Saturday, April 30, 2016
Russell Gold (Wake Forest) has posted his latest piece, Compensation's Role in Deterrence, on SSRN. Here's the abstract:
There are plenty of non-economic reasons to care whether victims are compensated in class actions. The traditional law and economics view, however, is that when individual claim values are small, there is no reason to care whether victims are compensated. Deterring wrongdoing is tort law’s primary economic objective. And on this score, law and economics scholars contend that only the aggregate amount of money that a defendant expects to pay affects deterrence. They say that it does not matter for deterrence purposes how that money is split between victims, lawyers, and charities. This Article challenges that claim about achieving tort law’s primary objective and argues that there is an economic reason to care whether victims are compensated in class actions. It offers reason to think that compensating victims deters more wrongdoing than the same amount of relief in other forms, at least in damages class actions.
Put a different way, this Article contends that the primary objectives of class actions — compensation and deterrence — are intertwined in ways that scholars have not previously recognized. Compensation affects the amount of reputational harm that class actions inflict on defendants, and anticipating that reputational harm provides a source of deterrence. Because the public values compensating victims in civil litigation, if class actions were frequently to slight compensation that would undermine public perception of the class device; class actions would come to seem more like plaintiffs’ lawyers’ extortion mechanisms than legitimate means of redressing harm. Diminished procedural legitimacy makes the class action a less powerful signal about the validity of the underlying claims, which undermines reputational deterrence.
Friday, April 29, 2016
Cathy Sharkey (NYU Law) has posted a new piece on SSRN entitled The BP Oil Spill Settlements, Classwide Punitive Damages, and Societal Deterrence. Here's the abstract:
The BP oil spill litigation and subsequent settlements provide an opportunity to explore a novel societal economic deterrence rationale for classwide supra-compensatory damages. Judge Jack Weinstein was a pioneer in the field of punitive damages class certification. In In re Simon II, he certified a nationwide punitive-damages-only class in a multijurisdiction, multidefendant tobacco lawsuit. Using Judge Weinstein’s innovations in In re Simon II as an analytical lens, the Article evaluates the future prospects for classwide punitive damages claims.
Specifically, the Article considers how private litigants might adopt a societal damages approach in negotiating and achieving class action settlements. Class action settlements readily accommodate the “public law” dimension of societal damages, as demonstrated by the classwide punitive damages settlement with BP’s co-defendant Halliburton. Indeed, on closer inspection, even the BP compensatory damages class settlement has a surrounding aura of societal damages. For even that ostensibly purely compensatory arrangement included an unusual (and mostly overlooked) feature: a provision for supra-compensatory multipliers applicable to certain claimants. This Article advances the new idea that these supra-compensatory multipliers are a form of classwide societal damages embedded within the settlement, and, in turn, a potential blueprint for nascent punitive damages classes of the future.
Our own Howie Erichson has posted his latest piece, Aggregation in Disempowerment: Red Flags in Class Action Settlements, on SSRN. It's a great read for judges and attorneys alike and points out--as the title suggests--provisions in class action settlements that should give judges pause before approving a class settlement.
Here's the abstract:
Class action critics and proponents cling to the conventional wisdom that class actions empower claimants. Critics complain that class actions over-empower claimants and put defendants at a disadvantage, while proponents defend class actions as essential to consumer protection and rights enforcement. This article explores how class action settlements sometimes do the opposite. Aggregation empowers claimants’ lawyers by consolidating power in the lawyers’ hands. Consolidation of power allows defendants to strike deals that benefit themselves and claimants’ lawyers while disadvantaging claimants. This article considers the phenomenon of aggregation as disempowerment by looking at specific settlement features that benefit plaintiffs’ counsel and defendants without benefiting class members. Recognizing that protection of disempowered class members lies with judges who review settlement agreements, the article identifies red flags to alert judges to problematic settlements and fee requests. By showing how certain settlement features reflect defendants’ cooption of the power of aggregation, the article offers a framework for thinking about class action power dynamics in the age of settlement.
Thursday, April 28, 2016
In my first post on Monopolies in Multidistrict Litigation, I noted that lead lawyers and defendants seem to benefit in tandem from the settlements they negotiate. This second post, Part II, explains how repeat players on both plaintiff and defense sides have perfected a fundamental shift in settlement design.
