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Full Opinion
OPINION AND ORDER
Plaintiffs in this class action seek compensatory and punitive damages for acts of genocide, including murder, rape, torture, and other torts, allegedly committed in Bosnia-Herzegovina by individuals under the command and control of defendant Radovan Karadzic. Following class certification, plaintiffs Jane Doe I et al. (the âDoe plaintiffsâ) moved the Court for approval of their proposed class notice plan. Thereafter, plaintiffs S. Kadic et al. (the âKadic plaintiffsâ) sought decertification of the plaintiff class or, alternatively, certification of one or more subclasses. For the following reasons, the motion to decertify is granted, and the mo-' tion to approve class notice is denied as moot.
BACKGROUND
The litigation was originally before this Court as two separate but related actions, Kadic v. Karadzic, No. 93 Civ. 1163, and Doe v. Karadzic, No. 93 Civ. 0878. The factual background of these two cases has been explained at length in numerous previous opinions,
By Opinion and Order dated December 2, 1997, the Court granted the Doe plaintiffsâ motion to certify the case as a limited fund class action, pursuant to Federal Rule of Civil Procedure 23(b)(1)(B). At the time, the Kadic plaintiffs did not oppose certification. As per the December 2,1997 Order, the class consists of âall people who suffered injury as a result of rape, genocide, summary execution, arbitrary detention, disappearance, torture or other cruel, inhuman or degrading treatment inflicted by Bosnian-Serb Forces under the command and control of defendant between April 1992 and the present.â
Following the certification order, however, the Kadic plaintiffs began a full-fledged campaign to withdraw from the mandatory class. On October 23, 1998, the Court denied their motion to opt out of the class. See Doe, 182 F.R.D. at 430. Thereafter, on January 7, 1999, the Court refused the Kadic plaintiffsâ request, for reconsideration of its previous ruling, see Doe, 1999 WL 6360, at *3, and declined to certify the issue for an interlocutory appeal, see id. at *4.
Despite these efforts, the litigation continued to move forward. On February 16,1999, the Doe plaintiffs sought an order approving their proposed notice plan, pursuant to Fed. R.Civ.P. 23(d)(2). See Doe Pl. Mem. at 3-6. However, on March 19,1999, the Kadic plaintiffs moved for decertification of the plaintiff class, pursuant to Fed.R.Civ.P. 23(c)(1), on the ground that the class no longer satisfied the basic requirements of Rule 23. See Kadic Pl. Mem. at 16-37. Alternatively, they requested certification of one or more subclasses, pursuant to Fed.R.Civ.P. 23(c)(4)(B). See Kadic Pl. Mem. at 38-42.
While the two motions were pending before this Court, on June 23, 1999, the United
DISCUSSION
I. Standard of Review for a Motion for Decertification
Under Fed.R.Civ.P. 23(c)(1), a class certification order is âconditional, and may be altered or amended before the decisions on the merits.â Consequently, courts are â ârequired to reassess their class rulings as the case develops.â â Boucher v. Syracuse Univ., 164 F.3d 113, 118 (2d Cir.1999) (quoting Barnes v. American Tobacco Co., 161 F.3d 127, 140 (3d Cir.1998)); see also In re Agent Orange Product Liab. Litig., 818 F.2d 145, 163 (2d Cir.1987) (âThe court may reconsider [its decision to certify a class], by decertifying, modifying the definition of the class, or creating subclasses in the light of future developments in the case.â); Woe v. Cuomo, 729 F.2d 96, 107 (2d Cir.1984) (âIt is often proper ... for a district court to view a class action liberally in the early stages of litigation, since the class can always be modified or subdivided as issues are refined for trial.â); Richardson v. Byrd, 709 F.2d 1016, 1019 (5th Cir.1983) (âThe district judge must define, redefine, subclass, and decertify as appropriate in response to the progression of the case from assertion to facts.â). In particular, prior to the point at which notice is sent to members of the class, a certification order âis inherently tentative.â Falcon, 457 U.S. at 160, 102 S.Ct. 2364.
