The quasi-class action method of managing multi-district litigations: Problems and a proposal

Vanderbilt Law Review

Volumn 63, Issue 1, 2010, Pages 107-177

  Silver, Charles ^a   Miller, Geoffrey P ^b,c  

^a University of Texas Law School   (United States)

^b Department of Law ^*  (United States)

^c NEW YORK UNIVERSITY SCHOOL OF LAW   (United States)

Author keywords

[No Author keywords available]

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EID: 78650642552     PISSN: 00422533     EISSN: None     Source Type: Journal    
DOI: None     Document Type: Review

References (310)

1. Deborah R. Hensler, Revisiting the Monster: New Myths and Realities of Class Action and Other Large Scale Litigation, 11 DUKE J. COMP. & INT'L L. 179, 185-86 (2001) [hereinafter Hensler, Revisiting the Monster];
2. Deborah R. Hensler, The Role of Multi-Districting in Mass Tort Litigation: An Empirical Investigation, 31 SETON HALL L. REV. 883, 895 (2001) [hereinafter Hensler, The Role of Multi-Districting].
3. The Diet Drugs MDL encompassed over 18,000 personal injury lawsuits, as well as a class action with 6 million members. In re Diet Drugs, 282 F.3d 220, 225 (3d Cir. 2002). The settlement required the defendant to pay over $6 billion, of which more than $600 million was awarded to MDL counsel and class counsel combined. In re Diet Drugs (Phentermine, Fenfluramine, Dexfenfluramine) Prods. Liab. Litig., 553 F. Supp. 2d 442, 456-59 (E.D. Pa. 2008) [hereinafter In re Diet Drugs Prods. Liab. Litig.]. The Vioxx MDL encompassed approximately 50,000 claimants. The settlement cost $4.85 billion.
4. See, e.g., Daniel Fisher, Will the Vioxx Settlement Work?, FORBES.COM, Nov. 13, 2007, http://www.forbes.com /2007/11/12/merck-vioxxlawsuits-biz-health- cz-df-1112vioxx.html;
5. Morning Edition: Merck Reaches $4.8 Billion Settlement in Vioxx Case (NPR radio broadcast Nov. 9, 2007), available at http://www.npr.org/ templates/story/story.php?storyId=16147998.
6. The lead attorneys in the MDL and related state court actions have requested 8 percent of the settlement fund, $388 million, in common benefit fees. The Settlement Channel, The Vioxx Settlement. What Does It Mean and What Happens Next?, http://thesettlementchannel.squarespace.com/the- settlement-channel-blog/2007/11/10/the-vioxx-settlement-what-does-it-mean-and- what-happens-next.html (Nov. 10, 2007, 09:11 EST).
7. For example, MDL judges now plan openly and successfully for inter-court cooperation, which makes pre-trial discovery proceed more smoothly. See Yvette Ostolaza & Michelle Hartmann, Overview of Multidistrict Litigation Rules at the State and Federal Level, 26 REV. LITIG. 47, 49-50 (2007).
8. See William B. Rubenstein, On What A "Common Benefit Fee"Is, Is Not, and Should Be, 3 CLASS ACTION ATT'Y FEE DIG. 87, 88-90 (Mar. 2009) (reporting fee award percentages for twenty-one MDLs).
9. RESTATEMENT (THIRD) OF THE LAW OF RESTITUTION AND UNJUST ENRICHMENT §30 cmt. b (Tentative Draft No. 3, 2004).
10. See Judith Resnik, Money Matters: Judicial Market Interventions Creating Subsidies and Awarding Fees and Costs in Individual and Aggregate Litigation, 148 U. PA. L. REV. 2119, 2129 (2000) ("Judges now have the power of payment, serving more like clients and consumers .. ....")
11. See, e.g., In re Vioxx Prods. Liab. Litig., MDL No. 1657, 2009 WL 2408884, at *3 (E.D. La. Aug. 3, 2009);
12. In re Zyprexa Prods. Liab. Litig., No. 04-MD-1596, 2008 WL 2511791, at *1 (E.D.N.Y. June 19, 2008).
13. The roots of the quasi-class action doctrine extend back to In re Air Crash Disaster at Florida Everglades. 549 F.2d 1006, 1012 (5th Cir. 1977) (observing that "the number and cumulative size of the massed cases created a penumbra of class-type interest on the part of all the litigants and of public interest on the part of the court and the world at large.") [hereinafter Everglades Crash],
14. Judge Weinstein appears to have first enunciated the idea in Ethical Dilemmas in Mass Tort Litigation, 88 Nw. U. L. REV. 469, 480-81 (1994)
15. ("What is clear from the huge consolidations required in mass torts is that they have many of the characteristics of class actions .... It is my conclusion . . . that mass consolidations are in effect quasi-class actions. Obligations to claimants, defendants, and the public remain much the same whether the cases are gathered together by bankruptcy proceedings, class actions, or national or local consolidations.").
16. Resnik, supra note 6, at 2121-22.
17. Even at the start of the decade, however, "judges ha[d] begun to reserve some of the money (formerly conceived to "belong' to individual attorneys) to pay common benefit lawyers."
18. Id. at 2175.
19. Many scholarly writings address MDLs as an important species of litigation and discuss examples of their use. See, e.g., RICHARD A NAGAREDA, MASS TORTS IN A WORLD OP SETTLEMENT (2007);
20. Hensler, Revisiting the Monster, supra note 1;
21. Hensler, The Role of Multi-Districting, supra note 1;
22. Richard L. Marcus, Cure-All for an Era of Dispersed Litigation? Toward a Maximalist Use of the Multidistrict Litigation Panel's Transfer Power, 82 TUL. L. REV. 2245 (2008);
23. Resnik, supra note 6. However, no prior writing discusses the pros and cons of the quasiclass action approach to MDL management or the specific procedures identified in the text.
24. For a more detailed discussion of the nature of CBW, see infra Part III.A and accompanying notes.
25. A federal MDL typically includes all related cases filed in federal courts, but fails to catch cases that were filed in state courts from which they could not be removed. When significant state court litigation exists, inter-court coordination may occur.
26. See Elizabeth J. Cabraser, In Rem, Quasi In Rem, and Virtual In Rem Jurisdiction Over Discovery, 10 SEDONA CONF. J. 253, 261 (2009)
27. ("[F]ederal courts have increasingly recognized the great advantages of active federal/state court coordination, particularly in multi-jurisdictional mass torts.").
28. 521 U.S. 591, 628 (1997).
29. 527 U.S. 815, 864 (1999).
30. The Federal Judicial Center found that the rate at which mass tort cases were certified as class actions for trial declined after Amchem and Ortiz, while the frequency of certification for purposes of settlement increased. THOMAS E. WILLGING & SHANNON R. WHEATMAN, ATTORNEY REPORTS ON THE IMPACT OF AMCHEM AND ORTIZ ON CHOICE OF A FEDERAL OR STATE FORUM IN CLASS ACTION LITIGATION: A REPORT TO THE ADVISORY COMMITTEE ON CIVIL RULES REGARDING A CASE-BASED SURVEY OF ATTORNEYS 4 (2004), available at http://www.fjc.gov/public/pdf.nsf/lookup /amort02.pdf/$file/amort02.pdf.
31. See, e.g., In re Vioxx Prods. Liab. Litig., 239 F.R.D. 450, 461-63 (E.D. La. 2006).
32. 28 U.S.C. §1407(a) (2007).
33. MANUAL FOR COMPLEX LITIGATION (FOURTH) §20.132 (2004) ("One of the values of multidistrict proceedings is that they .... afford a unique opportunity for the negotiation of a global settlement.");
34. Resnik, supra note 6, at 2149 (observing that "the MDL impulse to aggregate" reflects concerns "about waste and inefficiency").
35. Not everyone is happy about this. For a thoughtful discussion of many problems associated with expanded use of JPML's power to consolidate lawsuits,
36. see Marcus, supra note 9.
37. United States Judicial Panel on Multidistrict Litigation, An Overview of the United States Judicial Panel on Multidistrict Litigation, http://www.jpml.uscourts.gov/General-Info/Overview/overview.html (last visited Nov. 12, 2009).
