Mass Tort Litigation Blog

Settlement Reached in BP Litigation

John Schwartz at the New York Times reports that the litigation surrounding the BP Deepwater Horizon Oil Spill has settled for all of the litigants except the federal government.  The Judge overseeing the litigation issued the order late Friday night and will review the settlement. 

Here's the report from Bloomberg as well.

According to these reports, either the settlement will be paid by the $20 billion fund BP created to compensate victims or the fund will close and be replaced by a court overseen claims facility.  In any event, the amount of the settlement is $7.8 billion that from these reports is not in addition to the $20 billion already set aside. 

More to come. ADL

Ronald Brand on Access-to-Justice Analysis on a Due Process Platform

Ronald Brand (Pittsburgh) has posted to SSRN his article, Access-to-Justice Analysis on a Due Process Platform.  Here is the abstract:

In their article, Forum Non Conveniens and The Enforcement of Foreign Judgments, Christopher Whytock and Cassandra Burke Robertson provide a wonderful ride through the landscape of the law of both forum non convenience and judgments recognition and enforcement. They explain doctrinal development and current case law clearly and efficiently, in a manner that educates, but does not overburden, the reader. Based upon that explanation, they then provide an analysis of both areas of the law and offer suggestions for change. Those suggestions, they tell us, are necessary to close the “transnational access-to-justice gap” that results from apparent differences between rules applied in a forum non conveniens analysis and rules applied to the question of recognition of foreign judgments. While the analysis is good, it ignores core differences among legal systems, particularly the due process core of U.S. jurisdictional jurisprudence and the “access to justice” approach to jurisdiction, particularly of European civil law systems (from which most other civil law systems draw their origins). This distinction involves a fundamental difference, with U.S. doctrine focusing on the rights of the defendant and the civil law doctrine focusing on the rights of the plaintiff. So long as this difference exists, it will not be possible to wrap the process of declining jurisdiction and the process of recognition of foreign judgments in the same cloak of doctrine in order to provide common or connected analysis.

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Rhonda Wasserman on Secret Class Action Settlements

Professor Rhonda Wasserman (Pittsburgh) has posted to SSRN her article, Secret Class Action Settlements.  Here is the abstract:

This Article analyzes the phenomenon of secret class action settlements. To illustrate the practice, Part I undertakes a case study of a class action lawsuit that recently settled under seal. Part II seeks to ascertain the scope of the practice. Part II.A examines newspaper accounts describing class action settlements from around the country. Part II.B focuses on a single federal judicial district – the Western District of Pennsylvania – and seeks to ascertain the percentage of suits filed as class actions that were settled under seal. Having gained some understanding of the scope of the practice, the Article then seeks to assess it normatively. Part III analyzes the policy debate surrounding secret settlements of civil suits in general, fleshing out the competing policy objectives served by public access to, and confidentiality of, settlement agreements. Finally, Part IV examines the statutory, logistical and policy-based constraints that call into serious question the legality, efficacy and wisdom of secret class action settlements

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Honda Loses Small Claims Court Suit Over Hybrid Fuel Economy, Raising Questions About Alternatives to Class Actions

As the L.A. Times reports, Honda has lost a case filed in small claims court in California by a Civic hybrid owner who claims her Honda misrepresented the gas mileage possible.  The owner apparently opted out of a proposed class action settlement that might provide $100 and new-car rebate coupons to Civic owners, and pay class counsel $8.5 million in attorneys fees.  Instead, she filed in small claims court and after 3 hours of testimony over two days, she was awarded $9,867.19 in damages.  (In California small claims courts, parties must appear without separate counsel; plaintiff here was an attorney representing herself, though her bar membership is apparently inactive.)  Honda, however, plans to appeal the small claims award to Los Angeles County District Court.  (H/t to my Mass Tort Litigation student Michelle Rosenberg, who sent me the story.)

Might small claims court be a viable alternative to class action litigation?  Class actions of course are most appropriate in so-called negative value claims, where the cost of bringing individual suit exceeds the recovery sought.  Small claims court, with its radically diminished transaction costs (and no attorneys' fees), could be seen to shrink the realm of negative value claims.  And smalls claims court avoids the potential conflict of interest arising from the temptation for class counsel to settle class claims for a less than optimal amount, in pursuit of a hefty, sure, and speedy class counsel fee.  Small claims court still wouldn't be worth the trouble of people who think they were defrauded only a dollar or two, but it might be a viable alternative if hundreds of dollars per claimant were at stake.

