Friday, January 29, 2016
There's obviously been a lot in the news about multidistrict litigation--from Lance Cooper's allegations in GM to the recent selection of the plaintiffs' leadership slate in VW. But what do we really know about the settlements that come out of those large MDLs? On one hand, the answer is not much. Many of the deals are secret because they are private. But sometimes those private deals are nevertheless publicly available. And when they are, we read them. And analyze them.
The results can be a little disturbing. Given all of the hubbub over Cooper's allegations in GM (see Lahav's post), my co-author Margaret Williams and I decided to go ahead and release the findings of our recent study, Repeat Players in Multidistrict Litigation: The Social Network, on SSRN.
While past studies have considered repeat play on the plaintiffs’ side, this study is the first comprehensive empirical investigation of repeat play on both sides. It won't surprise most readers to learn that we found robust evidence of repeat play among both plaintiff and defense attorneys. What may be more interesting is that we used social-network analysis to demonstrate that a cohesive multidistrict-litigation leadership network exists, which connects people, law firms, and the proceedings themselves.
While repeat play may not be surprising for those in the know, the fact that repeat players exist matters considerably. Lead lawyers control the litigation, dominate negotiations, and design settlements.
To consider repeat players’ influence, we examined the publicly available nonclass settlements these attorneys negotiated, looking for provisions that one might argue principally benefit the attorneys, and not one-shot plaintiffs. By conditioning the deal on achieving a certain claimant-participation rate and shifting the deal-making entities from plaintiffs and defendants to lead lawyers and defendants, repeat players tied all plaintiffs’ attorneys’ financial interests to defendants’ ability to achieve closure.
Over a 22-year span, we were unable to find any publicly available nonclass settlement that didn’t feature at least one closure provision (which benefits the defendant), and likewise found that nearly all settlements contained some provision that increased lead lawyers’ fees. Based on the limited settlements available to us, we found reason to be concerned that when repeat players influence the practices and norms that govern multidistrict proceedings—when they “play for rules,” so to speak—the practices they develop may principally benefit them at the expense of one-shot plaintiffs.
Of course, our research doesn't speak directly to the allegations in GM, but it does make those allegations far less surprising. And if you compare our list of repeat players to the names of those appointed in Volkswagen, you'll see a lot of familiar names.
Thursday, January 28, 2016
Tuesday, January 26, 2016
Lance Cooper, a lawyer with ignition switch cases against GM, has made a motion to remove the MDL plaintiffs counsel in the ignition switch litigation. You can find some coverage by Sara Randazzo & Mike Spector at the Wall Street Journal. (I haven't seen the motion).
The first lawsuit to proceed to trial - of a total of six, three picked by plaintiffs, three by defendants - has ended with a dismissal with prejudice under a cloud of allegations of fraud. What does this say about bellwethers?
I think it says nothing about the underlying cases, or not very much. (It does tell you something about lawyer error, but that's a topic for another day). However, the recent events at trial do show that the way bellwether trials are structured is deeply flawed. If the cases tried are going to be meaningful, they should be randomly selected and the number of trials should be related to the variation in the underlying group of cases. If there is a high variation, you will need more trials to tell you much about the underlying run of cases. A number that is convenient (six, for example) is just that, convenient, but convenience should not be confused with meaningful. Now a lot is riding on this case because one would imagine, since plaintiffs picked it and they only get three, its a really good case for plaintiffs. So a skewed sample can tell you something - but what it ends up telling you is more about the lawyers than the underlying run of cases.
To understand this, imagine you have a jar full of marbles. If you know all the marbles are the same color, you can just pick one marble out of the jar to find out what the color of all the marbles is. But if the marbles are of various colors picking one marble is not enough. If you have a sense of the distribution of colors in the jar - say you know that there are some black and some red marbles - you can calculate how many marbles to pick out so that you will have a pretty good estimate of the proportion of red to black. The same with cases. If your cases are homogeneous, you can just try a few to get a sense of their value. The more heterogeneity, the greater the number of cases that need to be tried. This was the basis for Francis McGovern's idea of maturation of mass torts - you try lots of cases, and over time a value emerges. It was also the basis for the structure of bellwether trials in the 9/11 First Responders' Litigation.
Of course, its easy for me to say this. I am not running an MDL and I don't have to pay for all those trials, which are expensive. But that said, if you want to get a sample that could mean something, the sample size needs to be related to the variance of the underlying class and the method of selection needs to be random. That's basic statistical methods. I think that MDL judges need to partner with statisticians and have a serious conversation about what bellwether trials are trying to achieve and how best to do this. Judges have a lot of discretion and they can use it wisely to lead to fair and equitable results for everyone. There are ways to do better, we just need to find them.
Thursday, January 21, 2016
The first GM Ignition Switch Bellwether trial is going forward now. Below are some links to media coverage:
Wednesday, January 20, 2016
Monday, January 18, 2016
Professor Erin Sheley (Calgary Law) and Theodore Frank (Competitive Enterprise Institute) have posted to SSRN their article, Prospective Injunctive Relief and Class Action Settlements, Harv. J. L. & Pub. Pol'y (forthcoming). Here is the abstract:
Despite much controversy and criticism, the class action is alive and well. In particular, the injunctive remedy, requiring the defendant to change some aspect of its business practice, has become a common feature of class action settlements. This article explores a taxonomically distinct remedial category of injunction that has, as of yet, not generally been considered by courts and scholars as such: the prospective injunctive remedy. We demonstrate how the prospective injunctive remedy operates and argue that, in light of the special policy and legal problems it creates, courts should observe a presumption against approving settlements that contain provisions for prospective injunctive relief. In Part I we show how the parties to a class action have, in general, no incentive to benefit either absent class members or society at large and therefore require courts to police them to ensure justice. In Part II we describe the public law underpinnings of prospective injunctive relief and provide three case studies of consumer class actions that demonstrate how and why courts fail to accurately police this relief in the private law context. We compare the approved relief in these cases to the regulatory regimes they disrupt to argue that courts in this way allow class action litigation to produce bad public policy. In Part III we explore the ways in which these prospective remedies likewise produce bad law: namely, through the inappropriate creation of regulatory preemption and the potential violations of attorney-client fiduciary duty, the adequacy requirement of Rule 23(a)(4), and constitutional standing requirements. In Part IV we consider counterarguments and in Part V we conclude.