Back to the futures: privatizing future claims resolution.

• Author: Mullenix, Linda S.
• Position: Response to article by Geoffrey C. Hazard in this issue, p. 1901 - Mass Torts Symposium

INTRODUCTION

Professor Geoffrey Hazard has accurately captured the "Futures Problem." Not only has he succinctly stated the problem, but he also has hit the perfect pitch of pessimism entailed in this subject. It is abundantly clear that neither the judicial system nor the legislature will ever solve the problems of mass tort litigation until we find a way to resolve the futures problem.(1)

Professor Hazard has usefully distilled several conclusions from his knowledge of mass tort litigation, settlements, legislation, and rulemaking efforts. First, not all mass tort cases are alike.(2) Second, only latent-injury mass torts involve the futures problem.(3) Third, medical monitoring is only a partial, and not especially efficacious, means for dealing with future claimants.(4) Fourth, substantive, procedural, and technical difficulties limit the effectiveness of proposed bankruptcy solutions.(5) Fifth, Congress is an immovable object paralyzed by interest-group gridlock and is therefore incapable of legislating to resolve the futures problem.(6) Sixth, in light of the Supreme Court's 1999 Ortiz decision,(7) the limited fund concept is moribund for resolving future claims.(8) Seventh, class actions may compromise Seventh Amendment rights.(9) And last, the class action is dead.(10)

If this were not grim enough, the country's senior-ranking and highly eminent proceduralist ends his paper with a four-paragraph substantive solution to the futures problem.(11) Clearly, we are in trouble.

I join Professor Hazard in his dour pessimism. He correctly and poignantly describes the consequences for asbestos claimants of the Supreme Court's repudiation of the Amchem(12) and Ortiz settlements. Although the Court's rejection of these settlements vindicates due process, it also delays, denies, or devalues justice for thousands of genuinely injured claimants, a practical consequence that largely has been overlooked in the commentary on these decisions.(13)

I part company with Professor Hazard's gloom, however, in two respects. Although a consequence of the Amchem and Ortiz decisions may be a decline in the volume of class litigation(14)--a proposition I doubt(15)--class action litigation is far from dead.

As I have written elsewhere, I do not agree that the Ortiz decision effectively killed off the limited-fund class as a means for resolving mass torts or future claims.(16) I do not read Ortiz as flatly prohibiting limited fund class actions or certification of limited fund classes in mass tort litigation. In the future, attorneys will parse the Ortiz decision carefully, making every attempt to "prove up" the existence of the limited fund within the parameters Justice Souter believes the rule requires.

Nor do I read Ortiz so narrowly as to repudiate mandatory injunctive classes, a sweeping proposition so untenable that it seems incredible.(17) If Professor Hazard is correct, then what are we to make of the entire realm of public law litigation, which is built on the mandatory structural injunction?(18)

I do agree that the originalist view on Rule 23 expressed by Justice Souter will have a limiting, if not crippling, effect on class actions. We are entering a new era of class litigation that will be profoundly informed and shaped by the Amchem and Ortiz decisions. We cannot predict, however, the ultimate impact of these opinions based only on the current enthusiasm for class action litigation.

1. THE FUTURES PROBLEM AND THE COURTS

   The futures problem is very much with us.(19) As Professor Hazard accurately recognizes, the judicial system deals fairly well, if imperfectly, in resolving mass accident cases of the airplane crash/train-wreck variety.(20) Latent-injury mass torts, however, are more difficult to resolve because defendants and their insurers are unwilling to negotiate any deal that does not include future claims. Resolving future claims, then, is the ticket to the settlement table and what the defense lawyers call "global peace."(21)

   As we have learned, plaintiffs' lawyers are quite willing to punch the futures ticket and negotiate with defendants and their insurers to resolve future claims in latent injury mass torts.(22) Hence, plaintiff and defense lawyers, aided and abetted by adventuresome judges,(23) have creatively exploited various techniques to solve the futures problem.

   This endeavor has leaned heavily on metaphor, simile, and analogy. Thus, courts have found a future-claims fund to be similar to a res,(24) a limited fund,(25) an action in interpleader,(26) or a bankruptcy.(27) The signature theme of Justice Souter's Ortiz opinion is the direction to stop all this inventiveness.(28) As a result, courts have emphatically said that plaintiffs with current claims cannot negotiate for future claimants, or do so only at the peril of being charged with collusion, conflict of interest, inadequacy, and self-dealing.(29)

2. PROFESSOR HAZARD'S PROPOSAL TO DEAL WITH THE FUTURES PROBLEM

   Where does this leave us and what is to be done?(30)

   To deal with the futures problem, Professor Hazard would jettison all past attempts at inventiveness under Rule 23 or the Bankruptcy Code. Instead he proposes to federalize products liability law, underwritten by insurance, with relief administered by state workers' compensation systems.(31) This proposal combines federalization and the modern administrative state with a dab of private enterprise for good measure. This proposal also suggests that, notwithstanding our President's pronouncements, the era of big government is perhaps not over yet.

   With all due respect, and understanding very well the complexity of the futures problem, Professor Hazard's proposal nonetheless embodies another Rube-Goldberg-like contraption that cobbles together various schemes that individually make sense. It kind of sounds good. He has, of course, neglected to tell us why this proposal would appeal to Congress, as opposed to all other failed attempts to federalize products liability law.(32)

   Because I agree with Professor Hazard that prior attempts at dealing with the futures problems have been ineffectual--if not illegal--I propose an alternative idea to privatize effectively the resolution of future claims.

3. PRIVATIZING FUTURE CLAIMS

   1. Framing the Practical Problems

      The idea to privatize the resolution of future claims is derived from a few propositions that frame the practical problems involved in these claims. These include the necessities to: (1) resolve future claims as a part of any latent injury mass tort settlement; (2) sever future claims from current claims resolution; (3) estimate future claims accurately; and (4) create an independent entity to process future claims. As I will discuss below,(33) these practical problems can be addressed by utilizing current procedural mechanisms coupled with economic incentives.

      First, defendants will not settle a latent injury mass tort litigation unless the deal includes some disposition of future claims.(34) If latent injury mass torts are to be settled or resolved under judicial auspices--or through legislative initiative, for that matter--the resolution must include some disposition of future claims.

      Second, the resolution of future claims must be accomplished separately from the resolution of current or "inventory" claims. Hence, plaintiffs' attorneys cannot be involved in simultaneous negotiations for the resolution of current and future claims. If a latent injury mass tort involves future claims, that fact must be identified early in the litigation and the future claims should be severed from the litigation to avoid any possibility of conflicts of interest, sell-outs, or taint of collusion.

      Third, some entity other than the parties, their attorneys, and their experts should be responsible for determining the number of future claimants. If we have learned anything from three decades of mass tort litigation, it is that the actors involved in latent injury mass torts have proven to be notoriously bad at estimating the universe of future claimants.(35)

      The miscalculation of the numbers of future claimants has a cascade...