Monday, August 17, 2009

S. Todd Brown on The Private Market for Specious Claims

SSRN S. Todd Brown (Buffalo) has posted on SSRN his article, The Private Market for Specious Claims.  Here's the abstract:

One of the most curious aspects of the rise of aggregate mass tort litigation is the evolution of private markets for the development, trade, and sale of personal injury claims among attorneys. Much has been written about the economic efficiencies of mass tort litigation, and a far more modest body of scholarship has addressed the manner in which the private market for developing and prosecuting these claims generate these efficiencies. For all of their efficiencies, however, these markets have not developed in a way that makes actual litigation of claims possible, much less efficient. Rather, the efficiencies achieved have consistently promoted building the 'mass' of claims that may be brought, not developing and producing information sufficient to support the presentation and litigation of those claims in anything more than a superficial manner. Thus, even if nontraditional, streamlined adversarial processes might be employed to test the validity of these claims, these markets are ill-suited to provide courts and other participants with access to sufficient information to do so. The evolution of these markets in this manner is no accident. Efficiency is maximized where the parties do only as much as required and no more. And once a body of tort claimants achieves a sufficient mass, the perceived need to provide accurate in-depth information for the claims presented effectively vanishes. Developing efficient mechanisms for developing and communicating this information will provide no additional advantage (the information is not required for the claims to be paid in most cases) and may, in fact, reduce the number of claims that a lawyer may bring under applicable ethical and procedural rules. Ignorance in this case is not only bliss, it is also far more profitable. Moreover, as in other areas of law (such as the trading of specious debt collection claims), the multiple levels of claim acquisition and development in the private mass tort market may be viewed as shielding lawyers and service providers from culpability for filing specious claims, failing to satisfy traditional ethical duties to clients, and ignoring red flags that might otherwise demand additional investigation. The ability to control the flow of information to those affected by a particular action, a universal attribute of these markets, enhances the perceived insulation from liability. Even if this perception is misguided, it may nonetheless alter the participants' risk assessment and encourage the filing of specious claims. This article suggests that the markets for mass personal injury tort claims may be corrected by modest adjustments to party expectations, including the need to present testable information in a timely fashion. Although some commentators have suggested that such requirements will erase the positive efficiencies of mass tort litigation, the evidence in support of this suggestion is, at best, anecdotal and ignores the practical realities of mass tort practice and technological development. In short, insisting upon basic information development and ready availability of that information will necessitate fundamental changes to the private market for tort claims and better align the end goals of those markets with the goals of the tort system.


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