38. Lawyers with large inventories of signed clients often work in teams or groups.
39. JPML gathers some data and produces cursory reports, which are available at United States Judicial Panel on Multidistrict Litigation, Statistical Information, http://www.jpml.uscourts.gov/General-Info/Statistics/statistics. html (last visited Nov. 12, 2009).
40. JPML also produces specialized reports for a fee. Neither the reports themselves nor an index of them is publicly available. E-mail from Ariana Estariel to Charles Silver (July 10, 2008, 02:51:00 CST) (on file with author). The JPML is also so short of staff that it cannot even produce a list of its data fields for an independent researcher to examine.
41. Charles Silver & Geoffrey P. Miller, The Quasi-Class Action Method of Managing Multidistrict Litigations: Problems and a Proposal, New York University Law and Econ. Working Paper 6 n.18 (N.Y. Univ. Law & Econ. Working Papers, Paper No. 174, 2009), available at http://lsr.nellco.org/nyu- lewp/174/.
42. Fees have been managed in similar or identical ways in other cases. See, e.g., In re Bextra & Celebrex Mktg. Sales Practices & Prod. Liab. Litig., No. M.05-CV-01699-CRB, 2006 WL 471782, at *2-11 (N.D. Cal. Feb. 28, 2006).
43. The JPML currently divides cases into the following categories: air disaster, antitrust, contract, common disaster, employment practices, intellectual property, miscellaneous, products liability, sales practices, and securities. It has used other categories in the past. The categories do not necessarily track doctrinal lines.
44. See Mark Merrmann & Pearson Bownas, Making Book on the MDL Panel: Will It Centralize Your Products Liability Cases?, 8 CLASS ACTION LITIG. REP. 110, 111 n.4 (2007).
45. Williams et al report that "Only 20 percent of all MDL proceedings involve products liability claims, but the overwhelming majority of cases that are considered and transferred by the Panel involve such claims."
46. Margaret S. Williams, Richard A. Nagareda, Joe S. Cecil, Tom Willging, Kevin M. Scott & Emery G. Lee, The Expanding Role of Multidistrict Consolidation in Federal Civil Litigation: An Empirical Investigation 13 (Aug. 3, 2009) (unpublished manuscript, available at http://ssrn.com/abstract=1443375) . More than 90 percent of cases in MDLs involve products liability claims.
47. Id.
48. The Vioxx litigation was transferred on February 16, 2005. In re Vioxx Prods. Liab. Litig., MDL Docket No. 1657, 2007 WL 3354137, at *4 (E.D. La. Nov. 9, 2007).
49. For a case exemplifying these complications, see In re Diet Drugs Prods. Liab. Litig., supra note 2.
50. For discussions of the differences between aggregate procedures, see, for example, Howard M. Erichson, A Typology of Aggregate Settlements, 80 NOTRE DAME L. REV. 1769, 1773-84 (2005);
51. Charles Silver, Comparing Class Actions and Consolidations, 10 REV. LITIG. 495 (1991).
52. Lead Counsel handles "substantive and procedural issues during the litigation. Typically they act for the group - either personally or by coordinating the efforts of others-in presenting written and oral arguments and suggestions to the court, working with opposing counsel in developing and implementing a litigation plan, initiating and organizing discovery requests and responses, conducting the principal examination of deponents, employing experts, arranging for support services, and seeing that schedules are met."
53. MANUAL FOR COMPLEX LITIGATION (FOURTH) §10.221;
54. see also id. §10.224
55. (discussing the court's role in managing and overseeing counsel);
56. id. §22.62 (regarding the organization and designation of counsel by the court).
57. Liaison Counsel, usually a local attorney, handles "administrative matters, such as communications between the court and other counsel . . . , convening meetings of counsel, advising parties of developments, and . . . managing document depositories and . . . resolving scheduling conflicts."
58. MANUAL FOR COMPLEX LITIGATION (FOURTH) §10.221.
59. In the world of complex litigation, Judge Weinstein is a living legend and a continuing source of inspiration to many, including us. Many of his cases have become the focus of scholarly articles and books. See, e.g., PETER H. SCHUCK, AGENT ORANGE ON TRIAL: MASS Toxic DISASTERS IN THE COURTS (1987).
60. See, e.g., David M. Studdert et al, Claims, Errors and Compensation Payments in Medical Malpractice Litigation, 354 NEW ENG. J. MED. 2024, 2026 (2006) (studying random sample of medical malpractice cases and finding that 80 percent involved injuries that caused significant or major disability or death).
61. Gordon Gibb, Guidant Settles 4,000 Claims, Avoids Trial For Now, LAWYERSANDSETTLEMENTS.COM, July 30, 2007, available at http://www. lawyersandsettlements. com/articles/01194/guidant-settles.html
62. Alex Berenson, Lilly to Pay $690 Million in Drug Suits, N.Y. TIMES, June 10, 2005, at C1, available at http://www.nytimes.com/2005/06/10/ business/10lilly.html?scp =1&sq=lilly%20 to%20pay%20%24690&st=cse.
63. Kritzer Aff. ¶ 62, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Mar. 31, 2009)
64. (citing Joint Report No. 30 of Plaintiffs' and Defendants' Liaison Counsel 8 (Dec. 12, 2007)).
65. The Manual for Complex Litigation encourages judges to impose governance structures. See MANUAL FOR COMPLEX LITIGATION (FOURTH) §§10.22, 10.224, 22.62.
66. In In re Zyprexa, Judge Weinstein created two PSCs as a result of settlements that required restructuring the plaintiffs' control structure. See Zyprexa MDL Judge Gives A Bit More In Fees, But Denies Multipliers, Disbursement, 13-12 MEALEY'S EMERGING DRUGS & DEVICES 7 (2008) ("A second PSC is now representing plaintiffs not included in the initial settlement with Lilly.").
67. This is based on a Westlaw search.
68. MANUAL FOR COMPLEX LITIGATION (FOURTH) §10.224.
69. See infra note 118 (discussing the penalties Judge Fallon imposed on lawyers who challenged his handling of fees in the Vioxx MDL).
70. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708, 2005 WL 3704679, at *1 (D. Minn. Dec. 20, 2005).
71. We use the labels "non-lead lawyer," "limited lawyer," and "disabled lawyer" interchangeably.
72. MANUAL FOR COMPLEX LITIGATION (FOURTH) §10.22.
73. Id.
74. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708, 2008 WL 682174, at *5 (D. Minn. Mar. 7, 2008) (memorandum opinion and amended order regarding attorney's fees) (quoting In re Air Crash Disaster at Fla. Everglades, 549 F.2d 1005, 1016 (5th Cir. 1977));
75. see also In re Diet Drugs (Phentermine, Fenfluramine, Dexfenfluramine) Prods. Liab. Litig., No. 99-20593, 2002 WL 32154197, at *17 (E.D. Pa. Oct. 3, 2002) ("As a corollary to this appointment, the court must be permitted to compensate fairly the attorneys who serve on such a committee.").
76. An interesting question, beyond the scope of this article, is whether federal or state law regulates fee awards in MDLs containing cases over which the federal courts have jurisdiction based on diversity of citizenship.
77. Because fee awards affect substantive rights, Alyeska Pipeline Serv. Co. v. Wilderness Soc'y, 421 U.S. 240, 245-46 (1975),
78. one might contend, per Erie Railroad Co. v. Tompkins, 304 U.S. 64, 78 (1938),
79. and subsequent cases, that state law applies. However, this could pose serious administrative difficulties in MDLs, which often draw cases from many states. One might therefore contend that this is an appropriate context in which to develop a federal common law of procedure. MDL judges seem to have reached this conclusion, though without arguing for it explicitly.
80. One could argue that the statute empowers judges to create a federal common law of fees. Cf. Textile Workers Union of Am. v. Lincoln Mills of Ala., 353 U.S. 448, 450-51 (1957) (inferring federal courts' power to fashion federal law for the enforcement of collective bargaining agreements). Thus far, no federal court has made this argument.
81. FED. R. CIV. P. 23(h).
82. See In re Zyprexa Prods. Liab. Litig., 424 F. Supp. 2d 488, 491 (E.D.N.Y. 2006) (setting fee caps at 35 percent of client's recovery for attorneys involved in the MDL, subject to individual increase or decrease at discretion of Special Masters);
83. see also In re Vioxx Prods. Liab. Litig., 574 F. Supp. 2d 606, 607 (E.D. La. 2008) (awarding 32 percent of common fund to attorneys involved in the Vioxx MDL);
84. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., 2008 WL 682174, at *19 (capping fee awards for attorneys in this MDL at 20 percent, subject to individual increase by petition to the Special Masters).
