Is There a Future for Future Claimants after Amchem Products, Inc. v. Windsor?

Yale Law Journal

Volumn 107, Issue 8, 1998, Pages 2545-2581

  Raskolnikov, Alex ^a  

^a NONE

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EID: 0348167440     PISSN: 00440094     EISSN: None     Source Type: Journal    
DOI: 10.2307/797350     Document Type: Article

References (214)

1. In re Fibreboard Corp., 893 F.2d 706, 708 (5th Cir. 1990) (quoting the district court).
2. See In re Asbestos Prods. Liab. Litig. (No. VI), 771 F. Supp. 415, 422-24 (J.P.M.L. 1991). The transfer followed five previous rejections by the Multidistrict Litigation (MDL) Panel. See id. at 417.
3. See Georgine v. Amchem Prods., Inc., 157 F.R.D. 246 (E.D. Pa. 1994), vacated, 83 F.3d 610 (3d Cir. 1996), aff'd sub nom. Amchem Prods., Inc. v. Windsor, 117 S. Ct. 2231 (1997). A global settlement is a settlement binding all future claimants. There is no standard definition of the term "future claimants." See John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 95 COLUM. L. REV. 1343, 1424 n.320 (1995). In this Note, I define future claimants as persons who may, at any time in the future, bring an action against a defendant based on the claimants' or their relatives' contact with the defendant's products (a contact which itself may not have yet occured).
4. See Georgine v. Amchem Prods., Inc., 157 F.R.D. 246 (E.D. Pa. 1994), vacated, 83 F.3d 610 (3d Cir. 1996), aff'd sub nom. Amchem Prods., Inc. v. Windsor, 117 S. Ct. 2231 (1997). A global settlement is a settlement binding all future claimants. There is no standard definition of the term "future claimants." See John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 95 COLUM. L. REV. 1343, 1424 n.320 (1995). In this Note, I define future claimants as persons who may, at any time in the future, bring an action against a defendant based on the claimants' or their relatives' contact with the defendant's products (a contact which itself may not have yet occured).
5. 83 F.3d 610 (3d Cir. 1996), aff'd sub nom. Amchem, 117 S. Ct. 2231 (1997).
6. See In re Asbestos Litig. (Flanagan v. Ahearn), 90 F.3d 963 (5th Cir. 1996), vacated, 117 S. Ct. 2503 (1997).
7. 117 S. Ct. 2231 (1997). Throughout this Note, I refer to the asbestos settlement affirmed by the district court in Pennsylvania as Georgine. I refer to the Supreme Court's decision reversing this settlement as Amchem (Robert A. Georgine was no longer a party to the case at the time it reached the Supreme Court). This is to distinguish the Pennsylvania settlement from the Supreme Court decision that established standards for all global settlements.
8. See Ahearn, 117 S. Ct. at 2503.
9. The first paradigmatic mass tort action against the asbestos industry was decided in 1973. See Borel v. Fibreboard Paper Prods. Corp., 493 F.2d 1076 (5th Cir. 1973).
10. See Peter H. Schuck, Mass Torts: An Institutional Evolutionist Perspective, 80 CORNELL L. REV. 941, 951-52 (1995) (noting the experience, specialization, and sophistication of the mass tort bar on both sides).
11. See Amchem, 117 S. Ct. at 2250 (citing FED. R. CIV. P. 23(b)(3)).
12. See id. (citing FED. R. CIV. P. 23(a)(4)).
13. See id. at 2252.
14. See id. at 2244.
15. Id. at 2250 (emphasis added).
16. Id. at 2248 (emphasis added).
17. Because Ahearn was a mandatory class action under Rule 23(b)(1)(B), it did not have to satisfy Rule 23(b)(3)'s predominance requirement as the Georgine class did.
18. See Amchem, 117 S. Ct. at 2252 ("The argument is sensibly made that a nationwide administrative claims processing regime would provide the most secure, fair, and efficient means of compensating victims of asbestos exposure.").
19. The judiciary has made concerted and continuous attempts to shift the burden of mass tort administration onto Congress, with little success. See, e.g., Georgine v. Amchem Prods., Inc., 83 F.3d 610, 634 (3d Cir. 1996) (suggesting ways in which Congress may deal with asbestos litigation), aff'd sub nom. Amchem, 117 S. Ct. 2231 (1997); JUDICIAL CONFERENCE OF THE U.S. AD HOC COMM. ON ASBESTOS LITIG., REPORT OF AD HOC COMMITTEE ON ASBESTOS LITIGATION 1, 27-35 (1991) [hereinafter ASBESTOS REPORT] (urging Congress to resolve the asbestos crisis). Recent developments concerning the global tobacco settlement, however, may be a sign that Congress has decided to take a more active role in resolving at least some products liability disputes. See, e.g., Hatch Wants Tobacco Bill Before Recess, WASH. POST, Oct. 30, 1997, at A9; Tobacco Funds Allocation Adds Settlement Pressure, WASH. POST, Feb. 3, 1998, at A8.
20. The judiciary has made concerted and continuous attempts to shift the burden of mass tort administration onto Congress, with little success. See, e.g., Georgine v. Amchem Prods., Inc., 83 F.3d 610, 634 (3d Cir. 1996) (suggesting ways in which Congress may deal with asbestos litigation), aff'd sub nom. Amchem, 117 S. Ct. 2231 (1997); JUDICIAL CONFERENCE OF THE U.S. AD HOC COMM. ON ASBESTOS LITIG., REPORT OF AD HOC COMMITTEE ON ASBESTOS LITIGATION 1, 27-35 (1991) [hereinafter ASBESTOS REPORT] (urging Congress to resolve the asbestos crisis). Recent developments concerning the global tobacco settlement, however, may be a sign that Congress has decided to take a more active role in resolving at least some products liability disputes. See, e.g., Hatch Wants Tobacco Bill Before Recess, WASH. POST, Oct. 30, 1997, at A9; Tobacco Funds Allocation Adds Settlement Pressure, WASH. POST, Feb. 3, 1998, at A8.
21. The judiciary has made concerted and continuous attempts to shift the burden of mass tort administration onto Congress, with little success. See, e.g., Georgine v. Amchem Prods., Inc., 83 F.3d 610, 634 (3d Cir. 1996) (suggesting ways in which Congress may deal with asbestos litigation), aff'd sub nom. Amchem, 117 S. Ct. 2231 (1997); JUDICIAL CONFERENCE OF THE U.S. AD HOC COMM. ON ASBESTOS LITIG., REPORT OF AD HOC COMMITTEE ON ASBESTOS LITIGATION 1, 27-35 (1991) [hereinafter ASBESTOS REPORT] (urging Congress to resolve the asbestos crisis). Recent developments concerning the global tobacco settlement, however, may be a sign that Congress has decided to take a more active role in resolving at least some products liability disputes. See, e.g., Hatch Wants Tobacco Bill Before Recess, WASH. POST, Oct. 30, 1997, at A9; Tobacco Funds Allocation Adds Settlement Pressure, WASH. POST, Feb. 3, 1998, at A8.
22. The judiciary has made concerted and continuous attempts to shift the burden of mass tort administration onto Congress, with little success. See, e.g., Georgine v. Amchem Prods., Inc., 83 F.3d 610, 634 (3d Cir. 1996) (suggesting ways in which Congress may deal with asbestos litigation), aff'd sub nom. Amchem, 117 S. Ct. 2231 (1997); JUDICIAL CONFERENCE OF THE U.S. AD HOC COMM. ON ASBESTOS LITIG., REPORT OF AD HOC COMMITTEE ON ASBESTOS LITIGATION 1, 27-35 (1991) [hereinafter ASBESTOS REPORT] (urging Congress to resolve the asbestos crisis). Recent developments concerning the global tobacco settlement, however, may be a sign that Congress has decided to take a more active role in resolving at least some products liability disputes. See, e.g., Hatch Wants Tobacco Bill Before Recess, WASH. POST, Oct. 30, 1997, at A9; Tobacco Funds Allocation Adds Settlement Pressure, WASH. POST, Feb. 3, 1998, at A8.
23. See Black Lung Benefits Act, 30 U.S.C. §§ 901-945 (1994). The Act created a benefits program for miners afflicted with pneumoconiosis. See generally Robert L. Ramsey & Robert S. Habermann, The Federal Black Lung Program - The View from the Top, 87 W. VA. L. REV. 575 (1985).
24. See Black Lung Benefits Act, 30 U.S.C. §§ 901-945 (1994). The Act created a benefits program for miners afflicted with pneumoconiosis. See generally Robert L. Ramsey & Robert S. Habermann, The Federal Black Lung Program - The View from the Top, 87 W. VA. L. REV. 575 (1985).
