The New Mass Torts Bargain
56 Pages Posted: 12 Aug 2020 Last revised: 30 Nov 2022
Date Written: July 12, 2020
Mass torts create a unique scale of harm and liabilities. Corporate tortfeasors are desperate to settle claims but condition settlement upon resolution of substantially all claims at a known price – commonly referred to as a global settlement. Without this, corporate tortfeasors are willing to continue with protracted and fragmented litigation across jurisdictions. Global settlements can be elusive in these cases. Mass torts are oftentimes characterized by heterogeneous victim groups that include both current victims and future victims – individuals whose harm has not yet manifested and may not do so for years. Despite this incongruence, future victim claims must be aggregated as part of any global settlement. This is the tragedy of the mass tort anticommons: without unanimity, victim groups are unable to access settlement resources in a timely or meaningful way, but actual coordination across the group can be impossible.
Current resolution structures have proven ill-equipped to efficiently and equitably address the novel challenges posed by mass torts. Many cases cannot satisfy Rule 23’s requirements for class action certification. Multidistrict litigation is the most frequently invoked resolution structure, but the MDL process has infirmities. MDL lacks many of Rule 23’s fundamental safeguards that protect process integrity and victim autonomy. MDL has become a captive settlement process. In response, a new strategy for resolving modern mass torts has emerged. Corporate tortfeasors – including Johnson & Johnson, Purdue Pharma, Boy Scouts of America, and USA Gymnastics – have started filing for bankruptcy. These mass restructurings automatically halt the affected MDL cases and transfer proceedings to a bankruptcy court – a process I describe as bankruptcy preemption. Unfortunately, bankruptcy preemption replaces one deficient structure with another. Mass restructuring debtors are exploiting statutory gaps in the Bankruptcy Code in order to bind victims through an unpredictable, ad hoc structure. The new bargain creates myriad risks, including insolvent settlement trusts and disparate treatment across victim classes.
This Article is the first to attempt a reconceptualization of how modern mass torts should be resolved and delivers an unprecedented normative construct focused on addressing anticommons dynamics through statutory amendments to the Bankruptcy Code. These changes, coupled with an evolved perspective on fundamental structural anomalies, are designed to improve predictability, efficiency, and victim recoveries
Keywords: mass torts, multidistrict litigation, class actions, bankruptcy, civil procedure, torts, corporate restructurings, Purdue Pharma, Takata, Boy Scouts of America, USA Gymnastics, Imerys
JEL Classification: K13
Suggested Citation: Suggested Citation