Settlement-only class certification is the procedural mechanism through which mass liability disputes — pharmaceutical injuries, toxic torts, product defects, and insurance coverage failures — are conclusively resolved for millions of claimants who never appear in court. The Supreme Court's decisions in Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997) and Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999) established the constitutional and Rule 23 constraints within which settlement classes must be structured — constraints that remain the governing framework today, as supplemented by the 2018 amendments to Rule 23(e).
Amchem: All Rule 23 Requirements Apply to Settlement Classes
The asbestos crisis of the 1980s and 1990s generated one of the most ambitious class action settlement attempts in American legal history. In Amchem, Amchem Products and other defendants proposed a global settlement with a class of claimants who had been exposed to asbestos-containing products but had not yet filed suit — the "future claimants." The settlement created a compensation grid with caps, released all present and future claims, and enjoined class members from future litigation. The class was certified for settlement purposes; the settlement was approved; the Third Circuit decertified the class.
The Supreme Court affirmed decertification. Justice Ginsburg's majority opinion established the foundational rule: when a class is certified only for settlement purposes, all of the certification requirements in Federal Rule of Civil Procedure 23 still apply. The one accommodation for settlement is that the court need not inquire whether the case would be manageable for trial — because the settlement, if approved, eliminates the trial. But every other Rule 23(a) and (b) requirement must be rigorously satisfied.
*Why the Amchem class failed.* The class failed on two Rule 23 requirements.
Commonality and adequacy. The Court held that the diverse medical and legal circumstances of current claimants with manifest disease versus future claimants with mere exposure — whose interests diverge dramatically on settlement terms — prevented the class from sharing a "common contention" susceptible to resolution in one stroke. People with diagnosed mesothelioma have an immediate and pressing interest in maximizing recovery; people with only exposure history have an interest in preserving the option to file when disease eventually manifests. Those interests conflict, and a single class with a single set of class counsel cannot adequately represent both.
Predominance under Rule 23(b)(3). The Amchem class was certified under Rule 23(b)(3), which requires that common questions "predominate" over individual ones. The Court found that questions of individual exposure, disease causation, medical history, and damages were so varied — affecting hundreds of products, dozens of worksites, and three decades of exposure history — that common questions did not predominate. The settlement's existence could not paper over the individualized inquiry that the underlying claims would require.
The practical lesson. Amchem is a structural guide for what a properly constituted settlement class must look like. Subclasses with separate representatives and separate counsel must be created wherever the interests of identifiable groups within the proposed class are in genuine conflict. The adequacy of class counsel must be evaluated not merely by competence but by whether the counsel structure has any interest in sacrificing one subgroup's interests for another's. Settlement terms that cap some claims but not others, or that allocate differently among claimants with different litigation profiles, must be scrutinized for inter-class favoritism.
Ortiz: The Mandatory Class and the Limits of Rule 23(b)(1)(B)
Ortiz addressed a different procedural vehicle: the mandatory class under Rule 23(b)(1)(B), which permits certification without opt-out rights where prosecuting separate actions "would be dispositive of the interests of other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests." The paradigm is the limited fund — where a finite res exists and must be distributed ratably among all claimants, including absent ones.
Fibreboard Corporation faced asbestos liability estimated in the hundreds of billions. Its primary insurers (Continental and Pacific) negotiated a "global settlement" creating a $1.5 billion fund — contributed almost entirely by the insurers — to resolve all present and future claims through a mandatory class under Rule 23(b)(1)(B). Fibreboard contributed only $10 million. The settlement was approved; the Fifth Circuit affirmed; the Supreme Court reversed by a near-unanimous vote on the limited-fund issue, with Justice Souter writing for an eight-Justice majority on the central holding.
*The Ortiz limited-fund requirements.* The Court held that Rule 23(b)(1)(B) limited-fund certification requires satisfaction of three historically-grounded requirements:
- The fund must be identified and its inadequacy established. There must be a genuinely limited res — an identified fund whose total value is established and shown to be insufficient to satisfy all claims at full value.
- The whole of the inadequate fund, and no more, must be dedicated to the class. A limited-fund settlement cannot insulate assets from claimants while certifying the class as mandatory. Here, Fibreboard retained a $2 billion "backup" insurance settlement that provided coverage to defend future claims if the global settlement was struck down — a reserve that was not included in the class fund. The existence of the backup settlement demonstrated that the fund was not genuinely limited.
- The claimants must be treated equitably among themselves. Present claimants with diagnosed disease received far more favorable compensation rates under the settlement grid than future claimants. This disparity — without adequate representation of the future claimants' distinct interests — violated the equity requirement.
