August 25, 2011
RAND Reports on Asbestos Bankruptcy Trusts and Tort Compensation
RAND's Institute for Civil Justice last week released its report, Asbestos Bankruptcy Trusts and Tort Compensation, by Lloyd Dixon and Geoffrey McGovern. Here's the summary:
Payments by asbestos bankruptcy trusts have played an increasingly important role in compensating asbestos injuries and have become a matter of contention between plaintiff and defense attorneys. At issue is how tort cases take into consideration compensation paid by trusts and the evidence submitted in trust claim forms. This monograph examines how such evidence and compensation are addressed by state laws and considered during court proceedings. It also examines how the establishment of the trusts potentially affects plaintiff compensation from trusts and the tort system combined, payments by defendants that remain solvent, and the compensation available to future, as compared to current, plaintiffs. The authors find that the potential effects of trusts' replacement of once-solvent defendants are very different in states with joint-and-several liability than in states with several liability. In states with joint-and-several liability, total plaintiff compensation should not change. In several-liability states, the replacement of once-solvent defendants by trusts can cause total plaintiff compensation to increase, decrease, or remain unchanged. The findings underscore the importance of information on plaintiff exposure to the products and practices of the bankrupt firms in determining the trusts' effects on plaintiff compensation and on payments by defendants that remain solvent.
RAND also published the shorter Research Brief, Bankruptcy Trusts, Asbestos Compensation, and the Courts, by the same authors.
July 08, 2011
Potential Solutions for the Frivolous Lawsuit -- Of Rule 11 Proposals and Loser Pays
The U.S. Chamber of Commerce is arguing in favor of the Lawsuit Abuse Reduction Act, which is pending in the House and would change Rule 11 back to its pre-1993 mandatory sanctions approach and remove the current 21-day "safe harbor" for a litigant to withdraw challenged filings. In the 1980s, I believe the mandatory-sanctions/no-safe-harbor regime was blamed for increasing costly satellite Rule 11 litigations brought by both plaintiffs and defendants who perhaps in an excess of zeal repeatedly argued that the other side's positions were utterly meritless and frivolous.
The U.S. Chamber of Commerce also suggests that the Lawsuit Abuse Reduction Act would make it easier for parties challenging to recover their attorneys' fees. That modification raises the larger question of "loser pays" as a broad and perhaps more effective way to deter frivolous lawsuits. Under loser pays, the party that loses in a litigation must pay the attorneys' fees of the prevailing party. Followed in much of the world outside the U.S., loser pays deters frivolous litigation by removing much of the litigation costs that are used as a weapon to extract a nuisance-value settlement. For example, if it costs a defendant $50,000 in legal fees to obtain a ruling that a lawsuit is meritless, a plaintiff lawyer might offer to settle with the defendant for $25,000 -- less than it costs to litigate to a judge ruling. Unless the defendant thinks the plaintiff lawyer will turn around and sue the defendant again, the defendant may well choose the $25,000 settlement, even if the lawsuit seems clearly meritless or frivolous. But the $25,000 settlement may sufficiently compensate (via contingency fee) the plaintiff lawyer to incentivize the plaintiff lawyer to file another meritless claim against another defendant, and indeed, the plaintiff lawyer might even develop a successful business in frivolous claims. In contrast, if a loser-pays rule applies, defendant might well reject the $25,000 settlement and elect to spend $50,000 to obtain a court ruling exposing and dismissing the frivolous claim, also confident that the defendant can seek to recover the $50,000 in attorneys' fees from the plaintiff under the loser-pays rule. Moreover, ex ante, the plaintiff lawyer in a loser-pays jurisdiction should decline to even file a meritless claim, because the plaintiff lawyer would expect that the defendant would refuse a nuisance settlement and instead litigate to a ruling that will impose defendant's attorneys' fees on the plaintiff. The presence of loser pays is often cited as one reason that countries outside the United States have less litigation -- see, e.g., John Stossel, When Lawyers Become Bullies, Real Clear Politics (April 8, 2008).