85. Some commentators agree. See, e.g., Mary Katherine Bedard, Attorney Fee Awards and the Common Fund Doctrine: Hands in the Plaintiffs' Pockets?, PLAINTIFF MAG. 1, 2 (2008)
86. ("It is without question that a court has the power to award fees from a common fund to designated counsel who performed tasks on behalf of the group.");
87. Mark G. Boyko, The Role of Judges and Special Masters in Post-Settlement Claims Administration, 11 MEALEY'S EMERGING DRUGS & DEVICES 33 (2006)
88. ("While MDL plaintiffs are represented by counsel of their choosing, and likely have contingency fee agreements with them, those retail attorneys and their clients benefit collectively from the work of those on the plaintiffs steering committee, and, therefore, owe at least some portion of their settlement share to the leading plaintiffs counsel who oversaw uniform discovery, argued motions and otherwise protected the interest of all cases in the MDL.");
89. Dennis E. Curtis & Judith Resnik, Contingency Fees in Mass Torts: Access, Risk, and the Provision of Legal Services when Layers of Lawyers Work for Individuals and Collectives of Clients, 47 DEPAUL L. REV. 425, 430
90. ("At the conclusion of such litigations, when attorney fee payments come into play, the equitable common fund doctrine enables judges to supervise the payment of fees and costs to attorneys.").
91. For a detailed examination of the restitutionary basis for fee awards in class actions, see Charles Silver, A Restitutionary Theory of Attorneys' Fees in Class Actions, 76 CORNELL L. REV. 656 (1990-1991);
92. see also Alyeska Pipeline, 421 U.S. at 245-46 (describing origins and justification for the common fund doctrine).
93. RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT §30 cmt. b (Tentative Draft No. 3, 2004).
94. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 617 (1997)
95. (quoting Mace v. Van Ru Credit Corp., 109 F.3d 338, 344 (1997)).
96. RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT §30 cmt. b. (Tentative Draft No. 3, 2004);
97. see also Silver, supra note 47, at 664-65 (setting out conditions for the application of the common fund doctrine in class actions)
98. Silver, supra note 25, at 497-500 (explaining differences between class actions and consolidations that make it difficult to apply the common fund doctrine in the latter).
99. 417 F. Supp. 2d 147, 155 (D. Mass. 2006).
100. Id. at 150.
101. Lexecon Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26, 28 (1998).
102. The same problem arises in so-called "settlement-only classes," where returns are often meager because class counsel cannot credibly threaten defendants with class-wide judgments at trial. See, e.g., John C. Coffee, Jr., Class Action Accountability: Reconciling Exit, Voice, and Loyalty in Representative Litigation, 100 COLUM. L. REV. 370, 399 (2000)
103. (arguing that claimants and class counsel are "disarmed" in settlement-only classes because they cannot threaten the defendant with a class-wide judgment at trial). The U.S. Supreme Court made the same point in Amchem Products, Inc. v. Windsor, pointing out that a consequence of "permitting class designation despite the impossibility of litigation" would be that "class counsel . . . would be disarmed." 521 U.S. 591, 621 (1997).
104. John P. Gould, The Economics of Legal Conflicts, 2 J. LEGAL STUD. 279 (1973);
105. William M. Landes, An Economic Analysis of the Courts, 14 J.L. & ECON. 61 (1971);
106. Richard A. Posner, An Economic Approach to Legal Procedure and Judicial Administration, 2 J. LEGAL STUD. 399 (1973).
107. DeLaventura, 417 F. Supp. 2d at 155.
108. Id. at 150, 152.
109. An empirical study conducted by the Federal Judicial Center reports that 82.5 percent of all non-asbestos products liability cases closed in the MDL courts to which they were referred. Emery G. Lee, Margaret Williams, Richard A. Nagareda, Joe S. Cecil, Thomas E. Willging & Kevin M. Scott, The Expanding Role of Multidistrict Consolidation in Federal Civil Litigation: An Empirical Investigation 48 (Aug. 3, 2009), available at http://ssrn.com/abstract=1443375. Although this implies an 11.5 percent remand rate, the figure is misleading. Six MDLs account for the vast majority of the remands.
110. Id. at 17-18. Unless an entire MDL fails, a plaintiff involved in an MDL has little chance of obtaining a remand.
111. Eldon E. Fallon, Jeremy T. Grabill & Robert Pitard Wynne, Bellwether Trials in Multidistrict Litigation, 82 TUL. L. REV. 2323, 2330 (2008).
112. DeLaventura, 417 F. Supp. 2d at 156.
113. RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT §30 cmt. b (Tentative Draft No. 3, 2004) ("By comparison with [fee awards in] class actions, court-imposed fees to appointed counsel in consolidated litigation frequently appear inconsistent with restitution principles, since litigants may have no choice but to accept and pay for certain legal services as directed by the court.").
114. Id.
115. However, the idea of implied consent appears largely fictional in this context, given that most class members fail to opt out because of simple inertia.
116. Silver, supra note 25, at 499.
117. "The law's strong preference for contractual over restitutionary liability accounts for the general rule by which a person who seeks compensation for benefits conferred on another . . . must ordinarily found the claim on an agreement with the recipient." RESTATEMENT (THIRD) OF RESTITUTION & UNJUST ENRICHMENT §30 cmt. f (Tentative Draft No. 3, 2004).
118. Id. §30 cmt. b
119. ("The fundamental premise of class certification - that the cla ss is too numerous to permit individual joinder - tends to support a critical element of the restitution claim in these circumstances, namely, that the [fee] claimant [here, class counsel] was justified in proceeding in the absence of contract with the defendant (here, the individual class member or common-fund 'beneficiary').").
120. MDLs may create some bargaining impediments that do not exist in their absence. For example, in an MDL, lead lawyers and limited lawyers are caught up in a bilateral monopoly. Once appointed by a court, lead lawyers are the only sellers of CBW and limited lawyers are the only buyers. Efficient exchanges are difficult to negotiate in this environment. Before an MDL is created, this problem does not exist. Any lawyer can offer to provide CBW, and any lawyer can agree to buy it.
121. Id. §30 cmt. a.
122. 23 S.W.3d 428 (Tex. App.-Houston [1 Dist.] 2000). The famous MER/29 litigation provides another example of managing mass litigation contractually.
123. See Paul D. Rheingold, The MER/ 29 Story - An Instance of Successful Mass Disaster Litigation, 56 CAL. L. REV. 116, 123 (1968) (describing mass defective products litigation in which 288 lawyers or law firms formed a group to finance discovery and other litigation activities).
