Second Circuit allows new Agent Orange suit despite class settlement.

Two Vietnam War veterans can bring Agent Orange claims similar to those already settled in class action litigation because they were not adequately represented in the earlier case, the Second Circuit Court of Appeals has ruled. (Stephenson v. Dow Chemical Co., Nos. 00-9120(CON), 00-7455(L), 2001 WL 1524389 (2d Cir. Nov. 30, 2001).)

Res judicata--which prevents litigation of claims similar to those that already have been fully considered and decided in court--"generally applies to bind absent class members [to the class settlement] except where to do so would violate due process," wrote Judge Fred Parker for a unanimous three-judge panel. Due process, he said, requires notice of the litigation to interested parties, adequate legal representation, and an opportunity for claimants to opt out of the class.

Plaintiffs Daniel Stephenson and Joe Isaacson served in the Vietnam War between 1965 and 1970. They allege that exposure to Agent Orange caused their illnesses: bone marrow cancer and non-Hodgkins lymphoma, respectively.

The men filed separate lawsuits against the herbicide's manufacturers in 1998 and 1999. The suits were eventually transferred to the U.S. District Court for the Eastern District of New York--where a class action settlement involving virtually identical claims against the same defendants had been reached in 1984--and consolidated. (In re "Agent Orange" Prod. Liab. Litig., 597 F. Supp. 740 (E.D.N.Y. 1984), aff'd, 818 F.2d 145 (2d Cir. 1987).)

The class certified in the 1984 litigation included military personnel who had served in Vietnam from 1961 to 1972 and were exposed to Agent Orange or other herbicides. Also included in the class were family members--including children born before January 1, 1984; spouses; and parents--who suffered Agent Orange-related injuries.

The settlement specified that the class included people "who have not yet manifested injury," and it indemnified the defendants against future state court actions alleging the same claims as those already addressed. It required the defendants to pay into a fund from which parties to the settlement would receive payments for 10 years, beginning January 1, 1985, and ending December 31, 1994. Injuries manifested after 1994 were not eligible for payment.

The New York court dismissed Stephenson and Isaacson's case, rejecting their argument that because the settlement had no provision for post-1994 claimants, they had been inadequately represented. Judge Jack Weinstein held that the suit was an "impermissible collateral attack" on the settlement.

The Second Circuit disagreed. Parker wrote that although Stephenson and Isaacson fall within the class definition of the earlier litigation, they had learned of their injuries only after the settlement fund had expired. He held that the men had not been adequately represented, so they could not be bound by the settlement or barred from bringing suit.

The appeals court based its opinion on the U.S. Supreme Court's decisions in Amchem Products, Inc. v. Windsor and Ortiz v. Fibreboard Corp. (521 U.S. 591 (1997); 527 U.S. 815 (1999).) Both held that if plaintiffs were not proper parties to a judgment, res judicata could not defeat their claims. Parker also held that the Second Circuit's ruling did not expose the defendants to double liability because the plaintiffs had not been parties to the original suit.

"[T]he propriety of a collateral attack such as this is amply supported by precedent," Parker wrote. He noted that the Supreme Court held in Hansberry v. Lee that class action judgments can bind absent class members only if their interests are the same as those of the parties who represented the class. (311 U.S. 32, 41 (1940).) Likewise, the Second Circuit held in Van Gemert v. Boeing Co. that a "judgment in a class action is not secure from collateral attack unless the absentees were adequately and vigorously represented." (590 F.2d 433, 440 n.15 (2d Cir. 1978), aff'd, 444 U.S. 472 (1980).)

The Fifth, Seventh, Ninth, and Eleventh circuits have also recognized plaintiffs' right to attack the adequacy of representation in earlier class actions. (Gonzales v. Cassidy, 474 F.2d 67 (5th Cir. 1973); Williams v. Gen. Elec. Capital Auto Lease, Inc., 159 F.3d 266 (7th Cir. 1998); Crawford v. Honig, 37 F.3d 485 (9th Cir. 1994); Twigg v. Sears, Roebuck & Co., 153 F.3d 1222 (11th Cir. 1998).)