Friday, May 9, 2008
Help has arrived if you are looking for counterarguments to the standard (and to my mind, convincing) argument that collective litigation usually aids plaintiffs by providing economies of scale, permitting investment based on aggregate stakes, and creating settlement leverage. University of Pavia Ph.D. student Margherita Saraceno has offered an economic analysis of whether group litigation solves the problem of "diluted liability," reaching the contrarian conclusion that aggregation may reduce access and the overall deterrent effect of tort litigation. Here's the abstract on SSRN of Group Litigation, Access to Justice, and Deterrence:
Policy makers are currently evaluating group litigation as a device to guarantee effective access to justice and to improve deterrence in torts with multiple victims. This paper focuses on how group litigation affects: 1) access to justice, 2) the choice between settlement and litigation, 3) the settlement amount, and finally, 4) deterrence. The main finding is that group litigation does not always improve access to justice and deterrence. On the one hand, group litigation makes it easier for victims to sue, by creating scale economies and improving their confidence in the outcome of a trial. On the other hand, the group is costly for victims to organize and reduces the injurer‘s liability costs by facilitating settlement and creating scale economies at trial. The combined effect might be a reduction, rather than an increase, in the deterrent effect of tort law.
S. Todd Brown of Temple University has posted a new paper on SSRN, Section 525(g) Without Compromise: Voting Rights and the Asbestos Bankruptcy Paradox, forthcoming in the Columbia Business Law Review, arguing that the voting structure for approving asbestos bankruptcy trusts under section 524g gives the dominant plaintiffs' firms too much power. Here's the abstract:
Section 524(g) of the Bankruptcy Code was adopted to protect unknown future asbestos personal injury victims' rights and prospects for financial recovery. To serve these goals and satisfy the demands of due process, Section 524(g) provides two basic forms of virtual representation for future victims - requiring the appointment of an independent legal representative and aligning the interests of future victims with current claimants (75% of whom must approve any plan that invokes Section 524(g)). In recent years, however, the 75% super-majority vote requirement has been transformed into a veto power wielded by a small group of law firms, who control sufficient votes to block any proposed asbestos reorganization plan. These firms use this power to dictate critical steps in the process - including who will be appointed as the future victims' statutory legal representative - and demand terms that violate black letter bankruptcy law. Thus, the current approach leads to a bizarre paradox: the only way to obtain sufficient votes to confirm an asbestos reorganization plan is to include provisions that will render it unconfirmable (or, at least, unable to withstand challenge on appeal). The only way to overcome this paradox as a practical matter is to buy off all current parties who may object, usually by making deals that encroach upon the interests of future victims.
This article challenges the legal and practical justifications for the asbestos veto and outlines several modest modifications to the asbestos bankruptcy process. By restoring traditional negotiating leverage, returning voting power to asbestos victims, ensuring that legal representatives are unburdened by conflicts of interest, and aligning current and future victims' interests; this proposal outlines a more balanced, equitable approach to protecting future victims.
Thursday, May 8, 2008
The New York Times reported yesterday that some of the oil companies involved in a groundwater contamination suit that spanned across 17 states, including New York and California, have agreed to settle for $423 million. Over a hundred public water providers initiated the suit, which claimed that a popular gasoline additive called methyl tertiary butyl ether (MTBE) contaminated drinking water supplies. According to the EPA, MTBE causes cancer in laboratory rats. The full story is available here.
Wednesday, May 7, 2008
I just ran across a (relatively recent) article by Robert Bone entitled "Securing the Normative Foundations of Litigation Reform," 86 B.U. L. Rev. 115 (2006) and available on SSRN. Here is the abstract:
Federal court adjudication has changed in major ways over the past thirty years. Judges are more actively involved in promoting settlements than ever before; alternative dispute resolution has moved center stage; and large-scale aggregation of related lawsuits has become much more common. These changes raise deep and difficult questions that implicate core elements of civil adjudication. This symposium Essay explores some of the challenges these developments pose for procedural law in the twenty-first century. At its most general level, the Essay calls for more rigorous normative work in civil procedure and for a better understanding of the relationship between procedure and substantive law. The springboard for the Essay's argument is Professor Robert Cover's famous 1975 article, For James Wm. Moore: Some Reflections on a Reading of the Rules. A careful reading of Cover's article provides a framework for making three main points: first, that a coherent normative account of the procedure-substance relationship is essential to crafting sound procedure; second, that Cover grasped the nature of that relationship more clearly than many proceduralists do today; and third, that we would do well to follow Cover's lead in working out answers to the difficult procedural questions that twenty-first century judges will confront. The Essay concludes by discussing some implications for three critical areas of current and future reform interest: settlement, aggregation, and the proper scope of judicial discretion.