One significant objection to loser pays is that impecunious plaintiffs will elect never to file their claims not because their claims are frivolous, but because they are risk averse about the possibility of defendants' attorneys fees being imposed on them. This concern is even greater in tort litigation, where injured plaintiffs are regular folks whose finances may already be strained by an injury. So the argument goes, loser pays should be rejected because these impecunious plaintiffs will not file what are meritorious suits -- and access to justice is denied.
But what if the cost of loser pays were permitted to be shifted from a plaintiff to his or her attorney? Plaintiff attorneys already make entrepreneurial decisions about the likelihood of success in a case when plaintiff attorneys decide whether to take a case on contingency fee and risk no reimbursement if they lose at trial or by judicial ruling. Adding fee-shifting via loser pays would only increase the size of the bet on each case, and plaintiff firms could adjust to that larger bet by becoming somewhat larger and greater diversifying that risk, or even by gaining greater access to outside capital and loans (the latter of which is itself controversial). Ultimately, injured plaintiffs would conceivably still have access to attorneys for meritorious cases, but having lost the threat of nuisance-value settlements and now fearing fee-shifting via loser pays, plaintiff lawyers would screen out frivolous claims and never file them.
I think there is much to recommend this market-finance-oriented version of loser pays, but of course plaintiff lawyers might resist it because it would remove the stream of income from nuisance-value settlements. And even though they might not admit it, defense lawyers also benefit from being hired to defend frivolous cases, so they might not vigorously push such a proposal, unless their defendant clients vigorously pushed them to do so. Ultimately, a reduction in frivolous litigation reduces the wealth of the entire bar, but the bar has no valid entitlement to enrichment by waste. Notwithstanding lawyers' interests, Alaska has had a version of loser pays, and Texas over a month ago enacted a version of loser pays. If Texas Governor Rick Perry enters the Republican primary as a candidate for President in 2012, loser pays as litigation reform (and tort reform) may well receive substantial national attention. That would be a good thing.
June 01, 2011
Litigation Finance: Lend to the Lawyers
BNA reports on Core Funding Group LP v. McIntire, E.D. La., Civ. No. 07-4273, 5/11/11. In this case, the Eastern District of Louisiana Judge upheld an agreement between a mass tort lawyer and a creditor who had loaned the lawyer money to fund his part in a mass tort litigation.
Because the loan was to the lawyer, not the client, and therefore did not promote speculation or invite meddling in the lawsuit. If you have access to BNA you can find the squib here.
March 27, 2011
Video for Mississippi College Law Review Symposium on BP Oil Spill
The Mississippi College Law Review has posted the video for its symposium, Beyond the Horizon: The Gulf Oil Spill Crisis -- Analyzing the Economic, Environmental, and Legal Implications of the Oil Spill.
Panel One included Ms. Trudy Fisher, Executive Director, Mississippi Department of Environmental Quality; Professor Kenneth Murchison, James E. & Betty M. Phillips Professor, Paul M. Herbert Law Center Louisiana State University; and Professor David Robertson, W. Page Keeton Chair in Tort Law University Distinguished Teaching Professor, University of Texas at Austin. The moderator for Panel One was Ms. Betty Ruth Fox, Of Counsel, Watkins & Eager.
Panel Two included Professor Jamison Colburn, Professor of Law, Penn State University; Professor Edward Sherman, W.R. Irby Chair & Moise S. Steef, Jr. Professor of Law, Tulane University; and myself. The moderator for Panel Two was Professor Jeffrey Jackson, Owen Cooper Professor of Law, Mississippi College School of Law.
Kenneth Feinberg, claims administrator for the Gulf Coast Claims Facility, delivered the symposium Keynote Presentation.
