Wednesday, November 16, 2011
Nora Freeman Engstrom (Stanford) has posted to SSRN Sunlight and Settlement Mills. The abstract provides:
Accident compensation, and particularly auto accident compensation, is typically thought to take one of two dichotomous forms: either no-fault or traditional tort. Further, conventional wisdom holds that while pure no-fault may be an option in theory, it is not one in practice. No pure no-fault auto regime has ever been enacted in the United States, and states these days are repealing, rather than enacting, modified no-fault legislation. Yet something peculiar is happening on the ground. Far out of the light of day, high-volume personal injury firms that I call “settlement mills” are quietly achieving many of no-fault’s objectives — speeding recoveries, lowering systemic costs, and delivering relatively standardized sums to an apparently expanded set of clients — while ostensibly operating within traditional tort. What settlement mills are accomplishing, then, is in some respects astonishing — and certainly commendable. Yet, the fact settlement mills’ distinctive operations are out of the light of day and rarely revealed to clients is problematic, raising profound issues of informed consent and highlighting severe information deficiencies in the market for legal services. A well-designed disclosure regime can preserve settlement mills’ substantial benefits, ameliorate their unique costs, and, more broadly, improve the tort system’s operation and address the vexing problem of attorney choice.