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Daniel Klerman on Personal Jurisdiction and Products Liability

Daniel Klerman (USC) has posted to SSRN his article, Personal Jurisdiction and Products Liability: An Economic Analysis.  Here is the abstract:

This article is the first sustained economic analysis of personal jurisdiction. It argues that plaintiffs should be able to sue where they purchased a product which caused injury. Such a rule allows manufacturers to set prices which take into account the quality of the forum state’s courts. If the courts are biased against out-of-state corporations, have overly generous judges or juries, or apply substantive law which is excessively pro-consumer, manufacturers can, through contracts with distributors and retailers, charge a higher price to consumers in that state. This prevents judges and juries from engaging in inter-state redistribution and gives states an incentive to provide efficient substantive rules and adjudicative institutions. In contrast, a rule which required suit in a place more fully under the control of the defendant – such as the place of manufacture or the location of the distributor – would encourage manufacturers to select inefficiently pro-defendant jurisdictions for their activities. Because consumers are unlikely to know where products are manufactured or distributed and are unlikely to be able to evaluate the quality of the law in those states, it is implausible to think that the market will give manufacturers incentives to locate their jurisdiction-triggering activities in states with efficient laws and institutions. This analysis is particularly important, because the Supreme Court has recently deadlocked on personal jurisdiction in product liability cases.

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More on the Second Circuit's Refusal to Block Enforcement of Ecuadoran Judgment

From Michael D. Goldhaber at AmLaw Daily.

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PIP Breast Implants and Mass Torts in Europe

According to this article from CNN, French authorities have arrested Jean-Claude Mas, the founder of Poly Implant Protheses (PIP), in connection with alleged manslaughter and involuntary harm to a woman who died from cancer and had PIP breast implants.  The article notes that 300,000 women in 65 countries received PIP breast implants, and that questions have been raised about the use of non-medical-grade silicon and PIP went bankrupt in late 2010.  

The PIP breast-implants controversy may present an opportunity to observe non-U.S.-style mechanisms for what here would likely have been a mass tort litigation.  Since the PIP breast implants were not permitted to be sold in the U.S., litigation may be concentrated abroad.  In general, my sense is that the European approach is more reliant on criminal law than tort for deterrence, compensatory damages are limited because of the comparatively extensive governmental social insurance, punitive damages are unavailable, and class actions are traditionally not embraced (though class actions appear to be on the rise globally -- see, e.g., the Stanford Global Class Actions Exchange).

Interestingly, according to the article, one French woman who received PIP breast implants said, "Too bad we do not have a justice system like they do in the United States which allows the accumulation of penalties...because the small punishment he will receive for what he did to 300,000 to 400,000 women, is not much compared to what we have suffered because of him."

(H/t to my Mass Tort Litigation student Abigail Anderson for sending me the CNN story.)

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Martin Redish on Pleading, Discovery, and the Federal Rules

Professor Martin Redish (Northwestern) has an article, Pleading, Discovery, and the Federal Rules: Exploring the Foundations of Modern Procedure, in the January 2012 issue of the Federalist Society's Engage.

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California Lawsuit Reform and the Need for Court Funding

Tom Scott, the Executive Director of California Citizens Against Lawsuit Abuse, has posted on Fox&Hounds a 2012 wishlist for legal reform.  While there are many proposed reforms helpful to business, I was struck by one not usually associated with business desires or law reform:

6. Stop cutting the funding of the California courts. Our court system is still reeling from cuts last year, and more cuts would only reduce access to the courts even more.

I am heartened to see that even those who are "fighting against lawsuit abuse" understand that adequate court funding is essential if suits are to be promptly adjudicated -- and found either meritorious and tried, or found unmeritorious and dismissed.  Both pro-plaintiff and pro-business groups should be able to come together to advocate for court funding in a time of shrinking governmental budgets.  And those who practice in mass tort litigation should be especially vocal, in light of the heavy demands such litigation places on state and federal courts.  Moreover, as the election season approaches and disagreements multiply across the political spectrum, liberals and conservatives might remind themselves that they agree on government's core responsibility in providing a functioning court system for dispute resolution.

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Southwestern Law School Symposium on Transnational Litigation and Civil Procedure

Below is the announcement from Southwestern Law School, and here is the brochure.