*Why Ortiz matters beyond asbestos. Ortiz has constrained the use of mandatory classes in mass tort litigation. Any attempt to use Rule 23(b)(1)(B) to bind non-opt-out claimants must demonstrate a genuinely limited, fully committed fund, equitable allocation, and adequate representation of all subgroups. Courts remain skeptical of limited-fund arguments where the defendant's liability insurance or corporate assets have not been exhausted or demonstrated to be legally insufficient to cover all claims. Ortiz also reinforced the Amchem* lesson about inter-class adequacy: a single class counsel representing claimants with divergent interests in the same mandatory class is constitutionally and structurally problematic.
Heightened Scrutiny for Settlement-Only Classes
Together, Amchem and Ortiz established what courts and commentators call "heightened scrutiny" for settlement-only class certification. The phrase reflects two distinct demands.
First, the absence of trial-manageability concerns does not reduce the certification burden — it eliminates only the manageability inquiry. All other requirements are evaluated with, if anything, greater care, because the settlement itself may be structured to obscure the very certification defects that would surface at trial. A damages class that could never be managed for trial because individual damage calculations would overwhelm common questions is nonetheless not certifiable for settlement purposes if predominance is not satisfied.
Second, the adversarial structure is compromised in settlement classes because the defendant has agreed to the settlement and both lead plaintiffs' counsel and defense counsel have an interest in having the settlement approved. This structural conflict demands heightened judicial scrutiny of the settlement's substantive fairness — not just its procedural regularity — and requires the court to ensure that objectors receive meaningful opportunity to be heard and that the class is not being used to coerce claimants into suboptimal settlements through the threat of binding absent parties.
The 2018 Rule 23(e) Amendments
The 2018 amendments to Federal Rule of Civil Procedure 23(e) substantially updated the settlement approval framework to address concerns that had accumulated since Amchem and Ortiz. Key changes:
Pre-certification notice is now expressly authorized. Rule 23(e)(1) now permits notice to class members before class certification is formally granted, in cases where the court will likely certify the class for purposes of settlement. This allows class members to participate in the approval process earlier — but also allows a pre-certification settlement to be presented to the court before full adversarial development of the certification record.
New approval factors under Rule 23(e)(2). Courts must now determine that a proposed settlement is "fair, reasonable, and adequate" after considering whether: (A) the class representatives and counsel have adequately represented the class; (B) the proposal was negotiated at arm's length; (C) the relief provided is adequate taking into account the costs, risks, delay, and terms of alternative proposals; and (D) the proposal treats class members equitably relative to each other. Factor (D) specifically operationalizes the Amchem/Ortiz requirement that subgroups within the class not be sacrificed for the benefit of others.
"Objectors" regime. Rule 23(e)(5) now requires court approval for any agreement conditioning an objector's withdrawal of an objection on other consideration, and authorizes the court to require identification of the objector's lawyers. This was designed to address professional objectors who filed objections primarily to negotiate side payments for withdrawal, but it has also raised questions about the rights of genuine objectors.
Practice Notes for Plaintiffs' Counsel
When you are class counsel negotiating the settlement:
- Design the class structure around subgroups with aligned interests from the start; do not assume a single class with a single counsel structure will survive Amchem scrutiny if groups within the class have materially divergent interests in settlement terms.
- Build the compensation grid to treat comparably situated claimants comparably; any differentiation must be defensible under the Rule 23(e)(2)(D) equitable treatment standard.
- Ensure that the settlement fund is genuinely committed; do not allow the defendant to retain insurance reserves or indemnity rights that could be characterized as making the fund not truly limited.
When you are representing objectors:
- Amchem and Ortiz provide the analytical framework for structural objections: inadequate subclass representation, predominance failure, or inequitable treatment between claimant groups.
- Under Rule 23(e)(5), your agreement to withdraw an objection is subject to court approval; negotiate carefully and document the value of any withdrawal.
Conclusion
Amchem and Ortiz are not historical curiosities. They remain the governing framework for settlement class approval in mass litigation, and their lessons — rigorous Rule 23 compliance, subclass structure for conflicting interests, genuine limited funds, equitable inter-class treatment — map directly onto the 2018 Rule 23(e) amendments. Counsel negotiating or objecting to settlement classes should treat these decisions as a checklist, not background reading.
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Informational only. Not legal advice. No attorney-client relationship is created by reading this post. Consult a licensed attorney in your jurisdiction.