Sunday, January 23, 2011
Interesting article from the New York Times on services that offer loans to litigants and the high interest rates typically charged: Lawsuit Loans Add New Risk for the Injured, by Binyamin Appelbaum. The article discusses the movement to subject such loans, and their high interest rates, to regulation. Of course, if the interest rates able to be charged are limited by state law, the effect may be to destroy the lawsuit loan market, because the default risk for such loans may be high enough that only a high-interest rate lending model may be profitable over the long term. Losing such loans would be unfortunate, because litigants with meritorious cases may need access to funds while the the justice system processes the case. Instead of regulatory capping of interest rates, why not instead rely on clear disclosure of rates in contracts, and market forces of vying lenders competing over interest rates?
Thursday, January 20, 2011
Lester Brickman (Cardozo) has posted to SSRN his article, Unmasking the Powerful Force that Has Mis-Shaped the American Civil Justice System, which appears in the Global Competition Law Review, Vol. 4, No. 3, 2010. Here's the abstract:
The contingency fee, once largely a uniquely American institution, is beginning to gain serious consideration in Europe and elsewhere. It is essential that those considering adopting some form of the contingency fee to finance civil litigation have a proper understanding of the impact of the contingency fee on the U.S. civil justice system. That understanding, however, appears woefully lacking. In Lawyer Barons: What Their Contingency Fees Really Cost America (Cambridge University Press 2011), I discuss the underappreciated and indeed, often unrealized costs of reliance on contingency fees to finance access to the tort system. In this essay, I reprise some of the impacts policymakers should take into account in determining whether the anticipated benefits of the American contingency fee system outweigh the considerable costs.
Wednesday, January 19, 2011
Monday, January 17, 2011
I hope are readers are having a good MLK day and that your employer gave you the day off in observance!
Benyamin Applebaum of the NY Times has an article on litigation funding in torts - the first story there is of a Vioxx plaintiff. See the article here.
For a very insightful take on litigation funding, in particular arguing that it is a good way to disgorge the appropriate amount from the defendant rather than permitting the defendant to get a discount because of plaintiffs economic situation, see Steven Gillers post at the Legal Ethics forum here.
Readers interested in this topic might also want to take a look at Maya Steinitz, Whose Claim is this Anyway? Third Part Litigation Funding, available on SSRN.
Wednesday, January 12, 2011
Congratulations to our co-blogger Alexandra Lahav of the University of Connecticut School of Law for being awarded the Fred C. Zacharias Memorial Prize for Scholarship in Professional Responsibility for her article, Portraits of Resistance: Lawyer Responses to Unjust Proceedings, which is forthcoming in the UCLA Law Review! The award was announced at the recent meeting of the professional responsibility section at the AALS conference.
Tuesday, January 11, 2011
On Saturday, February, 26, 2011, the Southwestern Journal of International Law is hosting a symposium entitled, 2021: International Law Ten Years From Now, at Southwestern Law School in Los Angeles. The symposium is being presented in conjunction with International Law Weekend-West of the International Law Association (American Branch). Panels will address topics including international litigation, international human rights, international environmental law/climate change, international dispute resolution law, and international legal profession. The keynote speaker will be Michael Traynor, President Emeritus and Council Chair of the American Law Institute, and Co-Chair of the ABA Commission on Ethics 20/20. Here's the brochure.
Wednesday, December 1, 2010
4th International Conference on the Globalization of Collective Litigation at Florida International University College of Law
The 4th International Conference on the Globalization of Collective Litigation will take place on Friday, December 10, 2010 at Florida International University College of Law in Miami.
This conference, co-organized by professors Manuel A. Gomez (Florida International University College of Law ) and Deborah R. Hensler (Stanford Law School) is the fourth in the series of international conferences on the global spread of collective litigation begun in 2007 at Oxford University. It will bring together academicians, policy analysts and legal practitioners to systematically review the status of collective litigation around the world with special focus on Latin America, a region signaled by a growing interest in protecting collective rights, the passage of legislation that provides for class actions and similar mechanisms, and the increased participation of domestic courts in deciding cases that involve large-scale accidents, environmental harms, exposure to toxic materials, defective products and financial injuries. The conference will address issues of critical importance including financing, coordination and enforcement. It will also serve as a vehicle to exchange information about how the collective litigation rules work in practice, who is availing themselves of these procedures and for what ends, and what the economic and social consequences are for individuals, business, and the public interest.
The full agenda and registration information are available here.