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Our Courts and the World: Transnational Litigation and Civil Procedure

Southwestern Law School

February, 3, 2012

 

On Friday, February 3, 2012, Southwestern Law School in Los Angeles, California and the Southwestern Journal of International Law are hosting a symposium entitled, Our Courts and the World: Transnational Litigation and Civil Procedure.   The symposium is co-sponsored by the American Society of International Law, the Junior International Law Scholars Association (JILSA), the Los Angeles County Bar Association -  International Law Section, and the State Bar of California - International Law Section.

 

This one-day symposium will bring together leading scholars from Canada and the United States to discuss the procedural issues that arise in transnational civil litigation cases. It will also assess how receptive courts are to transnational litigation and explore issues related to transnational class actions. The proceedings and papers from this symposium will be published in the Southwestern Journal of International Law.

 

What:	Southwestern Journal of International Law presents Our Courts and the World: Transnational Litigation and Civil Procedure
When:	Friday, February 3, 2012, 9:00 a.m. – 5:15 p.m.
Where:	Southwestern Law School, Los Angeles, California
	Panelists include (in alphabetical order): ·          Samuel P. Baumgartner, Professor of Law, University of Akron School of Law ·           Vaughan Black, Professor of Law, Dalhousie University Schulich School of Law ·           Gary B. Born, Partner, WilmerHale, Lecturer on Law, Harvard Law School ·           Stephen B. Burbank, David Berger Professor for the Administration of Justice, University of Pennsylvania Law School ·           Montré D. Carodine, Associate Professor of Law, University of Alabama School of Law ·           Donald Earl Childress III, Associate Professor of Law, Pepperdine University School of Law ·           Paul R. Dubinsky, Associate Professor of Law, Wayne State University Law School ·           Allan Ides, Christopher N. May Professor of Law, Loyola Law School, Los Angeles ·           Thomas Orin Main, Professor of Law, University of the Pacific, McGeorge School of Law ·           Erin O’Hara O’Connor, Professor of Law and Director of Graduate Studies, Law & Economics PhD Program, Vanderbilt Law School ·           Cassandra Burke Robertson, Associate Professor, Case Western Reserve University School of Law ·           Linda J. Silberman, Martin Lipton Professor of Law, New York University School of Law ·           Linda Sandstrom Simard, Professor of Law, Suffolk University Law School ·           Adam N. Steinman, Professor of Law and Michael J. Zimmer Fellow, Seton Hall University School of Law ·           Janet Walker, Professor of Law, Osgoode Hall Law School       ·           Rhonda Wasserman, Professor of Law, University of Pittsburgh School of Law                                                                                                 Moderators include: ·           William E. Thomson, Partners, Gibson, Dunn & Crutcher LLP ·           James H. Broderick, Jr., Partner, Squire, Sanders & Dempsey LLP ·           Marcus S. Quintanilla, Counsel, O’Melveny & Myers LLP ·           Ray D. Weston Jr., Vice President and General Counsel, Taco Bell Corp.   Symposium Co-Chairs: Austen Parrish, Professor of Law and Vice Dean, Southwestern Law School Christopher A. Whytock, Acting Professor of Law and Political Science, University of California, Irvine

 

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.

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Tort Reform in The Economist

The Economist this week has an article discussing various approaches to American tort reform, including loser pays and damage caps.

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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.

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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.

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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.

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Grabill on Judicial Review of Private Mass Tort Settlements

Jeremy Grabill (Weill, Gotshall) has posted to SSRN his article, Judicial Review of Private Mass Tort Settlements, which is forthcoming in the Seton Hall Law Review.  Here's the abstract:

In the mass tort context, class action settlements have largely given way to a unique form of non-class aggregate settlements that this Article refers to as “private mass tort settlements.” Although it has been argued that aggregation in tort law is “inevitable,” the legal profession has struggled for many years to find an effective aggregate settlement mechanism for mass tort litigation that does not run afoul of the “historic tradition” that everyone should have their own day in court, assuming they want it. Over the last decade, however, as a result of the evolution of non-class aggregate settlements, a new opt-in paradigm for mass tort settlements has emerged that is true to that historic tradition. This Article discusses the new opt-in paradigm and the appropriate contours of judicial authority vis-à-vis private mass tort settlements.

Private mass tort settlements present a difficult conundrum for presiding judges. On one hand, mass tort litigation requires active judicial involvement and oversight due to the sheer size and complexity of such matters. Thus, having been intimately involved in the litigation from its inception, it understandably seems natural for courts to want to exercise some degree of control over private mass tort settlements. But, on the other hand, like traditional one-on-one settlements and unlike class action settlements and other specific settlements, private mass tort settlements do not impact the rights of absent or unrepresented parties. Perhaps not surprisingly then, courts have struggled in applying established principles concerning the scope of judicial authority to evaluate and oversee the implementation of traditional settlements in the unfamiliar context of private mass tort settlements. 

