Monday, May 7, 2012

Businesspersons in Law Firms

Interesting article in today's Wall Street Journal on the increasing influence of businesspersons in managing law firms -- Practicing Business: Professional Managers Gain Wider Presence at Law Firms, by Jennifer Smith and Ashby Jones.  As defense firms expand their offices globally and sometimes exceed a billion dollars in annual revenue, business expertise is clearly beneficial, but must be integrated with professional ethical responsibilities and firm culture.  Not discussed in the article are the possible benefits to plaintiffs' firms in including businesspersons.  Increasingly, plaintiffs' firms in mass torts are collaborating globally, as well, and might benefit from specialized business insight.  

BGS

May 7, 2012 in Ethics, Lawyers | Permalink | Comments (0) | TrackBack (0)

Thursday, May 3, 2012

Sixth Circuit Affirms Kentucky Fen-Phen Convictions

On Tuesday, the Sixth Circuit U.S. Court of Appeals affirmed the convictions and sentences of William Gallion and Shirley Cunningham for their handling of a massive settlement of fen-phen claims. Here is the  Sixth Circuit opinion, and here are news accounts from Thomson Reuters and Bloomberg. The lawyers had been sentenced to 25 years and 20 years, respectively. The opinion provides interesting and useful background on the diet drugs litigation and settlement, and it offers a picture of how badly things can go when mass tort aggregate settlements are mishandled. Because the Daubert exclusion of defendants' expert was an issue on appeal, the Sixth Circuit referred to my trial testimony as an expert on behalf of the United States -- I don't know whether I should be offended or flattered that I was accused of espousing ivory tower ideals, but I take some solace in knowing that the court thought the ivory tower had it right.

HME

May 3, 2012 in Ethics, Fen-Phen, Lawyers, Settlement | Permalink | Comments (1) | TrackBack (0)

Tuesday, February 28, 2012

BP Today, Tomorrow and Into the Future

Gentle Readers,

You don't need the Mass Tort Litigation Blog to tell you that the imminent BP trial has been stayed pending settlement talks.  In the meantime, here are some thoughts from the ever relevant George Conk. Special shout out for his poetic references:  Diving Into the Wreck: BP and Kenneth Feinberg's Gulf

I was just at a wonderful conference at the Charleston School of Law on Mass Torts and the Federal Courts where Feinberg spoke.  One of the key questions at the conference is the extent to which claims facilities (BP, 9/11, etc.) are unique and unlikely to be repeated or the wave of the future.  The interesting thing about BP is that it shows the interaction between claims facilities and litigation - its not one or the other.  Speakers mentioned how companies trying to get ahead of a litigation may well look to the BP model.   Others questioned whether BP was really special because the company was prepared to admit liability (although not gross negligence). 

I was especially interested by the remarks of Sheila Birnbaum, currently running the 9/11 Fund for first responders and who mediated settlements for the 94 families who chose not to participate in the 9/11 Victim Compensation Fund.  Even the families who wanted a public trial to find out what happened ultimately settled because of the uncertainty of trial.  This raises important questions about the purpose of litigation for individuals: is it ultimately to get compensation? How important is it to get to the "truth"?  How important is vindication?  Punishment?  When people settle (or waive their right to litigate prior to filing suit), what kind of consent do we want and does money ultimately satisfy?  Lynn Baker, who was at the conference, referred me to the following article that addresses some of these questions: Gillian Hadfield, Framing the Choice Between Cash and the Courthouse: Experiences with the 9/11 Victims Compensation Fund.  This continues to be relevant, especially if Funds become a model rather than a one-off.

