October 16, 2006
ALI Principles of the Law of Aggregate Litigation
Last week, the American Law Institute held meetings of the Advisors and the Members Consultative Group for the Principles of the Law of Aggregate Litigation. The groups met to discuss Preliminary Draft No. 4 (Sept. 21, 2006), which is available for purchase from the ALI and also available in many law libraries. The draft contains three chapters, addressing (1) General Principles of Aggregation, (2) Aggregate Treatment of Common Issues; and (3) Aggregate Settlements. It's worth reading. The draft is full of thoughtful and provocative proposals, and the commentary and reporters' notes provide a thorough education in aggregate litigation policy.
Chapter 3 addresses both class action settlements and non-class aggregate settlements. Among other important proposals, it advances two ideas that, if adopted as law, would dramatically enhance the power of aggregate counsel to negotiate binding settlements for classes or non-class client groups in mass torts. Section 3.07 ("Approval of a Settlement Class") would allow approval of a settlement class action even if it does not satisfy the requirements for certification of a litigation class. This section rejects the position of Amchem Products v. Windsor (U.S. 1997) that a class may not be certified for settlement unless it satisfies the requirements for class certification for litigation (other than trial manageability). The issue hearkens back to the mid-1990's, when this came up in the Georgine case, and when the Advisory Committee on Civil Rules considered a proposal for a new category of class actions -- Rule 23(b)(4) -- that would have permitted certification of a settlement class action without meeting the requirements of Rule 23(b)(3) for trial. Given the reluctance of most courts to certify mass tort class actions, combined with the desire of defendants in some mass torts to seek global resolutions, anything that eases the certification of settlement class actions would enhance the possibility of broadly inclusive resolutions in mass tort litigation. Whether that's a good idea is another story, and the proposal in this ALI draft brings us back to the concerns about leverage, collusion, and reverse auctions that pervaded discussions of Amchem and the 23(b)(4) proposal.
As to non-class aggregate settlements, section 3.17 ("Circumstances Required for Aggregate Settlements to be Binding") would allow clients to waive, in advance, the informed consent requirement of the aggregate settlement rule. Every state has an ethics rule along the lines of Model Rule of Professional Conduct 1.8(g), forbidding lawyers to enter an aggregate settlement for multiple clients unless each client gives informed consent after full disclosure of the settlement terms. The proposal in the ALI draft would allow clients to consent, in the retainer agreement, to be bound later by an aggregate settlement. For example, under this proposal, a lawyer representing numerous plaintiffs in a particular mass tort might include in the retainer agreement a provision that each client agrees to be bound by an aggregate settlement if approved by majority vote of the client group. The proposal contains a number of specific protections for claimants, including a limited right to challenge the fairness of a settlement. Also, the proposal would limit such waivers to settlements involving numerous claimants and high aggregate stakes. Like the class action proposal, this proposal would empower lawyers to negotiate settlements on behalf of large groups of clients. In the mass collective representation typical of mass tort litigation, both plaintiffs' counsel and defendants often favor settlements that bind entire groups. Elsewhere (in Beyond the Class Action, 2003 U. Chi. Legal F. 519, 570-75, and in A Typology of Aggregate Settlements, 80 Notre Dame L. Rev. 1769, 1809-10 (2005)), I've explained why in general I do not think it makes sense to permit such ex ante waivers of the protections of the aggregate settlement rule. It will be interesting to see how the issue plays out in the ALI project.
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