25. The black lung program is widely considered to be a "fiasco." Schuck, supra note 9, at 970; see also Peter H. Schuck, The Worst Should Go First: Deferral Registries in Asbestos Litigation, 15 HARV. J.L. & PUB. POL'Y 541, 552 n.46 (1992) (citing studies critiquing the program).
26. A broad revision of Rule 23 - another possible alternative - seems highly unlikely. The Advisory Committee to the Judicial Conference of the United States has been working on such amendments for the past several years. Its proposed revision was published in 1996 for public comment. See Proposed Rules, 167 F.R.D. 523, 524 (1996). So far, only the least controversial change has made it to the next step. A new Rule 23(f), allowing immediate appeal of a trial court's decision certifying or decertifying a class, was submitted and approved by the Judicial Conference. See Judicial Conference Approves Single Change to Federal Rule Governing Class Action Suits, 66 U.S.L.W. 2182 (Sept. 30, 1997). The rule still requires approval from the U.S. Supreme Court and Congress to go into effect on December 1, 1998, as planned See id. The more controversial and far-reaching amendments, including a new Rule 23(b)(4) that would have allowed certification of a settlement-only class even though the class might not have been certifiable for trial under Rule 23(b)(3), never made it out of the Advisory Committee, though the Committee decided to review its decision in light of Amchem. See id. at 2183. The support for far-reaching changes aimed at adapting Rule 23 to a mass torts context seems to be dwindling, however. Even the Chairperson of the Advisory Committee now admits that the federal rules simply cannot resolve the future-claims problem. See id.
27. In re Asbestos Litig. (Flanagan v. Ahearn), 90 F.3d 963 (5th Cir. 1996), vacated, 117 S. Ct. 2503 (1997).
28. See, e.g., Coffee, supra note 3, at 1457-61 (arguing that bankruptcy gives better procedural and substantive protection to mass tort victims, provides clearer rules, and better handles conflict-of-interests problems); Ralph R. Mabey & Peter A. Zisser, Improving Treatment of Future Claims: The Unfinished Business Left by the Manville Amendments, 69 AM. BANKR. L.J. 487, 488 (1995) (explaining that bankruptcy is "the most effective framework for treating future claims"); Francis E. McGovern, The Defensive Use of Federal Class Actions in Mass Torts, 39 ARIZ. L. REV. 595, 610 (1997) (concluding that bankruptcy better protects victims while class actions favor management and shareholders); John A. Siliciano, Mass Torts and the Rhetoric of Crisis, 80 CORNELL L. REV. 990, 1002-05 (1995) (dismissing the views of those who argue that bankruptcy is inappropriate in mass torts, and insisting that it is the logical and correct resolution for many mass tort defendants).
29. See, e.g., Coffee, supra note 3, at 1457-61 (arguing that bankruptcy gives better procedural and substantive protection to mass tort victims, provides clearer rules, and better handles conflict-of-interests problems); Ralph R. Mabey & Peter A. Zisser, Improving Treatment of Future Claims: The Unfinished Business Left by the Manville Amendments, 69 AM. BANKR. L.J. 487, 488 (1995) (explaining that bankruptcy is "the most effective framework for treating future claims"); Francis E. McGovern, The Defensive Use of Federal Class Actions in Mass Torts, 39 ARIZ. L. REV. 595, 610 (1997) (concluding that bankruptcy better protects victims while class actions favor management and shareholders); John A. Siliciano, Mass Torts and the Rhetoric of Crisis, 80 CORNELL L. REV. 990, 1002-05 (1995) (dismissing the views of those who argue that bankruptcy is inappropriate in mass torts, and insisting that it is the logical and correct resolution for many mass tort defendants).
30. See, e.g., Coffee, supra note 3, at 1457-61 (arguing that bankruptcy gives better procedural and substantive protection to mass tort victims, provides clearer rules, and better handles conflict-of-interests problems); Ralph R. Mabey & Peter A. Zisser, Improving Treatment of Future Claims: The Unfinished Business Left by the Manville Amendments, 69 AM. BANKR. L.J. 487, 488 (1995) (explaining that bankruptcy is "the most effective framework for treating future claims"); Francis E. McGovern, The Defensive Use of Federal Class Actions in Mass Torts, 39 ARIZ. L. REV. 595, 610 (1997) (concluding that bankruptcy better protects victims while class actions favor management and shareholders); John A. Siliciano, Mass Torts and the Rhetoric of Crisis, 80 CORNELL L. REV. 990, 1002-05 (1995) (dismissing the views of those who argue that bankruptcy is inappropriate in mass torts, and insisting that it is the logical and correct resolution for many mass tort defendants).
31. See, e.g., Coffee, supra note 3, at 1457-61 (arguing that bankruptcy gives better procedural and substantive protection to mass tort victims, provides clearer rules, and better handles conflict-of-interests problems); Ralph R. Mabey & Peter A. Zisser, Improving Treatment of Future Claims: The Unfinished Business Left by the Manville Amendments, 69 AM. BANKR. L.J. 487, 488 (1995) (explaining that bankruptcy is "the most effective framework for treating future claims"); Francis E. McGovern, The Defensive Use of Federal Class Actions in Mass Torts, 39 ARIZ. L. REV. 595, 610 (1997) (concluding that bankruptcy better protects victims while class actions favor management and shareholders); John A. Siliciano, Mass Torts and the Rhetoric of Crisis, 80 CORNELL L. REV. 990, 1002-05 (1995) (dismissing the views of those who argue that bankruptcy is inappropriate in mass torts, and insisting that it is the logical and correct resolution for many mass tort defendants).
32. For a definition of the term "future claimants," see supra note 3.
33. See Amchem Prods., Inc. v. Windsor, 117 S. Ct. 2231, 2239 (1997).
34. See, e.g., In re School Asbestos Litig. (Celotex Corp. v. School Dist.), 789 F.2d 996 (3d Cir.), cert. denied, 479 U.S. 852 (1986); In re Northern Dist. of Cal. Dalkon Shield IUD Prods. Liab. Litig. (A.H. Robins Co. v. Abed), 693 F.2d 847 (9th Cir. 1982), cert. denied, 459 U.S. 1171 (1983); In re Federal Skywalk Cases (Stover v. Rau), 680 F.2d 1175 (8th Cir.), cert. denied, 459 U.S. 988 (1982); In re "Agent Orange" Prod. Liab. Litig. (Chapman v. Dow Chem. Co.), 635 F.2d 987 (2d Cir. 1980), cert. denied, 454 U.S. 1128 (1981).
35. See Ahearn, 90 F.3d at 1000 (Smith, J., dissenting).
36. Usually, global settlements provide for so-called back-end opt outs to alleviate concerns about inequitable treatment of future claimants and due process. See, e.g., id. at 972-73 (majority opinion). Unlike a front-end opt out by plaintiffs who are aware of the pending class action and decide not to participate, the back-end opt out is a right preserved for future claimants who will be bound by the settlement to withdraw and litigate their individual cases at some future date. For further discussion of back-end opt outs, see infra notes 153-159 and accompanying text.
37. See Amchem, 117 S. Ct. at 2249-50.
38. Id. at 2251.
39. For a definition of the term "mature mass tort," see infra text accompanying notes 34-35.
40. See, e.g., Coffee, supra note 3, at 1351. Large claimants are seriously injured people who have the potential to obtain substantial recoveries. These claims are worth pursuing on individual bases. The opposite is true for small claimants. Their claims are so small that it is inefficient to resolve them in individual suits. Yet their claims are meritorious, and in the aggregate, they create the potential for a significant gross recovery.
41. See id. at 1424. Near futures are persons who have suffered a legally cognizable injury, but nave not yet filed a suit. Intermediate futures are those who have been exposed to a toxic or defective substance or product but have not yet manifested an injury. Far futures are persons who have not yet been exposed or injured but will be in the future as a result of the defendant's past conduct.
42. Francis E. McGovern, Resolving Mature Mass Tort Litigation, 69 B.U. L. REV. 659, 659 (1989).
43. See, e.g., Jenkins v. Raymark Indus., 782 F.2d 468, 470 (5th Cir. 1986) (recognizing the existence of future claims in asbestos litigation).
44. Compare, for example, the great similarity of futures' "subclassing" (distribution between different types of claimants) in the latest global settlement, see, e.g., Coffee, supra note 3, at 1395 (describing the 1994 Georgine payment schedule), with the futures' payment schedule established eight years earlier, see id. at 1396 (describing the Johns-Manville settlement), and with the 1989 grid for present plaintiffs' compensation, see In re Fibreboard Corp., 893 F.2d 706, 710 (5th Cir. 1990). Thus, when a mass tort is globally mature, the internal small-large ratio among the futures is usually well known.