ADL

February 28, 2012 in 9/11, Aggregate Litigation Procedures, Conferences, Environmental Torts, Lawyers, Mass Disasters, Mass Tort Scholarship, Settlement | Permalink | Comments (0) | TrackBack (0)

Monday, February 6, 2012

Catherine Sharkey on the Vicissitudes of Tort

Professor Catherine Sharkey (NYU) has posted to SSRN her article, The Vicissitudes of Tort: A Response to Professors Rabin, Sebok & Zipursky.  Here is the abstract:

This response essay probes three themes that tie together three articles submitted for a tort symposium on “The Limits of Predictability and the Value of Uncertainty.” First, I explore the use of unpredictability as a code word for an assault on tort doctrine in response to an out-of-control tort system. In his historical account of the evolution of tort, Professor Rabin focuses on the canonical “no duty” rules of the nineteenth century and the contemporary rules-based limitations on open-textured liability in the twentieth century. But largely missing from this account is the story of rules promoting tort liability, such as strict liability, vicarious liability, negligence per se, and the like. Second, I probe the link between unpredictability and insurance. I argue that Professor Sebok’s efforts to distinguish champerty from illegal gambling and to analogize it to a form of insurance will inevitably fall short of establishing social acceptance or embrace of the practice. Third, I highlight the role of the U.S. Supreme Court and its incursions into the state law domain of tort in the name of predictability. Professor Rabin is doubtful that the U.S. Supreme Court will achieve great strides in its endeavor to quell unpredictability in punitive damages. Professor Zipursky has considerable angst about the Court’s making inroads into privacy and emotional distress torts. Such incursions are in keeping with the Court’s longer-term project of procedural reform of the civil litigation system in the name of unpredictability, but are novel in their ambition to launch frontal attacks.

BGS

February 6, 2012 in Ethics, Lawyers, Mass Tort Scholarship, Punitive Damages | Permalink | Comments (0) | TrackBack (0)

Fordham Lecture on Third-Party Litigation Funding by Lisa Rickard fo U.S. Chamber Institute for Legal Reform

Lisa Rickard, the President of the U.S. Chamber Institute for Legal Reform, will present the 2012 Noreen E. McNamara Memorial Lecture at Fordham Law School in New York.  Her lecture is entitled, The Commercialization of Legal Practice: Legal and Ethical Perils of Third-Party Litigation Funding, and the lecture will take place at 6:00 p.m., February 28, 2012.

BGS

February 6, 2012 in Ethics, Lawyers | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 31, 2012

Leading Law Firm Brands in U.S. for Major Litigation

Marketing-research company Acritas has released the results of its client-interview-based study of top law-firm brands, according to AmLaw Daily.  The firms most likely to be considered for major litigation were Skadden, Arps, Slate, Meagher & Flom; Kirkland & Ellis; Jones Day; Gibson, Dunn & Crutcher; and Sidley Austin.  All have active mass tort or products liability practices.

A particular congratulations to my former firm colleagues at Skadden and Jones Day, which placed #1 and #2 in the overall ranking of leading U.S. law firm brands.

BGS 

January 31, 2012 in Lawyers, Products Liability | Permalink | Comments (0) | TrackBack (0)

Zamir, Medina, and Segal on the Uniformity of Lawyers' Contingent Fee Rates

Eyal Zamir (Hebrew Univ.), Barak Medina (Hebrew Univ.), and Uzi Segal (Boston College, Economics) have posted to SSRN their article, The Puzzling Uniformity of Lawyers’ Contingent Fee Rates: An Assortative Matching Solution.  Here is the abstract:

Lawyers’ Contingent Fee (CF) rates are rather uniform, often one-third of the recovery. Arguably, this uniformity attests to collusion in the market, resulting in clients paying supra-competitive fees. This paper challenges this common argument.

Uniform CF rates are not necessarily superior to negotiable ones; yet they provide clients with an important advantage. They result in clients making a defacto “take-it-or-leave-it” offer. It precludes lawyers from exploiting their private information about the lawsuit’s expected value and the amount of work it requires. The uniformity of CF rates enables clients to hire the best available lawyer, either directly, if clients know lawyers’ ranking, or indirectly, through the referral system. This uniformity thus fosters a positive assortative matching of lawyers and clients. Finally, the fact that both direct clients and clients obtained through paid-for referrals pay the same CF rate does not attest to cross-subsidization, as the cases a lawyer gets through referrals are quite different than those she gets directly.

