Judging aggregate settlement.

Author:Jaros, David M.


While courts historically have taken a hands-off approach to settlement, judges across the legal spectrum have begun to intervene actively in "aggregate settlements"--repeated settlements between the same parties or institutions that resolve large groups of claims in a lockstep manner. In large-scale litigation, for example, courts have invented, without express authority, new "quasi-class action " doctrines to review the adequacy of massive settlements brokered by similar groups of attorneys. In recent and prominent agency settlements, including ones involving the SEC and EPA, courts have scrutinized the underlying merits to ensure settlements adequately reflect the interests of victims and the public at large. Even in criminal law, which has lagged behind other legal systems in acknowledging the primacy of negotiated outcomes, judges have taken additional steps to review iterant settlement decisions routinely made by criminal defense attorneys and prosecutors.

Increasingly, courts intervene in settlements out of a fear commonly associated with class action negotiations--that the "aggregate " nature of the settlement process undermines the courts' ability to promote legitimacy, loyalty, accuracy and the development of substantive law. Unfortunately, when courts step in to review the substance of settlements on their own, they may frustrate the parties' interests, upset the separation of powers, or stretch the limits of their ability. The phenomenon of aggregate settlement thus challenges the judiciary's duty to preserve the integrity of the civil, administrative, and criminal justice systems.

This Article maps the new and critical role that courts must play in policing aggregate settlements. We argue that judicial review should exist to alert and press other institutions--private associations of attorneys, government lawyers, and the coordinate branches of government--to reform bureaucratic approaches to settling cases. Such review would not mean interfering with the final outcome of any given settlement. Rather, judicial review would instead mean demanding more information about the parties ' competing interests in settlement, more participation by outside stakeholders, and more reasoned explanations for the trade-offs made by counsel on behalf of similarly situated parties. In so doing, courts can provide an important failsafe that helps protect the procedural, substantive, and rule-of-law values threatened by aggregate settlements.

Table of Contents Introduction I. The Inevitability of Aggregate Settlement in Civil, Criminal, and Administrative Law A. Aggregation in Civil, Administrative and Criminal Law 1. Aggregate Settlements in Civil Law 2. Aggregate Settlements in Administrative Law 3. Aggregate Settlements in Criminal Law B. The Pitfalls of Aggregate Settlement Civil, Administrative and Criminal Law II. Judicial Review of Aggregate Settlements A. Ad Hoc Judicial Responses to Aggregate Settlement Practice 1. Judicial Review of Aggregate Civil Settlements 2. Judicial Review of Aggregate Agency Settlements 3. Judicial Review of Aggregate Criminal Settlements B. Challenges to Judicial Oversight of Aggregated Settlement III. Towards a New Model of Judicial Review of Aggregate Settlement A. Judicial Review to Prod Aggregate Settlement Reform B. Judicial Review of Settlement Practices in Action 1. Complex Civil Litigation 2. Administrative Law 3. Criminal Law Conclusion Introduction

Judges do more than "say what the law is." (1) They also preserve the integrity of our justice system by ensuring that it produces fair outcomes. (2) When it comes to settlement, however, judges have historically taken a more hands-off approach. Judges ordinarily will not set aside a privately reached settlement as long as it is a product of a contested and arm's-length negotiation. (3)

Recently, however, some judges in civil, administrative, and even criminal law have begun to question the propriety of "aggregate settlements"--repeated settlements between the same parties or institutions that resolve large groups of claims in a lockstep manner. Consider the following examples:

* Judge Alvin Hellerstein rejected a multi-million-dollar settlement to resolve over 10,000 Ground Zero workers' claims, arguing: "Most settlements are private; a plaintiff and defendant come together, shake hands, and it's done with ... [B]asically it's the parties that decide ... This is different ... This is a case that's dominated my docket, and because of that, I have the power of review." (4)