Specifically, the Second Circuit has held that a âdistrict court may decertify a class if it appears that the requirements of Rule 23 are not in fact met.â Sirota v. Solitron Devices, Inc., 673 F.2d 566, 572 (2d Cir.1982); see also Monaco v. Stone, 187 F.R.D. 50, 59 (E.D.N.Y.1999) (âA class may be decertified if later events demonstrate that the reasons for granting class certification no longer exist or never existed.â); In re Prudential Securities Inc. Ltd. Partnerships Litig., 158 F.R.D. 301, 304-05 (S.D.N.Y.1994) (decertifying class sua sponte). Although at least one district court has concluded that the burden of persuasion remains throughout the litigation with the party desiring to maintain certification, see Smith v. Armstrong, 968 F.Supp. 50, 53 (D.Conn.1997), the Court may not disturb its prior findings absent âsome significant intervening event,â Langley v. Coughlin, 715 F.Supp. 522, 553
Despite having endured for over seven years, this litigation remains in its âearly stages,â Woe, 729 F.2d at 107, since class notification has not yet been provided, see Falcon, 457 U.S. at 160, 102 S.Ct. 2364. As we have not yet reached a âlate junctureâ in the context of this action, Wilder, 645 F.Supp. at 1312, any resulting prejudice to the parties arising from decertification would be minimal. Cf. Langley, 715 F.Supp. at 552 (â[T]he Court must take into consideration that an eve-of-trial decertification could adversely and unfairly prejudice class members, who may be unable to protect their own interests.â); see also Woe, 729 F.2d at 107 (finding abuse of discretion where district court decertified the class after granting summary judgment in part); Samuel v. University of Pittsburgh, 538 F.2d 991, 995-96 (3d Cir.1976) (Clark, J., sitting by designation) (remanding for an order recertifying the class after district court decertified after trial but prior to determining damages). Therefore, the Court shall reconsider its previous decision to certify the plaintiff class in light of the Supreme Courtâs recent pronouncements on this important issue. Cf. Wilder, 645 F.Supp. at 1312 & n. 15 (refusing to decertify in part because â[djefendants point[ed] to no change in the law that mandates decertification of the plaintiff class,â but rather âsimply recast the arguments they originally made against class certificationâ); id. at 1310 (holding that âcompelling reasonsâ for reexamination âinclude âan intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injusticeâ â) (quoting 18 Charles A. Wright, Arthur R. Miller & Edward H. Cooper, Federal Practice and Procedure § 4478, at 790 (1981)).
II. The Ortiz Decision
Although Ortiz may have thrust the âelephantine mass of asbestos casesâ into further chaos, Ortiz, 527 U.S. 815, 119 S.Ct. at 2302, it did finally resolve long-debated questions about how to apply Rule 23(b)(1)(B) to mass tort litigation. Faced with the possibility of practically unbounded liability, the defendant, Fibreboard Corporation, a former manufacturer of a variety of products containing asbestos, had negotiated a âglobal settlement agreementâ with representatives of its two main insurance providers and various plaintiffsâ law firms. See id., 119 S.Ct. at 2303-04. A group of named plaintiffs then, as agreed, filed an action seeking certification for settlement purposes of a mandatory class comprising three separate groups of plaintiffs. See id., 119 S.Ct. at 2305. Following an eight-day fairness hearing, the district court certified the class and approved the settlement as âfair, adequate, and reasonableâ under Rule 23(e), having concluded that permitting individual adjudications by class members âwould have destroyed the opportunity to compromise the insurance coverage dispute by creating the settlement fund, and would have exposed the class members to the very risks that the settlement addresses.â Id., 119 S.Ct. at 2306 (quoting Aheam v. Fibreboard Corp., 162 F.R.D. 505, 527 (E.D.Tex. 1995)). The Fifth Circuit affirmed, finding certification appropriate under a limited fund rationale âbased on the threat to âthe ability of other members of the class to receive full payment for their injuries from Fibreboardâs limited assets.â â Id. (quoting In re Asbestos Litig., 90 F.3d 963, 982 (5th Cir.1996)).
The Doe plaintiffs contend that, on account of several distinctions between Ortiz and the instant action, this Court need not reconsider its previous decision to certify the class. First, they argue that the Supreme Courtâs analysis in Ortiz was undertaken with the âheightened scrutinyâ required for evaluating the fairness of a proposed settlement. See July 9 Letter, at 1, 2; see also Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620, 117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). Second, they maintain, the Ortiz settlement was flawed by a conflict of interest between present and future claimants, which in turn raised the possibility of collusion between class representatives and the defendant. See id. According to the Doe plaintiffs, neither issue is present here.
These arguments must be rejected. Clearly, the settlement posture of Ortiz is a distinction without a difference, for the Court emphasized that â[t]he nub of this case is the certification of the class under Rule 23(b)(1)(B) on a limited fund rationale.â Id., 119 S.Ct. at 2307 (emphasis added). Nothing in the opinion renders its analysis unique to a settlement class. In fact, the Court referred to the aforementioned three characteristics as âthe essential premises of mandatory limited fund actions,â which surely extend beyond settlement classes. Id., 119 S.Ct. at 2316. As for the Doe plaintiffsâ attempt to characterize this litigation as lacking conflicts of interest among counsel, the history of the case belies that assertion.