Papers from the symposium will published in the Mississippi College Law Review. Here's the abstract for my symposium talk and forthcoming article:
The Gulf Coast Claims Facility set up following the BP Gulf Oil Spill might be seen as creating a new category of claims fund that might be termed a quasi-public mass tort claims fund. Unlike purely public funds such as the 9/11 Victim Compensation Fund, or purely private funds such as are increasingly created for mass settlements as in Vioxx, the Gulf Coast Claims Facility is funded privately by BP, but bears the public imprimatur of having been initially negotiated by President Obama. Indeed, in an Oval Office Address, President Obama promised that claims would be "fairly" paid and that the fund would "not be controlled by BP," but would instead be administered by an "independent third party." While a quasi-public fund has the advantage of delivering swift compensation in response to an ongoing crisis, the quasi-public fund risks claimant confusion about claim-administrator independence and whether claimants should retain their own counsel to assist in evaluating fund settlement offers. In turn, that claimant confusion can jeopardize the fund's societal savings in attorney-fee transaction costs, and lower claimant participation in the fund. Accordingly, to minimize claimant confusion, a quasi-public fund should provide transparency in its fee structure for claims administrators, and seek a claims-administrator fee structure that minimizes bias, such as utilizing a fixed fee not subject to reevaluation or having defendant agree to a third-party panel's assessment of fees for claims administrators. With regard to the Gulf Coast Claim Facility, claimant participation would likely be enhanced by greater transparency and use of a third-party panel to determine claim-administrator fees.
February 16, 2011
Mississippi College Law Symposium on BP Gulf Oil Spill
On this Friday, February 18, Mississippi College School of Law will be hosting a law review symposium, Beyond the Horizon: The Gulf Oil Spill Crisis -- Analyzing Economic, Environmental, and Legal Implications of the Oil Spill. Here's the short-form brochure: Download MC Law Review Symposium Brochure.
Speakers include Professors Jamison Colburn (Penn State), Kenneth Murchison (LSU), David Robertson (Texas), Edward Sherman (Tulane), and Trudy Fisher (Miss. Dep't Envt'l Quality). Moderators include Jeffrey Jackson (Mississippi College) and Betty Ruth Fox (Watkins & Eager). Papers will subsequently be published in the Mississippi College Law Review.
I will also be speaking at the symposium, discussing issues of claim-administrator compensation, transparency, and independence in connection with the Gulf Coast Claims Facility. My talk will expand upon my prior blog posts raising concerns (see here and here), which last summer triggered two articles in Forbes (see here and here), as well as a post from Legal Ethics Forum. Two weeks ago, the federal MDL court overseeing the BP litigation granted in part plaintiffs' motion to have the court oversee communications by the Gulf Coast Claims Facility, and the MDL court ordered that the Gulf Coast Claims Facility may not state that it is "neutral" or completely "independent" of BP. Here's the MDL opinion: Download Order - Mot to Supervise GCCF Doc 1098 2-2-2011. On the recent MDL opinion, see also this Reuters article from Moira Herbst, quoting David Logan (Roger WIlliams), Monroe Freedman (Hofstra), and me.
UPDATE -- Here's the full-length brochure for the symposium: Download MC Law BP Symposium Handout.
January 23, 2011
Interesting article from the New York Times on services that offer loans to litigants and the high interest rates typically charged: Lawsuit Loans Add New Risk for the Injured, by Binyamin Appelbaum. The article discusses the movement to subject such loans, and their high interest rates, to regulation. Of course, if the interest rates able to be charged are limited by state law, the effect may be to destroy the lawsuit loan market, because the default risk for such loans may be high enough that only a high-interest rate lending model may be profitable over the long term. Losing such loans would be unfortunate, because litigants with meritorious cases may need access to funds while the the justice system processes the case. Instead of regulatory capping of interest rates, why not instead rely on clear disclosure of rates in contracts, and market forces of vying lenders competing over interest rates?
January 20, 2011
Brickman on Contingency Fees
Lester Brickman (Cardozo) has posted to SSRN his article, Unmasking the Powerful Force that Has Mis-Shaped the American Civil Justice System, which appears in the Global Competition Law Review, Vol. 4, No. 3, 2010. Here's the abstract:
The contingency fee, once largely a uniquely American institution, is beginning to gain serious consideration in Europe and elsewhere. It is essential that those considering adopting some form of the contingency fee to finance civil litigation have a proper understanding of the impact of the contingency fee on the U.S. civil justice system. That understanding, however, appears woefully lacking. In Lawyer Barons: What Their Contingency Fees Really Cost America (Cambridge University Press 2011), I discuss the underappreciated and indeed, often unrealized costs of reliance on contingency fees to finance access to the tort system. In this essay, I reprise some of the impacts policymakers should take into account in determining whether the anticipated benefits of the American contingency fee system outweigh the considerable costs.