124. See, e.g., Vincent v. Hughes Air West, Inc., 557 F.2d 759, 770 (9th Cir. 1977) ("[A]s a general rule, if the third parties hire their own attorneys and appear in the litigation, the original claimant cannot shift to them his attorney's fees.");
125. id. at 771-72
126. ("[T]he reimbursement of the representative attorneys beyond the terms of their individual contracts was limited to that portion of the fund allocated to beneficiaries which had not participated in the suit [by hiring attorneys of their own].");
127. Nolte v. Hudson, 47 F.2d 166, 168 (2d Cir. 1931) ("[W]here [litigants] are represented by counsel of their own choice, who do in fact act for them, they cannot be compelled to share in the expenses incurred by the employment of other counsel by other [litigants]." (citation omitted));
128. Blue Cross and Blue Shield of Alabama v. Freeman, 447 So. 2d 757, 759 (Ala. Civ. App. 1983) (The common fund doctrine does not apply to "one who joins as a party in the suit, assists in the prosecution or contributes toward the expense of the recovery of the fund . . . .");
129. Valder Law Offices v. Keenan Law Firm, 129 P.3d 966, 972 (Ariz. Ct. App. 2006) (holding common benefit fees could not be assessed on party "[b]ecause of the presence of counsel, actively involved on behalf of [the client]");
130. Draper v. Aceto, 33 P.3d 479, 484 (Cal. 2001) (" '[A] court may award attorney's fees from a common fund to an attorney who has succeeded in preserving a fund when equity requires it,' but. . . 'this cannot be done when there are multiple beneficiaries of the fund and all - or substantially all - are represented by various counsel' "
131. (quoting Estate of Korthe, 88 Cal. Rptr. 465, 466 (Cal. Ct. App. 1970));
132. Steinberg v. Allstate Ins. Co., 276 Cal. Rptr. 32, 34 (Cal. Ct. App. 1990) ("The [common fund] doctrine does not apply . . . when each party has retained counsel, and each counsel actively prosecuted the case or actively participated in creation of the settlement.");
133. Estate of Korthe, 88 Cal. Rptr. 465, 467 (Cal. Ct. App. 1970) (explaining that the accepted rationale for common-fund recovery "applies only where a single beneficiary undertakes the risk and expense of litigation while the remaining beneficiaries sit on their hands");
134. Means v. Montana Power Co., 625 P.2d 32, 37 (Mont. 1981) ("[O]nly inactive or passive beneficiaries should be forced to bear the costs of litigation under the common fund doctrine.");
135. Estate of Kierstead, 237 N.W. 299, 300 (Neb. 1931) (denying recovery, notwithstanding "substantial benefit" conferred on defendants, where claimants "were notified that the defendants had employed another as their attorney");
136. Hurst v. Cavanaugh, No. 90-J-7, 1992 WL 208918, at *5 (Ohio Ct. App. Aug. 21, 1992) (holding that common fund doctrine cannot apply to persons represented by counsel who were active in the litigation);
137. Traveler's Ins. Co. v. Williams, 541 S.W.2d 587, 590 (Tenn. 1976) (The common fund doctrine "is never applied against persons who have employed counsel on their own account to represent their interests.");
138. DuPont v. Shackelford, 369 S.E.2d 673, 677 (Va. 1988) (explaining there are no "free rides" where all parties are represented by counsel);
139. see also Jean F. Rydstrom, Annotation, Construction and Application of "Common Fund" Doctrine in Allocating Attorneys' Fees Among Multiple Attorneys Whose Efforts Were Unequal in Benefiting Multiple Claimants, 42 A.L.R. FED. 134 §2b (2005)
140. (explaining that the common benefit doctrine does not "permit the allowance of fees from a fund created where all parties interested are represented by counsel of their own selection, each counsel in such case being required to look to his own client for compensation") (emphasis added).
141. RESTATEMENT (THIRD) OF RESTITUTION AND UNJUST ENRICHMENT §30 cmt. e (Tentative Draft No. 3, 2004).
142. Id.
143. Id. §30(3)(c) (emphasis added).
144. William B. Rubenstein, On What A "Common Benefit Fee" Is, Is Not, and Should Be, 3 CLASS ACTION ATTYFEE DIG. 87,89 (2009).
145. Prevailing practices in MDLs recognize this by reimbursing many non-lead lawyers for expenses incurred in connection with services deemed to be of common benefit to all claimants. See Pre-Trial Order No. 51, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Sept. 23, 2009), available at http://vioxx.laed.uscourts.gov/Orders/PT051.pdf (same);
146. Transcript of Status Conference at 43, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Sept. 17, 2009) (on file with author) (indicating that 112 lawyers applied for reimbursement of common benefit costs).
147. Affidavit of Walter Umphrey, Memorandum in Support of Motion for Reconsideration/Revision of Order Capping Contingency Fees and Alternatively for Entry of Judgment at 31, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Dec. 10, 2008).
148. Fallon, Grabill & Wynne, supra note 58, at 2335.
149. See, e.g., Vioxx Jury Adds $9 Million in Punishing Merck (National Public Radio broadcast Apr. 11, 2006), available at http://www.npr.org/ templates/story/story.php ?storyId=5336787&ps=rs (reporting that a New Jersey jury added $9 million in punitive damages to a $4.5 million compensatory award in favor of a Vioxx plaintiff);
150. Aaron Smith, Jury: Merck negligent, CNN MONEY, Aug. 22, 2005, http://money.cnn.com/2005/08/19/news/ fortune500/vioxx/index.htm (reporting that a Texas jury ordered Merck to pay $253 million in compensatory and punitive damages to a Vioxx plaintiff).
151. Fee applications always make attorneys' efforts seem heroic. For a standard example of the genre, see Plaintiffs' Liaison Counsel's Memorandum in Support of Motion for Award of Plaintiffs' Common Benefit Counsel Fees and Reimbursement of Expenses at 52-66, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Jan. 20, 2009),
152. and see also Curtis & Resnik, supra note 46, at 448, who state that "assessing the value of contributions of a multitude of attorneys to a particular outcome is very difficult."
153. RESTATEMENT (THIRD) OF RESTITUTION & UNJUST ENRICHMENT §30(3)(c), cmt. e, illus. 21 (Tentative Draft No. 3, 2004).
154. 549 F.2d 1006, 1014-15 (5th Cir. 1977) [hereinafter Everglades Crash].
155. Id. at 1009.
156. Id. at 1019.
157. Id. at 1020.
158. Id. at 1011.
159. Despite the limited precedential value of Everglades Crash, the 8 percent fee awarded by the trial judge appears to be taking on a life of its own. In the Vioxx MDL, also pending in the Fifth Circuit, the lead attorneys also request a fee award of 8 percent and cite Everglades Crash in support. Plaintiffs' Liaison Counsel's Memorandum in Support of Motion for Award of Plaintiff's Common Benefit Counsel Fees and Reimbursement of Expenses at 50-51, In re Vioxx .Prods. Liab. Litig. No. MDL 1657 (E.D. La. Jan. 20, 2009). Any serious regulator would reject this effort to use the earlier case as a template for the later one, the two MDLs presenting radically different pro duction problems. Everglades Crash involved a small number of persons killed in an airplane accident, a handful of lawyers, and a common fund fee request for $275,000. 549 F.2d at 1008-09, 1011. The Vioxx MDL contains tens of thousands of persons claiming to have been injured by a defective drug, lawyers by the hundred, and a demand for over $300 million in common fund fees.
160. In re Vioxx Prods. Liab. Litig., MDL No. 1657, 2009 WL 2408884, at*4-5 (E.D. La. Aug. 3, 2009).
161. Judges Fallon and Frank promulgated such agreements in Guidant and Vioxx. Aggreement (Full Participation Option) at 1-5, Pre-Trial Order No. 19, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Aug. 4, 2005). Judge Weinstein does not appear to have used form agreements in Zyprexa. Other judges have done so, however. See, e.g., In re Bextra & Celebrex Mktg. Sales Practices & Prod. Liab. Litig., No. MDL 1699, 2006 WL 471782, at *2 (N.D. Cal. Feb. 27, 2006) (J. Breyer) ("For all cases whose counsel have agreed within 90 days of this Order to cooperate with the MDL by signing an appropriate agreement . . . the assessment in such cases shall be two percent (2%) as fees and two percent (2%) as costs ... of the 'gross monetary recovery.'"). 86. This approach was taken in Bextra. See Pretrial Order No. 8A: Amendment to Order Establishing Common Benefit Fund at 4, In re Bextra & Celebrex Mktg. Sales Practices & Prod. Liab. Litig. No. MDL 1699 (N.D. Cal. July 7, 2008) (amending Pretrial Order No. 8 and increasing the set a side for common benefit fees from 4 percent to 8 percent).
162. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708, 2008 WL 451076, at *1 (D. Minn. Feb. 15, 2008). The order set aside $10 million in cost reimbursements, only $3.5 million of which was slated to cover the managerial attorneys' out of pocket expenses. Id.
163. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708, 2008 WL 682174, at *12 (D. Minn. Mar. 7, 2008) (observing that "a common benefit payment from the Settlemen t Fund is expressly contemplated by the terms of the MSA").
164. Id.
165. Judge Frank also argued that the form agreements allowed the managerial lawyers to apply for more than 4 percent in "class action attorneys' fees." In re Guidant Corp. Implantable Def ibrillators Prods. Liab. Litig., No. MDL 05-1708, 2008 WL 682174, at *11 (D. Minn. Mar. 7, 2008). The observation was irrelevant, however, because no class action was certified, or even sought to be certified, in the Guidant MDL, as Judge Frank knew. Id. (observing that "the Plaintiffs did not ultimately seek class certification"). Judge Frank's real point was that he never expected the form agreements to limit his powers.
