Mass Tort Litigation Blog

Lawyers Seek MDL Status for Ignition-Switch Liability Suits Against GM

Plaintiffs' attorneys huddled in Chicago on Wednesday to strategize about where to ask the MDL Panel to send the GM ignition switch cases.   As usual, there are several things that will influence plaintffs' attorneys' pick.  

According to this morning's article in the WSJ, Elizabeth Cabraser called the litigation "a perfect storm for a class action."  Maybe.  But that will largely depend on which circuit and which judge hears the case, how GM's bankruptcy affects the pending claims, and whether attorneys forgo personal injury claims (they will likely be excluded in the class definition) to pursue product liability and economic injuries.  

Choice of procedural law, like how to apply Rule 23, can vary.  Under Chan v. Korean Airlines, Ltd. (D.C. Cir. 1989), the Van Dusen doctrine, which holds that transferee courts must apply the choice of law interpretation of the transferor circuit, may not apply to 1407 transfers.  Rather, when it comes to procedural and other federal law matters, Korean Airlines suggests that transferee courts are obligated to follow their own interpretation of the relevant law.  Several circuits follow this rationale including the Second, Eighth, Ninth, and Eleventh.  Other circuits, including most notably, the Seventh, have held that a transferee court should use transferor court's interpretation of federal law.

 According to Bloomberg, several plaintiffs' attorneys are pushing for a California venue before Judge James Selna, who is currently handling the Toyota acceleration MDL.  This strategy makes sense on several fronts.  The Ninth Circuit, which originally upheld (in part) the certification in Dukes v. Wal-Mart Stores, Inc., has shown a willingness to resolve aggregate cases through class actions.  And given that courts in the Ninth Circuit apply their own procedural law where circuit splits are concerned, this could further help plaintiffs.  Finally, Judge Selna, who certified an economic loss settlement class action in the Toyota litigation, is a logical choice.

But other plaintiffs' attorneys (and of couse GM) have other ideas about where the MDL should land.  Bloomberg reports:

Other plaintiffs want the cases to be heard in Chicago, Miami or Corpus Christi,Texas, where they have sued. GM wants the cases consolidated in the federal court in Manhattan, about a mile from where a prior incarnation of the company filed for bankruptcy in 2009. Company lawyers say proximity to the bankruptcy court trumps Selna’s experience.

While the Panel considers the forum requests by the parties, it is in no way limited to those venues.  There are several factors that it typically cites in favor of forum selection such as the location of discovery materials, convenience of the witnesses, location of grand jury proceedings, possibility of coordination with related state-court proceedings, where the majority of cases are located, knowledge of the transferee judge, and the willingness and motivation of a particular judge to handle an MDL docket.  Of these factors, the transferee judge is by far the most important.  The Panel tends to look for judges who have handled MDLs successfully in the past.  And, for better or worse, "successful" means quick settlement (see here, p. 11-12 for more).

The Judicial Panel on Multidistrict Litigaiton is comprised of seven judges from around the country. Judge David Proctor is the Panel's newest edition and was added just this year to replace Judge Paul Barbadoro.

For more on the process that will--and should--unfold once a transferee judge is appointed and how those judges should go about appointing lead lawyers, see here.

 

 

Tidmarsh on Trial by Statistics and Auctioning Class Settlements

As I've slowly emerged from my grading slump, I've caught up on a number of interesting articles dealing with class actions, two of which are authored by Professor Jay Tidmarsh at Notre Dame.  In case you missed them, too, I thought I'd mention them here.  

The first is a new take on auctions.  Auctions have been proposed and used to pick class counsel, but Tidmarsh proposes using them to increase settlement prices.  Once the parties reach a settlement, the court puts the class's claims up for auction.  If an entity--presumably a corporation, though perhaps a third-party financier?--outbids the settlement price, that entity purchases the class's rights to sue and can continue to litigate against the defendant.  Here's the idea in Tidmarsh's own words in his SSRN abstract: 

Although they promise better deterrence at a lower cost, class actions are infected with problems that can keep them from delivering on this promise. One of these problems occurs when the agents for the class (the class representative and class counsel) advance their own interests at the expense of the class. Controlling agency cost, which often manifests itself at the time of settlement, has been the impetus behind a number of class-action reform proposals.

