98 Pages Posted: 29 Jun 2005 Last revised: 20 Oct 2015
Date Written: August 1, 2010
The potential for attorneys to collude in reaching a settlement agreement arises in any large-scale aggregation of mass torts. In the 1990s, attorneys settled seventy-four percent of the mass tort cases consolidated for transfer by the Judicial Panel on Multidistrict Litigation. Even though most mass tort litigation settles, the judicial system ensures the fairness and integrity of settlements only in the bankruptcy and class action contexts. Consequently, the fairness of the settlement can vary depending on how the judicial system aggregates the claims. Only thirty-nine percent of aggregated claims resulted in class action settlements. Two percent received bankruptcy protections. Approximately forty percent of the mass tort settlements settled outside the scope of judicial review and received no procedural assurances of fairness.
A traditional understanding of mass tort litigation views all aggregation as class actions. As this view holds, class actions deserve special procedural safeguards because they include absent class members. Other forms of litigation allocate autonomy to the individual to make decisions about the conduct of litigation, the course of settlement negotiations, and other decisions conventionally in the scope of the lawyer-client relationship. In non-class litigation, the conventional view assumes that clients protect their own interests by monitoring attorney conduct, choosing when and how to settle, and determining whether to proceed to trial. In class actions, class counsel has a duty to protect the interests of the class as a whole and counsel's decisions bind all class claimants. The individual in a class action has little authority over the conduct of the action, yet remains bound by the ultimate decision, so judges must approve settlement terms and attorneys' fees as well as ensure that attorneys adequately represent claimants.
Although this traditional understanding appropriately differentiates between class actions and individual representation, it fails to recognize that not all large-scale aggregation satisfies the requirements for class certification. A fluid ground exists between individual representation and class actions. With the rise of mass torts, courts aggregate claims through party joinder, statewide aggregation, bankruptcy, consolidation, and federal multidistrict litigation transfer. Yet, because many of the prerequisites to joinder require only common facts - not the predominance of common facts required for Rule 23(b)(3) class status - courts validly aggregate many claims that fail to meet the requirements of Federal Rule of Civil Procedure 23.
The concerns and symptoms of settlement collusion in class actions are nearly identical to those in post-aggregation settlements: a few attorneys who specialize in representing mass tort victims and defendants have repeated contact with one another and with the transferee judge who handles the factually similar claims; aggregating these claims in a single forum combined with "repeat player" attorneys presents opportunities for collusion; and mass tort claimants have an attenuated attorney-client relationship with their lawyer and exercise little or no meaningful control over their case. In any type of aggregated mass tort litigation, federal judges feel a mounting pressure, be it real or perceived, to efficiently dispose of the cases, which encourages them not to question the settlement terms. In short, collective representation, without the judicial supervision incorporated into the class action and bankruptcy schemes, permits collusion and inequitable settlement allocations that lead to second-class justice for mass tort claimants. Consequently, the judicial system should permit transferee judges to approve post-aggregation settlements using some of the same protective mechanisms contained in Rule 23.
Keywords: multidistrict litigation, Rule 23, class action, asbestos, bankruptcy, MDL
JEL Classification: K41
Suggested Citation: Suggested Citation
Burch, Elizabeth Chamblee, Unsettling Efficiency: When Non-Class Aggregation of Mass Torts Creates Second-Class Settlements (August 1, 2010). Louisiana Law Review, Vol. 65, p. 157, 2004. Available at SSRN: https://ssrn.com/abstract=749224