January 19, 2011
Freedman on Claims Facilties as a Work Around the Ethics Rules
Monroe Freedman has a very interesting post on Legal Ethics Forum about the BP Oil Spill Claims Facility and ethics: Claims Facilities and the Nullification of Ethical Duties.
January 17, 2011
I hope are readers are having a good MLK day and that your employer gave you the day off in observance!
Benyamin Applebaum of the NY Times has an article on litigation funding in torts - the first story there is of a Vioxx plaintiff. See the article here.
For a very insightful take on litigation funding, in particular arguing that it is a good way to disgorge the appropriate amount from the defendant rather than permitting the defendant to get a discount because of plaintiffs economic situation, see Steven Gillers post at the Legal Ethics forum here.
Readers interested in this topic might also want to take a look at Maya Steinitz, Whose Claim is this Anyway? Third Part Litigation Funding, available on SSRN.
January 12, 2011
Zacharias Memorial Prize for Scholarship in Professional Responsibility Awarded to Alexandra Lahav
Congratulations to our co-blogger Alexandra Lahav of the University of Connecticut School of Law for being awarded the Fred C. Zacharias Memorial Prize for Scholarship in Professional Responsibility for her article, Portraits of Resistance: Lawyer Responses to Unjust Proceedings, which is forthcoming in the UCLA Law Review! The award was announced at the recent meeting of the professional responsibility section at the AALS conference.
January 11, 2011
Southwestern Law School Symposium on International Law Ten Years From Now
On Saturday, February, 26, 2011, the Southwestern Journal of International Law is hosting a symposium entitled, 2021: International Law Ten Years From Now, at Southwestern Law School in Los Angeles. The symposium is being presented in conjunction with International Law Weekend-West of the International Law Association (American Branch). Panels will address topics including international litigation, international human rights, international environmental law/climate change, international dispute resolution law, and international legal profession. The keynote speaker will be Michael Traynor, President Emeritus and Council Chair of the American Law Institute, and Co-Chair of the ABA Commission on Ethics 20/20. Here's the brochure.
December 01, 2010
4th International Conference on the Globalization of Collective Litigation at Florida International University College of Law
The 4th International Conference on the Globalization of Collective Litigation will take place on Friday, December 10, 2010 at Florida International University College of Law in Miami.
This conference, co-organized by professors Manuel A. Gomez (Florida International University College of Law ) and Deborah R. Hensler (Stanford Law School) is the fourth in the series of international conferences on the global spread of collective litigation begun in 2007 at Oxford University. It will bring together academicians, policy analysts and legal practitioners to systematically review the status of collective litigation around the world with special focus on Latin America, a region signaled by a growing interest in protecting collective rights, the passage of legislation that provides for class actions and similar mechanisms, and the increased participation of domestic courts in deciding cases that involve large-scale accidents, environmental harms, exposure to toxic materials, defective products and financial injuries. The conference will address issues of critical importance including financing, coordination and enforcement. It will also serve as a vehicle to exchange information about how the collective litigation rules work in practice, who is availing themselves of these procedures and for what ends, and what the economic and social consequences are for individuals, business, and the public interest.
The full agenda and registration information are available here.
Although I won't be speaking at the conference, I'm planning on attending the conference, as I'm currently researching the Toyota Unintended Acceleration MDL in connection with a Law and Society Association international research collaborative (IRC) on the Globalization of Class Actions and Other Forms of Collective Litigation. Several of the conference moderators and speakers are also active in the IRC, including IRC participants Deborah Hensler (Stanford), Christopher Hodges (Oxford), Ianika Tzankova (Tilburg U., Netherlands), and Manuel Gomez (Florida International).
