Band 5, Heft 1-2 - Symposium issue: “The Public Life of Private Law: A Volume in Honor of Richard Nagareda”

Given a string of decisions restricting the use and availability of the class action device, the world of mass litigation may well be moving into a post-class action era. In this era, newer devices of aggregation—perhaps principally among them multi-district litigation (“MDL”)—increasingly will be called upon to meet the age-old mass litigation goal of achieving global peace of numerous claims arising out of a related, widespread harm. Indeed, coordination of pre-trial proceedings in the MDL frequently facilitates the achievement of this peace, given the reality that cases, once consolidated in the MDL, often settle en masse. However, one clear obstacle to the achievement of aggregate peace in the MDL, one that also plagues the achievement of that peace in the class action world, is our federal system of substantive and procedural law. In the MDL context, the problem arises because litigation involving state-law claims and non-diverse parties, which are not removable from state court, cannot be transferred to the MDL court. Despite their prevalence, little scholarly attention has been devoted to non-removable state-court actions in MDL. The few responses to this issue have largely focused upon the efficiencies that could be gained through increased, and perhaps total, consolidation of all related cases or, short of consolidation, through heightened coordination of pre-trial proceedings between state and federal judges. This Article questions whether these responses have led reform proposals in the wrong direction, and instead takes a different view. Rather than argue for increased consolidation, I offer for further consideration the possible ways in which the happenstantial existence of parallel tracks of related state and federal cases actually hold promise, if properly harnessed, as mechanisms for achieving the goals of aggregate litigation and for disciplining the contours of global settlements of mass disputes. In particular, I explore the possibility that the existence of parallel state and federal cases—frequently viewed as an obstacle to global resolution of claims unable to be consolidated in a single forum—may well fortuitously provide an opportunity to achieve the sorts of mass litigation resolution envisioned but unsuccessfully attempted in the class action context. In so doing, this Article adds new thoughts and theories to the specific debate regarding parallel state and federal claims in MDL, as well as to the larger debate about mass litigation governance in a post-class action world.

Professor Glover has argued that federal multidistrict litigation would benefit from the use of full state test cases in determining the settlement value of the litigation. This comment briefly explains why federal bellwether trials—at least before judges and juries of transferor districts—are more likely to assist in the settlement of federal multidistrict litigation: First, state cases that could not have been structured to permit federal subject matter jurisdiction are not likely to be diverse enough to allow the parties to assess the value of multidistrict litigation. By contrast, cases in which federal bellwether trials will be held can be selected from the whole range of federal cases consolidated in the multidistrict litigation. Second, neither judges nor plaintiffs’ counsel—in either state or federal court—are likely to be receptive to efforts to require attorneys in state court to participate in the resolution of federal multidistrict litigation. Finally, because federal bellwether trials by definition take place in federal court, they are likely to provide more accurate data about the settlement value of federal multidistrict litigation than would equally diverse state test cases.

The history of insolvency schemes as mass tort resolution devices is generally said to begin with the asbestos bankruptcies of the 1980s. This Article brings to light a much earlier example of the resolution of mass tort claims through another insolvency scheme—the equity receivership—that was a precursor to Chapter 11 of the Bankruptcy Code. The Article recounts the creation of a receivership after a fire at the Ringling Brothers circus killed and injured hundreds of spectators. It also describes the maneuvers of the key actors in the case and the legal landscape that explained their resort to a receivership instead of traditional civil litigation. The Article presents the Ringling Brothers case as more than a piece of historical trivia. The case raises a number of puzzles, most notably its success. While modern mass tort bankruptcies are criticized for a variety of perceived flaws, the Ringling Brothers receivership was widely praised. The Article considers a model of mass tort insolvency schemes as public law litigation in order to explain the different fates of the Ringling Brothers receivership and the modern mass tort bankruptcy.

When a defendant sets up a private voluntary compensation scheme or includes an arbitration clause in its form contracts, the resulting alternative dispute resolution (ADR) system bears striking resemblance to the typical endpoint of class action litigation—a settlement that sets up an administrative claims resolution scheme as an alternative to litigation on a mass basis. This article addresses the question of when the existence of one of these ADR systems—offering a shortcut to the same endpoint—should block future class action litigation. It examines important differences in timing, bargaining dynamics, and agency costs in these three contexts. And it argues that a court asked to certify a class in the face of an existing private resolution scheme should undertake a functional and essentially comparative inquiry, considering not only the potential savings in transaction and agency costs but also the underlying bargaining dynamics that may make these ADR shortcuts more vulnerable to unilateral manipulation by defendants than class action settlements.

