Unsettling Efficiency: When Non-Class Aggregation of Mass Torts Creates Second-Class Settlements

AuthorL. Elizabeth Chamblee
PositionAttorney, Holland & Knight LLP; Florida State University, J.D., 2004
Pages158-253

Attorney, Holland & Knight LLP; Florida State University, J.D., 2004; Vanderbilt Univ., B.A., English, 2000. I am especially indebted to Dean Paul LeBel at the University of North Dakota School of Law who shared not only a wealth of information about tort litigation but also his time, patience, and insight on earlier versions of this Article. Many thanks also to the editors of the Louisiana Law Review for their hard work throughout the editing process.

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I Introduction

The potential for attorneys to collude in reaching a settlement agreement arises in any large-scale aggregation of mass torts. In the 1990s, attorneys settled seventy-four percent of the mass tort cases consolidated for transfer by the Judicial Panel on Multidistrict Litigation.1 Even though most mass tort litigation settles, the judicialPage 159 system ensures the fairness and integrity of settlements only in the bankruptcy and class action contexts. Consequently, the fairness of the settlement can vary depending on how the judicial system aggregates the claims.2 Only thirty-nine percent of aggregated claims resulted in class action settlements.3 Two percent received bankruptcy protections.4 Approximately forty percent of the mass tort settlements settled outside the scope of judicial review and received no procedural assurances of fairness.5

A traditional understanding of mass tort litigation views all aggregation as class action. As this view holds, class actions deserve special procedural safeguards because they include absent class members.6 Other forms of litigation allocate autonomy to the individual to make decisions about the conduct of litigation, the course of settlement negotiations, and other decisions conventionally in the scope of the lawyer-client relationship.7 In non-class litigation, the conventional view assumes that clients protect their own interests by monitoring attorney conduct, choosing when and how to settle, and determining whether to proceed to trial.8 In class actions, class counsel has a duty to protect the interests of the class as a whole, and counsel's decisions bind all class claimants.9 The individual in a class action has little authority over the conduct of the action, yet remains bound by the ultimate decision. Therefore, judges must approve settlement terms and attorneys' fees as well as ensure that attorneys adequately represent claimants.10

Although this traditional understanding appropriately differentiates between class actions and individual representation, itPage 160 fails to recognize that not all large-scale aggregation satisfies the requirements for class certification.11 A fluid ground exists between individual representation and class actions.12 With the rise of mass torts, courts aggregate claims through party joinder,13 statewide aggregation,14 bankruptcy,15 consolidation,16 and federal multidistrict litigation transfer.17 Yet, because many of the prerequisites to joinder require only common facts-not the predominance of common facts required for Rule 23(b)(3) class status18-courts validly aggregate many claims that fail to meet the requirements of Federal Rule of Civil Procedure 23.

The concerns and symptoms of settlement collusion in class actions are nearly identical to those in post-aggregation settlements:19a few attorneys who specialize in representing mass tort victims and defendants have repeated contact with one another and with the transferee judge who handles the factually similar claims. Allowing aggregation of these claims in a single forum combined with "repeat player" attorneys presents opportunities for collusion.20 Also, massPage 161 tort claimants have an attenuated attorney-client relationship with their lawyer and exercise little or no meaningful control over their case.21 In any type of aggregated mass tort litigation, federal judges feel a mounting pressure, be it real or perceived, to efficiently dispose of the cases, which encourages them not to question the settlement terms.22 In short, collective representation, without the judicial supervision incorporated into the class action and bankruptcy schemes, permits collusion and inequitable settlement allocations that lead to second-class justice for mass tort claimants.23 Consequently, the judicial system should permit transferee judges to approve post-aggregation settlements using some of the same protective mechanisms contained in Rule 23.

Even though legal literature contains an abundance of information about class action settlements, the aspect of collusion in non-class post-aggregation settlements has largely gone unnoticed.24Accordingly, Part II creates a framework for understanding the variations between types of mass torts and explains how collusion can occur within various methods of aggregation. Part II.A defines the different categories of mass torts and highlights the effects of the recent Multiparty, Multiforum Trial Jurisdiction Act of 2002 on single-event mass accidents.25 Because the category of dispersed/personal injury mass torts has been the most visible, this article primarily uses those as examples even though the article's analysis applies to all types of mass torts. Part II.B pinpoints three primary conditions that contribute to collusion-repeat attorneys specializing in mass torts, a single forum, and an overburdened court-and illustrates how collusion occurs in mass tort settlements through reverse auctions and issue preclusion. Part II.C considers the methods for and limits on aggregation, including removal, the All Writs Act,26 class actions, consolidation, and change of venue. In discussing the methods for aggregation, this Part incorporates and analyzes the 2003 amendments to Rule 23. Part III expands the initial framework in Part II to include the historical purpose and function of the Judicial Panel on Multidistrict Litigation (the Panel).

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By identifying the need to streamline the federal courts' approach to mass torts as the Panel's primary objective, this Part begins to flesh out the origins of a push toward expediency without a counterbalance for fairness.

Part IV develops this impulse toward efficiency by examining two recent Congressional proposals. Part IV.A analyzes the Multidistrict Litigation Restoration Act of 2004,27 which if passed, will reverse the Supreme Court's decision in Lexecon v. Milberg Weiss Bershad Hynes & Lerach.28 The Lexecon Court rejected the long-standing practice of permitting the transferee court (the court that would receive mass tort litigation from the Panel) to transfer jurisdiction to itself for trial purposes. Allowing the transferee court to retain trial jurisdiction increases the pressure on defendants to settle, which in turn may inflate the number of inadequate settlements. Part IV.B explains and questions the Class Action Fairness Acts,29 which purport to limit the role of the Panel by preventing it from transferring certain litigation removed from state courts. Even though the bill limits consolidation of actions that do not allege class status, nothing in the bill prevents the court from transferring venue to the court with the majority of similar litigation, then consolidating the actions under Federal Rule of Civil Procedure 42(a). This aggregation also encourages settlement by threatening defendants with more claims.

Part V contrasts the mounting pressure by Congress and the lower courts to streamline mass torts with the Supreme Court's concern about fairness. Part V.A assesses the Court's recognition of the potential for collusion in settlements through its rejection of two asbestos class action settlements, Amchem Products, Inc. v. Windsor30and Ortiz v. Fibreboard Corp.31 This Part argues that had the Court focused on efficiency, it could have affirmed the settlements and eradicated much of the asbestos litigation. Yet, the Supreme Court concentrated not on streamlining cases, but on fairness. Part V.B. considers the fairness aspects of using bankruptcy as an alternative to class actions by examining the Dalkon Shield litigation. Part V.C. raises the concern that aggregation "blackmails" defendants into settlement and questions whether success is appropriately measured by settlement. By raising the conflicting goals of the tort system, this Part emphasizes the need to reach a balance between...

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