166. Id.
167. (observing that "the Court... contemplate[d] additional common benefit payments in the event of settlement").
168. Lester Brickman, Contingency-Fee Con-Men, WALL ST. J., Sept. 25, 2007, at A18 ("It is beyond cavil that plaintiffs' lawyers negotiating their fees directly with, and separately payable by, a defendant... breach lawyers' fiduciary obligations to clients."). Like most conflicts, this one may be waived by an informed client. In MDLs, the conflict is not even acknowledged, let alone waived.
169. In re Cendant Corp. PRIDES Litig., 243 F.3d 722, 728 (3d Cir. 2001);
170. Weinberger v. Great N. Nekoosa Corp., 925 F.2d 518, 524 (1st Cir. 1991).
171. Multiple judicial decisions condemned the conflict. See, e.g., Zucker v. Occidental Petroleum Corp., 192 F.3d 1323, 1327 (9th Cir. 1999), cert. denied, 529 U.S.
172. 1066 (2000) ("A client who employs a lawyer to litigate against a third party has a legitimate interest in having his lawyer refrain from taking the third party's money in exchange for throwing the fight."). Academic commentary likewise abounds. See, e.g., John C. Coffee, Jr., Understanding the Plaintiff's Attorney: The Implications of Economic Theory for Private Enforcement of Law Through Class and Derivative Actions, 86 COLUM. L. REV. 669, 714 (1986)
173. ("Often, the plaintiffs attorneys and the defendants can settle on a basis that is adverse to the interests of the plaintiffs. At its worst, the settlement process may amount to a covert exchange of a cheap settlement for a high award of attorney's fees.");
174. Alon Klement, Who Should Guard the Guardians? A New Approach for Monitoring Class Action Lawyers, 21 REV. LITIG. 25, 42-43 (2002) (discussing various forms sweetheart deals can take in class actions and mass tort cases);
175. Susan P. Koniak & George M. Cohen, In Hell There Will Be Lawyers Without Clients or Law, 30 HOFSTRA L. REV. 129, 145 (2001)
176. (describing class action practice as "a world in which lawyers make fabulous fees for achieving very little," while "defendant- corporations make sweetheart deals to dispose of serious liability at bargain-basement rates");
177. Christopher R. Leslie, De Facto Detrebling: The Rush to Settlement in Antitrust Class Action Litigation, 50 ARIZ. L. REV. 1009, 1016 (2008) ("Self-interested class counsel are willing to settle on the cheap in exchange for generous attorneys' fees.");
178. Richard A. Nagareda, Turning from Tort to Administration, 94 MICH. L. REV. 899, 933 (1996) (observing that class counsel can "entice defendants to reduce their total payments by providing counsel with generous fees but affording inadequate compensation to the class").
179. John C. Coffee, Jr., Rethinking the Class Action: A Policy Primer on Reform, 62 IND. L.J. 625, 647-48 (1986-87) (describing how opportunities for structural collusion arise in class actions);
180. Coffee, supra note 92, at 718.
181. In re Mark M. Hager, 812 A.2d 904, 912 (D.C. 2002).
182. Interestingly, in Bextra the managerial lawyers did not "contract around" their agreements, but asked the court for an order raising the common benefit set aside instead.
183. See supra note 86.
184. This was the proper way to proceed, because it did not involve an abuse of the lead attorneys' control of settlement negotiations.
185. Master Settlement Agreement §9.2.1, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Nov. 9, 2007).
186. Id. §9.2.2.
187. Id. §1.2.4.
188. By including this provision in the MSA, the lead attorneys in Vioxx breached their fiduciary duties a second time, the first time being when they used their control of settlement negotiations to increase the fund available to pay their fees. The lead attorneys thought the settlement was the best option for many claimants. They therefore knew that limited attorneys would be ethically bound to enroll at least some clients in the settlement, even though a lawyer enrolled even a single client had to waive any and all objections to the common benefit fee and cost provisions. In practical effect, the lead lawyers used limited lawyers' professional responsibilities to render limited lawyers powerless to oppose their opportunistic gambit.
189. Plaintiffs' Liaison Counsel's Memorandum in Support of Motion for Award of Plaintiffs' Common Benefit Counsel Fees and Reimbursement of Expenses, supra note 77, at 22.
190. Judge Alice Gibney, the trial judge presiding over the state court consolidation of Kugel Mesh cases in Rhode Island, recently made the conflict that arises when plaintiffs' lawyers bargain separately over relief for their clients and fees for themselves a fixture of the negotiations in that case. She expressly authorized the lead attorneys to negotiate a "payment from [the] defendants . . . separate from and in addition to any payment made to any plaintiff, which separate payment(s) is intended to be for common benefit attorneys' fees and expenses".
191. In re All Individual Kugel Mesh Cases, No: PC-2008-9999 (Superior Court, Providence, R.I.), Assented to Assessment Order (R.I. Aug. 11, 2009). The order is ill advised
192. See RESTATEMENT (THIRD) OF THE LAW GOVERNING LAWYERS §37 (2000) ("A lawyer engaging in clear and serious violation of duty to a client may be required to forfeit some or all of the lawyer's compensation for the matter. Considerations relevant to the question of forfeiture include the gravity and timing of the violation, its willfulness, its effect on the value of the lawyer's work for the client, any other threatened or actual harm to the client, and the adequacy of other remedies.").
193. In re Vioxx Prods. Liab. Litig., 574 F. Supp. 2d 606, 607 (E.D. La. 2008).
194. This assumes an average retainer agreement providing for a fee of 40 percent plus costs. In failing to give adequate notice, Judge Fallon also followed Judge Frank, who capped disabled lawyers' contingent fees in an order the main purpose of which was to set the common benefit fee award. When the disabled lawyers protested, Judge Frank defended himself by asserting that a footnote to the PSC's fee award submission gave all attorneys notice that their fees might be reduced. Order Regarding Requests for Motions to Reconsider the Court's March 7, 2008 Order Regarding Determination of the Common Benefit Attorney Fee Amount and Reasonable Assessment of Attorney Fees at 3, In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708 (D. Minn. Mar. 28, 2008). The footnote, which merely pointed out the Court's power to evaluate contingent fee agreements, was plainly inadequate. It neither said limited lawyers' fee agreements were unreasonable nor asked the Court to impose a fee cap. Judge Frank also stated that the lawyers who complained of lack of notice "should [have been] well aware of the case law supporting the Court's inherent right and responsibility to review contingency fee contracts for fairness."
195. Id. at 3 n.2. Obviously, the knowledge that a court can review a contingent fee is no substitute for notice that it will do so at a particular time.
196. In re Zyprexa Prods. Liab. Litig., 424 F. Supp. 2d 488, 490-91 (E.D.N.Y. 2006).
197. Order Regarding Determination of the Common Benefit Attorney Fee Amount at 5, In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708 (D. Minn. Feb. 15, 2008).
198. Memorandum Opinion and Amended Order Regarding Determination of the Common Benefit Attorney Fee Amount and Reasonable Assessment of Attorney Fees at 48, In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708 (D. Minn. Mar. 7, 2008).
199. Thirteen law firms urged Judge Frank to reconsider his ruling.
200. Id. at 1-2 n.l. Notably, the group of objectors included the entire Lead Counsel Committee (LCC).
201. Id. Judge Frank stuck to his guns. Thereafter, sixty-seven attorneys or law firms filed requests with the Court's Special Masters to increase their fees from 20 percent to 33 percent, as Judge Frank had allowed them to do. This group also included members of the LCC. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708, 2008 WL 3896006, at *3 n.8 (D. Minn. Aug. 21, 2008). Overwhelmed by the flood of requests, the Special Masters urged Judge Frank to raise the cap to 25 percent for all lawyers across the board. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708, 2008 WL 3896018, at *1 (D. Minn. June 30, 2008). Judge Frank rejected their recommendation because it would have required some clients to pay more in total fees than their contracts required. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708, 2008 WL 3896006, at *10 (D. Minn. Aug. 21, 2008). To ensure that no client paid more than the contract price, he imposed the cap described in the text.
202. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708, 2008 WL 3896006, at *10 (D. Minn. Aug. 21, 2008).