Professor Elizabeth Thornburg (SMU) has posted an article to SSRN -- Judicial Hellholes, Lawsuit Climates, and Bad Social Science: Lessons from West Virginia, W. Va. L. Rev. (forthcoming 2008). Here's the abstract:
The American Tort Reform Association (ATRA) was founded in 1986 by the American Medical Association and American Council of Engineering Companies, and now has hundreds of corporate members. Every year, ATRA releases a list of Judicial Hellholes: court systems alleged to be unfair to defendants. The name is definitely catchy: the thought of a judicial hellhole invokes images of Kafka, Satan and the Queen of Hearts. No wonder ATRA's hellhole campaign has embedded itself in media vocabulary. And no wonder state courts and state legislatures bend over backwards to get out from under the hellhole label. Similarly, the U.S. Chamber of Commerce has a spin-off organization,the Institute for Legal Reform, that issues an annual report on each state's lawsuit climate, ranking states from 1 to 50 on their friendliness to business, based on a survey of general counsel of very large businesses and their outside lawyers. Since no state wants to be found near the bottom of the list, the ILR report also creates pressure for legal change.
This essay uses West Virginia as a test case to examine the methodology of the Hellhole and Lawsuit Climate reports. It provides context by briefly tracing the earlier campaigns of tort reform advocates, highlighting some of the ways in which they have played fast and loose with numbers and stories. The essay describes the national Hellhole and Lawsuit Climate campaigns, and then focuses on ATRA's treatment of West Virginia in order to demonstrate the techniques of the hellhole reports. For example, the reports represent opinions as facts, use quotations and anecdotes in a misleading and manipulative way, omit bad facts, and misuse statistics.
Reasonable scholars on all sides of the substantive and procedural issues involved in tort litigation have debated and will continue to debate difficult issues such as deterrence, insurance, proof of causation, procedural efficiency, the role of the courts, the limits of science, and best choice of decision maker. The hellhole reports add nothing to these thoughtful and nuanced debates; indeed, they debase that debate by misleading and misinforming citizens and lawmakers.
Daniel Farber (Berkeley Law) has just posted an article on SSRN entitled "Tort Law in the Era of Climate Change, Katrina and 9/11: Exploring Liability for Extraordinary Risks." The abstract follows:
Tort cases generally deal with routine risks - the kind of risk that a person encounters as a result of driving a car or buying a product. These risks are also staples of the insurance industry. Today, however, society faces risks that threaten massive harms to large segments of the public. Such risks materialized with 9/11 and Hurricane Katrina, and may confront us with climate change.
The first part of this article is comprised of case studies of how the tort system has responded to catastrophic risks such as large-scale flooding, terrorist acts, and climate change. Liability approaches vary depending on the problem and jurisdiction, but there is at least no consistent pattern of immunity for those who have created catastrophic risks or failed to take reasonable precautions against them.
Part II examines how compensation for catastrophic risks could contribute to societal goals such as deterring undesirable risks and social risk-spreading. The risk-spreading goal is particularly important because of the reluctance of private insurers to cover such risks. Compensation, whether administrative or judicial, might also contribute to stronger risk prevention or mitigation, and under some circumstances would advance corrective justice.
Tuesday, May 6, 2008
The Bhopal gas-leak disaster in India remains perhaps the most devastating single-incident mass tort in terms of loss of human life. As this article from the Associated Press shows, nearly 25 years later, the effects are still being felt. Here's an excerpt from the article, Indian police detain 80 protesters from Bhopal, by Ashok Sharma:
Police detained 80 people who walked nearly 500 miles from the site of a catastrophic 1984 gas leak in central India to protest Monday outside the prime minister's residence, an organizer said.
The protesters, including 52 children, were calling for the site of the Bhopal gas leak to be cleaned up and for survivors to be compensated, said Rachna Dhingra, a spokeswoman for Bhopal Group for Information and Action.
Guards took the protesters to a nearby police station soon after they arrived outside Prime Minister Manmohan Singh's official residence, Dhingra said. They were freed two hours later.
Police officer Jagat Singh said the protesters came without an appointment with the prime minister, and protests are not allowed around the official residence.
