In Re School Asbestos Litigation. School District of Lancaster Manheim Township School District, Lampeter-Strasburg School District and Northeastern School District v. 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 Corp., U.S. Gypsum, U.S. Mineral Products Co., Sprayon Insulation & Acoustics, Inc., Sprayon Research Corp., Keene Corp., Worben Co., Inc., Wilkin Insulation Co., W.R. Grace & Co., Owens-Corning Fiberglas Corporation, Standard Insulations, Inc., North American Asbestos Corp., 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. Appeal of National Gypsum Company, United Sta

Citation: 842 F.2d 671Docket: 87-1123

Court: Court of Appeals for the Third Circuit; March 16, 1988; Federal Appellate Court

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Consolidated appeals stem from class action litigation in the United States District Court for the Eastern District of Pennsylvania, involving public and private elementary and secondary schools across the nation. The schools are suing manufacturers and suppliers of asbestos-containing materials to recover expenses related to the removal, repair, containment, and maintenance of such materials in their buildings. The appellants include several major corporations associated with asbestos production and distribution, while the appellees represent various school districts and plaintiffs involved in the case. The appeals were argued on July 7, 1987, and decided on March 17, 1988, by the United States Court of Appeals for the Third Circuit, with Circuit Judges Higginbotham and Becker, along with District Judge Barry, presiding over the case.

The district court issued an order under Fed. R.Civ. P. 23(d) regulating communications between class action litigants, requiring appellant corporations and the Safe Buildings Alliance (SBA) to display a specified notice regarding ongoing litigation whenever they communicate with members of the plaintiff class or related groups. The corporations, including National Gypsum Company, United States Gypsum Company, W.R. Grace Co., The Celotex Corporation, and Owens-Corning Fiberglas Corporation, challenged this order on the grounds that it exceeded the court's authority under Rule 23(d) and infringed upon their First Amendment rights. The court found the order improper under Rule 23(d) and decided to vacate it, remanding for further proceedings. 

The SBA, formed in April 1984, consists exclusively of the appellant corporations and aims to advocate for their interests regarding asbestos-related issues. The organization, primarily funded by its members, was established to better communicate their perspectives to government and the public amidst growing concerns about asbestos in buildings. The SBA identifies itself as a lobbying and public education entity with objectives including developing alternatives to asbestos removal, establishing abatement standards, creating responsible inspection processes, and providing training for removal contractors. Since its inception, SBA has actively represented its members’ views in various governmental contexts and initiated public education efforts to address misconceptions about asbestos hazards.

The corporate-defendant-appellants assert that the Small Business Administration (SBA) is not focused on litigation, highlighting that it has never participated in product liability cases. Despite this, the SBA acknowledges that the potential for litigation was a factor leading to its formation. The SBA emphasizes that concerns over members' liability in such litigation have been pivotal to its lobbying and public education efforts. The primary responsibility for asbestos-related costs falls on building owners, yet suppliers also face liability risks, necessitating a joint interest in efficiently managing asbestos risks to reduce overall expenses while ensuring safety.

A key aspect of the SBA's public education initiative is to inform stakeholders—including architects, contractors, building owners, and the general public—about the low risk of harm posed by asbestos-containing products and the potential risks associated with their removal. The SBA has engaged in various outreach activities, including seminars and direct communications, to disseminate this information.

The legal proceedings were significantly influenced by the SBA's distribution of a booklet titled "What You Should Know About Asbestos in Buildings," which presents the SBA's perspective that asbestos typically does not present a health hazard and that removal may not be advisable. The booklet does not reference any ongoing litigation and was widely distributed, particularly to school officials.

In response to the SBA’s actions, class plaintiffs sought a preliminary injunction to prevent the SBA from communicating with class members regarding the booklet. After an evidentiary hearing, the district court issued Order No. 79, requiring the SBA to include specific information when communicating about school asbestos matters with class members or related groups.