 BGS

January 31, 2012 in Ethics, Lawyers, Mass Tort Scholarship, Settlement | Permalink | Comments (0) | TrackBack (0)

Tuesday, January 17, 2012

Top Products Liability Defense Firms in the AmLaw Litigation Power Rankings

American Lawyer has put together a list of most-appearing law firms over the past 10 years of its rankings for Litigation Department of the Year.  Several firms on the list are cited for past awards for practice-area expertise in products liability.  Here are those firms' rankings places in the overall Litigation Power Rankings AmLaw list (counting the firm with highest score as #1):

#3                   Jones Day

#11                 Shook, Hardy

#14 (tied)        Reed, Smith

#14 (tied)        Skadden

#19                 King & Spalding

#24                 Dechert

I practiced at both Jones Day and Skadden, and have worked with lawyers from Shook, Hardy; Reed Smith; King & Spalding; and Dechert.  All are excellent.

BGS

January 17, 2012 in Lawyers, Products Liability | Permalink | Comments (0) | TrackBack (0)

Saturday, January 14, 2012

BP, the Gulf Coast Claims Fund, and MDL Plaintiffs' Lawyers

All that in the recent interesting op-ed from New York Times business columnist Joe Nocera -- BP Makes Amends.

BGS

January 14, 2012 in Aggregate Litigation Procedures, Environmental Torts, Informal Aggregation, Lawyers, Mass Disasters, Procedure, Punitive Damages, Settlement | Permalink | Comments (0) | TrackBack (0)

Thursday, January 12, 2012

Mark Hermann on Class Actions on Above the Law

Mark Hermann has posted "Torpedoing Class Actions" in his column on Above the Law which highlights Martin Redish's book "Wholesale Justice" and my book review "Are Class Actions Unconstitutional?"

Hermann asks why class action defense lawyers aren't bringing up Redish's arguments more in courtrooms across the nation.  More thoughts on this later...in the meantime, I recommend his post. 

ADL

January 12, 2012 in Books, Class Actions, Lawyers, Mass Tort Scholarship | Permalink | Comments (0) | TrackBack (0)

Thursday, January 5, 2012

Class Action Countermeasures on the 10 Most Interesting Class Action Articles of 2011

You can find a list of the 10 best class actions articles according to class action countermeasures here.   Our own Beth Burch gets praise for her latest piece Financiers as Monitors, which I also thought is a great contribution to the literature.

While I don't agree with Mr. Trask's assessment of my own work, legal academia or what people ought to write about, his wish list of articles is a great starting place for students looking to write a note on class action related topics.

ADL

January 5, 2012 in Class Actions, Lawyers, Mass Tort Scholarship | Permalink | Comments (0) | TrackBack (0)

Monday, December 5, 2011

Fight Ensures over Attorneys' Fees in BP Oil Spill MDL

Yesterday's NY Times had an article by John Schwartz titled, "Plaintiffs' Lawyers in a Bitter Dispute Over Fees in Gulf Oil Spill Cases."  The article chronicles the now typical battle over attorneys' fees in multidistrict litigation where judges compensate Plaintiffs' Steering Committee members from other attorneys' fee awards.  This dispute is particularly bitter; the steering committee is asking for fees not just from those involved in the federal multidistrict litigation, but from those who negotiated their own recoveries from the privately administered Gulf Coast Claims Facility.

ECB

December 5, 2011 in Current Affairs, Environmental Torts, Ethics, Lawyers | Permalink | Comments (0) | TrackBack (0)

Sunday, November 27, 2011

Fifth Annual Conference on the Globalization of Class Actions and Mass Litigation at The Hague

The Fifth Annual Conference on the Globalization of Class Actions and Mass Litigation is being hosted by Tilburg University and will be held on December 8-9, 2011 in The Hague, Netherlands.  The conference is being organized by Professors Deborah Hensler (Stanford Law School), Christopher Hodges (Oxford Centre for Socio-Legal Studies and Erasmus University), and Ianika Tzankova (Tilburg University).  Master claim administrator Kenneth Feinberg is delivering the keynote speech.