203. See In re Zyprexa Prods. Liab. Litig., 424 F. Supp. 2d 488, 490 (E.D.N.Y. 2006) ("[M]uch of the discovery work [limited lawyers] would normally have done on a retail basis in individual cases has been done at a reduced cost on a wholesale basis by the plaintiffs' steering committee.");
204. see also In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708, 2008 WL 682174, at *18 (D. Minn. Mar. 7, 2008) ("Because of the mass nature of this MDL, the fact that several firms/attorneys benefited from economies of scale, and the fact that many did or should have benefited in different degrees from the coordinated discovery, motion practice, and/or global settlement negotiations, there is a high likelihood that the previously negotiated contingency fee contracts would result in excessive fees.");
205. Order & Reasons at 19, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Aug. 27, 2008) ("[T]he Court must assess the reasonableness of the contingent fees in light of the fact that the economies of scale have led to a global settlement offering considerable benefit to the attorneys.").
206. Samuel Issacharoff & John Fabian Witt, The Inevitability of Aggregate Settlement An Institutional Account of American Tort Law, 57 VAND. L. REV. 1571 (2004).
207. It is common knowledge that "the MDL panel . . . overwhelmingly favors the procedure it administers. Thus, once the MDL panel decides to consider a matter pursuant to Section 1407(a), transfer is more than likely." DeLaventura v. Columbia Acorn Trust, 417 F. Supp. 2d 147, 150 (D. Mass. 2006). One study finds that transfer and consolidation are overwhelmingly likely in products liability cases with multiple cases filed when the defendant supports the motion.
208. Mark Herrmann & Pearson Bownas, Making Book on the MDL Panel: Will It Centralize Your Products Liability Cases?, 8 Class Action Litig. Rep. (BNA) 110 (Feb. 9, 2007).
209. Status Conference at 22, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Dec. 10, 2008).
210. See, e.g., An Attorney for You, http://www.anattorneyforyou.com (last visited Nov. 12, 2009) (website enabling consumers to obtain offers of representation from competing law firms).
211. Affidavit of Joshua D. Wright, Memorandum in Support of Motion for Reconsideration/Revision of Order Capping Contingency Fees and Alternatively for Entry of Judgment at 10, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Dec. 10, 2008).
212. Id.
213. THOMAS V. VAKERICS, ANTITRUST BASICS § 3.03 (2009).
214. To challenge fee caps, lawyers must be willing to run considerable risks. When the VLC challenged the fee cap in Vioxx, Judge Fallon issued a sua sponte order appointing the Civil Litigation Clinic at the Tulane Law School to represent their clients' fee-related matters. Order, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Dec. 19, 2008), available at http://vioxx.laed. uscourts.gov/Orders/TulaneClinic.pdf. He also ordered the VLC lawyers to send their clients copies of his order, thereby fomenting animosity between the lawyers and their clients which did not previously exist.
215. Id. After holding a hearing, Judge Fallon then reaffirmed his original fee cap order, giving no weight whatever to or even mentioning the evidence and arguments the VLC submitted. Order, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Aug. 3, 2009). Finally, he entered two further orders the net effect of which was to place all and only the VLC lawyers' fees in escrow until their challenge to the 32 percent order was resolved, including the 24 percent fee to which their entitlement was undisputed.
216. Pre-Trial Order No. 49, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Sept. 23, 2009), available at http://vioxx.laed.uscourts.gov/Orders/ PT049.pdf; Pre-Trial Order No. 50, In re Vioxx Prods. Liab. Litig., No. MDL 1657 (E.D. La. Sept. 23, 2009), available at http://vioxx.laed.uscourts.gov/ Orders/PTO50.pdf. It is difficult to find a legitimate purpose for any of these measures.
217. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708, 2008 WL 3896006, at *9-10 (D. Minn. Aug. 21, 2008).
218. Caps on prices and wages are the subject of a large literature. For a review of the use of price controls in the United States, see HUGH ROCKOFF, DRASTIC MEASURES: A HISTORY OF WAGE AND PRICE CONTROLS IN THE UNITED STATES 1-4 (1984).
219. See also Hugh Rockoff, Price Controls, in THE CONCISE ENCYCLOPEDIA OF ECONOMICS (2d ed. 2007), http://www.econlib .org/library/Enc/PriceControls.html ("Price ceilings . . . cause shortages.");
220. Thomas Sowell, An Ancient Fallacy: Price Controls, CAPITALISM MAG., June 27, 2002, http://www.capmag.com/ article.asp?ID=1684 ("It is not just the quantity supplied that declines under price controls. Quality also declines.").
221. See, e.g., Terry Carter, Tort Reform Texas Style, A.B.A. J., Oct. 2006, at 30, 34 (reporting that Texas Governor Rick Perry, a proponent of tort reform, proposed a cap on contingent fees);
222. Patrick Danner, Lawyers' Fees Come Under Fire, MIAMI HERALD, Jan. 3, 2004, at IE (reporting that the Florida Medical Association backed a constitutional amendment capping contingent fees in medical-liability cases).
223. On the importance of access to counsel as a condition for suing, see Charles Silver & David A. Hyman, Self-Representation in Paid Bodily Injury Claims in Texas, 1988-2005 (paper presented at ABA Section of Litigation Symposium on Access to Civil Justice, Dec. 4-5, 2008) (on file with ABA) (finding that less than 1 percent of paid bodily injury claimants filed lawsuits without retaining attorneys).
224. Lawyers with cases in state courts share in common benefit fees because global settlements involve their clients as well as claimants in an MDL. Sometimes, these lawyers must subject themselves to regulation by an MDL judge as a condition for enrolling their clients in a global settlement. For example, Sections 9.2.3-9.2.5 of the Vioxx Master Settlement Agreement provided that Judge Fallon would oversee distribution of common benefit fees, after appointing a fee allocation committee and in cooperation with other identified judges. Settlement Agreement §§ 9.2.3-9.2.5, In re Vioxx Prods. Liab. Litig., MDL No. 1657 (E.D. La. Nov. 9, 2007), available at http://www.browngreer.com/ vioxxsettlement/images/pdfs/mastersa.pdf.
225. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., No. MDL 05-1708, 2008 WL 451076, at *1 (D. Minn. Feb. 15, 2008); see also Settlement Agreement §§9.2.4, In re Vioxx Prods. Liab. Litig., MDL No. 1657 (E.D. La. Nov. 9, 2007), available at http://www.browngreer.com/ vioxxsettlement/images/pdfs/mastersa.pdf (granting Judge Fallon authority to establish the Fee Allocation Committee). The allocating committees' recommendations were subject to judicial review.
226. In Guidant, Judge Frank appointed six lawyers to a Common Benefit Attorney Fee and Cost Committee: four members of the PSC and two lawyers with cases in both the MDL and the Minnesota state courts. Guidant, 2008 WL 451076, at *1. In Vioxx, Judge Fallon named nine lawyers to an Allocation Committee: three members of the Plaintiffs' Executive Committee; two PSC members; and four attorneys with state court cases. Pre-Trial Order No. 32 at 1-2, In re Vioxx Prods. Liab. Litig., MDL No. 1657 (E.D. La. Nov. 20, 2007), available at http://vioxx.laed.uscourts.gov/Orders/vioxx.pto32.pdf.
227. Order of United States District Court Judge Donovan W. Frank at 1, In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., MDL No. 05-1708 (DWF/AJB) (D. Minn. May, 27, 2008), available at http://www.mnd.uscourts.gov/ MDL-Guidant/Pretrial-Minutes /2008/080527ord05md1708.pdf.
228. In re Agent Orange Prod. Liab. Litig., 818 F.2d 216, 221 (2d Cir. 1987).
229. Id. at 218.
230. Id. at 222-23.
231. John C. Coffee, Jr., The Regulation of Entrepreneurial Litigation: Balancing Fairness and Efficiency in the Large Class Action, 54 U. CHI. L. REV. 877, 903 (1987).
232. Id.
233. Paul A. Samuelson, The Pure Theory of Public Expenditure, 36 REV. ECON. & STAT. 387, 388 (1954).
234. Everglades Crash, 549 F.2d 1006, 1017 (5th Cir. 1977).
235. Id.
236. Id. (emphasis added).
237. In re Zyprexa Prods. Liab. Litig., No. 04-MD-1596, 2008 WL 1844000, at *5 (E.D.N.Y. Apr. 22, 2008).
238. In Zyprexa, Judge Weinstein learned about the fees the lead attorneys received from their signed clients indirectly. A special master obtained this information for him.