Therefore, this Court must reexamine the appropriateness of class certification on a limited fund rationale based on the guidelines set forth in Ortiz. It is incumbent upon the Court to determine the extent to which the facts in this case comport with the characteristics historically common to all limited fund class actions, which, under Ortiz, form âat least a sufficient set of conditions to justify binding absent members of a class under Rule 23(b)(1)(B), from which no one has the right to secede.â Id., 119 S.Ct. at 2311. In particular, the outcome in Ortiz turned on the weakness of the evidentiary record upon which the district court has rested its certification order. See id., 119 S.Ct. at 2316-18. Thus, the Court must evaluate whether the
III. Necessary Characteristics of a Rule 23(b)(1)(B) Class Action
Rule 23(b)(1)(B) provides for certification of a mandatory class whose members have no right to opt out. In addition to the prerequisites of Rule 23(a), subsection 23(b)(1)(B) requires that âthe prosecution of separate actions by or against individual members of the class would create a risk of ... adjudications with respect to individual members of the class which would as a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.â
The Ortiz Court discussed various â[classic examples of such a risk of impairment,â and observed that in such cases, âthe shared character of rights claimed or relief awarded entails that any individual adjudication by a class member disposes of, or substantially affects, the interests of absent class members.â Ortiz, 119 S.Ct. at 2309. Consequently, the paradigm suit under Rule 23(b)(1)(B) is the limited fund class action, in which â âclaims are made by numerous persons against a fund insufficient to satisfy all claims.â â County of Suffolk v. Long Island Lighting Co., 907 F.2d 1295, 1303 (2d Cir. 1990) (quoting Fed.R.Civ.P. 23, Adv. Comm. Notes). âClassic illustrations [of a limited fund class action] include claimants to trust assets, a bank account, insurance proceeds, company assets in a liquidation sale, proceeds of a ship sale in a maritime accident suit, and others.â 1 Herbert Newberg & Alba Conte, Newberg on Class Actions § 4.09, at 4-32 to 4-33 (3d ed.1992); see also In re Drexel Burnham Lambert Group, 960 F.2d 285, 292 (2d Cir.1992); In re Joint Eastern & Southern Dist. Asbestos Litig., 982 F.2d 721, 736-37 (2d Cir.1992), modified on rehâg, 993 F.2d 7 (2d Cir.1993); Agent Orange, 818 F.2d at 163; In re Diamond Shamrock Chems. Co., 725 F.2d 858, 862 (2d Cir.1984).
Yet, while the Rule speaks to the ârisk of impairmentâ of future claims, courts have long recognized that âthe meaning of subsection (b)(1)(B) is not as broad as it seems.â Landau v. Chase Manhattan Bank, N.A., 367 F.Supp. 992, 998 (S.D.N.Y.1973); see also Ortiz, 119 S.Ct. at 2312 (âIt is true, of course, that the text of Rule 23(b)(1)(B) is on its face open to a more lenient limited fund concept----â). Undoubtedly, nearly every potentially large judgment risks depletion of the defendantâs assets and thus creates a risk that adjudication could âas a practical matter be dispositive of the interests of the other members not parties to the adjudications or substantially impair or impede their ability to protect their interests.â Fed.R.Civ.P. 23(b)(1)(B).
Accordingly, Ortiz confirmed that mandatory class treatment under a limited fund rationale must be confined to a narrow category of cases. âThe cases forming this pedigree of the limited fund class action as understood by the drafters of Rule 23 have a number of common characteristics, despite the variety of circumstances from which they arose.â Ortiz, 119 S.Ct. at 2311. As the Court recognized, âthe greater the leniency in departing from the historical limited fund model, the greater the likelihood of abuse.â Id., 119 S.Ct. at 2313. It therefore chose to follow the âprudent course,â as reflected by the Advisory Committeeâs distaste for creativity under Rule 23(b)(1)(B), and directed the federal judiciary to âpresume that when subdivision (b)(1)(B) was devised to cover
Having considered the history of Rule 23(b)(1)(B) and its predecessors in equity, the Supreme Court found âgood reasons to treat these [three] characteristics as presumptively necessary, and not merely sufficient, to satisfy the limited fund rationale for a mandatory action.â Id., 119 S.Ct. at 2312. Under this standard, a majority of the Justices agreed that various features of the class certification in Ortiz departed markedly from limited fund antecedents. See id., 119 S.Ct. at 2321. Since Ortiz, the lower federal courts have followed the High Court in declining to certify putative (b)(1)(B) classes that fail to conform to the traditional pedigree. See, e.g., In re Diet Drugs Prods. Liability Litig., No. MDL 1203, Civ. A. 98-20594, 1999 WL 782560, at *7 (E.D.Pa. Sept. 27, 1999); Cullen v. Whitman Med. Corp., 188 F.R.D. 226, 236 (E.D.Pa.1999).