November 22, 2010
More Discussion of Ken Feinberg's Pay in BP Gulf Oil Spill Fund
Moira Herbst of Reuters has a short, but thoughtful piece analyzing the issues at play for a private claims administrator running a quasi-public claims fund. It's easy to sympathize in the abstract with Ken Feinberg's difficult situation in exploring what's appropriate in his unprecedented role; but with his firm being compensated at an average of $1,000 per hour (according to Herbst's analysis), he's not ultimately likely to get much sympathy.
July 28, 2010
Feinberg to Disclose Compensation for Administering BP Fund
The Associated Press reports that Ken Feinberg announced on Tuesday that he will disclose BP's compensation to him for administering the $20 billion BP oil-spill claims fund, after he had previously stated such information would be "confidential" and "between [him] and BP." Feinberg now concedes the "perception of a conflict." Feinberg also said the he might request that than an outsider "with great credibility" set his salary. (H/t to Ted Frank of the Center for Class Action Fairness for apprising me of this development.)
On Sunday, July 18, I posted about the possible conflict of interest for Feinberg, arguing that he should disclose his compensation and seek a federal judge to assess his billable hours and rate, as is routinely done in class-action fee requests by class counsel. My post triggered a short article by Forbes and a post on Legal Ethics forum. I doubt my post had anything specifically to do with Feinberg's decisionmaking, but I'm happy that he has decided both to disclose his compensation and to seek a reputable third party to oversee his compensation, rather than BP (presumably, BP will agree to whatever the third-party determines). As I mentioned in my earlier post, I never meant to call into question Feinberg's integrity; rather, I urged this path as a way to help the success of the fund by removing any possible conflict of interest, and I expect that both Feinberg and BP will be happy to put this issue behind them.
UPDATE -- A Forbes article today discusses my prior blog post and Feinberg's recent decision to disclose his compensation.
July 18, 2010
Ken Feinberg Compensation for Administering BP Fund -- A Problem and Possible Solution
Today, I saw on Bloomberg Rewind a video of several questions to Kenneth Feinberg, administrator of the $20 billion BP oil-leak compensation fund. (Video of the interview apparently not yet available on the internet.) At one point, the reporter asked Feinberg how he would be paid, and Feinberg responded that BP would pay because neither the victims nor taxpayers should have to pay him. Fair enough. But when the reporter asked Feinberg whether his compensation would be disclosed, Feinberg said that his compensation "would be confidential."
The issue of Feinberg's compensation is interesting. Feinberg worked pro bono on the 9/11 victim compensation fund -- a remarkable and laudable commitment given the substantial time involved. I'm not suggesting that Feinberg should go on doing such monumental administrative tasks pro bono -- but is it appropriate for him to keep his compensation from BP confidential?
As with the 9/11 fund, Feinberg will likely have tremendous discretion in fashioning the administrative claim mechanism for the BP compensation fund. His exercise of discretion could possibly result in BP saving substantial funds, especially if any remainder of the $20 billion fund is to be returned to BP. Accordingly, a fair process at a minimum requires that both the amount of his compensation, and the method of compensation be disclosed publicly. If BP has the ability to review and cut his billable hours or his billable-hour rate, for example, Feinberg might have a conflict of interest that could lead him unconsciously to favor BP in structuring the administrative fund or making awards. As a result, in addition to public disclosure, an even better solution might be for BP and Feinberg also to agree to have a federal judge review Feinberg's billable hours, billable-hour rate, and total fee, much as is already typically done by judges reviewing class counsel fee awards in class-action settlements under Rule 23. See Fed. R. Civ. P. 23(h) ("In a certified class action, the court may award reasonable attorney's fees and nontaxable costs that are authorized by law or by the parties' agreement.").
I of course do not mean in any way to call into question Feinberg's integrity; he is widely viewed as the nation's leading claims administrator. But even federal judges have their compensation set publicly and in a manner that could not be said to incentivize them to favor one litigant over another. We would never approve of a judge being paid confidentially by only one litigant -- and we shouldn't here either, especially when the claims structure could be seen as quasi-public in light of the President's central involvement and comments that "[i]n order to ensure that all legitimate claims are paid out in a fair and timely manner, the account must and will be administered by an independent, third party." Ultimately, removing the issue of Feinberg's fees from any controversy would aid Feinberg in making the BP fund a success.