* In a series of opinions reviewing the SEC's handling of more than 200 consent decrees, Judge Jed Rakoff rejected several proposed corporate settlements with the SEC. (5) In one case, the Court said the deal showed a "cynical relationship between the parties: the S.E.C. gets to claim that it is exposing wrongdoing ... [, while] the Bank's management gets to claim that they have been coerced into an onerous settlement by overzealous regulators." (6)

* Judge William Young rejected several criminal plea deals, explaining that "however agreeable [the plea is] to the executive--once aggregated together with similar decisions across the criminal justice system--[it] results in the denigration of the criminal law." (7)

At the time, all of these cases attracted attention for what were perceived as renegade acts of maverick judging. (8) Each case represents, however, part of a broader, unexplored trend. Across the civil, administrative and criminal divide, courts have intervened out of a fear that the "aggregate" nature of the settlement process undermined the ability of our public dispute resolution system to promote legitimacy, loyalty, accuracy, and the development of substantive law. At the same time, judicial intervention into the substance of the settlement risked contravening the interests of the parties, upsetting the separation of powers, and stretching the limits of judicial competence.

An increase in judicial supervision of aggregate settlements would have wide-ranging repercussions across the law. Many informal procedures aggregate cases in civil, administrative, and criminal law. In personal injury, insurance, and multidistrict litigation, for example, the same plaintiff and defense lawyers rely on routine settlement practices in individual cases--sometimes negotiating sweeping settlement matrices to resolve thousands of claims brought by similarly situated victims. (9) In criminal law, a categorical approach to plea bargains has led to high-volume and cookie-cutter settlement systems, with little regard for criminal defendants' culpability and individual circumstances. (10) In multimillion-dollar administrative settlements, federal agencies increasingly rely on centralized enforcement divisions, a small number of private claim facilities, and boilerplate settlements to set policy and provide compensation without traditional procedural safeguards to make rules or decide cases transparently." Even as we promise people the right to their own lawyer and their own "day in court," (12) outcomes in civil, criminal, and administrative disputes just as often turn on what happens in massive and opaque settlement bureaucracies--unseen organizations of lawyers, businesses and claim facilities--which quietly sweep together and resolve large groups of cases, swiftly and categorically. (13)

In this Article, we set out to show what aggregated settlement means for our public system of adjudication and specifically for the obligations of the judges who shepherd cases through that system. Specifically, we think a legal system dependent on informally aggregated settlement presents challenges to judges across many areas of civil, criminal, and administrative law. All three systems, to varying degrees, rely on courts to resolve disputes in order to protect individual rights and promote the public interest. Settlements have long been a part of that process-conserving public resources, while offering flexible alternative resolutions for the parties. (14) But, in each system, courts have traditionally assumed that settlements resulted from contested, individualized, and arm's-length negotiations requiring little judicial oversight of either the process or the result. (15)

The reality of informal aggregate-settlement practice, however, upends the traditional view that settlements are simply creatures of contract that reflect parties' individual choices made in the "shadow of the law." (16) Settlements are instead mass produced by private bureaucratic systems, resolving disputes according to categorical rules, local norms, and "going rates" divorced from the legal merits of the underlying claims. (17) The attractions of aggregate settlement are manifold. Attorneys--who hold a legal monopoly over access to the courts--are naturally encouraged to broker ready-made deals based on their repeated interactions with the small coterie of judges, administrators, and decisionmakers who handle their clients' disputes. Mass claim handling offers predictability in a world of open-ended legal standards, not to mention a survival mechanism to fight off crushing caseloads. Perhaps it should be little surprise that lawyers have relied on precursors to modern aggregate settlement practice since as long ago as the 1880s, when the American legal profession first came to maturity. (18)

In all this time, however, we have continued to lack any satisfying theoretical foundation for judges to supervise aggregate settlement. (19) The current judicial response to the rise of bureaucratic settlement has either been to passively accept such settlements as indistinguishable from individualized settlements or to intervene in an ad hoc fashion to try to assure "adequate" representation. In large-scale multidistrict litigation, for example, courts have created new "quasi-class action" doctrines to review the adequacy of massive settlements without express authority to do so. (20)...

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