239. See id. at *5 nn.12-13 (indicating use of Special Masters in collecting evidence).
240. In re Diet Drugs (Phentermine, Fenfluramine, Dexfenfluramine) Prods. Liab. Litig., 553 F. Supp. 2d 442, 492 (E.D. Pa. 2008);
241. see also Memorandum and Order of United States Magistrate Judge Roanne L. Mann at 9, In re Zyprexa Prods. Liab. Litig., MDL No. 1596 (JBW) (RLM) (E.D.N.Y. Dec. 29, 2006) ("fees awarded in common fund cases may not exceed what is 'reasonable' under the circumstances") (quoting Goldberger v. Integrated Res., Inc., 209 F.3d 43, 47 (2d Cir. 2000)).
242. In re Diet Drugs, 553 F. Supp. 2d at 492.
243. See id. (applying factors developed for use when awarding fees in class actions while observing that the "factors ... do not strictly apply to the MDL because we are not dealing with a class settlement fund.");
244. see also In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., MDL No. 05-1708 (DWF/AJB), 2008 WL 682174, at *16 (D. Minn. Mar. 7, 2008) (applying multi-factor approach endorsed by the Eighth Circuit in a class action) (citing In re Xcel Energy, Inc., Sec., Derivative & "ERISA" Litig., 364 F. Supp. 2d 980, 992-93 (D. Minn. 2005)).
245. See, e.g., Memorandum and Order of United States Magistrate Judge Roanne L. Mann at 11-12, In re Zyprexa Prods. Liab. Litig., MDL No. 1596 (JBW) (RLM) (E.D.N.Y. Dec. 29, 2006) (approving the PSC's request for 4 percent of the settlement fund partly because it compared favorably with the fees awarded in identified class actions with large settlement funds).
246. 15 U.S.C. § 78u- 4(a)(3)(B)(v) (2007); see also Cohen v. U.S. Dist. Ct. for N. Dist. of Cal, No. 09-70378, 2009 WL 3681701, at *4 (9th Cir. Nov. 5, 2009) ("The logical interpretation of the statute's failure to provide an intricate procedure for the district court to follow after rejecting the lead plaintiffs selection is that the power to select lead counsel remains in the hands of the lead plaintiff.").
247. Warren Buffett is thought to be the author of this phrase. See, e.g., Answers.com, http://www.answers.com/topic/skin-in-the-game (last visited Nov. 12, 2009).
248. MANUAL FOR COMPLEX LITIGATION (FOURTH) § 10.244 (2004).
249. See id. ("Deferring to proposals by counsel without independent examination . . . invites problems down the road if designated counsel turn out to be unwilling or unable to discharge their responsibilities satisfactorily or if they incur excessive costs.").
250. Collusion could lead to excessive charges for CBW, as discussed above. See supra, Part II.D.
251. Commenting on a prior draft of this article, one reader observed that judicial regulation of lead lawyers' fees in MDLs is a continuing response to the many fee abuses that have occurred when lawyers were left unsupervised. The reader specifically mentioned the infamous Fine Paper case, in which a circus erupted after the lead attorney accused other lawyers of committing various forms of billing fraud in an effort to win as much of the $50 million settlement for themselves as possible. Following lengthy hearings and a thorough audit, the outraged trial judge found that the fee applications were "grossly excessive" and cut the total amount requested by 80 percent. In Re Fine Paper Antitrust Litig., 98 F.R.D. 48, 68 (E.D. Pa. 1983);
252. see also Coffee, supra note 129, at 907-10 (discussing the controversy relating to attorneys' fees in Fine Paper). Fine Paper shows quite clearly that lawyers cannot be allowed to set their own fees. Insofar as limited lawyers are concerned, this is not a problem in MDLs because their fees are regulated contractually. The same would be true if fees for CBW were regulated by agreements among attorneys. Judge Kozinski made a similar point in his dissent in In re FPI/Agretech Securities Litigation, 105 F.3d 469, 477 (9th Cir. 1997), also an MDL. The question there was whether the district court judge erred by refusing to enforce a fee sharing agreement among the lead attorneys. Although Kozinski agreed that judicial control of fees is "entirely appropriate" when attorneys apply for fee awards from common funds, he thought the fee sharing agreement was a valid contract and should have been enforced.
253. Id. Noting that "[l]awyers, no less than any others, are entitled to arrange their affairs by private contract," Kozinski argued that judges must evaluate common fund fee requests because these requests lack natural bounds. Id. By contrast, judicial regulation has no place when a valid contract establishes a fee sharing arrangement and enforcement of the contract would not impact the total amount paid in fees. Properly considered, Fine Paper actually weighs against the quasi-class action method and in favor of our proposal. Under existing arrangements, judges rely on lead attorneys to recommend amounts for common benefit fee awards in MDLs. This encourages abuses of the type that occurred in Fine Paper and necessitates careful judicial scrutiny of fee requests. Under our proposal, described in further detail below, lead lawyers' fees would be set upfront by other lawyers who would suffer if lead lawyers were to overcharge. This would substantially reduce the need for judicial monitoring.
254. The criteria that formally govern the JPML's choices of transferee fora are discussed in David F. Herr, Multidistrict Litigation Manual ch. 7 (2008). According to Herr, "[t]he [JPML] undoubtedly considers the ability and reputation of a judge" when making assignments, and also "look[s] specifically to prior experience as a transferee judge in MDL proceedings."
255. Id. § 7.11.
256. See Everglades Crash, 549 F.2d 1006, 1017 (5th Cir. 1977) (commenting that "[i]n the next case the best available lead counsel may have one case out of 100").
257. Original PSC's Memorandum of Law in Support of Its Motion for an Award of Attorneys' Fees and Reimbursement of Expenses at 2 n.2., In re Zyprexa Prods. Liab. Litig., MDL No. 1596 (JWB) (RLM) (E.D.N.Y. Oct. 18, 2006).
258. Reciprocity is deeply engrained in humans. See generally ROBERT AXELROD, THE EVOLUTION OF COOPERATION (1984) (exploring how cooperation strategies developed and using game theory to predict results). Even trivial gifts like coffee mugs and pens have been found to influence decisions.
259. Judicial orders rejecting fee requests from managerial attorneys ex post can, however, deter managerial lawyers from logging excessive hours in future cases.
260. See, e.g., Memorandum and Order of United States Magistrate Judge Roanne L. Mann at 6, In re Zyprexa Prods. Liab. Litig., MDL No. 1596 (JBW) (RLM) (E.D.N.Y. Dec. 29, 2006) (observing that the PSC submitted "detailed time records" for review);
261. id. at 11 (noting that the PSC requested compensation for more than "65,283 hours working for the common benefit of all plaintiffs").
262. This assumes that time expended on CBW increased the value of claims by more than $30 million.
263. Rents are payments exceeding wage earners' long-run opportunity costs. See A. Ross Shepard, Economic Rent and the Industry Supply Curve, 37 S. ECON. J. 209, 209 (1970), for a further brief explanation of "economic rent."
264. Lawyers and clients may also believe that gaining justice includes using MDL settlements to strengthen policies that protect consumers from defective products. In other words, private litigation may supplement regulation, which claimants or plaintiffs' attorneys may think is too weak. We do not consider this motivation in this section, but do not mean to deny its existence.
265. Lawyers chosen for lead positions routinely advertise the fact. The Vioxx case provides many examples. See, e.g., About Russ Herman, http://www.hhkc.com/ apg-a9-Russ- M-Herman.aspx (last visited Nov. 12, 2009) ("Liaison Counsel and Member of PSC Executive Committee and In Re Vioxx: MDL1657.");
266. Attorney Profile: Andy D. Birchfield, Jr., http://www.beasleyallen.com/ attorney/Andy-Birchfield/ (last visited Nov. 12, 2009) ("In April of 2005, Andy was chosen to co-lead the Plaintiffs Steering Committee for the federal Vioxx Litigation MDL.");
267. Firm Overview and History, http://www.lfsblaw.com/overview.jsp (last visited Nov. 12, 2009) ("Partner Arnold Levin . . . continues to serve on Plaintiffs' Steering Committees and Executive Committees of many important cases including . . . the Vioxx Products Liability Litigation").
