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January 28, 2008

The Public and Private Faces of Peace for Mass Torts

By Richard A. Nagareda

Tort law is traditionally labeled a species of "private" law, a sibling of such things as the law governing contracts and corporations. To be sure, much of tort law, such as the everyday automobile accident case, retains much of this private dimension in practice. Mass torts diverge from this familiar pattern, however. In a new book, Mass Torts in a World of Settlement (University of Chicago Press), I trace how mass tort litigation has given rise to an uneasy combination of private and public institutions; and I discuss what the law should do about it.

The evolved response of the civil justice system to mass torts has been to shift from litigation on the private-law model of tort law to something much more like public administration. Simply put, the endgame of mass tort litigation today is not trial but some form of comprehensive settlement—what lawyers on both sides describe, with only a smidgen of exaggeration, as "global peace." Whatever the vehicle chosen, the peace terms are broadly similar. Instead of continued costly litigation, peace in the mass tort world substitutes a miniaturized, privatized version of workers' compensation for the affected claimants. Debates over matters of pretrial procedure—say, over whether a class action will be certified or whether the plaintiffs' expert scientific evidence will be deemed admissible—comprise crucial sparring points, precisely because they affect dramatically the ultimate price of peace. The interesting questions for the law are: Who are the peacemakers, and what means may they wield to make peace?

The peacemakers here consist of private lawyers—in practice, an elite segment of well-capitalized plaintiffs' lawyers with nationwide practices and an equally elite segment of the "big firm" defense bar. No one seriously believes that Congress can or should step in to set the peace terms for every mass tort of the future. Peace for mass torts thus necessarily means relying primarily on private lawyers as peacemakers.

This is not an ignoble or unimportant enterprise for the private bar. Structuring the kinds of business transactions to make peace in mass torts—and transactions they most certainly are—involves just as much savvy and creativity as the most complex corporate mergers. And the transactional dimension of peace here has the potential to advance the same social objective: to create wealth by bringing into being resources that would not otherwise exist through the reduction of litigation uncertainty. This is why the means chosen for peace take on such critical importance. Only by offering closure—only by exercising a considerable measure of coercive authority—can the dealmakers unlock the value-creating potential of peace. Yet the need for coercion is also what nudges private dealmaking into a matter of public concern.

Since the Supreme Court's 1997 decision in Amchem Products, Inc. v. Windsor, the law has witnessed a halting search for some legitimate means to make peace in mass tort litigation. The means employed have ranged broadly, from the poles of private contract (legitimized by notions of individual client consent, as in conventional civil settlements) and of public legislation (of the sort seen in the federal 9/11 victim compensation fund). Between these two poles rest a variety of means that are problematic precisely because of their hybrid, private-and-public nature—things like aggregate settlements in consolidated litigation, class action settlements (as in Amchem itself), and corporate reorganizations under the Bankruptcy Code.

Moves to tighten to the point of unviability things like class action settlements—as Amchem quite arguably does—cannot slay the mass tort monster. They merely force peacemaking efforts over to surrounding territory—to bankruptcy and to private contracts. In the asbestos area, the Amchem Court's clampdown on class settlements unleashed a deluge of asbestos-related bankruptcies in which both courts and the business press have documented even more problematic self-dealing and conflicts of interest than were voiced against the Amchem deal. On the opposite side of the spectrum, the recent $4.85 billion deal in the Vioxx litigation seeks to reinvigorate private contracts—there, a contract not as one might expect between the defendant Merck and plaintiffs, but literally between Merck and the key plaintiffs' lawyers whose client inventories include the bulk of extant Vioxx claims.

The law would benefit from seeing each of these means not in terms of traditional procedural categories but, rather, as much more contiguous and overlapping in character. Whatever the means chosen, what the peacemaking plaintiffs' lawyers seek to do is to exercise a form of leverage: to use mass inventories of existing claims to assert a broader power to bargain with the defendant to set the peace terms for the future. What is needed for mass torts is a corresponding legal response that would turn this leveraging into its own source of constraint—that would bestow the coercive authority needed to make peace, but only coupled with measures to link the interests of the peacemakers to the long-term viability of the arrangements they create. Such measures might include the overriding of existing lawyer-client retention agreements so as to link the fees to be obtained from clients by plaintiffs' lawyers to the peace terms that they fashion for non-clients who are otherwise similarly situated.

This is a good deal less sweeping or radical than it might sound. Lawyer-client retention agreements grounded in conventional notions of the autonomous individual client and a lawyer loyal to her alone are strikingly out of line with the reality of aggregate representation in the mass tort setting. Overriding the fee terms in such contracts precisely when plaintiffs' lawyers seek to move beyond individual client representation and into the realm of peacemaking would merely expose to the clear light of day the leveraging that undergirds the dynamics of peace negotiations. It would bring the law into closer alignment with the practical reality of peacemaking in the aggregate, rather than rail against it in the manner of Amchem. And, not incidentally, it would be grounded in notions of public governance.

It is not easy to let go of the profession's old ideal of individualized client autonomy, or its old ethical strictures against attorney control of litigation. Yet new times call for new measures. If legal institutions are to advance the aggregate good, they need to develop new ways to tie the interests of the real decision-makers in litigation to the interests of those whom they purport to govern. No less is needed for peacemaking as a form of governance in mass tort litigation.

Richard Nagareda is Professor of Law and Director of the Cecil D. Branstetter Litigation & Dispute Resolution Program at Vanderbilt University Law School.

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Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.