As I elaborate on pages 19-21, the demise of the mass tort class action makes it more difficult for defendants to achieve holistic closure, for MDL settlements technically bind only those litigants before the court. But defendants have been able to regain a greater degree of finality through a foundational shift in settlement construction: unlike traditional settlements between plaintiffs and defendants, all twelve deals in the dataset were agreements between lead lawyers and defendants.
As such, these deals position lead plaintiffs’ lawyers as settlement gatekeepers, for defendants will not make better offers to others without the threat of trial; doing so would work against their closure goal. These new deals then serve as a mandatory gateway for anyone wanting to settle, and typically require non-lead attorneys to become signatories alongside their clients. Accordingly, all master settlement agreements in the dataset aimed some provisions at plaintiffs’ attorneys and some at their clients. As a later post will explore, it's the provisions targeting plaintiffs' attorneys that raise the most ethical problems.
Making deals with plaintiffs’ attorneys masterfully furthers defendants’ end game in two ways.
First, the agreements impose uniform endorsement requirements on participating attorneys to discourage them from “cherry picking,” a practice in which lawyers settle most cases, but continue litigating those with the strongest claims or most sympathetic facts. By requiring a high percentage of plaintiffs to accept the settlement offer for it to take effect and insisting that individual attorneys recommend that all their clients settle (including clients who had not yet sued or who were pursuing relief elsewhere), defense attorneys essentially conditioned plaintiffs’ attorneys fees on achieving their closure aims.
A plaintiff’s attorney is either “all in” and would collect significant contingent fees from all her settling clients, or “all out” and would have to spend significant resources litigating individual cases. As such, recommendation provisions alter the typical contingent fee model where an attorney’s recovery increases alongside her clients’ recovery and instead ties plaintiffs’ attorneys’ financial self-interest to each other and to the entire claimant base.
This shift also allows defendants to reach some plaintiffs who are outside of the federal court’s jurisdiction, and others who haven’t yet filed suit (through case census provisions - see pp. 27-29). It thereby recaptures some of the finality that class actions once offered through binding absent class members.
Second, when combined with the defendant's ability to walkaway from the deal if too few claimants consent to settle, provisions aimed at plaintiffs' attorneys (attorney-recommendation provisions, attorney' withdrawal provisions - see pp. 19-26) collectively reduce the demand for legal representation. The settlement effectively becomes the only “game” in town.
Like oligopolists, leaders are able to thwart competition and reduce demand by using attorney withdrawal and recommendation provisions to restrict the legal services market (at least for those with similar allegations against the same defendant). When defendants threaten to abandon the deal if too few plaintiffs participate, and participating attorneys must recommend the deal to all of their clients and withdraw from representing those who refuse, leaders can regulate the legal service being offered and control a sufficiently large share of that market
In this sense, master settlements can recreate bottleneck problems where dominant firms raise competitors’ costs by obtaining exclusionary rights; once defendants negotiate master settlements with plaintiffs’ leadership, that agreement typically becomes the only settlement option.
Why should we be concerned? Apart from inherent economic concerns that arise under these conditions, the next post will explore why provisions targeting attorneys are ethically troubling.
Thursday, April 21, 2016
I've spent the better part of the past year and a half analyzing the publicly available nonclass aggregate settlements that have taken place in multidistrict litigation alongside leadership appointments, common-benefit fees, and, where available, recovery to the plaintiffs. This has given me an in-depth look at what's happening (or has happened) in Propulsid, Vioxx, Yasmin/Yaz, DePuy ASR Hip Implant, Fosamax (2243), American Medical Systems pelvic mesh litigation, Biomet, NuvaRing, and Actos. I've also analyzed fee practices in Baycol, Ortho Evra, Avandia, Mentor Corp. ObTape, Prempro, Chantix, Pradaxa, and Ethicon Pelvic Repair.
This endeavor has been deeply unsettling for a variety of ethical, doctrinal, and systemic reasons. Professors Erichson and Zipursky's prior work on Vioxx opened our eyes to troubling provisions in that deal, but I had no idea how widespread the problems were or how they had evolved over time from deal to deal until now.