Although I won't be speaking at the conference, I'm planning on attending the conference, as I'm currently researching the Toyota Unintended Acceleration MDL in connection with a Law and Society Association international research collaborative (IRC) on the Globalization of Class Actions and Other Forms of Collective Litigation. Several of the conference moderators and speakers are also active in the IRC, including IRC participants Deborah Hensler (Stanford), Christopher Hodges (Oxford), Ianika Tzankova (Tilburg U., Netherlands), and Manuel Gomez (Florida International).
Monday, November 22, 2010
Moira Herbst of Reuters has a short, but thoughtful piece analyzing the issues at play for a private claims administrator running a quasi-public claims fund. It's easy to sympathize in the abstract with Ken Feinberg's difficult situation in exploring what's appropriate in his unprecedented role; but with his firm being compensated at an average of $1,000 per hour (according to Herbst's analysis), he's not ultimately likely to get much sympathy.
Wednesday, July 28, 2010
The Associated Press reports that Ken Feinberg announced on Tuesday that he will disclose BP's compensation to him for administering the $20 billion BP oil-spill claims fund, after he had previously stated such information would be "confidential" and "between [him] and BP." Feinberg now concedes the "perception of a conflict." Feinberg also said the he might request that than an outsider "with great credibility" set his salary. (H/t to Ted Frank of the Center for Class Action Fairness for apprising me of this development.)
On Sunday, July 18, I posted about the possible conflict of interest for Feinberg, arguing that he should disclose his compensation and seek a federal judge to assess his billable hours and rate, as is routinely done in class-action fee requests by class counsel. My post triggered a short article by Forbes and a post on Legal Ethics forum. I doubt my post had anything specifically to do with Feinberg's decisionmaking, but I'm happy that he has decided both to disclose his compensation and to seek a reputable third party to oversee his compensation, rather than BP (presumably, BP will agree to whatever the third-party determines). As I mentioned in my earlier post, I never meant to call into question Feinberg's integrity; rather, I urged this path as a way to help the success of the fund by removing any possible conflict of interest, and I expect that both Feinberg and BP will be happy to put this issue behind them.
UPDATE -- A Forbes article today discusses my prior blog post and Feinberg's recent decision to disclose his compensation.
Sunday, July 18, 2010
Today, I saw on Bloomberg Rewind a video of several questions to Kenneth Feinberg, administrator of the $20 billion BP oil-leak compensation fund. (Video of the interview apparently not yet available on the internet.) At one point, the reporter asked Feinberg how he would be paid, and Feinberg responded that BP would pay because neither the victims nor taxpayers should have to pay him. Fair enough. But when the reporter asked Feinberg whether his compensation would be disclosed, Feinberg said that his compensation "would be confidential."
The issue of Feinberg's compensation is interesting. Feinberg worked pro bono on the 9/11 victim compensation fund -- a remarkable and laudable commitment given the substantial time involved. I'm not suggesting that Feinberg should go on doing such monumental administrative tasks pro bono -- but is it appropriate for him to keep his compensation from BP confidential?
As with the 9/11 fund, Feinberg will likely have tremendous discretion in fashioning the administrative claim mechanism for the BP compensation fund. His exercise of discretion could possibly result in BP saving substantial funds, especially if any remainder of the $20 billion fund is to be returned to BP. Accordingly, a fair process at a minimum requires that both the amount of his compensation, and the method of compensation be disclosed publicly. If BP has the ability to review and cut his billable hours or his billable-hour rate, for example, Feinberg might have a conflict of interest that could lead him unconsciously to favor BP in structuring the administrative fund or making awards. As a result, in addition to public disclosure, an even better solution might be for BP and Feinberg also to agree to have a federal judge review Feinberg's billable hours, billable-hour rate, and total fee, much as is already typically done by judges reviewing class counsel fee awards in class-action settlements under Rule 23. See Fed. R. Civ. P. 23(h) ("In a certified class action, the court may award reasonable attorney's fees and nontaxable costs that are authorized by law or by the parties' agreement.").
I of course do not mean in any way to call into question Feinberg's integrity; he is widely viewed as the nation's leading claims administrator. But even federal judges have their compensation set publicly and in a manner that could not be said to incentivize them to favor one litigant over another. We would never approve of a judge being paid confidentially by only one litigant -- and we shouldn't here either, especially when the claims structure could be seen as quasi-public in light of the President's central involvement and comments that "[i]n order to ensure that all legitimate claims are paid out in a fair and timely manner, the account must and will be administered by an independent, third party." Ultimately, removing the issue of Feinberg's fees from any controversy would aid Feinberg in making the BP fund a success.