BGS  

November 27, 2011 in Aggregate Litigation Procedures, Class Actions, Conferences, Ethics, Informal Aggregation, Lawyers, Mass Tort Scholarship, Procedure | Permalink | Comments (0) | TrackBack (0)

Monday, October 31, 2011

Ted Frank Profile in the Wall Street Journal

In today's Wall Street Journal, There's a profile of Ted Frank of the Center for Class Action Fairness.  The WSJ Law Blog also has a companion post on him today.  Ted Frank has been toiling for years on class actions, as well as law reform generally in his previous position at the American Enterprise Instititue. Today's recognition is well deserved.

For one indication of his devotion to class-action reform, check out Ted Frank's license plate.

BGS

October 31, 2011 in Class Actions, Lawyers, Procedure | Permalink | Comments (0) | TrackBack (0)

Monday, October 10, 2011

Morris Ratner on A New Model of Plaintiffs' Class Action Attorneys

Morris Ratner (Harvard) has posted to SSRN his article, A New Model of Plaintiffs' Class Action Attorneys, Rev. Litig. (forthcoming).  The article presents a nuanced, updated portrait of plaintiffs' class action firms today that challenges prior conceptions of class-counsel bias.  Here's the abstract:

This Article offers a new model for conceptualizing plaintiffs’ class action attorneys, and thus for understanding principal-agent problems in class action litigation. It responds to the work of Professor John C. Coffee, Jr., who, in a series of influential articles, demonstrated that principal-agent problems may be acute in class action litigation because class members lack the information or financial incentive to monitor class counsel; class counsel is thus free to pursue his own interests at the expense of the class members. But what are those interests, and how do they diverge from the class members’ interests? Professor Coffee provided one answer to this sub-set of questions, presenting a conventional account of class counsel and the precise parameters of his disloyalty corresponding with three descriptive assertions: that class counsel is either a solo practitioner or in a small firm; that he is predominantly interested in maximizing his law firm profit; and he capably pursues his fee-maximizing goal by investing his time in cases based on confident predictions about expected fees. In this Article, I articulate an updated and competing conception of the dominant class action attorneys and firms: the leading firms today are relatively large and internally complex; law firm structural complexity creates diverse incentives other than maximization of law firm profit; and class counsel invest time in cases for complex reasons other than the effect on expected fees, particularly because fees are notoriously difficult to predict. Modeling class counsel to recognize this complexity has three virtues: it better reflects the actual characteristics of the most significant class action attorneys, and hence is a more accurate descriptive tool; as such, it enables a more precise understanding of the extent and nature of agency or loyalty problems; and thus, finally, it provides a more solid basis for reforms. In particular, this new model sheds insight on the importance of direct versus incentive-based regulation to manage agency costs in class actions. In light of the diverse incentives this new model reveals, direct regulation of outcomes by trial courts using enhanced final approval standards should be a central part of any package of reforms to manage agency costs in class litigation.

BGS

October 10, 2011 in Class Actions, Ethics, Lawyers, Mass Tort Scholarship, Procedure | Permalink | Comments (0) | TrackBack (0)

Thursday, 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.  

BGS

August 25, 2011 in Aggregate Litigation Procedures, Asbestos, Ethics, Lawyers, Mass Tort Scholarship, Procedure, Products Liability, Settlement | Permalink | Comments (1) | TrackBack (0)

Tuesday, August 23, 2011

Politics, Media, and Lawsuit Reform -- The Perry Push for Loser Pays

Since my earlier post on loser pays as a solution to frivolous lawsuits, attention to loser pays as lawsuit reform has increased, apparently largely as a result of Texas Governor Rick Perry's announcement that he is seeking the Republican nomination for President.  Recall that Governor Perry in May enacted a form of loser pays in Texas.  (See also this July speech by Perry discussing passage of loser pays in Texas.)  Then, in August, when Governor Perry announced his candidacy for President, he included in his speech a reference to loser pays, eliciting a surprisingly large cheer from the crowd (see this video at 25 seconds).  Governor Perry's presidential-campaign website then again highlighted lawsuit reform (and thereby also his loser-pays approach) by claiming that "Texas' unmatched record on job creation was based on a few simple ideas: Don't spend all the money.  Keep taxes low.  Make regulations fair and predictable. And stop the frivolous lawsuits that paralyze job creators."  (Emphasis added.)