Appendix A is a "NOTICE" detailing the member companies of the SBA, which primarily fund the SBA, and identifies these companies as defendants in a class action lawsuit where all public and private elementary and secondary schools are plaintiffs. It includes the contact information for lead counsel representing the plaintiff class. Order No. 79, accompanied by a supporting opinion from the district court, is the subject of appeals filed by corporate defendant-appellants and the SBA in February and March 1987. The district court denied a motion to stay the order pending appeal, leading class plaintiffs to move to dismiss the appeals based on jurisdictional grounds. On March 20, 1987, the court granted a stay and referred the jurisdictional issue to the merits panel.

The first issue for determination is the appellate jurisdiction of this Court. The SBA and member companies claim Order No. 79 is appealable under three grounds: as a collateral final order under 28 U.S.C. Sec. 1291, as an interlocutory order granting an injunction under 28 U.S.C. Sec. 1292(a)(1), and, if no right to appeal exists, as a petition for mandamus. Although Order No. 79 does not constitute a final order under Sec. 1291, it is deemed appealable under the collateral order doctrine established in Cohen v. Beneficial Indus. Loan Corp. This doctrine applies to orders that, while not final, determine claims of right that are sufficiently important to warrant immediate review. The order must be a definitive disposition of a significant issue rather than tentative. The Court previously assessed finality in the context of orders restricting communications by plaintiffs or their attorneys, determining that some orders were not clearly tentative, thus supporting the appealability of the current order.

The order continuing the prohibition on communications with class members raises complex questions regarding its appealability. The defendants argue that the district court's ruling is tentative, as it is subject to reconsideration when the general stay of the lawsuit is reviewed. While this aspect relates to discovery, the order also significantly restricts communications regarding the Alabama consent decree's impact on potential class members' rights, which complicates its finality under the Cohen rule. Ultimately, the court determined that Order No. 79 is reviewable under discretionary mandamus jurisdiction, as it constitutes a final disposition concerning the SBA's communications about school asbestos matters with class members.

Order No. 79 lacks a specified time limit and is not indicated as tentative, leading to the conclusion that it meets the finality requirement for appeal. The order addresses issues separate from the class action's merits and impacts the SBA's First Amendment rights, qualifying it as an important issue under the Cohen criteria. The potential irreparable loss of First Amendment freedoms, even for short durations, is acknowledged as a serious concern, particularly since the order could remain in effect throughout the litigation. Therefore, the rights asserted by the SBA would be irreparably compromised if not reviewed before trial, making Order No. 79 appealable under section 1291.

Appellants contest the validity of Order No. 79 on two main grounds: first, they assert that the district court exceeded its authority under Rule 23(d), constituting an abuse of discretion; second, they argue that the order unlawfully restricts the SBA's First Amendment right to engage in public discourse on asbestos and building safety. The district court has broad authority under the Federal Rules of Civil Procedure to control class actions and issue orders that prevent abuse of the process, particularly to protect absent class members' interests and facilitate fair resolutions of claims. Rule 23(d) specifically addresses orders governing the conduct of actions. Misleading communications to class members can undermine the fairness and administration of justice, yet regulating such communications also risks infringing on First Amendment rights. The issuance of Order No. 79 must therefore balance these competing interests, guided by the standards established in Gulf Oil, which emphasizes the need for clear records and specific findings when limiting communications. The district court conducted an evidentiary hearing and issued findings to support Order No. 79, concluding that the SBA operates as an alter ego of the SBA defendants due to their financial and operational control. Furthermore, the court found that a booklet published by the SBA misleadingly suggests that not all asbestos removal is necessary, which could lead to public misunderstanding regarding asbestos safety.