UPDATE -- Professor Andrew Perlman (Suffolk) comments at Legal Ethics Forum on my post above.
UPDATE #2 -- Forbes' On The Docket blog discusses my post above: Feinberg's BP Pay: Should It Be Disclosed?, by Daniel Fisher.
Monday, May 17, 2010
Recent crises stemming from BP's oil spill and Toyota's acceleration problems have brought a swarm of media coverage, congressional hearings, regulatory agency activity, corporate news conferences, and lawsuits. Indeed, theories of liability may stem not only from the initial traumatic incident or incidents, but from the corporation's putative mishandling of the crisis once it unfolds. On the corporate side, what's called for is thoughtful and coherent crisis management that moves the corporation through the crisis in a way that resonates with corporate core values, thereby maintaining the value of the ongoing enterprise, and that is mindful of impending theories of liability.
Despite the great need for such a coherent approach to mass tort crisis management, what's remarkable is the apparent paucity of attention given the subject by legal scholars. That may be because crisis management involves public relations and communications, as well as management and leadership; hence crisis management has been the focus of public relations consultants and some professors in communications schools and business schools. But at the heart of corporate crises are frequently the law and liability, so law professors should not be absent. Lawyers and law firms already occasionally promote their ability to handle an emerging corporate crisis by quickly assembling a team of lawyers from a broad array of areas -- see, e.g., Skadden's Crisis Management; and lawyer practitioners have delivered various continuing education talks and papers on crisis management, as well as an interesting short symposium paper by Harvey L. Pitt and Karl A. Groskaufmanis, When Bad Things Happen to Good Companies: A Crisis Management Primer, 15 Cardozo L. Rev. 951 (1994). But while practitioners bring on-the-ground expertise, they may lack the theoretical depth and interdisciplinary zeal of law professors, and practitioners present a conflict-of-interest risk in preferring, for example, fee-heavy litigation over other methods of mass tort crisis management and resolution. A full academic account of mass tort crisis management would entail an awareness and integration of various legal areas -- tort, procedure, litigation, ethics, regulatory action, congressional investigations and activity (including possible compensation funds), and pertinent constitutional issues -- with public relations and management. I look forward to turning my attention increasingly to that task.
Where do you look for corporate crisis management expertise in mass torts? Books, articles, law firms, or consultants? Does your law firm market itself as offering corporate crisis management; if so, what's your approach? If you work at a consulting group that does crisis management, do you have in-house lawyers that assist you or do you work with the corporation's outside counsel? Feel free to post a resource or comment.
May 17, 2010 in Aggregate Litigation Procedures, Current Affairs, Environmental Torts, Ethics, Lawyers, Mass Disasters, Mass Tort Scholarship, Procedure, Regulation, Vehicles | Permalink | Comments (0) | TrackBack (0)
Thursday, April 29, 2010
Tony Sebok (Cardozo) has posted his piece "The Inauthentic Claim" to SSRN. This is a very important paper arguing against the usual rule limiting types of litigation financing. The implications of the thesis for mass torts is significant. If people could sell lawsuits the landscape of aggregate litigation would change in significant ways. Here is the abstract:
This Article argues that third parties should be able to invest in lawsuits to a much greater degree than is currently permitted in most jurisdictions in the United States. The laws of assignment and maintenance limit the freedom of litigants to sell all or part of their lawsuits to strangers. I argue in the Article that the foundation of both doctrines is based on something I call the theory of “the inauthentic claim.”
The theory of the inauthentic claim asserts that there is a quality, separate and in addition to legal validity, which confers “authenticity” to a lawsuit. It does not presuppose that “inauthentic” lawsuits are more likely to be spurious, fraudulent, or frivolous than “authentic” lawsuits. It holds, instead, that the mere fact that a third party involved him or herself in the suit for the wrong reasons (either by taking an assignment in the suit or supporting the suit), is proof that the suit is against public policy.
This Article examines two arguments that might be used to defend the theory of the inauthentic claim, one from history and one from jurisprudence. I conclude that neither argument is persuasive. I conclude the Article by sketching a research agenda based on empirical evidence that would help policymakers and judges choose the socially optimal set of rules for third party investment in litigation.
