Mass Tort Litigation Blog

BP Looking to Exit Gulf Settlement

According to a news report, BP today asked the Fifth Circuit to reverse the district court's approval of the Gulf oil spill settlement. I have not seen the court filing, but according to this AP report as published by the NY Times, "BP is trying to persuade a federal appeals court that it should throw out a judge's approval of the company's multibillion-dollar settlement with Gulf Coast residents and businesses. Last year, BP PLC joined plaintiffs' attorneys in urging U.S. District Judge Carl Barbier to give the deal his final approval. On Friday, however, the company's lawyers argued in a court filing that Barbier's more recent interpretation of settlement terms have allowed businesses to receive hundreds of millions of dollars for inflated or fictitious claims." As told in the Houston Chronicle, BP would still support the settlement if the Fifth Circuit were to decide in BP's favor on its earlier appeal challenging Judge Barbier's rulings on the generosity of payouts.

BP's decision to ask for reversal of its settlement class action (a deal that BP had negotiated and agreed to, and for which BP had previously argued in favor of judicial approval), is a fascinating turn of events in light of the history of the Gulf Oil Spill litigation and settlement. Shortly after the Deepwater Horizon explosion, BP established a compensation fund to pay claims. Kenneth Feinberg was named administrator of the fund, which came to be knows as the Gulf Coast Claims Facility (GCCF), and the GCCF proceeded to settle thousands of claims. But BP later joined with a group of plaintiffs' lawyers to negotiate a settlement class action that would replace the GCCF as settlement mechanism. For BP, a settlement class action offered a greater prospect of finality because it could bind all class members who fail to opt out, whereas the GCCF settlement program could bind only those claimants who chose to accept their compensation offers. In other words, even though the claims systems strongly resembled each other, a key difference is that a settlement class action uses the adjudicative power of the court to bind class members, in contrast to the claims facility, which depended upon the consent of individual claimants to settle their claims.

I've argued elsewhere that settlement class actions should be impermissible because they use the power of the courts to disadvantage claimants. But the BP news drives home the point that the opposite problem can occur -- a defendant may feel disadvantaged by a settlement class action because it deprives the defendant of control over the settlement process.

HME 

 

In Memorium: Ronald L. Mottley (1944-2013)

Famed mass tort plaintiffs' lawyer Ron Mottley has passed away, according to an announcement today on the Mottley Rice firm website by his partner Joe Rice. Mottley played a leading role in many of the biggest mass torts -- asbestos, tobacco, 9/11, Gulf oil spill, and lead paint, to name a few. I knew him only from accounts of his work and from reading about him in various books on the tobacco litigation and other mass tort wars. He was known not only for his legal skill and tenacity, but also for his outsized personality and lifestyle. Dionne Searcey at the WSJ law blog describes Mottley as "the gregarious, hard-charging and hard-living attorney who was known for his compassion for victims of corporate wrongdoing."

HME

Update: here's a link to the New York Times article. 

ECB

Kate Greenwood on Litigant Regulation of Physician Conflicts of Interest

Professor Kate Greenwood (Seton Hall) has posted to SSRN her article, 'Litigant Regulation' of Physician Conflicts of Interest, Ga. St. L. Rev. (forthcoming).  Here's the abstract:

While physicians’ financial relationships with pharmaceutical and medical device manufacturers are increasingly of concern to legislators and regulators, plaintiffs have had only limited success pursuing private law remedies for the harms that result from conflicts of interest. Courts have long channeled individual patients’ claims against their conflicted doctors into the medical malpractice cause of action, where patients have difficulty establishing that their physicians’ conflicts caused them to suffer concrete and compensable injuries. With recent notable exceptions, courts have also blocked patients’ claims against drug and device manufacturers. Courts apply the learned intermediary doctrine to dispose of failure-to-warn personal injury suits, without regard to whether the plaintiff’s physician had a financial relationship with the defendant manufacturer. Third-party payers, such as employers, insurance companies, and union health and welfare funds, have similarly struggled to overcome a strong presumption of physician independence. Courts routinely find that a physician’s prescribing decision breaks the chain of causation between a manufacturer’s illegal promotional efforts and a payer’s obligation to pay for a prescription, even when those promotional efforts include the payment of kickbacks.  

Courts can and should move beyond the often counterfactual presumption of physician independence. In personal injury cases, this can be achieved through a nuanced analysis of alleged conflicts of interest that distinguishes between kickbacks, on the one hand, and legitimate financial relationships between manufacturers and physicians, on the other. Limited early discovery would allow plaintiffs to develop their claims about the influence of conflicts on their physicians’ decision-making without putting an undue burden on defendants. In economic injury cases, courts can move beyond the presumption of physician independence by allowing plaintiffs to use standard statistical methods to demonstrate that physicians’ prescribing decisions were not independent in the aggregate. If the doctrine were to evolve in these ways, it would amplify the role “litigant regulation” plays in the regulatory structure governing physician-industry relationships and bring closer the goal of ensuring that patients and payers are fairly compensated for the harms caused by conflicts of interest.

BGS

Adam Abelkop on Tort Law as Environmental Policy Instrument

Adam Abelkop (Graduate Student, Indiana U., Bloomington, School of Public & Environmental Affairs) has posted to SSRN his article, Tort Law as an Environmental Policy Instrument, 92 Or. L. Rev. (forthcoming 2013).  Here's the abstract:

Policymakers aiming to tackle any environmental problem have a diverse tool chest of policy instruments at their disposal, including command and control regulations, taxes, marketable allowance, and liability entitlements. Scholars of public health and safety have been debating the effectiveness of tort law as a regulatory tool for decades. The legal literature on this topic, though, is muddled because the field has failed to adopt a set of criteria by which to compare tort law to public regulation. Heightened clarity on the usefulness of tort law as a complementary policy instrument to public regulations may have legal and policy implications. This article therefore adopts evaluation criteria from the policy analysis and public policy fields — equity, legitimacy, efficiency, organizational competence, effectiveness, and cost-effectiveness — to evaluate the strengths and weaknesses of tort law as an environmental policy instrument relative to public regulation.

