Sorting Bugs and Features of Mass Tort Bankruptcy

27 Pages Posted: 13 Jan 2023 Last revised: 31 May 2023

See all articles by Melissa B. Jacoby

Melissa B. Jacoby

University of North Carolina School of Law

Date Written: May 31, 2023

Abstract

In 1997, after two years of study, the National Bankruptcy Review Commission recognized bankruptcy’s potential as a forum to address mass tort problems. It emphasized, however, that Congress needed to do much more to ensure due process, address major risks of under-compensation and inconsistent compensation, and reduce uncertainty about the lawfulness of these cases. United States Supreme Court cases invalidating particular limited-fund class actions raised the stakes, casting doubt on certain analogous bankruptcy practices.

Congress adopted neither the Commission’s proposals nor others on the topic. Mass tort bankruptcy practice continued without legislative clarifications or improvements, culminating in recent high-profile and controversial cases.

Revisiting earlier reform discussions helps reveal how much bugs, rather than features, drive some mass tort bankruptcies. Defendants gravitate to bankruptcy to do extraordinary things that have weak statutory and constitutional support and are in tension with principles of due process, not to mention federalism and separation of powers. The design of mass tort bankruptcies also tends to blunt the effective operation of standard Chapter 11 protections meant to empower individual creditors—tools that often are cited as making bankruptcy “better” for mass tort than other aggregate litigation fora. That makes the system overly reliant on group representation measures in mass tort cases in ways that are inconsistent with both bankruptcy law and constitutional principles. The analysis here invites skepticism about whether the system can lawfully and fairly deliver

Keywords: bankruptcy, mass tort, talc, asbestos, chapter 11, Boy Scouts of America, Purdue Pharma, opioid, due process

JEL Classification: K13, K41, G33

Suggested Citation

Jacoby, Melissa B., Sorting Bugs and Features of Mass Tort Bankruptcy (May 31, 2023). 101 Texas Law Review 1745 2023, UNC Legal Studies Research Paper No. 4323151, Available at SSRN: https://ssrn.com/abstract=4323151 or http://dx.doi.org/10.2139/ssrn.4323151

Melissa B. Jacoby (Contact Author)

University of North Carolina School of Law ( email )

Van Hecke-Wettach Hall, 160 Ridge Road
CB #3380
Chapel Hill, NC 27599-3380
United States

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