Propulsid appears to be the primogenitor, for all subsequent deals in the data replicated some aspect of its closure provisions. But Propulsid is extraordinarily troubling: 6,012 plaintiffs abandoned their right to sue in court in favor of settling. Only 37 of them (0.6 percent) recovered any settlement money through the physician-controlled claims review process, receiving little more than $6.5 million in total. Lead lawyers, on the other hand, received over $27 million in common-benefit fees through a deal they negotiated directly with the defendant (and had the court approve). Sadly, that's just the tip of the iceberg.
I posted the fruits of my labor on SSRN today in a piece titled, Monopolies in Multidistrict Litigation. It's a 70+ page tomb, so I'll be covering specific aspects of it over the next few weeks in a series of blog posts. It's not only an indictment of current practices and procedures, but it offers myriad ways for judges to improve MDL practice. It even comes complete with handy pocket guides for judges, leadership application forms, and leadership applicant scoring sheets in the appendix.
For those of you who love data, there are several tables that may be of interest: Table 1: Provisions Benefitting Defendants Occurring within the Analyzed Settlements on p. 20; Table 2: Common-Benefit Fee Practices on p. 33; and Table 3: Common-Benefit Awards and Nonclass Claimant Recovery within the Data on p. 48.
Today's post simply introduces the paper, so here is the summary:
When transferee judges receive a multidistrict proceeding, they select a few lead plaintiffs’ lawyers to efficiently manage litigation and settlement negotiations. That decision gives those attorneys total control over all plaintiffs’ claims and rewards them richly in common-benefit fees. It’s no surprise then that these are coveted positions, yet empirical evidence confirms that the same attorneys occupy them time and again. When asked, repeat players chalk it up to their experience and skill—no one can manage and negotiate as well as they can. Off the record, however, any plaintiff’s lawyer who’s been involved in multidistrict litigation will explain repeat players’ dominance with stories of backroom deals, infighting, and payoffs. Yet, when judges focus on cooperation and consensus in selecting leaders and then defer to those leaders in awarding common-benefit fees, they dampen open rivalry and enable repeat actors to mete out social and financial sanctions on challengers.
Anytime repeat players exist and exercise both oligopolistic leadership control across multidistrict proceedings and monopolistic power within a single proceeding, there is concern that they will use their dominance to enshrine practices and norms that benefit themselves at consumers’ (or here, clients’) expense. Apprehensiveness should increase when defense lawyers are repeat players too, as they are in multidistrict litigation. And anxiety should peak when the circumstances exhibit these anti-competitive characteristics, but lack regulation as they do here. Without the safeguards built into class certification, judicial monitoring and appellate checks disappear. What remains is a system that permits lead lawyers to act, at times, like a cartel.
Basic economic principles demonstrate that noncompetitive markets can result in higher prices and lower outputs, and agency costs chronicle ways in which unmonitored agents’ self-interest can lead them astray. By analyzing the nonclass deals that repeat players design, this Article introduces new empirical evidence that multidistrict litigation is not immune to market or agency principles. It demonstrates that repeat players on both sides continually achieve their goals in tandem—defendants end massive suits and lead plaintiffs’ lawyers increase their common-benefit fees. But this exchange may result in lower payouts to plaintiffs, stricter evidentiary burdens in claims processing, or higher plaintiff-participation requirements in master settlements.
These circumstances warrant regulation, for both multidistrict litigation and class actions are critical to redressing corporate wrongdoing. Even though judges entrench and enable repeat players, they are integral to the solution. By tinkering with selection and compensation methods and instilling automatic remands after leaders negotiate master settlements, judges can capitalize on competitive forces already in play. By tapping into the vibrant rivalries within the plaintiffs’ bar, judges can use dynamic market solutions to remap the existing regulatory landscape by invigorating competition and playing to attorneys’ strengths.
As always, your comments are welcome (the draft is still just that, a draft) - please email any comments or corrections to me eburch at uga.edu. More soon...
Monday, April 18, 2016
Sunday, April 17, 2016
Submissions and nominations of articles are now being accepted for the seventh annual Fred C. Zacharias Memorial Prize for Scholarship in Professional Responsibility. To honor Fred's memory, the committee will select from among articles in the field of Professional Responsibility with a publication date of 2016. The prize will be awarded at the 2017 AALS Annual Meeting in San Francisco. Please send submissions and nominations to Professor Samuel Levine at Touro Law Center: email@example.com. The deadline for submissions and nominations is September 1, 2016.
