ASBESTOS SETTLEMENT NIXED : APPEALS COURT REJECTS LIMITS PLACED ON FUTURE CLAIMANTS NOT YET AILING.

Byline: Barry Meier The New York Times

A federal appeals court threw out a landmark $1.3 billion class-action settlement Friday that would have limited future health claims of hundreds of thousands of workers and their families against 20 major asbestos producers.

The 1993 proposal, which was closely watched by legal scholars, was praised by its advocates as a model that companies that produced asbestos or other toxic materials could follow to protect themselves against the uncertainty surrounding potential claims by those who have not yet developed any signs of illness.

But Friday's decision, issued by a three-judge panel of the 3rd U.S. Circuit Court of Appeals in Philadelphia, appears to throw that whole approach into question. Unless reversed by a higher court, it also raises the possibility that tens of thousands of individual asbestos cases that might have been resolved through the settlement may soon cascade into court.

The decision, while sweeping in its potential impact on business and currently healthy individuals exposed to cancer-causing and other toxic materials, does not affect the mass of past and present asbestos claims, such as the type that drove Johns-Manville Corp. into bankruptcy.

Some public interest groups, joined by representatives of the plaintiffs' bar and others, had attacked the pact, arguing that it stripped future litigants of their rights.

They also suggested that the companies and particular plaintiffs' lawyers involved in the agreement had colluded. The participants in the settlement denied the charge.

A top executive for the Center for Claims Resolution, an organization in Princeton, N.J., that handles workers' claims for the 20 former asbestos producers involved in the agreement, said the appeals panel's decision reopens the door to needless rounds of costly litigation.

``We are going to make every effort to try and hold this settlement together,'' said Lawrence Fitzpatrick, the president of the group. ``We believe that it is a good one both for asbestos victims and for companies.'' Fitzpatrick vowed to appeal the ruling.

At the heart of the Philadelphia case was a contentious and far-sweeping issue: Could class-action settlements be used to resolve future claims from people who did not know yet that they were sick?

Many class-action settlements - like the deal involving claims against makers of silicone breast implants - seek to resolve both existing and future health complaints at the same time. But the Philadelphia case and others like it were striking because they were aimed at claims that arise only after the class-action suit has been filed and settled.

The origins of the case reach back to 1992, when the companies involved - former producers of asbestos like Armstrong World Industries, Pfizer Inc., GAF Corp., National Gypsum Co., Union Carbide Corp. and others - approached leading plaintiffs' lawyers and agreed to settle thousands of existing health complaints in deals that yielded the lawyers millions of dollars in fees.

Then, the lawyers and companies devised a settlement involving all people who had not filed claims against the companies before January 1993, and convinced a lower court to adopt it in 1994.

The settlement quickly aroused opposition from other plaintiffs' lawyers, who pointed out that future claimants would receive much less than those involved in the settlement of existing claims.

Laurence Tribe, a professor of constitutional law at Harvard University who argued in the appeals court against the settlement, said he feared that dozens of similar agreements would follow if the court's decision went the other way.

``Mass torts of every imaginable sort would have been ripe for this kind of solution,'' Tribe said.

For years, courts have tried to find ways to resolve the huge number of cases brought by asbestos victims.

Judge Edward Becker, who wrote the appeals panel ruling, said the Philadelphia case posed a monumental choice between ``forging a solution to a major social problem on the one hand and preserving its institutional values on the other.''

Becker acknowledged that the futures-related settlement was ``arguably a brilliant partial solution to the scourge of asbestos.''