The leak from the Bhopal pesticide plant in 1984 killed at least 10,000 people and affected about 550,000 others. A subsidiary of U.S. chemical company Union Carbide ran the plant at the time.
In the vein of scholarship propounding greater bureaucratization of the courts comes this article - "Improving Judicial Settlement Conferences" - from Jeffrey Parness (Northern Ill.) (and available on SSRN) suggesting more formalization and guidelines for judicial settlement conferences. Here is the abstract:
Professors Molot, Fuller, Fiss, and Resnik, among others, have expressed concerns about the unbounded, unchecked, unbridled, and virtually unfettered judicial discretion of American trial court judges who preside over civil case settlement conferences. I am also concerned. But the best response is not to abolish or severely restrict judicial settlement conferences. Rather, it is to add more formality and more written guidelines. New guidelines would discourage each trial court judge from marching to the beat of her own drummer. These guidelines should involve, as suggested by Professor Fuller, both more adversary control and more detailed and written criteria. In addition, new guidelines should expressly recognize that the claims and interests that might be discussed at judicial settlement conferences are far broader than the justiciable claims that might be discussed at trial preparation conferences. Thus, civil case settlement talks and civil case settlements subject to same-case judicial enforcement can involve many more claims, interests, and people than would have been involved in any adversarial proceedings. New written guidelines for federal and state courts should follow existing rules and statutes of general and particular applicability already operating in some American trial courts. As with pleading and discovery, new settlement conference guidelines should speak to differences between civil actions, including some distinctions between significant cases and routine cases and between civil cases based upon the amounts in controversy.
Monday, May 5, 2008
The Minnesota state legislature appears on the verge of approving a $38 million compensation package to settle the claims of victims of the 2007 collapse of the I-35 bridge over the Mississippi River in Minneapolis, according to this AP story on law.com (via Point of Law):
Minnesota lawmakers reached agreement on a $38 million compensation package for victims of a deadly bridge collapse, culminating months of work to provide relief beyond the state's legal liability. The deal struck in a joint committee of the House and Senate will offer everyone who was on the bridge up to $400,000, with an additional $12.6 million pool for the people who suffered the most severe injuries and losses. Thirteen people died in the Aug. 1 collapse and 145 were hurt. ...
The package is expected to be approved by the Legislature on Monday and sent off to Republican Gov. Tim Pawlenty, who called it "needed relief and support" for victims.
If victims agreed to take the money, they would have to sign away their rights to sue the state and other governmental entities in Minnesota. They would not be precluded from suing other parties in the collapse. ...
The National Transportation Safety Board is investigating the cause of the collapse. Officials have focused on a design flaw involving gussets, the plates that help connect steel beams, and the weight of construction materials at vulnerable points in the bridge. Victim lawsuits are on hold until a final determination is made.
As a legislative decision to compensate disaster victims, the package bears a passing resemblance to the September 11 Victims Compensation Fund. It is better understood, however, as an ordinary mass tort settlement, in which a defendant (the state) offers to settle plaintiffs' claims against it. Unlike the 9/11 Fund, which used government funds but required participants to release their claims against the airlines and other private parties, the Minnesota deal apparently requires only the release of claims against the state, just like any other settlement offer by a defendant.
Sunday, May 4, 2008
The Ninth Circuit issued an opinion last week on the All Writs Act exception to the Anti-Injunction Act. In Negrete v. Allianz Life Insurance Co. of North America, 2008 WL 1868993, the district court certified a nationwide RICO class a few months before other state and federal courts certified competing classes. Plaintiffs in a competing class initiated in the Minnesota District Court by the Minnesota Attorney General began mediation discussions with the condition that talks would include the possible settlement of other actions. Plaintiffs in the California district court requested that the court enjoin the negotiations.
"On March 19, 2007, the district court, without holding a hearing, issued an order nominally denying the application because it was "not authorized by the All Writs Act." How ever, the court went on to order:
Any discussions of a settlement that would affect any claims brought in this litigation, other than claims of an individual plaintiff or class member, must be conducted or authorized by plaintiffs' Co-Lead Counsel. Any proposed settlement that resolves, in whole or in part, the claims brought in this action shall first be subject to review and approval by the Court in this litigation."