45. The Fifth Circuit opined in 1986 that asbestos-related claims would continue to appear for the next 15 years. See Jenkins, 782 F.2d at 470. Five years later, estimates extended to the year 2015. See, e.g., ASBESTOS REPORT, supra note 18, at 2. Shortly thereafter, an expert panel concluded that asbestos-related claims would not cease until the year 2049. See In re Joint E. & S. Dist. Asbestos Litig., 878 F. Supp. 473, 490 (E. & S.D.N.Y. 1995), aff'd in part, vacated in part, 78 F.3d 764 (2d Cir. 1996). The rate with which future claims will turn into present ones is also likely to remain uncertain for some time before a mass tort becomes globally mature. The Jenkins court, for example, predicted in 1986 that "filings will continue at a steady rate until the year 2000." Jenkins, 782 F.2d at 470. It was wrong. For example, the number of asbestos-related filings increased by 66% between 1989 and 1990. See Note, In re Joint Eastern and Southern District Asbestos Litigation: Bankrupt and Backlogged - A Proposal for the Use of Federal Common Law in Mass Tort Class Actions, 58 BROOK. L. REV. 553, 555 n.9 (1992).
46. The Fifth Circuit opined in 1986 that asbestos-related claims would continue to appear for the next 15 years. See Jenkins, 782 F.2d at 470. Five years later, estimates extended to the year 2015. See, e.g., ASBESTOS REPORT, supra note 18, at 2. Shortly thereafter, an expert panel concluded that asbestos-related claims would not cease until the year 2049. See In re Joint E. & S. Dist. Asbestos Litig., 878 F. Supp. 473, 490 (E. & S.D.N.Y. 1995), aff'd in part, vacated in part, 78 F.3d 764 (2d Cir. 1996). The rate with which future claims will turn into present ones is also likely to remain uncertain for some time before a mass tort becomes globally mature. The Jenkins court, for example, predicted in 1986 that "filings will continue at a steady rate until the year 2000." Jenkins, 782 F.2d at 470. It was wrong. For example, the number of asbestos-related filings increased by 66% between 1989 and 1990. See Note, In re Joint Eastern and Southern District Asbestos Litigation: Bankrupt and Backlogged - A Proposal for the Use of Federal Common Law in Mass Tort Class Actions, 58 BROOK. L. REV. 553, 555 n.9 (1992).
47. See ASBESTOS REPORT, supra note 18, at 6-7.
48. See Georgine v. Amchem Prods., Inc., 157 F.R.D. 246, 325 (E.D. Pa. 1994), vacated, 83 F.3d 610 (3d Cir. 1996), aff'd sub nom. Amchem Prods., Inc. v. Windsor, 117 S. Ct. 2231 (1997).
49. Compare ASBESTOS REPORT, supra note 18, at 2 (200,000), with Coffee, supra note 3, at 1385 (500,000).
50. See, e.g., Ahearn v. Fibreboard Corp., 162 F.R.D. 505, 528 (E.D. Tex. 1995) (asserting that "[a]sbestos litigation is undoubtedly the most 'mature' of all mass tort litigation"), aff'd sub nom. In re Asbestos Litig. (Flanagan v. Ahearn), 90 F.3d 963 (5th Cir. 1996), vacated, 117 S. Ct. 2503 (1997); Coffee, supra note 3, at 1433 (suggesting that asbestos cases "are the paradigm of a 'mature' mass tort").
51. See infra notes 77-89 and accompanying text.
52. F is a known number. The uncertainty about the expected number of future claims is impounded in α.
53. S are the median values taken from the latest individual and nonglobal settlements.
54. F is discounted to present value, possibly at a standard long-term interest rate on government securities of duration matching the expected duration of the mass tort. Present-value discount is not a part of α.
55. In other words, the uncertainties in the fund amount F and the present claims' values and numbers are much less than the uncertainty of the overall value of future claims due to a greater uncertainty in α.
56. The parties could mistakenly agree on a number that turns out to be too high. This is highly unlikely, however, because both the defendants and the present claimants would be better off understating the number of future claimants. Such an agreement would also go against the vast mass tort experience of underestimating the number of future claims. See, e.g., In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 982 F.2d 721, 726 (2d Cir. 1992) (describing the unraveling of the Johns-Manville Trust when, within several months of its formation, it received 50% more claims than the highest estimate made when the plan was approved).
57. See Susan P. Koniak, Feasting While the Widow Weeps: Georgine v. Amchem Products, Inc., 80 CORNELL L. REV. 1045, 1066-68 (1995). Note that the same plaintiffs' attorneys settled their present claims with the same defendants shortly prior to the global settlement in separate inventory settlements providing a convenient reference point for the established historic values. The parties also had the awards schedules from the Johns-Manville bankruptcy, also involving asbestos, as a reference. Nevertheless, the Georgine awards were on average about one-seventh of those in the Johns-Manville case, despite the fact that the Georgine defendants were financially viable companies while Johns-Manville was in bankruptcy. See Coffee, supra note 3, at 1395-96.
58. See Amchem Prods., Inc. v. Windsor, 117 S. Ct. 2231, 2251 (1997).
59. See id. at 2240.
60. See id.
61. See Coffee, supra note 3, at 1394.
62. N estimation, see infra notes 77-89 and accompanying text.
63. E) = (1 - 0.3) × (1 - 0.5) = 0.35.
64. I say "almost" because discounting to present value should have made futures' awards somewhat smaller.
65. While the disparities in treatment of present and future claimants were not as glaring in Ahearn as they were in Georgine, they were still very substantial. See Coffee, supra note 3, at 1401-02 (suggesting that the soaring stock price of the Fibreboard Corp., the defendant in Ahearn, was strong evidence that future claimants lost substantial wealth as the result of the settlement).
66. E are always zero.
67. In re "Agent Orange" Prod. Liab. Litig., 996 F.2d 1425, 1437 (2d Cir. 1993) (emphasis added).
68. Roger C. Cramton, Individualized Justice, Mass Torts, and "Settlement Class Actions": An Introduction, 80 CORNELL L. REV. 811, 831 (1995).
69. See Koniak, supra note 49, at 1075-78.
70. See Coffee, supra note 3, at 1435.
71. Koniak, supra note 49, at 1149 n.475 (quoting an attorney representing the Center for Claims Resolution). While one might attribute this statement to an extreme case of trial advocacy, it shows that even the Georgine advocates recognized equal treatment as a normative goal.
72. Amchem Prods., Inc. v. Windsor, 117 S. Ct. 2231, 2251 (1997) (citing FED. R. CIV. P. 23(a)(4)).
73. See id. Other courts had already demanded subclassing in asbestos settlements. See, e.g., In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 982 F.2d 721, 739 (2d Cir. 1992).
74. See Amchem, 117 S. Ct. at 2251. Just as present claimants can "rob" future ones, near futures can "rob" far futures by providing for front-loaded payments, not accounting for inflation, etc. The Court's concern was clearly not about a particular conflict (present plaintiffs versus futures or near futures versus far futures), but about a fundamental conflict of interests among claimants whose claims appear at ditterent points intime.
75. For examples of subclassing along the size scale (and ignoring the temporal scale), see RICHARD B. SOBOL, BENDING THE LAW: THE STORY OF THE DALKON SHIELD BANKRUPTCY 312-14 (1991); and Coffee, supra note 3, at 1394-95. These examples show that real settlements have many more than the small and large categories used for the analysis in this Note. They also show that this larger number of categories is manageable. But these categories are manageable only as long as all of them apply only to present plaintiffs. It is hard to imagine how the settling parties could separate present, near, intermediate, and far futures into each of these categories and provide each category with separate representation.
76. That is they are the same with time discounting for the future claim's value.
77. E - something they would not have been able to do under the pro rata rule.
78. Present claimants' and future claimants' interests diverge due to the indeterminacy in the number of future claims and uncertainties external to a particular mass tort. For a discussion of the latter type of uncertainties, see infra notes 165-177 and accompanying text.
79. See Schuck, supra note 9, at 948-50.
80. See id.
81. This Note argues that this is exactly what happened in Amchem. Saying that the Court disapproved of the settlement because of its concern for future claimants is almost the same as saying that the Court found a to be unacceptably high.
82. See Georgine v. Amchem Prods., Inc., 83 F.3d 610, 620 (3d Cir. 1996), aff'd sub nom. Amchem Prods., Inc. v. Windsor, 117 S. Ct. 2231 (1997).