This Article seeks to provide a clear path forward by first examining the limited contexts in which courts have the authority to evaluate and oversee the implementation of traditional settlements, highlighting the nature of the absent or unrepresented interests that judicial review is designed to protect in those traditional contexts. The Article then discusses the emerging opt-in paradigm for mass tort settlements and traces the paradigm’s lineage to three recent cases: In re Baycol Products Liability Litigation, In re Vioxx Products Liability Litigation, and In re World Trade Center Disaster Site Litigation. The Article argues that the well-established maxim that courts lack authority over private one-on-one settlements should apply with equal force to private mass tort settlements because these non-class aggregate settlements allow each individual plaintiff to decide whether or not to settle on the terms offered and do not impact the rights of absent or unrepresented parties. In short, courts do not have - and do not need - the authority to review private mass tort settlements. The Article concludes by addressing the arguments that have been advanced to support judicial review of non-class aggregate settlements, debunking the “quasi-class action” theory that some courts have relied upon to regulate attorneys’ fees in connection with mass tort settlements, and discussing the various ways in which courts may nevertheless be able to influence private mass tort settlements.

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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.  

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Call for Papers for "New Voices" Workshop at Vanderbilt's Branstetter Litigation & Dispute Resolution Program

Announcement from Professor Tracey George, who is the new Director of Vanderbilt's Branstetter Litigation & Dispute Resolution Program:

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VANDERBILT LAW SCHOOL • BRANSTETTER LITIGATION & DISPUTE RESOLUTION PROGRAM

CALL FOR PAPERS

Vanderbilt Law School and the Cecil D. Branstetter Litigation & Dispute Resolution Program announce the 2012 New Voices in Civil Justice Scholarship Workshop to be held at Vanderbilt on April 20, 2012, and invite submissions for the workshop.

The Branstetter Litigation & Dispute Resolution Program draws on a multimillion-dollar endowment to support research and curriculum in civil litigation and dispute resolution.  The idea for the Branstetter “New Voices” workshop is to draw together scholars on civil justice issues who are in the first seven years of their academic careers. Four to six scholars will be chosen by anonymous review of the submitted papers.  The audience will include invited junior scholars, Vanderbilt faculty, and invited guests.  Previous participants include Nora Freeman Engstrom (Stanford), Maria Glover (Harvard), Margaret Lemos (Cardozo), Jonathan Mitchell (George Mason), Myriam Gilles (Cardozo), Donna Shestowsky (UC Davis), Benjamin Spencer (Washington & Lee), Amanda Tyler (George Washington), and Tobias Wolff (Pennsylvania).

The format for the workshop is designed to maximize collegial interaction and feedback.  All participants will have read the selected papers.  A senior faculty member will provide a brief overview and commentary on the paper, and then we are off and running with interactive discussion.  Paper authors thus do not deliver prepared “presentations” as such.  Rather, the overwhelming majority of each session is devoted to collective discussion of the paper involved. 

Submission requirements.  

1. Subject matter.  Submitted papers should address an aspect of civil justice.  Subject areas may include, but are not limited to, civil procedure, complex litigation, evidence, federal courts, judicial decisionmaking, alternative dispute resolution, remedies, and conflict of laws.  In keeping with the intellectual breadth of the Branstetter Program faculty, we are very receptive to the full range of scholarly methodologies, from traditional doctrinal analysis to quantitative or experimental approaches.  

2. Author qualifications.  To be eligible to submit a paper, scholars must currently hold a permanent faculty position.  In addition, scholars may not have held a position at assistant professor or higher (including visiting assistant professor) prior to 2004.

3. Format.  Papers may be sent in either Microsoft Word or Adobe Acrobat format.  To maintain the anonymity of the process, please remove any self-identifying information from the submission.

4. Deadline.  Submissions should be e-mailed to Branstetter.Program@vanderbilt.edu no later than January 13, 2011.  Please include your name, current position, and contact  information in the e-mail accompanying the submission.  We will contact you with our decision by February 15.

The Branstetter Program will pay all reasonable travel expenses within the United States for invited participants.  If you have any questions, please email Professor Tracey George, Branstetter Program Director, at Branstetter.Program@vanderbilt.edu

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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.

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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.

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