BGS

Supreme Court Petition in Engle Progeny Case

Am Law Litigation Daily has an article on the tobacco companies' filing another certiorari petition in an Engle progeny case: Tobacco Companies Seek Supreme Court Cert in Engle Case, by Ross Todd.  Here's their petition for a writ of certiorari.  The appellate team includes Greg Katsas (Jones Day), Paul Clement (Bancroft), and Miguel Estrada (Gibson Dunn).

I've previously addressed issue preclusion, verdict variability, and problems with the Engle case in my article, Jackpot Justice: Verdict Variability and the Mass Tort Class Action, 80 Temp. L. Rev. 1013 (2007).

BGS

Richard Zitrin on Regulating the Behavior of Lawyers in Mass Individual Representations

Professor Richard Zitrin (UC Hastings) has posted to SSRN his article, Regulating the Behavior of Lawyers in Mass Individual Representations: A Call for Reform, 3 St. Mary’s J. on Legal Malpractice & Ethics 86 (2013).  Here's the abstract:

Cases in which lawyers represent large numbers of individual plaintiffs are increasingly common. While these cases have some of the indicia of class actions, they are not class actions, usually because there are no common damages, but rather individual representations on a mass scale. Current ethics rules do not provide adequate guidance for even the most ethical lawyers. The absence of sufficiently flexible, practical ethical rules has become an open invitation for less-ethical attorneys to abuse, often severely, the mass-representation framework by abrogating individual clients’ rights. These problems can be abated if the ethics rules offered better practical solutions to the mass-representation problem. It is necessary to reform the current rules, but only with a solution that is both practical and attainable, and with changes that maintain the core ethical and fiduciary duties owed by lawyers to their individual clients, including loyalty, candor, and independent professional advice.

BGS

The Spread of Class Actions in Europe

The Wall Street Journal has an article on the spread of class actions and collective litigation in Europe: Europe Walks Fine Line in Pursuing Class Actions, by Naftali Bendavid.

BGS

Cy Pres Settlements Upstream

Adap Liptak of the NYTimes has a piece When Lawyers Cut Their Clients Out of the Deal about a cy pres settlement with Facebook.  In this settlement (approved by the 9th Circuit) the lawyers got $2.3 million and the clients got a cy pres contribution, apparently $6.5 million to a foundation over which Facebook has some control according to the article.  The cy pres recipient is something called the Digital Trust Foundation.  A quick google search came up with a bunch of references to the Facebook settlement but no website for this foundation. 

The Ninth Circuit affirmed the settlement and denied rehearing en banc, with a dissent on rehearing en banc, making this a possible Supeme Court cert grant.  (A cert petition was filed on June 26, 2013). 

There is a lot of scholarship on the topic of how much lawyers should be paid relative to class members as well as articles critizing cy pres settlements.  Some links to this work are below. The problem is this.  We regulate entities like Facebook largely by litigation.  In the absence of the class action, there would be little or no enforcement of the consumer protection laws.  But the class action litigation needs to be funded, and it is funded out of lawyers percentage of the total fund, usually the total fund from a settlement because class actions are almost never litigated.  Its very hard to certify a class action, so class actions are often certified for settlement only.  The incentive of the lawyers, fearing no class certification or realistic possibility of actually litigating, is to settle.  The incentives for defendants, wanting to get the litigation off their books, is to settle cheap.  The answer to this problem in my view is to allow classes to be litigated, not to tighten the certification standards further.

If the settlement will deter future misconduct, even if the money doesn't go directly to the class members, there is still a lot of societal value there.  But is $8.8 million enough to deter Facebook? Does it have any relationship to the potential value of this lawsuit?  That is, what is the value of the claims multiplied by the probability of success? 

In my own work, I've suggested that cy pres settlements are not necessarily bad, but that certainly doesn't mean they are always good.  Class members should just be polled in determining where cy pres settlements should go.  The argument that class members will not appreciate the putative $1 (I think I saw it was $1.12) they would get in a settlement like this one is reasonable.  But that doesn't make a settlement like this one okay.  Especially in a settlement involving facebook users, who presumably are all connected via facebook, there is no reason why absent class members cannot be polled. Do they "like" this foundation?  what would they prefer?   Might I suggest Public Citizen as a recipient?   

This case might be a fine vehicle for the Supreme Court to consider cy pres settlements. Given how few cases the Court decides, how few class actions actually are filed and litigated (less than 1% of the federal docket) its not clear to me that this is the best use of its time.  That said, if the Court does grant cert, it would be wise to consider both the overall benefits and costs of cy pres to consumers and society more generally, not merely the fact that the lawyers got a lot of money here.  This is a story of more money than sense. 

ADL

Some links:

Cert Petition

Center for Class Action Fairness

Lahav, Two Views of the Class Action (advocating polling)

Gilles & Friedman, Exploding the Class Action Agency Costs Myth (SSRN)

Fitzpatrick, Do Class Action Lawyers Make Too Little? (SSRN) 

Redish et. al., Cy Pres Relief and the Pathologies of the Modern Class Action (SSRN)