83. See Coffee, supra note 3, at 1446.
84. E = 0), the latter, by protecting their own interests, necessarily protect future small claimants as well. Thus, from a situation where the interests of the present plaintiffs conflict with those of the future ones, the pro rata rule creates a regime where the interests of the present (and future) large plaintiffs conflict with the interests of present (and future) small claimants. All futures have representatives among present plaintiffs negotiating a global settlement.
85. See supra text accompanying notes 39-43. The Dalkon Shield litigation is another example. Even when this mass tort was mature, the discount coefficient for future claimants was hotly disputed. See SOBOL, supra note 67, at 183.
86. In the Dalkon Shield litigation, for example, the lowest estimate of future defendant's liability was $1.215 billion, and the highest was $7.167 billion. See SOBOL, supra note 67, at 183. The more recent estimates of the total number of asbestos-related claims against Manville Trust range from 210,000 to 600,000. See Coffee, supra note 3, at 1361 nn.58-59.
87. Two or three out of the five figures suggested during evaluation of A.H. Robins's liability in the Dalkon Shield litigation were close to each other. See SOBOL, supra note 67, at 183. A similar middle ground may be found if one looks at all estimates suggested for Manville Trust asbestos liability: 210,000; 306,000; 450,000; 560,000; and from 300,000 to 600,000. See Coffee, supra note 3, at 1361 nn. 58-59. While these numbers are quite different, one can detect a range suggesting at least the order of magnitude for the expected number of future claims.
88. During the Dalkon Shield litigation, for example, the company itself presented the $1.215 billion estimate while the tort claimants provided the $7.167 billion estimate. The equity committee, the unsecured creditors committee, and the defendant's insurance company produced the middle-ground valuations. See SOBOL, supra note 67, at 183.
89. Arguably, less complicated valuation problems in the Dalkon Shield case led to more accurate predictions and to more adequate compensation of future claimants. See, e.g., Georgene M. Vairo, The Dalkon Shield Claimants Trust: Paradigm Los, (or Found)?, 61 FORDHAM L. REV. 617, 651-60 (1992) (describing the A.H. Robins bankruptcy as a success). In other mass torts, such as asbestos, estimating the futures' expected numbers and total liabilities has been much harder. In the asbestos context, the courts, and the experts working under their supervision, have struggled to produce accurate valuations. Both the Johns-Manville and the National Gypsum bankruptcies resulted in underfunded trusts. See Coffee, supra note 3, at 1387, 1422 n.308.
90. N).
91. N-type indeterminacies. In the Manville case, for example, Judge Weinstein used a special master (a mass tort expert), a court expert (a law school dean), another expert (a professor of demographics), and a consultant to establish the.number of future claimants. See In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 982 F.2d 721, 731-32 (2d Cir. 1992). The judge appropriated $60,000 for studies of the expected numbers of future claimants. See id. at 732. In the Dalkon Shield case, Judge Merhige required each party to make its own evaluation of the expected number of future claims and their total value. See SOBOL, supra note 67, at 178-97. As a result, five different teams of experts used various statistical techniques to produce five different estimates of the future claims' number. Far from simply accepting the numbers, the judge interrogated the proponents of each valuation at a special hearing and invited all parties to contest one another's findings. See id. Yet another example of an extensive effort to evaluate the expected number and total value of future claims is the National Gypsum bankruptcy. See FREDERICK C. DUNBAR & DENISE A. NEUMANN, NATIONAL ECON. RESEARCH ASSOC., INC., ESTIMATING FUTURE ASBESTOS CLAIMS: LESSONS FROM THE NATIONAL GYPSUM LITIGATION (1993).
92. N-type indeterminacies. In the Manville case, for example, Judge Weinstein used a special master (a mass tort expert), a court expert (a law school dean), another expert (a professor of demographics), and a consultant to establish the.number of future claimants. See In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 982 F.2d 721, 731-32 (2d Cir. 1992). The judge appropriated $60,000 for studies of the expected numbers of future claimants. See id. at 732. In the Dalkon Shield case, Judge Merhige required each party to make its own evaluation of the expected number of future claims and their total value. See SOBOL, supra note 67, at 178-97. As a result, five different teams of experts used various statistical techniques to produce five different estimates of the future claims' number. Far from simply accepting the numbers, the judge interrogated the proponents of each valuation at a special hearing and invited all parties to contest one another's findings. See id. Yet another example of an extensive effort to evaluate the expected number and total value of future claims is the National Gypsum bankruptcy. See FREDERICK C. DUNBAR & DENISE A. NEUMANN, NATIONAL ECON. RESEARCH ASSOC., INC., ESTIMATING FUTURE ASBESTOS CLAIMS: LESSONS FROM THE NATIONAL GYPSUM LITIGATION (1993).
93. See Francis E. McGovern, Looking to the Future of Mass Torts: A Comment on Schuck and Siliciano, 80 CORNELL L. REV. 1022, 1027-32 (1995).
94. See Robert G. Bone, Statistical Adjudication: Rights, Justice, and Utility in a World of Process Scarcity, 46 VAND. L. REV. 561 (1993); Troyen A. Brennan, Causal Chains and Statistical Links: The Role of Scientific Uncertainty in Hazardous-Substance Litigation, 73 CORNELL L. REV. 469 (1988); Michael J. Saks & Peter David Blanck, Justice Improved: The Unrecognized Benefits of Aggregation and Sampling in the Trial of Mass Torts, 44 STAN. L. REV. 815 (1992); Steve Gold, Note, Causation in Toxic Torts: Burdens of Proof, Standards of Persuasion, and Statistical Evidence, 96 YALE L.J. 376 (1986). The differences among courts' experiences can be easily explained. Estimation of the claims' values is the critical issue in traditional (nonglobal) mass torts class actions - something the courts have been dealing with for some time. See, e.g., Jenkins v. Raymark Indus., 782 F.2d 468, 471 (5th Cir. 1986) (affirming a scheme of determining class members' claim values based on jury "mini-trials" and conclusions of a special master). Until recently, courts simply had less need to use statistics to predict the expected number of future claimants. The Dalkon Shield settlement was not approved until the late 1980s. See In re A.H. Robins Co., 880 F.2d 709 (4th Cir. 1989). The National Gypsum and the Johns-Manville bankruptcies reached their initial conclusions in the early 1990s. See Coffee, supra note 3, at 1422 n.308.
95. See Robert G. Bone, Statistical Adjudication: Rights, Justice, and Utility in a World of Process Scarcity, 46 VAND. L. REV. 561 (1993); Troyen A. Brennan, Causal Chains and Statistical Links: The Role of Scientific Uncertainty in Hazardous-Substance Litigation, 73 CORNELL L. REV. 469 (1988); Michael J. Saks & Peter David Blanck, Justice Improved: The Unrecognized Benefits of Aggregation and Sampling in the Trial of Mass Torts, 44 STAN. L. REV. 815 (1992); Steve Gold, Note, Causation in Toxic Torts: Burdens of Proof, Standards of Persuasion, and Statistical Evidence, 96 YALE L.J. 376 (1986). The differences among courts' experiences can be easily explained. Estimation of the claims' values is the critical issue in traditional (nonglobal) mass torts class actions - something the courts have been dealing with for some time. See, e.g., Jenkins v. Raymark Indus., 782 F.2d 468, 471 (5th Cir. 1986) (affirming a scheme of determining class members' claim values based on jury "mini-trials" and conclusions of a special master). Until recently, courts simply had less need to use statistics to predict the expected number of future claimants. The Dalkon Shield settlement was not approved until the late 1980s. See In re A.H. Robins Co., 880 F.2d 709 (4th Cir. 1989). The National Gypsum and the Johns-Manville bankruptcies reached their initial conclusions in the early 1990s. See Coffee, supra note 3, at 1422 n.308.
96. See Robert G. Bone, Statistical Adjudication: Rights, Justice, and Utility in a World of Process Scarcity, 46 VAND. L. REV. 561 (1993); Troyen A. Brennan, Causal Chains and Statistical Links: The Role of Scientific Uncertainty in Hazardous-Substance Litigation, 73 CORNELL L. REV. 469 (1988); Michael J. Saks & Peter David Blanck, Justice Improved: The Unrecognized Benefits of Aggregation and Sampling in the Trial of Mass Torts, 44 STAN. L. REV. 815 (1992); Steve Gold, Note, Causation in Toxic Torts: Burdens of Proof, Standards of Persuasion, and Statistical Evidence, 96 YALE L.J. 376 (1986). The differences among courts' experiences can be easily explained. Estimation of the claims' values is the critical issue in traditional (nonglobal) mass torts class actions - something the courts have been dealing with for some time. See, e.g., Jenkins v. Raymark Indus., 782 F.2d 468, 471 (5th Cir. 1986) (affirming a scheme of determining class members' claim values based on jury "mini-trials" and conclusions of a special master). Until recently, courts simply had less need to use statistics to predict the expected number of future claimants. The Dalkon Shield settlement was not approved until the late 1980s. See In re A.H. Robins Co., 880 F.2d 709 (4th Cir. 1989). The National Gypsum and the Johns-Manville bankruptcies reached their initial conclusions in the early 1990s. See Coffee, supra note 3, at 1422 n.308.
97. See Robert G. Bone, Statistical Adjudication: Rights, Justice, and Utility in a World of Process Scarcity, 46 VAND. L. REV. 561 (1993); Troyen A. Brennan, Causal Chains and Statistical Links: The Role of Scientific Uncertainty in Hazardous-Substance Litigation, 73 CORNELL L. REV. 469 (1988); Michael J. Saks & Peter David Blanck, Justice Improved: The Unrecognized Benefits of Aggregation and Sampling in the Trial of Mass Torts, 44 STAN. L. REV. 815 (1992); Steve Gold, Note, Causation in Toxic Torts: Burdens of Proof, Standards of Persuasion, and Statistical Evidence, 96 YALE L.J. 376 (1986). The differences among courts' experiences can be easily explained. Estimation of the claims' values is the critical issue in traditional (nonglobal) mass torts class actions - something the courts have been dealing with for some time. See, e.g., Jenkins v. Raymark Indus., 782 F.2d 468, 471 (5th Cir. 1986) (affirming a scheme of determining class members' claim values based on jury "mini-trials" and conclusions of a special master). Until recently, courts simply had less need to use statistics to predict the expected number of future claimants. The Dalkon Shield settlement was not approved until the late 1980s. See In re A.H. Robins Co., 880 F.2d 709 (4th Cir. 1989). The National Gypsum and the Johns-Manville bankruptcies reached their initial conclusions in the early 1990s. See Coffee, supra note 3, at 1422 n.308.
98. See David S. Salsburg & Jack F. Williams, A Statistical Approach to Claims Estimation in Bankruptcy, 32 WAKE FOREST L. REV. 1119 (1997) (critiquing existing statistical techniques and suggesting a new one).
99. See, e.g., id. at 1130-38 (describing an existing face-value model, a zero-value model, a market-theory model, a forced-settlement model, a discounted-value model, and a summary-trial model, and proposing a new model).
100. See Schuck, supra note 9, at 951-53.
101. N estimates, I later propose additional procedural protections for future claimants. See infra notes 160-164 and accompanying text.
102. In bankruptcy, the pro rata rule is called temporal equality. See Mark J. Roe, Bankruptcy and Mass Tort, 84 COLUM. L. REV. 846, 853 (1984).
103. See, e.g., In re Klein Sleep Prods., Inc., 78 F.3d 18, 20 (2d Cir. 1996); In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 982 F.2d 721, 736-37 (2d Cir. 1992); Coffee, supra note 3, at 1458-59.
104. The courts have gone so far as to adopt a rule that if a settlement is fair, then the negotiations were fair as well. See, e.g., Bowling v. Pfizer, 143 F.R.D. 141, 152 (S.D. Ohio 1992) (citing cases). The Amchem Court chastised the district court for overreliance on "fairness" of the settlement by explicitly stating that "[f]ederal courts . . . lack authority to substitute for Rule 23's certification criteria a standard never adopted - that if a settlement is 'fair,' then certification is proper." Amchem Prods., Inc. v. Windsor, 117 S. Ct. 2231, 2249 (1997).
105. In Ahearn, for example, the court used a mandatory class action because available assets comprised a limited fund of insurance proceeds. If a $2 billion insurance fund was almost insufficient to satisfy all existing and future claims, an extra tenth of this amount ($250 million, representing all of the defendant's assets) could not have been enough to guarantee a comfortable distance from Chapter 11. But see infra note 104 and accompanying text (arguing that a company's assets may not reflect its true market value).
106. See infra Part IV.
107. The Georgine plaintiffs were exposed to different products, for different durations, and in different ways, suffered different illnesses, and had different complicating factors. See Amchem, 117 S. Ct. at 2250. In addition, it remains unclear whether any exposure-only plaintiffs will contract a disease at all, and if so, which ones will do so and what their medical expenses will be. See id.
108. Id.
109. Note that 23(b)(1) class actions are still subject to the four-prong test of Rule 23(a), including the commonality requirement. Importantly, the Court acknowledged that the commonality requirement, while similar to the predominance inquiry, is far less demanding. See id.
110. This was one of the main reasons that courts were slow to accept mass tort class actions in the first place. See Coffee, supra note 3, at 1344 & n.2. It was also one of the greatest complaints of the injured veterans in the Agent Orange case - the first case to approve a global settlement. See PETER H. SCHUCK, AGENT ORANGE ON TRIAL: MASS TOXIC DISASTERS IN THE COURTS 171-73 (1986). There is a "deep-rooted historic tradition that everyone should have his own day in court." CHARLES A. WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 4449, at 417 (1981).
111. This was one of the main reasons that courts were slow to accept mass tort class actions in the first place. See Coffee, supra note 3, at 1344 & n.2. It was also one of the greatest complaints of the injured veterans in the Agent Orange case - the first case to approve a global settlement. See PETER H. SCHUCK, AGENT ORANGE ON TRIAL: MASS TOXIC DISASTERS IN THE COURTS 171-73 (1986). There is a "deep-rooted historic tradition that everyone should have his own day in court." 18 CHARLES A. WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 4449, at 417 (1981).
112. See Robert L. Rabin, Continuing Tensions in the Resolution of Mass Toxic Harm Cases: A Comment, 80 CORNELL L. REV. 1037, 1041 (1995).
113. This is true at least within a litigation-based regime. For alternative ways of resolving mass torts through an administrative-law-type system, see, for example, Robert L. Rabin, Some Thoughts on the Efficacy of a Mass Toxics Administrative Compensation Scheme, 52 MD. L. REV. 951 (1993); and David Rosenberg, The Causal Connection in Mass Exposure Cases: A "Public Law" Vision of the Tort System, 97 HARV. L. REV. 849 (1984).
114. This is true at least within a litigation-based regime. For alternative ways of resolving mass torts through an administrative-law-type system, see, for example, Robert L. Rabin, Some Thoughts on the Efficacy of a Mass Toxics Administrative Compensation Scheme, 52 MD. L. REV. 951 (1993); and David Rosenberg, The Causal Connection in Mass Exposure Cases: A "Public Law" Vision of the Tort System, 97 HARV. L. REV. 849 (1984).
115. For discussion of the harms brought by immature global settlements, see infra notes 121-128 and accompanying text.
116. For a detailed discussion of the factors affecting γ, see infra notes 165-177 and accompanying text.
117. F is known.
118. These two figures can be dramatically different. For example, Judge Williams concluded in 1981 that the assets of A.H. Robins totaled $280 million. See In re Northern Dist. of Cal. Dalkon Shield IUD Prod. Liab. Litig., 526 F. Supp. 887, 893 (N.D. Cal. 1981), vacated, 693 F.2d 847 (9th Cir. 1982). Six years later bankruptcy proceedings led to the sale of the same company and the creation of a fund totaling $2 475 billion. See In re A.H. Robins Co., 880 F.2d 709, 721 (4th Cir. 1989). The difference was due to the fact that the district court looked at the defendant's net assets while the bankruptcy sale produced the amount equal to the defendant's value as a going concern. Microsoft Corp. offers another example of a possible difference between these two figures. Its net assets (total assets minus total liabilities) for 1997 were roughly $11 billion. See Microsoft Corp., 1997 Annual Report (visited Feb. 3, 1997) 〈http://www .microsoft.com/msft/ar97/financial/income.htm〉, 〈http://www.microsoft.com/msft/ar97/financial/highlights .htm〉, 〈http://www.microsoft.com/msft/ar97/financial/notes.htm〉. Its market value (roughly estimated as the weighted average number of shares outstanding during 1997 times the arithmetic average of the lowest and the highest share price for 1997) equals $125 billion. See id.
119. FED. R. CIV, P. 23(b)(1). The Advisory Committee has interpreted this rule as satisfied "when claims are made by numerous persons against a fund insufficient to satisfy all claims." Id. 23(b)(1)(B) advisory committee's note (1966).
120. See In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 982 F.2d 721, 736-37 (2d Cir. 1992). See generally Richard L. Marcus, They Can't Do That, Can They? Tort Reform via Rule 23, 80 CORNELL L. REV. 858, 878 (1995) (noting that there are "situations in which there is a finite legal limit to the fund available to satisfy claims," such as when a dollar limit on recovery is placed by a law such as the Price-Anderson Act).
121. See In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 982 F.2d 721, 736-37 (2d Cir. 1992). See generally Richard L. Marcus, They Can't Do That, Can They? Tort Reform via Rule 23, 80 CORNELL L. REV. 858, 878 (1995) (noting that there are "situations in which there is a finite legal limit to the fund available to satisfy claims," such as when a dollar limit on recovery is placed by a law such as the Price-Anderson Act).
122. Findley, 982 F.2d at 735.
123. See, e.g., In re Asbestos Litig. (Flanagan v. Ahearn), 90 F.3d 963, 982 (5th Cir. 1996), vacated, 117 S. Ct. 2503 (1997).
124. See, e.g., Findley, 982 F.2d at 737 (referring to Drexel Burnham Lambert Group's settlement of its litigation with the Securities and Exchange Commission providing for payment of $200 million into a fund created for "defrauded purchasers, with the fund to be augmented by an additional payment of $150 million").
125. In re Joint E. & S. Dist. Asbestos Litig. (Keene Corp. v. Fiorelli), 14 F.3d 726, 732 (2d Cir. 1993); accord In re School Asbestos Litig., 789 F.2d 996 (3d Cir. 1986); In re Bendectin Prods. Liab. Litig., 749 F.2d 300 (6th Cir. 1984); In re Northern Dist. of Cal. Dalkon Shield IUD Prods. Liab. Litig., 693 F.2d 847, 851 (9th Cir. 1982). But see Ahearn, 90 F.3d at 983 (concluding that in appropriate and limited circumstances the defendant's potential or probable insolvency can create a limited fund within the meaning of Rule 23(b)(1)(B)); Findley, 982 F.2d at 739 (stating in dicta that a limited fund class action may be possible in the case, but decertifying the class anyway); In re Drexel Burnham Lambert Group, Inc., 960 F.2d 285, 292 (2d Cir. 1992) (approving a limited fund class action under particular circumstances while recognizing that normally it should not be used in the bankruptcy context).
126. For discussion of mass-tort-related factors, see infra text accompanying note 152. Unrelated factors affecting V may include making and patenting major inventions, securing the services of valuable key personnel, reaching an advantageous agreement with labor unions, prevailing in lawsuits, and making successful investments. The state of the national and global economy may also affect V.
127. A firm's value V is limited in the sense that it can be determined at any given moment from certain available information. Those who believe in a semi-strong version of efficient market theory think that the stock price of a firm reflects all publicly available information about it. See, e.g., STEPHEN A. ROSS ET AL., CORPORATE FINANCE 340 (4th ed. 1996). Conceivably, discovery during negotiations may yield even more information, which could help produce an even better estimate of the firm's value. Amounts of available insurance funds, contributions by codefendants, and non-tort liabilities can be estimated and are never infinite.
128. See infra text accompanying notes 116-118.
129. See, e.g., Ahearn, 90 F.3d at 1006 (Smith, J., dissenting) (arguing that 23(b)(1)(B) class actions are only constitutional for equitable (as opposed to legal) actions, such as actions by a trust beneficiary, where the plaintiff's pro rata rights to the trust corpus are already established by law); Findley, 982 F.2d at 736 (noting that it would be easier to approve a limited fund class action in the context of insolvency when it is used "for its traditional purpose of effecting a pro rata reduction of all claims").
130. See infra text accompanying note 152.
131. In re Joint E. & S. Dist. Asbestos Litig. (Keene Corp. v. Fiorelli), 14 F.3d 726 (2d Cir. 1993).
132. Id. at 732; see also Findley, 982 F.2d at 735-36.
133. See Keene, 14 F.3d at 728 (reporting that Keene's net assets, including the disputed insurance claims were around $51 million while its asbestos-related liabilities were approximately $500 million).
134. A is thus the amount of the firm's net assets - its total assets reduced by the amount of its total non-tort liabilities.
135. F).
136. I adopt the term "nuisance" settlement in view of Professor Schuck's conclusion that the only possible explanation for the Agent Orange settlement amount was its "nuisance value" on the eve of the trial. SCHUCK, supra note 98, at 259.
137. By acting preemptively, the defendant may choose plaintiffs' lawyers who agree to the legal environment favorable to the defendant. The term legal environment includes factors ranging from the law of a particular state to the views of a particular judge. For a demonstration of the critical importance of the legal environment, see SOBOL, supra note 67, at 40, which describes the troubles of A.H. Robins in the courtroom of Judge Theis.
138. The breast implants settlement may be an example of a preemptive settlement. See In re Silicone Gel Breast Implant Prod. Liab. Litig. (Breast Implants Litigation), No. CV 92-P-10000-S, MDL No. 926, Civ. A. No. CV94-P-11558-S, 1994 WL 578353, at *1 (N.D. Ala. Sept. 1, 1994). As this example shows, defendants planning a preemptive settlement may underestimate the number of claims, overestimate their own liability, or both. Former FDA Commissioner David Kessler, whose decision on January 7, 1992, to impose a temporary moratorium on the use of silicone breast implants transformed the breast implant litigation into a mass tort, said recently: "We now have, for the first time, a reasonable assurance that silicone-gel implants do not cause a large increase in disease in women." West's Legal News: Torts and Personal Injury: Breast Implants Pathfinder, 1997 WL 12523, at *4 (Jan. 16, 1997).
139. The Agent Orange fact pattern proved typical of nuisance mass tort class actions. In the Rhone-Poulenc controversy, for example, plaintiffs' statistical chances of success were a meager 7.7%. See In re Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1299 (7th Cir. 1995). In the 15-year history of the breast implants litigation only about a dozen cases were adjudicated prior to consolidation in Judge Pointer's court See Breast Implants Litigation, 1994 WL 578353, at *1. Smokers had no cases to rely on in Castano v. American Tobacco Co., 84 F.3d 734 (5th Cir. 1996). The long history of tobacco litigation was of no help to the Castano plaintiffs because they were relying both on a new theory of liability and on entirely new evidence. See id. at 751.
140. Castano, 84 F.3d at 746 (citing cases).
141. Such plaintiffs appeared in the Agent Orange case and attempted to reopen the settlement. See In re "Agent Orange" Prod. Liab. Litig., 996 F.2d 1425 (2d Cir. 1993). The court barred their actions in view of the earlier settlement.
142. To be sure, historic values themselves are susceptible to criticism, but short of a massive shift in the compensation regime to an administrative-agency-type scheme, these values are the best estimates the parties could have.
143. See Schuck, supra note 9, at 958-59 (arguing that the importance of accurate evaluation of mass tort claims cannot be overestimated and can be achieved only by maturation of a mass tort).
144. William W. Schwarzer, Settlement of Mass Tort Class Actions: Order out of Chaos, 80 CORNELL L. REV. 837, 841 (1995) (emphasis added).
145. Marcus, supra note 106, at 880 (emphasis added).
146. See Amchem Prods. Inc. v. Windsor, 117 S. Ct. 2231, 2249 (1997) (criticizing the practice of finding certification proper based on the finding that the settlement is fair, and rejecting the conclusion that a common interest in a fair compromise could satisfy the predominance requirement).
147. Schwarzer, supra note 129, at 841.
148. See Coffee, supra note 3, at 1362 n.60 ("[N]o effort was made to develop any actuarial estimate of future claims in the recent asbestos class actions."). This disinterest is hard to understand in Georgine and impossible to understand in Ahearn. While Georgine was a global settlement, one could argue that, because it was not a limited fund class action, the estimate of the futures' number was less crucial. The argument is plausible - but false. The Georgine settlement had many limited fund features. It imposed "case flow maximums" on the number of claims in each category to be paid each year. These "maximums" were already set "less than the annual new case filings against the [Georgine] defendants." Georgine v. Amchem Prods., Inc., 157 F.R.D. 246, 280 (E.D. Pa. 1994), vacated, 83 F.3d 610 (3d Cir. 1996), aff'd sub nom. Amchem, 117 S. Ct. 2231 (1997). The court recognized the
149. The A.H. Robins Company, National Gypsum Corp., and Johns-Manville Corp. were all bankrupt when the issue of future claimants arose. See supra note 81.
150. See, e.g., Coffee, supra note 3, at 1458-59. Because the rule of absolute priority requires that tort claimants receive full payment before stockholders can share in the firm's value, the value of all tort claims must be established by a bankruptcy court.
151. The Fifth Circuit satisfied itself by concluding that, without the settlement, "Fibreboard would be unable to pay all the valid claims against it within five to nine years." Ahearn, 90 F.3d at 982.
152. See, e.g., In re Johns-Manville Corp., 68 B.R. 618, 620-22 (Bankr. S.D.N.Y. 1986) (describing a more than four-year-long process in establishing two trusts, one of which would inter alia, hold 80% of the stock of the reorganized entity), aff'd in part, rev'd in part, 78 B.R. 407 (Bankr. S.D.N.Y. 1987), aff'd sub nom. Kane v. Johns-Manville Corp., 843 F.2d 636 (2d Cir. 1988). When mass tort claimants become owners of a defendant firm, they by this very fact capture the value of the firm. Another process that effectively reveals the full value of a defendant firm during bankruptcy proceedings is a bidding war between several potential acquirers of the bankrupt defendant. See, e.g., SOBOL, supra note 67, at 198-209 (describing the bidding for A.H. Robins).
153. See, e.g., In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 982 F.2d 721, 725-26 (2d Cir. 1992) (describing the creation of the original Manville Trust).
154. This was the result in Ahearn. See Coffee, supra note 3, at 1402 (noting that Fibreboard contributed $10 million of its approximately $250 million assets). Insurance proceeds comprised the bulk of the settlement fund. See Ahearn, 90 F.3d at 971-72. In the district court, Judge Parker briefly treated the issue in the following way: "There is no authority or reason why Class Counsel may settle a 23(b)(1)(B) class action only if all of the defendant's resources are included in the settlement. Such a rule would make no sense, would discourage settlements and has been rejected." Ahearn v. Fibreboard Corp., 162 F.R.D. 505, 527 (E.D. Tex. 1995) (citing two district court cases), aff'd sub nom. Ahearn, 90 F.3d 963 (5th Cir. 1996), vacated 117 S. Ct. 2503 (1997). Issues of authority aside, I respectfully disagree with Judge Parker about the reason behind the inclusion requirement. As I argue in this Note, the situation is just the reverse: There is no reason not to include all of the defendant's resources in the settlement process. This does not mean that all these resources should be used to compensate mass tort claimants, but without considering them it is impossible to determine whether the time of global settlement has come, or what the appropriate settlement fund should be.
155. For discussion of who these parties are likely to be, see infra notes 143-150 and accompanying text.
156. F. I discuss γ-type uncertainties below. See infra notes 165-177 and accompanying text.
157. For an argument that mass tort plaintiffs have ethical obligations toward each other, see Carrie Menkel-Meadow, Ethics and the Settlements of Mass Torts: When the Rules Meet the Road, 80 CORNELL L. REV. 1159, 1177 & n.71 (1995).
158. An example of a premature action is the breast implants settlement. See Coffee, supra note 3, at 1433.
159. See supra text accompanying notes 116-118.
160. For example, a recent study shows that 70% of large reorganizations resulted in a management change during the pendency of the Chapter 11 proceedings. See Lynn M. LoPucki & William C. Whitford, Patterns in the Bankruptcy Reorganization of Large, Publicly Held Companies, 78 CORNELL L. REV. 597, 610-11 (1993).
161. See infra notes 192-195 and accompanying text.
162. See infra notes 165-177 and accompanying text.
163. N) before a court focused on the issue. If the proposed regime is adopted and the defendants can adjust their behavior accordingly, future claimants may gain an unexpected "friend."
164. Under the current regime, the threat of large claimants' voting with their feet causes the defendants to structure the deal so that the difference between the large- and small-claim awards under the settlement is larger than the difference between the respective historic values. See Coffee, supra note 3, at 1450-51 n.431.
165. F rather than for a lower V.
166. F and V to be high. The following table summarizes the parties' negotiating objectives:
167. See, e.g., Roe, supra note 90, at 856-62 (describing the operational collapse of firms facing unresolved mass tort claims).
168. Professor Coffee, for example, has made a proposal to combine a mandatory class action at the liability stage with deferred limited opt-out rights. See Coffee, supra note 3, at 1446-53.
169. Protection of defendants' funds against depletion by present claimants is one of the central issues of contemporary debate. See generally Symposium, Mass Tortes: Serving Up Just Desserts, 80 CORNELL L. REV. 811 (1995). Professor Coffee argues that unrestricted present claimants "will deplete virtually any settlement fund in short order, leaving future claimants empty-handed." Coffee, supra note 3, at 1387.
170. The ability of back-end opt outs to preserve futures' autonomy is probably the most popular argument in favor of this procedural device. See, e.g., Coffee, supra note 3, at 1447 (calling litigant autonomy "a value normally deserving considerable constitutional weight"); Schuck, supra note 9, at 964 (calling the institutionalization and enlargement of claimant autonomy a "highly desirable and important innovation for the emergent mass tort system"). The preference for the futures' autonomy is either expressly explained or supported by an implicit recognition that present claimants receive higher benefits from global settlements than do the futures. The proposed regime attacks the problem at its root - it insures that the benefits are equal (including appropriate discounts). This makes the indirect compensation via back-end opt outs unnecessary.
171. See, e.g., Bowling v. Pfizer, Inc., 143 F.R.D. 141, 170 (S.D. Ohio 1992) (binding in a settlement only small claimants (both present and future) who had the defendant's heart valve, yet suffered no noticeable physical injury from it). The unique feature of the settlement approved in Bowling is an absolute freedom to opt out reserved for claimants who move into the large plaintiff category because of a failure of their valves. See id. at 150.
172. Back-end opt-out provisions almost always deny the right to claim punitive damages. See, e.g., In re Asbestos Litig. (Flanagan v. Ahearn), 90 F.3d 963, 973 (5th Cir. 1996) (noting that the settlement precluded punitive damages), vacated, 117 S. Ct. 2503 (1997). The number of claimants who can exit each year is limited, often to a minuscule percentage of the total number of plaintiffs. See, e.g., Georgine v. Amchem Prods., Inc., 83 F.3d 610, 620 (3d Cir. 1996) (describing strict limits on "extraordinary" claims and caps on non-"extraordinary" claims paid out according to a settlement), aff'd sub nom. Amchem Prods., Inc., v. Windsor, 117 S. Ct. 2231 (1997). Claimants must go through one or several alternative dispute resolution proceedings before a court hearing becomes available. See, e.g., Ahearn, 90 F.3d at 972-73. Any award obtained in court is capped by a certain amount, see, e.g., id. at 973 (citing a $500,000 cap on recovery in the tort system and preclusion of recovery of punitive damages), and even this award is paid over an extended period, see id. Finally, attorneys' fees are limited. See id. It is undeniably true that "[i]t is not a matter of semantics, not a matter of whether the talismanic word 'opt-out' is used but whether the right given exists in effect." In re A.H. Robins Co., 880 F.2d 709, 745 (4th Cir. 1989) (citing Walters v. National Ass'n of Radiation Survivors, 473 U.S. 305, 321 (1985)). But it is equally true that, as the restrictions accumulate, the back-end opt out looks more and more like no opt out at all, semantically or substantively.
173. See Schuck, supra note 9, at 967.
174. Ahearn, 90 F.3d at 1007 n.30 (Smith, J., dissenting).
175. It is most likely that such parties will be future claimants.
176. This is so because earlier plaintiffs' awards will be reduced, not late in the game when there is no cash in the settlement fund, but much earlier, when the expectation about the remaining liabilities changes. There are other ways to make both present plaintiffs and defendants more sensitive to undervaluing future claims. For example, instead of paying present claimants in full, the settlement could provide for annuity-type payments such that the present value of the annuity equals the total award amount. Combined with the ongoing revaluation technique, this would effectively hold the unpaid portion of the earlier plaintiffs' claims as insurance against devaluation of the later claimants' awards. An even stronger measure might be to do the same with the plaintiffs' counsel fees (which, in the Georgine case, could have exceeded $100 million). See Koniak, supra note 49, at 1067. There are other ways to make both present plaintiffs and defendants more sensitive to undervaluing future claims. A detailed discussion of such alternatives is beyond the scope of this Note.
177. This presumes that the court will retain the futures' representative for as long as there are future claimants. It also presumes that such a representative will be compensated enough to provide ongoing vigorous representation.
178. There is considerable evidence showing that the judges who handle mass tort cases often reach a point when they become personally interested in settling the dispute. See, e.g., Ahearn, 90 F.3d at 971 (describing critical negotiations at Judge Parker's home and later at a nearby coffee shop); SCHUCK, supra note 98, at 143-67 (describing the extraordinary efforts of Judge Weinstein to settle the Agent Orange case); SOBOL, supra note 67, at 44-45 (describing a critical decision in the Dalkon Shield case reached in Judge Merhige's home). Judges who spend this much time and effort settling cases are unlikely to be pleased when they come back. On the other hand, to the extent the judges feel responsible for gross undervaluations under their supervision, the proposed procedural modification will allow them to deal with the problem more easily. See, e.g., In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 982 F.2d 721, 727 (2d Cir. 1992) (describing the Herculean efforts of Judge Weinstein to reopen the Manville Trust settlement single-handedly).