In response, the media and policy groups have turned their attention to loser pays.  The Washington Examiner several days ago ran an editorial entitled, Lawsuit Reform Could be Big in 2012, which discussed the passage of loser pays in Texas.  The Wall Street Journal Editorial Report on Fox News last weekend highlighted Perry's record on loser pays in Texas, calling it a "major, major reform."  The Institute for Legal Reform of the U.S. Chamber of Commerce yesterday sent out an email blast linking a survey that asked if lawsuit reform should be part of a pro-growth agenda.  And yesterday, Politico published a lengthy analysis of plaintiffs' lawyers preparing to organize politically against Governor Perry, should he be the Republican nominee, because of Perry's record on Texas tort reform: "Among litigators, there is no presidential candidate who inspires the same level of hatred — and fear — as Perry, an avowed opponent of the plaintiffs’ bar who has presided over several rounds of tort reform as governor."

What might Governor Perry do on loser-pays lawsuit reform were he to become President Perry?  Perry is an avowed defender of federalism, so one would think he would not attempt to push loser pays in areas traditionally under state law (such as tort law).  But he might attempt to insert loser-pays provisions in federal statutes creating causes of action.  And as candidate, nominee, or president, he could significantly influence the debate in statehouses about loser pays by continuing to cite loser pays and lawsuit reform as a reason for his claimed relative success of the Texas economy in creating jobs.  Stay tuned.

BGS 

August 23, 2011 in Current Affairs, Lawyers, Procedure | Permalink | Comments (0) | TrackBack (0)

Friday, July 8, 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.

BGS

July 8, 2011 in Aggregate Litigation Procedures, Ethics, Lawyers, Procedure, Settlement | Permalink | Comments (0) | TrackBack (0)

Sunday, 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.

BGS 

March 27, 2011 in Aggregate Litigation Procedures, Conferences, Environmental Torts, Ethics, Lawyers, Mass Disasters, Mass Tort Scholarship | Permalink | Comments (1) | TrackBack (0)

Friday, March 25, 2011

The Market for Specious Claims

S. Todd Brown (Buffalo) has posted a paper entitled The Market for Specious Claims on SSRN.  It promises to be an interesting application of the adverse selection problem to our favorite subject here at the Mass Tort Litigation Blog!  Here is the abstract:

Few problems are more disruptive to the efficient operation of comprehensive mass tort settlements than over-subscription, which, at times, appears to be fueled primarily by specious claims. In settlements with opt out rights, a flood of claims can generate a market for lemons, with the weakest claims submitting to the settlement and the strongest opting out and seeking recovery at trial or in private settlement. In binding settlements, they may result in a commons problem, requiring dramatic reductions in payment that effectively transfer recoveries from those with intrinsically strong claims to those with weak claims.

This Article evaluates the history of three mass torts where specious claim practices were uncovered and identifies common themes that reflect broader lessons about the potential for over-subscription. In particular, although commentators often focus on the incentives that drive claim recruiting, this Article explains that over-subscription has its origins in claim development incentives, which may be distorted by fixed settlement criteria and encourage practices that lend themselves to specious claim filings. This dynamic is particularly likely to generate specious claim markets for low or negative expected value claims. Moreover, the manner in which this process unfolds presents special difficulties for ethical enforcement and deterrence, suggesting that other mechanisms for controlling specious claim markets may be necessary.

ADL

March 25, 2011 in Aggregate Litigation Procedures, Fen-Phen, Lawyers, Mass Tort Scholarship, Products Liability, Settlement | Permalink | Comments (0) | TrackBack (0)