Governing the Anticommons in Aggregate Litigation
D. Theodore Rave
University of Houston Law Center
May 23, 2013
66 Vanderbilt Law Review 1183 (2013)
NYU School of Law, Public Law Research Paper No. 12-42
NYU Law and Economics Research Paper No. 12-30
This Article argues that there is an “anticommons” problem in aggregate litigation. An anticommons occurs when the consent of too many owners is needed to use a resource at its most efficient scale. When many plaintiffs have similar claims against a common defendant, those claims are often worth more if they can be bundled up and sold to the defendant (i.e., settled) as a single package — that is, the defendant may be willing to pay a premium for total peace. But because the rights to control those claims are dispersed among the individual plaintiffs, transaction costs and strategic holdouts can make aggregation difficult, particularly in cases where class actions are impractical. Recently the American Law Institute (“ALI”) proposed modifying long-standing legal ethics rules governing nonclass aggregate settlements to allow plaintiffs to agree in advance to be bound by a supermajority vote on a group settlement offer. By shifting from individual control over settlement decisions to collective decisionmaking, the ALI proposal may offer a way out of the anticommons dynamic and allow the group to capture the peace premium. Critics, however, say that allowing plaintiffs to surrender their autonomy will leave them vulnerable to exploitation by their lawyers and by the majority. Viewed through the lens of the anticommons, these concerns are manageable. Similar anticommons problems arise in many areas of law, ranging from eminent domain to oil and gas to sovereign debt. But instead of slavishly preserving the autonomy of individual rights holders, these areas of law have developed strategies for aggregating rights when doing so will result in joint gains. Drawing from these other contexts, this Article argues that the legitimacy of compelling individuals to participate in a value-generating aggregation depends on the presence of governance procedures capable of protecting the interests of the individuals within the collective and ensuring that the gains from cooperation are fairly allocated. Governance is thus the key to legitimizing attempts to defeat the anticommons in mass litigation through aggregation, whether by regulatory means, such as the class action, or contractual precommitment, as in the ALI proposal.
Number of Pages in PDF File: 78
Keywords: anticommons, aggregate litigation, mass litigation, aggregate settlement, aggregate settlement rule, ALI Principles, peace premium, non-class, mass torts, class action, collective action clause, Vioxx
JEL Classification: K40, K41Accepted Paper Series
Date posted: August 3, 2012 ; Last revised: June 14, 2013
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