The Ninth Circuit concluded that the quasi-injunction was inappropriate. Here’s an excerpt of its rationale:
Courts have held that the existence of advanced federal in personam litigation may, in some instances, permit an injunction in aid of jurisdiction. That is a fairly common theme. See In re Diet Drugs Prods. Liab. Litig., 282 F.3d 220, 239 (3d Cir.2002) (MDL class action where class provisionally certified and settlement preliminarily approved); Hanlon v. Chrysler Corp., 150 F.3d 1011, 1018, 1024-25 (9th Cir.1998) (class action settlement preliminarily approved and state court action would opt out a whole subclass); Winkler v. Eli Lilly & Co., 101 F.3d 1196, 1201-03 (7th Cir.1996) (MDL case where a state proceeding would overturn the effect of a district court discovery order); Battle v. Liberty Nat'l Life Ins. Co., 877 F.2d 877, 880-81 (11th Cir.1989) (class action case had reached judgment stage and state court litigation would interfere with administration of post-judgment proceedings); In re Baldwin-United Corp., 770 F.2d 328, 337-38 (2d Cir.1985) (MDL class action where class certified, settlement agreements reached, and only district court approval of those remained); Carlough v. Amchem Prods., Inc., 10 F.3d 189, 195, 202-04 (3d Cir.1993) (class action where settlement imminent); Swann v. Charlotte-Mecklenburg Bd. of Educ., 501 F.2d 383, 383-84 (4th Cir.1974) (per curiam) (class action case had reached judgment and state court litigation would interfere with carrying out the terms of that judgment).
But in less advanced cases, courts have been more chary about issuing injunctions, as, indeed, they should have been. For example, the Third Circuit has confronted an MDL action case where a state court was entertaining a settlement of a class action covering a class of General Motors truck owners, who alleged defective placement of fuel tanks, at the same time as an MDL class action on the same subject was before the district court. In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 134 F.3d 133, 137 (3d Cir.1998). The court of appeals pointed out that no settlement had yet been approved by the MDL court, no provisional settlement was in hand, and no conditional class certification was extant. Id. at 144-45. Therefore, the state court proceeding was not the kind of interference that could justify an injunction. The Second Circuit reached the same result in a similar, but more advanced, piece of litigation. There the district court was handling an MDL securities class action arising out of the collapse of WorldCom. See Ret. Sys., 386 F.3d at 421. The district court enjoined class action proceedings in an Alabama court arising out of the same collapse. Id. at 423. That case had been moving toward trial, and the district court enjoined it from proceeding until after there was a trial in the federal class action. Id. No class settlement in the MDL case was imminent, but the injunction was issued on the basis that district court trial dates should be protected. Id. at 428-29. The court of appeals declared that the district court"has no interest-no interest that can be vindicated by the exercise of the federal injunction power-in being the first court to hold a trial on the merits." Id. at 429. It, therefore, overturned the injunction. Id. at 431; see also Zurich Am. Ins. Co. v. Superior Court, 326 F.3d 816, 826 (7th Cir.2003) (reversing grant of injunction where proceedings insufficiently advanced).
Here, none of the considerations that have induced courts to issue injunctions despite the strictures of the Anti-Injunction Act was present. This was not an MDL case; discovery was not complete; no class settlement was imminent, in fact, as far as the record shows no serious settlement progress had been made; and, finally, there was no evidence of collusive procedures, reverse auction or otherwise, even assuming that the existence of those would justify an injunction of state proceedings.
Article in the Wall Street Journal -- Pfizer Settles Lawsuits Over Two Painkillers, by Nathan Koppel and Heather Won Tesoriero. What's interesting is Pfizer's approach to settlement: negotiating settlements with plaintiff's firms that have a large inventory of plaintiffs, rather than attempting (like Merck in Vioxx) to offer a massive settlement to all plaintiffs nationwide. Here's an excerpt:
Pfizer Inc. has struck tentative settlements with groups of plaintiffs who allege that the painkillers Celebrex and Bextra caused heart attacks and strokes, according to lawyers at three firms involved in the litigation.
These firms represent more than 200 out of the thousands of people who sued Pfizer over the two medications. The drug maker may have struck additional deals and remains in discussions with other plaintiffs' law firms, according to lawyers involved in the talks.
Unlike Merck & Co.'s recent global settlement of litigation involving the painkiller Vioxx, Pfizer is attempting to resolve its liability on a firm-by-firm basis, lawyers say. The Bextra and Celebrex cases didn't present nearly the same threat to Pfizer that Vioxx did to its maker, though.