Thursday, September 5, 2019

Mass Tort Deals - Chapter 2

Continuing to work my way through Mass Tort Deals by Elizabeth Chamblee Burch.  If you're interested in the earlier post on it--it's available here.  

The chapter is titled "Quid Pro Quo Arrangements" for good reason.  I finished the chapter with the sense that attorneys in the space negotiate with defendants to bargain away plaintiff rights in exchange for things the plaintiffs' attorneys want for themselves and the defense lawyers want for their clients.  As someone who also teaches professional responsibility, I struggled to understand how many practices and agreements could ever be consistent with the ethics rules.

Take the settlement-recommendation provisions.  Lawyers enter into settlement agreements in these cases where they agree that they will recommend to every client in their "inventory" that they accept the settlement.  In many instances, they also put in writing that they will flat out drop clients and withdraw from representation if the clients do not agree to settle.  The ethics rules make whether to take a settlement offer a client decision.  And these "attorney-recommendation" provisions are common.  84% of the settlement agreements in the dataset have them.  53% of the time they also have the withdrawal provisions. 

What do you do if you have a client who would be better served by not agreeing to the settlement?  Settlements will probably be right for some clients and wrong for others.  An attorney who binds herself to give a particular recommendation to a client surely impairs her ability to give independent advice.  The Connecticut Bar Association issued an ethics opinion sharing my view that these provisions fall over the line.  Despite this, the provisions keep showing up in these settlements.  And these are not the only, shall we say, ethically complex provisions showing up.

Consider settlement "reversion" terms.  Funds within the settlement pool that don't get used up will revert back to the defendant.  This also creates an incentive to include terms making it harder for plaintiffs to actually access the settlement.  In some instances, the agreements will set up claim review boards or other gateways plaintiffs must pass through to recover.  Of course, this allows the lead attorneys involved to collect large fees off a big settlement fund and the defendant to claw most of the money back when few plaintiffs can actually collect.

These troubling practices may persist because mass tort deals work differently than their more orderly cousins--the class actions.  There just isn't any procedure available for objecting to these settlement structures. 

Enormous rewards await attorneys involved in striking these deals.  Not only do they get "common benefit" fees premised on the idea that their leadership work gave value to all other plaintiffs, they also get other benefits.  For example, in situations where a settlement matrix gets created, they design the matrix, point system, and guidance documents used to determine how much a particular plaintiff will take home.  This gives them an undeniable edge when they bring their own clients to the table.  They know how to position them in ways that other attorneys do not.  It would not surprise me if some tilted the matrix to favor their particular inventory if they were able to sign up more plaintiffs with particular characteristics.

https://lawprofessors.typepad.com/business_law/2019/09/mass-tort-deals-chapter-2.html

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Comments

Please keep it up - this is fascinating esp with the bizarre opioid mass tort shenanigans .

Posted by: Andrea | Sep 5, 2019 10:02:15 PM

A delightfully insightful review, written by a brilliantly driven attorney/professor, that poses a provocative question all attorneys should consider when weighing career advancement over professional responsibility. Looking forward to future reads.

PhD*

Posted by: Jane Meadows | Sep 6, 2019 6:02:35 PM

We'll have more Mass Tort Deals each week until we're through it!

Posted by: Ben Edwards | Sep 7, 2019 9:55:07 AM