This Article develops a proposal that, in conjunction with reforms in fee structure and opt-out rights, controls agency costs at the time of settlement. The idea is to allow the court, once a settlement has been achieved, to put the class’s claims up for auction, with the settlement acting as reserve price. An entity that outbids the settlement becomes owner of the class’s claims, and may continue to pursue the case against the defendant. A successful auction results in more compensation for the class. On the other hand, if no bids are received, the court has evidence that the settlement was fair. The prospect of a settlement auction also deters class counsel and the defendant from negotiating a sweetheart deal that sells out the class.

The Article works through a series of theoretical and practical issues of settlement auction, including the standards that a court should use to evaluate bids, the limitations on who may bid, and the ways to encourage the emergence of an auction market.

Tidmarsh's second article returns to a long-espoused notion: trial by statistics (or, as Justice Scalia used in the pejorative sense in Wal-Mart Stores, Inc. v. Dukes, "Trial by Statistics.").  Here's the abstract, which explains the idea concisely:

“Trial by statistics” was a means by which a court could resolve a large number of aggregated claims: a court could try a random sample of claim, and extrapolate the average result to the remainder. In Wal-Mart, Inc. v. Dukes, the Supreme Court seemingly ended the practice at the federal level, thus removing from judges a tool that made mass aggregation more feasible.

After examining the benefits and drawbacks of trial by statistics, this Article suggests an alternative that harnesses many of the positive features of the technique while avoiding its major difficulties. The technique is the “presumptive judgment”: a court conducts trials in a random sample of cases and averages the results, as in trial by statistics. It then presumptively applies the average award to all other cases, but, unlike trial by statistics, any party can reject the presumptive award in favor of individual trial. The Article describes the circumstances in which parties have an incentive to contest the presumption, and explores a series of real-world issues raised by this approach, including problems of outlier verdicts, strategic behavior by parties, and the parties’ risk preferences. It proposes ways to minimize these issues, including a requirement that the party who reject a presumptive judgment must pay both sides’ costs and attorneys’ fees at trial.

The Article concludes by showing that this approach is consonant with important procedural values such as efficiency, the accurate enforcement of individual rights, dignity, and autonomy.

Although, as Professor Tidmarsh notes, Justice Scalia frowned upon using statistics to resolve aggregated claims in federal court, the opinion didn't say that using statistics would violate federal constitutional due process.  That seems to leave the door open for the legislature to act and authorize statistics were it so inclined.  

 

Happy reading!

Judging Multidistrict Litigation

I posted a new article to SSRN this morning that's been a labor of love for well over a year now.  I'm excited about this new piece for a few reasons.  

First, it debuts an original data set of all lead lawyers appointed in 72 product liability and sales practices MDLs that were pending as of May 14, 2013.  As such, it's the only paper (that I know of) that includes empirical evidence on plaintiffs-side repeat players appointed to leadership positions.  (Yes, it includes a list of some of the most entrenched repeat lawyers and law firms as an appendix.)  (If this is of interest, have a look at Margaret Williams, Emery Lee, and Catherine Borden's recently published paper in the Journal of Tort Law titled Repeat Players in Federal Multidistrict Litigation, which looks at all plaintiffs' attorneys in MDLs using social network analysis.) 

I also explain why appointing a leadership group comprised of predominately repeat players can cause inadequate representation problems.  For example, repeat players playing the long game have rational, economic incentives to curry favor with one another, protect their reputations, and develop reciprocal relationships to form funding coalitions and receive client referrals.  As such, extra-legal, interpersonal, and business concerns may govern their interactions and trump their agency obligations to uniquely situated clients who could threaten to bust a multi-million dollar deal.  Non-conforming lawyers may be ostracized and informally sanctioned, which promotes cooperation, but deters dissent and vigorous representation.  Over time, expressing contrary opinions could brand the dissenting lawyer a defector, which could decrease lucrative leadership opportunities.  (Other reasons abound, which I explain on pages 25-27 of the paper.) 