The district court determined that the SBA booklet is misleading, primarily regarding its claimed objectivity and neutrality concerning asbestos in buildings. It noted that the booklet fails to acknowledge contrary scientific evidence and does not disclose the authors' involvement in ongoing litigation. The court also concluded that the SBA's motives in distributing the booklet were to persuade plaintiffs to avoid asbestos removal, thereby diminishing the defendants' liability in the class action. Although the court classified the booklet as commercial speech, deserving less First Amendment protection, it did not find that the booklet had compromised the integrity of the litigation prior to the evidentiary hearing on November 10, 1986. The court deemed Order No. 79 necessary to ensure clear communication with class members and protect them from misleading information. It emphasized that unauthorized notices lacking objectivity could confuse class members and hinder justice.

The appellants raised three main challenges to Order No. 79. They contended that the order does not align with Rule 23’s purpose of protecting class members while facilitating timely resolutions of cases. They argued that the evidence does not substantiate any harm to class interests, nor does it demonstrate actual or likely abuses. Lastly, they claimed that the court's requirement for affirmative disclosure represents an overly broad restriction on SBA's free speech, exceeding the authority granted under Rule 23(d). They maintained that SBA's communications do not threaten class members' participation in litigation and argued that the court's findings did not indicate serious misconduct, contrasting previous Rule 23(d) cases that addressed direct misconduct influencing class members' participation. The appellants characterized the SBA booklet as "litigation neutral," lacking any reference to the litigation or class members' legal rights.

Order No. 79 has been challenged by appellants on the grounds that the district court failed to differentiate between communications about the litigation and those concerning a public issue also under litigation. Unlike previous Rule 23(d) orders that addressed clear misconduct aimed at swaying class members’ participation or undermining their trust in class counsel, this case focuses on communications related to asbestos in school buildings, which the district court found to be litigation-relevant. These communications are seen as attempts to protect the defendants' financial interests by influencing outcomes that could affect liability.

The district court has the authority under Rule 23(d) to safeguard the integrity of the class and justice administration, extending beyond just misleading communications. Therefore, it is within the district court's discretion to require the SBA to disclose its involvement when communicating with class members about the lawsuit. The appellants argued that the SBA booklet doesn't pose harm warranting intervention under Rule 23(d), but this argument does not invalidate Order No. 79.

Furthermore, the appellants contended that the district court did not meet Gulf Oil's requirement for a clear record and specific findings to justify limiting the SBA's speech. However, Rule 23(d) does not necessitate proof of actual harm and instead allows for restrictions to prevent potential serious abuses. Although a more explicit discussion of abuse likelihood would have been beneficial, the district court's findings regarding the SBA's direct communications met the necessary standards. The findings indicated that the SBA booklet was misleading and could potentially dissuade class members from pursuing asbestos removal, thus justifying an affirmative disclosure requirement.

However, the court noted that the order's scope was overly broad, applying to any communication about school asbestos matters with class members or related groups, which did not align with the identified harm or the district court’s findings.

Gulf Oil mandates that orders under Rule 23(d) be precisely defined and confined to their appropriate scope. Order No. 79 fails to meet this requirement due to its lack of specificity, potentially applying to non-misleading communications that do not harm class members. Consequently, it exceeds the court's authority under Rule 23(d) and must be vacated. The district court's findings only addressed the misleading nature of an SBA booklet and did not establish any potential harm from SBA's communications in regulatory, legislative, or media contexts. The broad language of Order No. 79 incorrectly implies it applies to all communications from the SBA, not just those directly related to the lawsuit or class members’ rights. This overreach includes public speeches and media interviews that may reach class members, thereby creating impractical scenarios where SBA representatives must disclose plaintiff counsel details in diverse discussions about environmental issues. The record supports a more limited disclosure requirement for direct communications with class members, indicating that the district court lacked sufficient grounds to issue such an expansive order.