UPDATE -- Professor Andrew Perlman (Suffolk) comments at Legal Ethics Forum on my post above.
UPDATE #2 -- Forbes' On The Docket blog discusses my post above: Feinberg's BP Pay: Should It Be Disclosed?, by Daniel Fisher.
May 17, 2010
Mass Tort Crisis Management
Recent crises stemming from BP's oil spill and Toyota's acceleration problems have brought a swarm of media coverage, congressional hearings, regulatory agency activity, corporate news conferences, and lawsuits. Indeed, theories of liability may stem not only from the initial traumatic incident or incidents, but from the corporation's putative mishandling of the crisis once it unfolds. On the corporate side, what's called for is thoughtful and coherent crisis management that moves the corporation through the crisis in a way that resonates with corporate core values, thereby maintaining the value of the ongoing enterprise, and that is mindful of impending theories of liability.
Despite the great need for such a coherent approach to mass tort crisis management, what's remarkable is the apparent paucity of attention given the subject by legal scholars. That may be because crisis management involves public relations and communications, as well as management and leadership; hence crisis management has been the focus of public relations consultants and some professors in communications schools and business schools. But at the heart of corporate crises are frequently the law and liability, so law professors should not be absent. Lawyers and law firms already occasionally promote their ability to handle an emerging corporate crisis by quickly assembling a team of lawyers from a broad array of areas -- see, e.g., Skadden's Crisis Management; and lawyer practitioners have delivered various continuing education talks and papers on crisis management, as well as an interesting short symposium paper by Harvey L. Pitt and Karl A. Groskaufmanis, When Bad Things Happen to Good Companies: A Crisis Management Primer, 15 Cardozo L. Rev. 951 (1994). But while practitioners bring on-the-ground expertise, they may lack the theoretical depth and interdisciplinary zeal of law professors, and practitioners present a conflict-of-interest risk in preferring, for example, fee-heavy litigation over other methods of mass tort crisis management and resolution. A full academic account of mass tort crisis management would entail an awareness and integration of various legal areas -- tort, procedure, litigation, ethics, regulatory action, congressional investigations and activity (including possible compensation funds), and pertinent constitutional issues -- with public relations and management. I look forward to turning my attention increasingly to that task.
Where do you look for corporate crisis management expertise in mass torts? Books, articles, law firms, or consultants? Does your law firm market itself as offering corporate crisis management; if so, what's your approach? If you work at a consulting group that does crisis management, do you have in-house lawyers that assist you or do you work with the corporation's outside counsel? Feel free to post a resource or comment.
May 17, 2010 in Aggregate Litigation Procedures, Current Affairs, Environmental Torts, Ethics, Lawyers, Mass Disasters, Mass Tort Scholarship, Procedure, Regulation, Vehicles | Permalink | Comments (0) | TrackBack
April 29, 2010
Sebok on Alienation of Claims
Tony Sebok (Cardozo) has posted his piece "The Inauthentic Claim" to SSRN. This is a very important paper arguing against the usual rule limiting types of litigation financing. The implications of the thesis for mass torts is significant. If people could sell lawsuits the landscape of aggregate litigation would change in significant ways. Here is the abstract:
This Article argues that third parties should be able to invest in lawsuits to a much greater degree than is currently permitted in most jurisdictions in the United States. The laws of assignment and maintenance limit the freedom of litigants to sell all or part of their lawsuits to strangers. I argue in the Article that the foundation of both doctrines is based on something I call the theory of “the inauthentic claim.”
The theory of the inauthentic claim asserts that there is a quality, separate and in addition to legal validity, which confers “authenticity” to a lawsuit. It does not presuppose that “inauthentic” lawsuits are more likely to be spurious, fraudulent, or frivolous than “authentic” lawsuits. It holds, instead, that the mere fact that a third party involved him or herself in the suit for the wrong reasons (either by taking an assignment in the suit or supporting the suit), is proof that the suit is against public policy.
This Article examines two arguments that might be used to defend the theory of the inauthentic claim, one from history and one from jurisprudence. I conclude that neither argument is persuasive. I conclude the Article by sketching a research agenda based on empirical evidence that would help policymakers and judges choose the socially optimal set of rules for third party investment in litigation.