Second, it provides some much needed guidance for transferee judges.  Although the Manual for Complex Litigation remains the go-to guide for transferee judges, it hasn't been updated in 10 years.  So much has changed since the fourth edition was published in 2004.  Accordingly, in "Judging Multidistrict Litigation," I suggest best practices for appointing and compensating lead lawyers.  Judges can compensate lead lawyers on a coherent and more predictable basis by distilling current theories down to their common denominator: quantum meruit.  Quantum-meruit awards would align fees with other attorney-fee decisions and compensate leaders based on the value they actually add.  

Third, as anyone familiar with the area knows, settlement review in nonclass litigation is controversial at best.  After judges expressly deny class certification they then harken back to Rule 23 and their "inherent equitable authority" to comment on settlements.  So, employing a quantum-meruit theory for awarding lead lawyers' attorneys' fees would give judges a legitimate private-law basis for scrutinizing settlements.  Because courts must evaluate the case's success to determine how much compensation is merited, it could likewise help stymie a trend toward self-dealing where repeat players insert fee provisions into master settlements and require plaintiffs and their attorneys to "consent" to fee increases to obtain settlement awards.

The article is forthcoming in N.Y.U. Law Review in April of 2015, so I still have a bit of time to tinker with it and welcome comments in the interim (eburch at uga.edu).  In the meantime, here's the formal SSRN abstract.

High-stakes multidistrict litigations saddle the transferee judges who manage them with an odd juxtaposition of power and impotence. On one hand, judges appoint and compensate lead lawyers (who effectively replace parties’ chosen counsel) and promote settlement with scant appellate scrutiny or legislative oversight. But on the other, without the arsenal class certification once afforded, judges are relatively powerless to police the private settlements they encourage. Of course, this power shortage is of little concern since parties consent to settle. 

Or do they? Contrary to conventional wisdom, this Article introduces new empirical data revealing that judges appoint an overwhelming number of repeat players to leadership positions, which may complicate genuine consent through inadequate representation. Repeat players’ financial, reputational, and reciprocity concerns can govern their interactions with one another and opposing counsel, often trumping fidelity to their clients. Systemic pathologies can result: dictatorial attorney hierarchies that fail to adequately represent the spectrum of claimants’ diverse interests, repeat players trading in influence to increase their fees, collusive private deals that lack a viable monitor, and malleable procedural norms that undermine predictability.

Current judicial practices feed these pathologies. First, when judges appoint lead lawyers early in the litigation based on cooperative tendencies, experience, and financial resources, they often select repeat players. But most conflicts do not arise until discovery and repeat players have few self-interested reasons to dissent or derail the lucrative settlements they negotiate. Second, because steering committees are a relatively new phenomenon and transferee judges have no formal powers beyond those in the Federal Rules, judges have pieced together various doctrines to justify compensating lead lawyers. The erratic fee awards that result lack coherent limits. So, judges then permit lead lawyers to circumvent their rulings and the doctrinal inconsistencies by contracting with the defendant to embed fee provisions in global settlements—a well recognized form of self-dealing. Yet, when those settlements ignite concern, judges lack the formal tools to review them. 

These pathologies need not persist. Appointing cognitively diverse attorneys who represent heterogeneous clients, permitting third-party financing, encouraging objections and dissent from non-lead counsel, and selecting permanent leadership after conflicts develop can expand the pool of qualified applicants and promote adequate representation. Compensating these lead lawyers on a quantum-meruit basis could then smooth doctrinal inconsistencies, align these fee awards with other attorneys’ fees, and impose dependable outer limits. Finally, because quantum meruit demands that judges assess the benefit lead lawyers’ conferred on the plaintiffs and the results they achieved, it equips judges with a private-law basis for assessing nonclass settlements and harnesses their review to a very powerful carrot: attorneys’ fees.