In his interesting and important article, “Settlement, ADR, and Class Action Superiority,” Professor Rave argues that courts should review private ADR schemes established to compensate for mass harms before denying certification of subsequently filed class actions. This Comment makes three points. First, any evaluation of an ADR scheme can and should consider deterrence more seriously than Rave suggests. Second, Rave’s analysis should pay more attention to the potential effects of ex post review on ex ante incentives to create private schemes. Third, Rave’s balancing test for evaluating the adequacy of a private ADR scheme needs more development.

In Mass Torts in a World of Settlement , Richard Nagareda noted the importance of the highly specialized bar in creating the existing multidistrict litigation (MDL) landscape. In fact, Nagareda argues that mass torts “accentuate the role of lawyers as agents” who make and enforce a “grand, all-encompassing peace” (2007, p. ix). The influence this bar wields is so great that much of the book is dedicated to discussing potential limits on these administrators. Similarly, the emergence of a specialized segment of the bar is noted by several scholars of MDL, but there has been little systematic research. Using social network analysis, we look to address this issue by examining clusters of plaintiff attorneys over time. We find that the bar is really broken into two groups: generalists, working in several types of MDL proceedings, and specialists, those who tend to focus on a single type of MDL. These findings suggest not all types of proceedings operate in the same way. Moreover, we find that there is significant variation among proceedings in the pace at which specialized lawyers join the litigation.

Prosecutors, federal agencies, state attorneys general, and other officers in the executive branch often shape national policy through large monetary settlements with corporations. But the debate over this kind of “regulation by deal” has changed dramatically over the past decade. Although commentators once questioned whether such settlements made for good policy or exceeded officials’ legal authority, today’s headlines instead raise questions long associated with private justice: How do state actors appropriately compensate direct victims of the gulf coast oil spill? Is the National Mortgage Foreclosure Settlement sufficiently limited to paying only those homeowners with the most “deserving” losses? The growing commitment of public resources to collecting victim compensation from corporate wrongdoers characterizes what I call a “Corrective Justice State.” Corrective justice, a concept ordinarily associated with the private law of torts, contracts, or property, differs from traditional public law approaches to compensation in three ways. Corrective justice (1) repairs discrete injuries between identifiable parties, rather than curing diffuse social harm; (2) uses wrongdoers’ funds to restore individual losses, rather than public funds to improve public welfare; and (3) favors retrospective sanctions of specific wrongdoers over prospective regulation. Increasingly, public officials justify massive settlements with the rhetoric of corrective justice to bolster new, creative applications of executive power. But that same corrective justice philosophy may poorly serve those who depend on the modern administrative state for effective regulation and compensation. To the extent the Corrective Justice State relies on discretionary settlement decisions to regulate corporate behavior, it may forgo prospective solutions among broad constituencies, with traditional democratic checks from courts and legislatures. And despite their lip-service to corrective justice—where state actors trumpet payouts financed by corporate wrongdoers for the benefit of a “deserving” class of victims—public officials often lack information required to serve parties’ specific interests in corrective justice. Government actors need to move beyond corrective justice principles to address our collective concerns. State actors may continue to pursue corrective justice when they broker large compensatory settlements, so long as they adopt more procedural safeguards for the victims they purport to serve—including more participation and judicial review. But, to address collective and diffuse problems, those same safeguards should be relaxed to account for (1) value of individual claims, (2) the diversity of interests and relief, and (3) the extent to which state action forecloses private litigation.

Professor Zimmerman correctly notes that federal agencies have moved away from rulemaking and toward the use of corrective justice, that is, the punishment of wrongdoing. His proposal to import public values into their use of corrective justice is a salutary one. But no improvement of the corrective justice process will overcome its evident limitations. Rulemaking, and the ex ante approach to regulation that it embodies, remains an essential means for governing our complex, technological Q#.