(h/t Chris Robinette at Torts Prof Blog)
March 01, 2010
Erichson & Zipursky on mass settlements
Benjamin Zipursky and I have completed a paper entitled "Consent versus Closure." Ben is one of the nation's leading experts on torts and legal theory. He and I have long shared an interest in mass tort litigation, and we share certain concerns about the direction mass tort settlements seem to be heading. In particular, we were both troubled by the mandatory withdrawal provision of the Vioxx settlement, and we both opposed the American Law Institute's proposal to permit advance consent to aggregate settlements. More generally, we see the Vioxx deal and the ALI proposal as part of a troubling broader trend, in both practice and scholarship, toward embracing the pursuit of absolute closure by empowering plaintiffs' lawyers to deliver their clients' claims in settlement. Here's the abstract:
Claimants, defendants, courts, and counsel are understandably frustrated by the difficulty of resolving mass tort cases. Defendants demand closure, but class certification has proved elusive and non-class settlements require individual consent. Lawyers and scholars have been drawn to strategies that solve the problem by empowering plaintiffs’ counsel to negotiate package deals that effectively sidestep individual consent. In the massive Vioxx settlement, the parties achieved closure by including terms that made it unrealistic for any claimant to decline. The American Law Institute’s Principles of the Law of Aggregate Litigation offers another path to closure: it proposes to permit clients to consent in advance to be bound by a settlement with a supermajority vote. This article argues that, despite their appeal, both of these strategies must be rejected. Lawyer empowerment strategies render settlements illegitimate when they rely on inauthentic consent or place lawyers in the untenable position of allocating funds among bound clients. Consent, not closure, is the touchstone of legitimacy in mass tort settlements.
"Consent versus Closure" critiques mandatory withdrawal, looking at specific legal ethics rules and doctrines as well as the more basic problem of inauthentic consent. It critiques the ALI's advance consent proposal based not only on the problem of inauthentic consent, but also the problem of nonconsentable conflicts, exploring what it means for claimants to own their claims and for lawyers to represent clients in pursuing those claims.
This article picks up on the theme of "The Trouble with All-or-Nothing Settlements," in which I used six case studies to show various problems caused by demands for fully comprehensive settlements outside of class actions and bankruptcy.
February 14, 2010
BAR/BRI Attorneys Awarded Costs, but No Fees
The Wall Street Journal's Law Blog reported Friday that Judge Manuel Real told Bar/Bri antitrust litigators that they could recover around $1.26 million in costs, but not the $12 million in attorneys fees. Judge Real cited concerns about conflicts of interest and ethical concerns in forfeiting McGuireWoods LLP's fees. The full story is available here.
February 02, 2010
Adequacy of Representation
I recently posted a response to Jay Tidmarsh's article, Rethinking Adequacy of Representation, 87 Texas Law Review 1137 (2009) on SSRN. Although I ultimately find his recommendation troubling for the reasons I highlight below, I highly recommend his article. Here's his abstract:
This article by Jay Tidmarsh questions the usefulness of traditional tests for adequacy of representation in class action proceedings. When determining whether to certify a class, courts have sought to avoid endorsing those classes marred by conflicting interests or the possibility of collusion. Yet, Tidmarsh argues, such conflicts of interest are an intrinsic characteristic of class actions, stemming from the very policy rationales that have prompted the judiciary to allow litigation by classes.
As a result, the current doctrine of adequate representation has left the courts without a bright-line rule; instead, the courts' inquiries into adequacy of representation must focus primarily on the degree of conflicts, leading to confusion and uncertainty--indeed, were prevailing case law strictly applied, virtually no class action could survive the test for adequacy. Tidmarsh therefore proposes an alternative, bright-line rule: "Representation by class representatives and counsel is adequate if, and only if, the representation makes class members no worse off than they would have been if they had engaged in individual litigation." This rule, he believes, would afford far better protection to the interests of individual class members while simultaneously providing the judiciary with a more intelligible test that could be applied with far more consistency.
And here's the abstract from my response, titled Procedural Adequacy: