LAQ settlement. Basically, their argument is that the settlement agreement bars them from pursuing claims for contribution or indemnity against LAQ. See Brief for Kaiser Cement Corp. at 37-43; Brief for U.S. Gypsum at 14-20. They contend that their dismissal by the district court leaves them out in the cold, unable to test subject matter jurisdiction and the adequacy of the procedures leading to final judgment. They argue that they should be given the opportunity to assert these claims in order to preserve their rights to contribution or to establish judgment reduction rights against class members in this or subsequent litigation.
The appellees counter that these protestations are without merit. They argue that appellants have failed to demonstrate legal prejudice that might give them standing to contest the LAQ settlement and, lacking this, their "lost opportunity" argument cannot be asserted and their appeal should be dismissed.
It is clear that the appellants bear the burden of demonstrating that they have standing. See e.g., Ass'n of Data Processing Serv. Org., Inc. v. Camp, 397 U.S. 150, 154, 25 L. Ed. 2d 184, 90 S. Ct. 827 (1970); Baker v. Carr, 369 U.S. 186, 204, 7 L. Ed. 2d 663, 82 S. Ct. 691 (1961). To establish standing to appeal a settlement, a non-settling defendant may not merely claim an interest in the lawsuit but must show some cognizable prejudice to a legal relationship between it and the settling parties. In re Fine Paper Litig. State of Wash., 632 F.2d 1081, 1087 (3d Cir. 1980) (non-settling party may not object to settlement terms that do not affect its own rights); Utility Contractors Ass'n of New Jersey v. Toops, 507 F.2d 83, 85 (3d Cir. 1975) (non-settling parties have no standing to object to partial settlement where they demonstrated no interference with any legal relationship between them and the settling parties); see also Waller v. Financial Corp. of Am., 828 F.2d 579, 583 (9th Cir. 1987); Quad /Graphics, Inc. v. Fass, 724 F.2d 1230 (7th Cir. 1983); In re Viatron Computer Sys. Corp. Litig., 614 F.2d 11 (1st Cir.), cert. denied, 449 U.S. 826 (1980); ...
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