179. A significant part of this institutional knowledge would come from continual reassessment of the adequacy of original and subsequent valuations of the expected number of future claims.
180. See DUNBAR & NEUMANN, supra note 83, at 31.
181. See Mike Causey, HMOs May Be Best Route, WASH. POST, Aug. 18, 1995, at B2. While health care expenses per capita grew at about 9% annually from 1950 to 1995, the Consumer Price Index (CPI) increased at a rate of only 4.5%. See Karen Davis, Medicare: Options for the Long Term, in POLICY OPTIONS FOR REFORMING THE MEDICARE PROGRAM 113, 115 (Stuart H. Altman et al. eds., 1997). On the other hand, during the 1993-1995 period, health care expenses grew at a rate of 5.5% and the CPI at 2.8%. See id. In 1994, national health care expenditures grew more slowly than Gross Domestic Product. See id. It is hard to know what is responsible for the recent slowdown in private health outlays or whether this trend is permanent or temporary.
182. See Mike Causey, HMOs May Be Best Route, WASH. POST, Aug. 18, 1995, at B2. While health care expenses per capita grew at about 9% annually from 1950 to 1995, the Consumer Price Index (CPI) increased at a rate of only 4.5%. See Karen Davis, Medicare: Options for the Long Term, in POLICY OPTIONS FOR REFORMING THE MEDICARE PROGRAM 113, 115 (Stuart H. Altman et al. eds., 1997). On the other hand, during the 1993-1995 period, health care expenses grew at a rate of 5.5% and the CPI at 2.8%. See id. In 1994, national health care expenditures grew more slowly than Gross Domestic Product. See id. It is hard to know what is responsible for the recent slowdown in private health outlays or whether this trend is permanent or temporary.
183. Such a decrease seems to be taking place in the breast implants litigation. See supra note 123.
184. See Schuck, supra note 20, at 546-47.
185. E.g., Coffee, supra note 3, at 1395-96 (using the "other cancer" category).
186. For an example of the awards schedules in two asbestos-related settlements, see id. at 1395-96. Recoveries by the "other cancer" victims were scheduled to be 80% less than by the mesothelioma victims. See id.
187. Courts have expanded categories of compensable harms to include fear of future injury, medical-monitoring costs, and exposure-only nonimpairing conditions, see, e.g., Schuck, supra note 9, at 947 & n.25, while simultaneously limiting defenses, see, e.g., In re "Agent Orange" Prod. Liab. Litig., 996 F.2d 1425, 1436 (2d Cir. 1993) (acknowledging that the government contractor defense had been limited since the resolution of the original case). For a look at recent legislative changes in the law of torts, see Mark Thompson, Letting the Air out of Tort Reform, A.B.A. J., May 1997, at 64.
188. Courts have expanded categories of compensable harms to include fear of future injury, medical-monitoring costs, and exposure-only nonimpairing conditions, see, e.g., Schuck, supra note 9, at 947 & n.25, while simultaneously limiting defenses, see, e.g., In re "Agent Orange" Prod. Liab. Litig., 996 F.2d 1425, 1436 (2d Cir. 1993) (acknowledging that the government contractor defense had been limited since the resolution of the original case). For a look at recent legislative changes in the law of torts, see Mark Thompson, Letting the Air out of Tort Reform, A.B.A. J., May 1997, at 64.
189. See In re A.H. Robins Co., 880 F.2d 709, 711 (3d Cir. 1989).
190. See id. at 715.
191. See West's Legal News: Torts and Personal Injury: Breast Implants Pathfinder, supra note 123, at *3.
192. See id.
193. Among the γ-risks, inflation can be evaluated with the highest degree of certainty. It is therefore not surprising that both courts and scholars have focused their attention on this γ-factor. See, e.g., Amchem Prods., Inc. v. Windsor, 117 S. Ct. 2231, 2251 (1997); Coffee, supra note 3, at 1459.
194. Such modification should clearly take place, for example, if Congress were to adopt universal health coverage and the settlement provides for medical-monitoring costs. The procedural modification to the pro rata rule already presupposes a continuous monitoring by the futures' representative and a possible readjustment of the awards. It provides a convenient framework to monitor and adjust for future changes in γ-type risks.
195. In re Asbestos Litig. (Flanagan v. Ahearn), 90 F.3d 963, 970 (5th Cir. 1996) (stating that the principal defendant "made it clear from the beginning that it would only entertain a global settlement if the settlement brought 'total peace'"), vacated, 117 S. Ct. 2503 (1997).
196. See sources cited supra note 23.
197. See 11 U.S.C. § 1126 (1994).
198. See id. § 1125.
199. See id. § 1129(b)(1).
200. See id. § 1129(a)(7).
201. Cf. Thomas A. Smith, A Capital Markets Approach to Mass Tort Bankruptcy, 104 YALE L.J. 367, 382-89 (1994) (discussing underestimation, and thus undercompensation, of claims in mass tort bankruptcies).
202. Coffee, supra note 3, at 1388 (describing the Johns-Manville bankruptcy).
203. See In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 982 F.2d 721, 725-28 (2d Cir. 1992).
204. See id. at 753.
205. Just before Dow Corning filed for Chapter 11, the plaintiffs could count on, at best, 12% to 16% of their originally scheduled benefits and, at worst, less than 5%. See Coffee, supra note 3, at 1408. The share of the original claim values payable by the Manville Trust was 10%. See In re Joint E. & S. Dist. Asbestos Litig. (Keene Corp. v. Fiorelli), 78 F.3d 764, 770 (2d Cir. 1996).
206. See Roe, supra note 90, at 905.
207. See id. at 905-17.
208. See supra notes 143-150 and accompanying text.
209. Recent decisions have held that there must be some "prepetition relationship" between future claimants and the bankrupt defendant in order for the future claimants to have standing. Epstein v. Official Comm. of Unsecured Creditors of the Estate of Piper Aircraft Corp., 58 F.3d 1573, 1577 (11th Cir. 1995). Other courts use a more liberal "conduct test," under which a right to payment arises when the conduct giving rise to the alleged liability has occurred. See id. Even these courts, however, presume some prepetition relationship between the debtor's conduct and the claimant. See id. at 1576-77.
210. In re Asbestos Litig. (Flanagan v. Ahearn), 90 F.3d 963, 985 (5th Cir. 1996), vacated, 117 S. Ct. 2503 (1997).
211. In re Joint E. & S. Dist. Asbestos Litig. (Findley v. Blinken), 982 F.2d 721, 752 (2d Cir. 1992) (Feinberg, J., concurring in part and dissenting in part) (internal quotations omitted).
212. Notably, in the Piper Aircraft bankruptcy it was the future claimants' representative who argued for their inclusion in the Piper creditors' ranks. See Epstein, 58 F.3d at 1575.
213. Amchem Prods., Inc. v. Windsor, 117 S. Ct. 2231, 2247 (1997).
214. To be sure, all of these conditions may not obtain for every mass tort. Yet, ironically, they did obtain in the very case considered by the Supreme Court. The situation was ripe for the global settlement under the proposed regime just before the Georgine deal and the accompanying inventory settlements were negotiated. Asbestos was clearly the most mature mass tort. Information about future claimants was sufficient to classify it as globally mature. While several asbestos manufacturers had gone bankrupt, all 19 Georgine defendants were financially viable companies. See Koniak, supra note 49, at 1047. Yet all parties involved in the case, including class representatives, the plaintiffs' bar, defendants, and the Georgine court itself, were concerned about defendants' possible future bankruptcies. See id. at 1099-100 (citing testimony by various parties regarding their concerns about future liability as well as the concerns of the Georgine court). In other words, there was probably a good chance that both Inequalities (3) and (4) were true. Thus, Georgine is an existing example that a real mass tort may satisfy the requirements of the proposed regime. Moreover, there is a reason to expect that more mass torts will reach global maturity in the future than have in the past. Many earlier mass torts never globally matured (and went straight into bankruptcy) because of unlimited awards and relaxed substantive doctrines. All of these rules are under attack today. See Thompson, supra note 171, at 65. As the states limit punitive damages, cap noneconomic awards, and modify their rules prohibiting juries from learning of collateral sources for paying damages, it becomes more and more likely that defendant firms will remain financially viable for a considerable time after their total liabilities (including those to future claimants) begin to exceed their value as a going concern. Therefore, more firms will be able to satisfy the requirements of the proposed regime.