We’ve been thinking again about the American Law Institute’s “Principles of the Law of Aggregate Litigation,” in part because we’ll be asked to vote on whether to accept the draft at the ALI’s annual meeting in May.
The draft is long and says many things.
One thing that it says, however, is this:
To facilitate aggregate settlements, the draft proposes to change the usual ethics rules that require every individual client to accept the settlement offered to him or her. The ALI suggests a new rule in cases involving 40 or more claimants and aggregated claims valued at more than $5 million. In those situations, plaintiffs’ counsel should be permitted to obtain advance waivers from their clients in which the clients agree — before they see the terms of any proposed settlement — to accept the settlement so long as 75% of the claimants approve the settlement or, “if the settlement significantly distinguishes among different categories of claimants, a separate 75 [%] vote of each category of claimants” approves the settlement. ALI Draft Proposal, Disc. Draft No. 2, at Sec. 3.17(b).
This proposal represents a dramatic change from existing law and is meant to facilitate settlements in, among other situations, mass torts.
And this proposal is sure to be the subject of vigorous debate at the ALI meeting in May. For the stirrings of that debate, see Professor Nancy Moore’s forthcoming article in the DePaul Law Review, which aims a broadside at the Discussion Draft.
We’ll leave the law review commentary to the scholars, but we have a few bloggers’ technical issues to pose here:
First, should it really matter if “the settlement distinguishes among different categories of claimants”? In most mass torts, the concern is damage-averaging — that claimants with weak (or non-existent) claims will recover more than they should, and claimants with strong claims will recover less than they should. The problem is thus not with distinguishing among different categories of claimants, but with failing to distinguish among them: Should the category of claimants really be “stomach and esophageal cancers,” or does that category improperly treat identically people with claims of different strengths — “stomach” cancers and “esophageal” cancers? And, under the ALI’s proposal, who is going to analyze settlement agreements to ensure that only similarly situated claimants are paid similarly?
Second, what’s a “category” of claims? Is that what we would think of under Rule 23 as a “class” or “sub-class” of plaintiffs? If so, AmChem suggests that, at least for class action law, many personal injury claims cannot be roped together into a single group. Should the rules really be different for “aggregate settlements”? If so, why? If each person’s claim is inherently individualized, why should the votes of differently-situated claimants override the individual
person’s decision not to settle?
Third, don’t mass tort lawyers seem to be stumbling toward ways to resolve aggregate litigation that don’t require wholesale changes in the rules of ethics? We grant that AmChem makes it much harder to settle cases through the middle ground — class actions — and we’re not big fans of putting our clients into Chapter 11 to settle mass torts. Litigants do, however, seem to be making some progress designing other ways to resolve mass torts. Many Zyprexa claims, for
example, have been resolved in a series of aggregate settlements that involved neither certifying classes nor filing for bankruptcy. And the Vioxx settlement, though it has its critics, seems to be making its way to finality. Perhaps one of those settlements — or others percolating through the system — will serve as a model for resolving future mass torts, without forcing us to re-write the ethics rules of all 50 states.
We don’t envy the Reporters for the Aggregate Litigation Project. They’re tackling an awfully tough, and awfully contentious, area of the law.
We’ll be watching this debate with interest, and we’ll be mighty curious to see the result of the vote in May.