With these precedents in mind, this Court too must carefully scrutinize these characteristics as they apply to the situation at hand. Of particular relevance is the question of whether the parties can provide specific evidence supporting the existence of a limited fund. Based on the language in Ortiz, any substantial deviation from the classic limited fund class action would compel decertification. At the very least, âthe burden of justification rests on the proponent of any departure from the traditional norm.â Ortiz, 119 S.Ct. at 2312.
IV. Specific Evidence of the Inadequacy of the Fund to Satisfy All Claims
âThe first and most distinctive characteristic [of the limited fund pedigree] is that the totals of the aggregated liquidated claims and the fund available for satisfying them, set definitely at their mĂĄximums, demonstrate the inadequacy of the fund to pay all the claims.â
A. Scope of the Fund
Before determining whether the so-called âfundâ is a âlimitedâ one, the Court must first ascertain the parameters of the âfundâ at issue in this case. The Doe plaintiffs submit that the amount potentially available to satisfy a judgment in this case is the defendantâs current net wealth, see Doe Pl. Opp. Mem. at 8, an assumption upon which the Court originally certified the plaintiff class, see Doe, 176 F.R.D. at 462. This comports with the Supreme Courtâs recognition that a defendantâs assets âwould obviously be âlimitedâ in the traditional sense if the total of demonstrable claims would render [him] insolvent.â Ortiz, 119 S.Ct. at 2317.
Yet, in contrast to the traditional limited fund class action, the defendant here is neither a corporation with limited liability nor âa fixed and limited fund in danger of depletion,â Moore v. Ross, 502 F.Supp. 543, 550 (S.D.N.Y.1980), but rather an individual, living person subject to in personam claims. See In re Asbestos Litig., 134 F.3d at 673 (Smith, J., dissenting); see also Madanes v. Madanes, 981 F.Supp. 241, 262 (S.D.N.Y. 1997) (â[T]here is a difference between an action to obtain money from a specific, limited fund, and an action that seeks damages against third parties for misdeeds potentially related to the fund.â). Any judgment against the defendant will be enforceable against him for at least twenty years, see Fed.R.Civ.P. 69(a); N.Y. C.P.L.R. § 211(b), and any assets subsequently discovered by the plaintiffs or earned by the defendant will be subject to the judgment. Hence, the Doe plaintiffs must establish not only that the defendantâs current net worth is insufficient to satisfy a potential judgment, but also a âsubstantial probabilityâ that the defendant will be unable to pay such claims over the life of the judgment. Cf. In re Joint Eastern & Southern Dist. Asbestos Litig., 982 F.2d at 727 (requiring âa substantial probability that payment of damage awards would exhaust the Trustâs available and projected assetsâ).
Based on the above definition of the âfundâ at stake in this litigation, the Court must conclude that there can be âno adequate finding of fact to support [the] application [of Rule 23(b)(1)(B)] here.â Ortiz, 119 S.Ct. at 2317. As the Kadic plaintiffs correctly point out, see Kadic PL Mem. at 18, there has been no fact-finding inquiry to examine evidence supporting certification under Rule 23(b)(1)(B). See Ortiz, 119 S.Ct. at 2318; In re Temple, 851 F.2d 1269, 1272 (11th Cir.1988); Greenman, 829 F.2d at 1546; School Asbestos Litig., 789 F.2d at 1005; Bendectin, 749 F.2d at 306; In re Joint Eastern & Southern Dist. Asbestos Litig., 129 B.R. 710, 825 (Bankr.E.D.N.Y.1991), vacated on other grounds, 982 F.2d 721 (2d Cir.1992), modified on rehâg, 993 F.2d 7 (2d Cir.1993). Neither discovery nor hearings were ever conducted. Nor was any evidence obtained or considered, with the single exception of defendantâs own self-serving, unsworn assertion that he could not afford to defend the action in the United States.