(h/t Chris Robinette at Torts Prof Blog)
Monday, March 1, 2010
Benjamin Zipursky and I have completed a paper entitled "Consent versus Closure." Ben is one of the nation's leading experts on torts and legal theory. He and I have long shared an interest in mass tort litigation, and we share certain concerns about the direction mass tort settlements seem to be heading. In particular, we were both troubled by the mandatory withdrawal provision of the Vioxx settlement, and we both opposed the American Law Institute's proposal to permit advance consent to aggregate settlements. More generally, we see the Vioxx deal and the ALI proposal as part of a troubling broader trend, in both practice and scholarship, toward embracing the pursuit of absolute closure by empowering plaintiffs' lawyers to deliver their clients' claims in settlement. Here's the abstract:
Claimants, defendants, courts, and counsel are understandably frustrated by the difficulty of resolving mass tort cases. Defendants demand closure, but class certification has proved elusive and non-class settlements require individual consent. Lawyers and scholars have been drawn to strategies that solve the problem by empowering plaintiffs’ counsel to negotiate package deals that effectively sidestep individual consent. In the massive Vioxx settlement, the parties achieved closure by including terms that made it unrealistic for any claimant to decline. The American Law Institute’s Principles of the Law of Aggregate Litigation offers another path to closure: it proposes to permit clients to consent in advance to be bound by a settlement with a supermajority vote. This article argues that, despite their appeal, both of these strategies must be rejected. Lawyer empowerment strategies render settlements illegitimate when they rely on inauthentic consent or place lawyers in the untenable position of allocating funds among bound clients. Consent, not closure, is the touchstone of legitimacy in mass tort settlements.
"Consent versus Closure" critiques mandatory withdrawal, looking at specific legal ethics rules and doctrines as well as the more basic problem of inauthentic consent. It critiques the ALI's advance consent proposal based not only on the problem of inauthentic consent, but also the problem of nonconsentable conflicts, exploring what it means for claimants to own their claims and for lawyers to represent clients in pursuing those claims.
This article picks up on the theme of "The Trouble with All-or-Nothing Settlements," in which I used six case studies to show various problems caused by demands for fully comprehensive settlements outside of class actions and bankruptcy.
Sunday, February 14, 2010
The Wall Street Journal's Law Blog reported Friday that Judge Manuel Real told Bar/Bri antitrust litigators that they could recover around $1.26 million in costs, but not the $12 million in attorneys fees. Judge Real cited concerns about conflicts of interest and ethical concerns in forfeiting McGuireWoods LLP's fees. The full story is available here.
Tuesday, February 2, 2010
I recently posted a response to Jay Tidmarsh's article, Rethinking Adequacy of Representation, 87 Texas Law Review 1137 (2009) on SSRN. Although I ultimately find his recommendation troubling for the reasons I highlight below, I highly recommend his article. Here's his abstract:
This article by Jay Tidmarsh questions the usefulness of traditional tests for adequacy of representation in class action proceedings. When determining whether to certify a class, courts have sought to avoid endorsing those classes marred by conflicting interests or the possibility of collusion. Yet, Tidmarsh argues, such conflicts of interest are an intrinsic characteristic of class actions, stemming from the very policy rationales that have prompted the judiciary to allow litigation by classes.
As a result, the current doctrine of adequate representation has left the courts without a bright-line rule; instead, the courts' inquiries into adequacy of representation must focus primarily on the degree of conflicts, leading to confusion and uncertainty--indeed, were prevailing case law strictly applied, virtually no class action could survive the test for adequacy. Tidmarsh therefore proposes an alternative, bright-line rule: "Representation by class representatives and counsel is adequate if, and only if, the representation makes class members no worse off than they would have been if they had engaged in individual litigation." This rule, he believes, would afford far better protection to the interests of individual class members while simultaneously providing the judiciary with a more intelligible test that could be applied with far more consistency.
And here's the abstract from my response, titled Procedural Adequacy:
Wednesday, January 13, 2010
The folks over at Drug and Device Law (now under partially new management that apparently is more fond of literary allusions than the old) have an interesting post on misjoinder, for those of you interested in the real nitty gritty of procedure. The bottom line: they are worried about plaintiffs who jigger their cases through joinder to avoid the federal courts' jurisdiction. For those of you not into the technical aspects of procedure in complex litigation, there are lots of federalism issues raised by this as well.
Usually when academics and policymakers talk about class action lawyers selling out the interests of the class in favor of increasing their fees there isn't any direct proof that this is what occurred, and its always hard to second guess the outcome of negotiations (not to mention hindsight bias). But here is a case that is quite obvious, the kind that ends up making things worse for upstanding plaintiffs lawyers.