Order No. 79 is vacated, and the matter is remanded to the district court for further proceedings. The case has previously been before the court, which affirmed the district court's certification of the class as an "opt-out" class under Federal Rule of Civil Procedure 23(b)(3). Owens-Corning Fiberglas Corporation is identified as an associate member of the School Boards Association (SBA), which includes four regular corporate-defendant-appellants. The excerpt outlines the SBA’s involvement in legislative and regulatory activities regarding asbestos, including participation in congressional hearings, rulemaking, and the development of regulations to assist building owners with asbestos assessment and abatement. The SBA engaged with various stakeholders, including state and federal officials and educational institutions, and provided information to its members. The plaintiffs initially sought a preliminary injunction but clarified that they were requesting an injunction under Rule 23(d)(2). The motion included demands for the SBA to disclose prior communications with class members and to issue a court-approved corrective statement. The order mandates that this notice be prominently displayed in all future communications with the plaintiff class.

No provisions exist for identifying past communications or issuing a curative notice. The Safe Buildings Alliance (SBA) includes United States Gypsum Company, National Gypsum Company, W.R. Grace & Co., and The Celotex Corporation, with Owens-Corning Fiberglas Corp. as an associate member. These companies primarily fund the SBA and are defendants in the litigation In Re: Asbestos School Litigation, Master File No. 83-0268, in the U.S. District Court for the Eastern District of Pennsylvania. All public and private elementary and secondary schools are plaintiffs in this litigation, collectively suing these defendants and other asbestos companies, with representation from lead counsel David Berger and Herbert B. Newberg.

Section 1291 grants jurisdiction to the courts of appeals over final decisions from district courts unless a direct review is available in the Supreme Court. The case Weight Watchers of Philadelphia, Inc. v. Weight Watchers Int'l, Inc. established that an order allowing defendants to communicate with potential class members was not appealable under the Cohen collateral order doctrine, as it did not have drastic consequences on the plaintiffs' rights. In contrast, lifting the stay on Order No. 79 could significantly impact the appellants' rights. The court recognizes that Section 1291 allows the SBA to appeal from Order No. 79, without considering other jurisdictional claims.

Additionally, the order in Gulf Oil limited communications by plaintiffs' counsel with potential class members due to concerns over client solicitation, which is not applicable here. The Supreme Court found that the Gulf Oil order interfered with class counsel's efforts to advocate for class members' rights. In the current case, the appellants argue that Order No. 79 imposes an undue burden on their First Amendment rights to engage in public discourse about asbestos issues, rather than interfering with the litigation process itself.

Concerns center on the district court's alleged overreach of authority under Rule 23(d) in issuing Order No. 79. The court must have specific evidence of abuses to restrict communications, as established in *Coles v. Marsh*. It is emphasized that restrictions must align with the objectives of Rule 23, requiring the narrowest relief necessary to protect parties involved. The district court found that the SBA booklet was misleading; while it presented expert opinions on asbestos, it failed to disclose that the authors were defendants in the class action, undermining its neutrality. The broad scope of Order No. 79 was deemed unjustified due to insufficient findings of potential harm from the defendants' communications. The document references various cases illustrating improper communications by defendants that discouraged class participation. Lastly, the district court acknowledged the extensive nature of its order in a conference call, affirming its far-reaching implications that exceed the justified harm identified in the record.

When speaking to audiences that may include members of the plaintiffs' class, it is recommended to provide appropriate notice. This may involve further mailings of relevant publications, direct written communications, or personal interactions, including statements at seminars attended predominantly by class members. The court does not need to evaluate the appellants' First Amendment claims or the validity of Order No. 79 under D.R. 7-104 of the Pennsylvania Code of Professional Responsibility. D.R. 7-104 prohibits lawyers from communicating with parties represented by counsel without prior consent or legal authorization and from advising unrepresented individuals if their interests may conflict with those of the lawyer's client. Although class plaintiffs mention this rule, it was not adequately raised in lower court proceedings, and the district court's opinion did not indicate reliance on it. As the court generally does not consider issues presented for the first time on appeal, the issue will not be addressed.