In Defense of Private Claims Resolution Facilities

Abstract

This contribution to a Symposium in honor of Francis McGovern's life and accomplishments is a natural occasion on which to assess some of the normative arguments for and against private claims resolution facilities (CRFs). He was one of the most prominent figures in the world of multi-claimant litigation and settlements. We were privileged to work alongside him in various matters and to consider him a friend. We miss him dearly.

The Article begins, in Part II, by describing three core models of private CRFs that are commonly observed in mass tort settings, often in combination: individual settlements by in-house counsel, victim compensation funds, and group settlements (inventory and global). Our view is that variations in the design of CRFs often have functional explanations as responses to the desires and needs of the parties. When the parties differ in their preferred arrangements, the design of a CRF will inevitably reflect inequalities in bargaining power between the parties. That is expected, as each CRF is the product of compromise. With regard to each of the three core models, this second Part will discuss when and why the defendant might prefer it, then go on to discuss its benefits and costs to the plaintiffs (and plaintiffs’ counsel). Part III then addresses two criticisms that scholars have levied against one or more of these types of private CRFs: that private CRFs deny claimants corrective justice, and that judicial supervision is needed to protect claimants’ autonomy and to police agency failures on the plaintiffs’ side. We argue that the first criticism is mistaken because it wrongly contends that corrective justice requires the use of courts, and that the second is erroneous because market forces should encourage plaintiffs’ attorneys to protect claimants’ autonomy as fully as claimants want and tend to reduce agency costs to an efficient level in multi-claimant settlements no less than in single-client matters. The Article concludes in Part IV with some final thoughts on the limited potential of judicial review to improve private CRFs.

Keywords: mass torts, settlements, aggregate settlements, private claims resolution facilities, judicial supervision, corrective justice

JEL Classification: K1, K13, K40, K41