Much of our work in mass torts overlaps heavily with professional responsibility. Our own Alexi Lahav has won the prize in the past, and Morris Ratner and I were co-winners this year. Morris's winning article is, Class Counsel as Litigation Funders, 28 Geo. J. Legal Ethics 271 (2015), and mine was Judging Multidistrict Litigation, 90 N.Y.U. L. Rev. 71 (2015).
Saturday, April 9, 2016
Professor Briana Rosenbaum (Tennessee Law) has posted to SSRN the abstract for her article, The RICO Trend in Class Action Warfare, 102 Iowa L. Rev. (forthcoming 2016). Here's the abstract:
The class action device has been under attack for decades. Recent Supreme Court cases have further enervated class actions, and the current Congress is considering both class action and tort reform. Recently, defendants in aggregate litigation have employed an additional tactic by filing civil RICO cases against plaintiffs’ counsel alleging they fraudulently concealed a few baseless lawsuits among larger sets of claims. The predicate acts in those RICO cases consist solely of litigation activities: the filing of complaints in mass actions and related litigation documents. Members of the defense bar have made no secret of the fact that these RICO cases are part of a larger strategy to prevent plaintiffs’ attorneys from bringing large-scale class actions and other aggregate litigation. Despite the rich literature on class actions, this recent aggressive use of RICO by the defense bar and corporate interest groups to punish plaintiffs’ attorneys for the alleged fraudulent filing of aggregate litigation has gone relatively unexplored.
This Article pulls together several previously unassociated areas of law-including RICO, Rule 11, class actions, SLAPP motions, and asbestos litigation-to develop a model of the RICO trend. It then argues that holding plaintiffs’ attorneys liable under civil RICO solely for litigation activities is illegal, results in the lamentable federalization of state common law, and leads to improper forum shopping. The RICO trend also avoids legitimate state protections for litigation activity and is a thinly-veiled attempt by the defense bar to further weaken class actions by targeting the plaintiffs’ attorneys themselves. Just as critically, this use of RICO punishes the aggregate litigation device itself, rather than the underlying fraudulent conduct; as a remedy for frivolous aggregate litigation conduct, it is both over- and under-inclusive. This Article concludes by proposing several alternatives, including effectively barring any civil RICO action targeting attorneys’ pure litigation activities without systemic wrongdoing.
Professors Jef P. B. De Mot (Ghent University), Michael G. Faure (University of Maastricht - Faculty of Law & Erasmus School of Law), and Louis T. Visscher (Rotterdam Institute of Law and Economics & Erasmus School of Law) have posted to SSRN their article, Third Party Financing and its Alternatives: An Economic Appraisal. Here's the abstract:
In this contribution we provide an economic approach to third party funding. We first explain why third party funding emerges. It can be considered as a remedy for the market failure that can occur in cases of so-called dispersed losses where rational apathy may occur, and also when individuals do not bring claims solely because they do not have sufficient funds. However, we argue that although TPF can help solve market failures, it can create also problems of its own. All the classic economic problems, such as the principal-agent problem, information and transaction costs may jeopardize the effectiveness of TPF. However, we argue that remedies can be designed to increase the effectiveness. We further compare TPF to other mechanisms that could equally cure the market failures, such as legal expenses insurance (LEI) and the transfer of claims. We also briefly compare TPF to contingency fee arrangements, although this is not the central focus of our contribution.
Professor Adam Steinman (Alabama Law) has posted to SSRN his article, The Rise and Fall of Plausibility Pleading?, 69 Vanderbilt L. Rev. 333 (2016). Here's the abstract:
The Supreme Court's 2007 decision in Bell Atlantic Corp. v. Twombly and its 2009 decision in Ashcroft v. Iqbal unleashed a torrent of scholarly reaction. Commentators charged these decisions with adopting a new pleading regime, "plausibility pleading," that upended the notice-pleading approach that had long prevailed in federal court. Whether a complaint could survive a motion to dismiss — it was argued — now depends on whether the court found the complaint plausible, allowing courts to second-guess a complaint's allegations without any opportunity for discovery or consideration of actual evidence. Lower courts began to cite Twombly and Iqbal at a remarkably high rate, and empirical work revealed their effect on both dismissal rates and litigant behavior.