A class action lawyer settled a class action on behalf of 7 plaintiffs, paying the class reps $7 million and himself $2 million, rather than arranging payment for the entire class. The settlement was overturned.
Now whether this is an efficient approach from an economic perspective I leave to your consideration. But in any event its not currently permitted. For an argument that it is more efficient to pay the lawyers than try to pay the class from a deterrence perspective, see Myriam Gilles & Gary Friedman, Exploding the Class Action Agency Costs Myth - the link is to SSRN.
The Florida Bar has recommended discipline. You can see the article here at the ABA Law Journal.
Monday, November 16, 2009
Dan Levine, Pair of Plaintiffs Lawyers May Face Different Fates in 9th Circuit Disciplinary Action, The Recorder (discussing disciplinary action in Nicaraguan pesticides case).
Francis E. McGovern (Duke), The Second Generation of Dispute System Design: Reoccurring Problems and Potential Solutions, Ohio St. J. Disp. Resol. (2008) (posted on SSRN).
William H. Simon (Stanford & Columbia), Moral Freaks: Lawyers’ Ethics in Academic Perspective, Geo. J. Lgl. Ethics (forthcoming) (posted on SSRN).
Keith N. Hylton (Boston Univ.) & Haizhen Lin (Indiana), Trial Selection Theory and Evidence: A Review (posted on SSRN).
Neil Vidmar (Duke) & Mirya R. Holman (Duke), The Frequency, Predictability and Proportionality of Punitive Damages in State Courts (posted to SSRN).
Patrick M. Connors (Albany), Which Party Pays the Costs of Document Disclosure?, Pace L. Rev. (2009) (posted to SSRN).
Wednesday, November 4, 2009
My new paper, The Trouble with All-or-Nothing Settlements, is now available on SSRN. I presented it at last week's symposium in Kansas on "Aggregate Justice: Perspectives Ten Years After Amchem and Ortiz." The theme of the conference got me thinking about the shift in mass dispute resolution. The failed settlements in Amchem and Ortiz were driven by defendants' insistence on peace, and defendants today often demand similar comprehensiveness. Much of the action, however, has shifted from settlement class actions to non-class aggregate settlements. Rather than peace through Rule 23, defendants try to obtain peace by negotiating settlements with all-or-nothing clauses, mandatory withdrawal provisions, or other terms to ensure comprehensiveness. Too often, however, such all-or-nothing settlements lead to ethical problems. This paper is my attempt to unpack the various problems engendered by such deals. Here's the abstract:
When defendants settle litigation involving multiple plaintiffs, they often insist that they will settle only if they obtain releases from all or nearly all of the plaintiffs in the group. Judges, lawyers, and academics largely accept the drive for comprehensive settlements as a given, and many embrace such settlements as a positive goal. All-or-nothing settlements, however, create uncommon pressures and opportunities for abuse. Exploring a number of recent mass settlements that have led to disciplinary proceedings, civil litigation, and criminal prosecutions, this article shows the pressures and opportunities that arise out of defendants' insistence on bringing all claimants into a deal.
The article describes seven types of ethical problems created by demands for fully inclusive settlements. First, all-or-nothing settlements create client-client and lawyer-client conflicts of interest. Second, such settlements exacerbate problems concerning the allocation of settlement funds, including incentives to misallocate. Third, they create a risk of strategic hold-outs as savvy clients may attempt to extort additional money by withholding consent. Fourth, they create an incentive for lawyers to keep settlement money in reserve as a slush fund to ensure full participation, leading to problems of misallocation and client deception. Fifth, they generate loyalty problems by pressuring lawyers to withdraw from representing non-settling clients. Sixth, they create special problems concerning clients’ informed consent to aggregate settlements. And seventh, they introduce a risk of collusion as the interest of plaintiffs’ counsel aligns with the defendant’s interest in getting every plaintiff to sign on to the deal. Although all-or-nothing settlements provide peace for defendants and value for claimants, the troubles they engender suggest that the current love affair with comprehensive settlements - evident in academic writings, judicial pronouncements, and defendant demands - should be tempered by a realistic appreciation of the ethical downside.
I'd be very interested in any comments readers may have. If you have thoughts or suggestions either about the overall analysis or about any of the specific settlements discussed in the paper, please feel free to e-mail me directly or to comment on the blog.
Wednesday, August 19, 2009