Although Twombly and Iqbal were troubling on many levels, the rise of a newly restrictive form of plausibility pleading was not inevitable. There was — and still is — a path forward that would retain the notice-pleading approach set forth in the text of the Federal Rules themselves and confirmed by pre-Twombly case law. This Article describes this reading of Twombly and Iqbal, and explains how more recent Supreme Court pleading decisions are consistent with this understanding. It is crucial, however, that these post-Iqbal decisions and the approach to pleading they reflect receive the same attention that accompanied Twombly, Iqbal, and the rise of plausibility pleading. Otherwise the narrative that Twombly and Iqbal compel a more restrictive pleading standard may become further entrenched, compounding the adverse effects of those problematic decisions.
Friday, April 1, 2016
Thursday, March 31, 2016
This case involved a crash on an icy bridge in New Orleans during a rare ice storm in that part of the country. The plaintiffs suffered minor injuries.
The jury found the accident was caused by the ice storm, not the defect. It did, however, also find that the car was "unreasonably dangerous." With respect to that determination, Prof. Carl Tobias (Richmond) is quoted in the Bloomberg article saying: “The plaintiffs can claim a victory at least insofar as the jury made that finding, which is a critical finding. Every case will be on its own merits, but I think they can claim that as an important development.”
Thursday, March 24, 2016
The New York Times has an article today on the link between NFL and Tobacco called NFL's Concussion Research Deeply Flawed.
What does this mean for the NFL settlement? Should the issue be approached in the mode advocated long ago by Francis McGovern - that is, by allowing the mass tort to mature through multiple trials before a settlement is reached?
This article also raises the question of how the law promotes and creates disincentives for entities to conduct reliable scientific studies. For interesting takes on that question, compare Wendy Wagner, Choosing Ignorance in the Manufacture of Toxic Products with Wendy Wagner, When All Else Fails: Regulating Risky Products Through Tort Litigation.
Tuesday, March 22, 2016
The Supreme Court today issued its decision in Tyson Foods v. Bouaphakeo. The Court upheld class certification on a state claim that parallels FLSA and the FLSA collective action (which is not a class action but an opt-in procedure) and reaffirmed its precedent that representative evidence can be used in FLSA cases. The Court's decision emphasizes that there is no one size fits all in the use of statistical evidence in class actions - whether evidence is appropriate is a question of evidence law that depends on the specific legal and factual requirements of the individual case. The case also supports the relatively narrow reading appellate courts have given the Court's decision in Comcast. The evidence presented, be it statistical or any other form of evidence, must fit the claims, but that does not mean that statistical analysis cannot help the court and the jury better understand what transpired.
What does Tyson portend for future trials, which Robert Klonoff predicted are going to be more common in class actions? A couple things. First, defendants will probably seek to bifurcate trials and make greater use of specific verdict forms rather than try to assault a lump sum verdict on appeal. Second, Daubert challenges are likely to continue to be contentious, and we'll see them twice: first on certification and again at trial.
Now the case goes back to the district court to determine an allocation plan, which I doubt defendants will challenge. The point of this appeal was to try to eliminate the use of statistical evidence in class actions and to broaden Comcast - otherwise why would fighting a 2.9 million dollar verdict be worth it for a defendant like Tyson? I can't think of a reason other than setting a precedent that prohibits the use of statistics in complex litigation will protect it and other defendants from class wage and hour claims, and potentially other claims. And note that the late Justice Scalia's dissent, if he had dissented, would have played little role in the outcome of the case as Justice Roberts joined the majority. It would have been 6 to 3 instead of 6 to 2.
One more thing: is this a business unfriendly decision? I think not. It is narrowly drawn to apply the law (FLSA) to employers, but an employer such as Tyson Foods can protect itself by keeping records that would obviate the need for representative evidence.
Friday, March 11, 2016
Bloomberg BNA has an article by Steve Sellers about increased judicial scrutiny by courts in mass products liability cases. He lists several cases in the last few years in which courts denied secrecy provisions in settlements because of the public interest:
, 2016 BL 6286, 9th Cir., No. 15-55084, 1/11/16. This case in the 9th Circuit granted in intervenor public interest organization's motion to obtain documents in a lawsuit involving defective car parts.
Maybe there is a trend towards transparency. Another recent Bloomberg BNA piece by Perry Cooper highlights the question of whether class action settlement outcomes should be required to be disclosed.
Sunday, February 21, 2016
Professor Joanna Shepherd (Emory) has posted to SSRN her article, An Empirical Survey of No-Injury Class Actions. Here is the abstract:
This report empirically examines the allocation of settlements and awards in no-injury class actions among plaintiffs, attorneys, and cy pres funds. The results are based on my study of 432 no-injury class action settlements and trial awards from 2005-2015. The study finds that, on average, 60 percent of the total monetary award paid by the defendants was allocated to the plaintiffs’ class and 37.9 percent was allocated to attorneys’ fees. However, because many settlements disperse the unclaimed portion of the settlement fund to a cy pres fund, the funds available to class members at the time of settlement may significantly overstate the actual amount class members ultimately receive. Although 60 percent of the total monetary award may be available to class members, in reality, they typically receive less than 9 percent of the total. In comparison, class counsel receives an average of 37.9 percent of available funds, over 4 times the funds typically distributed to the class. A result in which plaintiffs recover less than 10 percent of the award, with the rest going to lawyers or unrelated groups, clearly does not achieve the compensatory goals of class actions. Instead, the costs of no-injury class actions are passed on to consumers in the form of higher prices, lower product quality, and reduced innovation.
Jill Fraley on the Government Contractor Defense and Superior Orders in International Human Rights Law
Professor Jill Fraley (Washington & Lee) has posted to SSRN her article, The Government Contractor Defense and Superior Orders in International Human Rights Law. Here is the abstract:
As military functions are increasingly outsourced to corporate contractors, civil courts face adjudicating issues of tort liability arising from actions occurring in war zones. Currently victims of torture and other invasive military techniques used at Abu Ghraib and Guantanamo Bay seek to prevail over issues of sovereign immunity and to hold corporations responsible for the actions of their employees. In response, corporations shield themselves with the government contractor defense, an affirmative defense developed in the context of product liability actions. Recent articles have overwhelmingly suggested that the defense will succeed and often have argued that it should succeed due to issues of sovereign immunity. This article makes a novel claim — a claim which is supported by placing the government contractor defense in the context of international law. This article examines the theoretical foundations of the government contractor defense, and comparing the elements of the defense to the international law of human rights, argues that the government contractor defense is reducible to a claim of “superior orders.” The government contractor defense is attempting to hang on the coattails of sovereign immunity — i.e., the defense is nothing more than an argument that “the government told me to do it.” Indeed, this is what one must argue to present the traditional prima facie case for the government contractor defense: specific orders and compliance with those orders. In light of the analytical similarity between the two defenses, and given the absolute ban of the superior orders defense in international law, the government contractor defense is unacceptable in the context of claims of human rights violations.
Professor Robert Rabin (Stanford) has posted to SSRN his article, Intangible Damages in American Tort Law: A Roadmap. Here is the abstract:
This paper is meant to provide a succinct roadmap to the many pathways taken in providing recovery for intangible harm in tort. The paper was initially prepared for a comparative law conference, and in that setting, I assumed a lack of close familiarity with the historical origins and surprisingly broad expanse of recovery for intangible harm in American tort law. While succinctly presented, the present revised treatment, for those conversant with the US system, is meant to be comprehensive, addressing defamation and privacy, no-fault and tort reform, as well as the more conventional common law topics of intangible damages in cases of intentional and accidental harm.
Monday, February 8, 2016
In today's New York Times, Michael Wines & John Schwartz have an article called "Regulatory Gaps Leave Unsafe Lead Levels in Water Nationwide."
What they describe in the article are not only regulatory gaps - that is places such as certain waterways or sources of water that are un- or under- regulated, but also cases where regulations are ignored, poorly followed, etc.
On prawfsblawg, Rick Hills writes about the Flint water crisis in particular and the relationship between litigation and regulation. He correctly observes: "Darnell Earley, the emergency manager appointed by Governor Snyder to run Flint, had a bureaucratic mandate to save money and no electoral incentive to protect non-fiscal goals like voters' health. By switching Flint's water supply from the expensive Detroit water system to the cheaper and more corrosive Flint River, Earley maximized the first goal and ignored the second, with the result that Flint's residents now have elevated lead levels in their blood."