268. Distinguishing between returns for which an agent is responsible and returns attributable to other causes, usually described as "nature," is a core problem for principals.
269. For a discussion of the possibility that the JPML keeps judges' ability to settle complex cases in mind when deciding where to locate MDLs, see Marcus, supra note 9, at 2288-89.
270. As previously stated, MDL judges occasionally appoint client-less attorneys to lead positions. These lawyers seem to always be local attorneys who are known to the court. Judges' reasons for appointing these lawyers are unknown, but they may be following the MANUAL FOR COMPLEX LITIGATION (FOURTH). After explaining that the role of liaison counsel is to handle "administrative matters," the Manual adds that "[l]iaison counsel will usually have offices in the same locality as the court." MANUAL FOR COMPLEX LITIGATION (FOURTH) § 10.221. Computers and electronic communications have surely rendered this instruction obsolete.
271. In the MER/29 litigation, which occurred in the time before MDLs, cooperating lawyers supported the production of CBW by making a $100 initial payment, a $200 supplement, and an assessment capped at $1,000 that varied with the number of cases a lawyer was handling. Rheingold, supra note 67, at 123.
272. See, e.g., In re Agent Orange Prods. Liab. Litig., 818 F.2d 216, 218 (2d Cir. 1987) (striking down a fee sharing agreement entered into by members of the class action's PMC that reallocated the time-based fee award).
273. Elliott J. Weiss & John S. Beckerman, Let the Money Do the Monitoring: How Institutional Investors Can Reduce Agency Costs in Securities Class Actions, 104 YALE L.J. 2053, 2105 (1995).
274. Weiss & Beckerman, supra note 162, at 2090 (reporting that the mean share of the settlement accounted for by the largest single claimant in twenty cases studied was 13.1 percent).
275. Id.
276. PMC members need not always be excluded from providing CBW. Occasionally, a PMC attorney could be uniquely qualified for a particular job. The proposal might allow exceptions in these situations, with the consent of other PMC members and the approval of the court. Presumably, the order granting the exception would identify the services to be performed and set appropriate limits on its scope. The requirement that PMC members may not perform CBW except at their own expenses could be waived by agreement among all attorneys.
277. Ex ante, the PMC's incentives would be imperfect because situations could exist in which the PMC would profit by foregoing opportunities beneficial to claimants. For example, suppose the PMC could spend $10 million on a CBC expected to generate a $50 million recovery or $20 million on a CBC expected to produce a $60 million recovery. The claimants, who one may assume are obligated to pay 40 percent contingent fees, would prefer the latter option, which generates a net recovery of $36 million to the former, which nets only $30 million. But the PMC would prefer the latter, which generates a net fee (after paying the CBC) of $10 million ($20 million - $10 million), to the former, which pays them only $4 million ($24 million - $20 million). After the CBC is hired, however, the PMC's interests would fully align with the claimants'. Both would ignore the cost of CBW and desire the largest possible recovery.
278. 15 U.S.C. § 78u-4(a)(3)(B)(ii) (2006).
279. Id. § 78u-4(a)(3)(B)(iii)(II)(aa).
280. The Supreme Court has long been concerned about conflicts of interests in class actions that threaten to saddle segments of a class with inadequate representation. See, e.g., Ortiz v. Fibreboard Corp., 527 U.S. 815, 856 (1999) (stating that present and future claims must be divided into subclasses with separate representation to prevent conflicting interests of counsel);
281. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 627 (1997) (stating the need for individuals whose sole duty is to represent members of that subgroup, not the entire class);
282. Hansberry v. Lee, 331 U.S. 32, 44 (1940) (finding that parties who challenged an agreement were adequately represented when the agreement was formed). Adequate representation is equally important in MDLs.
283. See PROJECT ON THE PRINCIPLES OF AGGREGATE LITIG. (2003-present), http://www.ali.org/index.cfm?fuseaction=projects.proj-ip&projectid=7.
284. For example, a judge could appoint a group of lawyers to a PMC subject to the condition that they join forces with another attorney whose inventory contains claimants with identified injuries.
285. See Lester Brickman, The Use of Litigation Screenings in Mass Torts: A Formula for Fraud?, 61 SMU L. REV. 1221, 1232-35 (2008) (describing procedures used by lawyers to accumulate massive inventories of asbestos cases).
286. See also Ralph A. Davies, A Balanced Perspective: The Welding Fume Litigation, FOR DEF., Aug. 2007, at 14, 17, http://forthedefense.org/CD/Public/ FTD/2007/August/2007%20August%20FTD%20-%20Welding %20Fume%20Litigation.pdf (last visited Nov. 12, 2009) (discussing Judge O'Malley's method for weeding out weak cases).
287. Brickman, supra note 171, at 1303 (citing In re Welding Fume Prods. Liab. Litig., MDL No. 1535, Case No. 1: 03-CV-17000, at 6 (N.D. Ohio Mar. 31, 2006) (case administration order)).
288. Brickman, supra note 171, at 1294 (citing In re Welding Fumes Prods. Liab. Litig., MDL No. 1535, Case No. 1: 03-CV-17000 (N.D. Ohio Nov. 8, 2005) (report of proceedings of jury trail)).
289. Plaintiffs can also "pile on" after settlement. The settlement of the Diet Drugs litigation provides an example. Although medical evidence led the defendant to predict about 36,000 claims, over 87,000 were submitted. In re Diet Drugs (Phentermine, Fenfluramine, Dexfenfluramine) Prods. Liab. Litig., 226 F.R.D. 498, 505, 508 (E.D. Pa. 2005). Back-end piling on, however, while a significant problem for the administration of MDL cases, would not affect our proposal for the selection of PMC members, which we anticipate will be done at the beginning of the case.
290. In re Enron Corp. Sec. Litig., 206 F.R.D. 427, 440 (S.D. Tex. 2002) ("The PSLRA does not delineate a procedure for determining the 'largest financial interest' among the proposed class members.").
291. Id. ("The four factors relevant to the calculation are (1) the number of shares purchased; (2) the number of net shares purchased; (3) the total net funds expended by the plaintiffs during the class period; and (4) the approximate losses suffered by the plaintiffs.").
292. When commenting on drafts of this article, several readers identified reciprocal agreements between the PMC and the CBC as a potential source of corruption. The PMC in Case 1 would hire a particular CBC at a high wage with the understanding that the CBC would return the favor in Case 2, where the CBC would attempt to become PMC. To discourage such arrangements, judges could require lawyers chosen as PMC or CBC to disclose prior appointments to these roles and to disavow any side deals. Judges could also impose prophylactic rules limiting the frequency with which lawyers can swap positions.
293. When calling for greater judicial oversight of fees in mass tort cases, Professor Resnik identified some of the many difficulties of setting fees correctly. Resnik, supra note 6, at 2177-80. Yet, she offered few reasons for believing that judges would regulate lawyers' compensation well. In a prior article, Professor Resnik also acknowledged that serious conflicts and information problems hamper judicial regulation of fees. Curtis & Resnik, supra note 46, at 452-53.
294. Some MDLs contain class actions. We have not tailored the proposal for use in these proceedings. One possibility would be to award fees separately for class counsel and the CBC, as was done in Diet Drugs. 226 F.R.D. at 504. This might be workable if the tasks to be performed by class counsel and the CBC were divided upfront, for the PMC could then negotiate with the CBC knowing which tasks the CBC would perform. This seems both awkward and artificial, however. Class counsel and the CBC have the same job: providing CBW.
295. An example will make the PMC's incentives clear. Suppose that all claimants in an MDL are identical, that the PMC represents half of them pursuant to 40 percent contingent fee agreements, and that PMC can hire Lawyer A or Lawyer B as CBC. Both lawyers want the same fee, 5 percent of the gross recovery, but A is the better pick and will generate an expected recovery 10 percent larger than B ($110M vs $100M). If A is hired, the PMC's fee will be ($110M)(.5)(.4) - ($110M)(.05)(.5) = $19.275M. If B is hired, the PMC will earn less- ($100M)(.5)(.4) - (S100M)(.05)(.5) = $17.5M. By hiring the inferior lawyer, the PMC would harm itself. This will be true as long as the PMC promises the CBC less than its entire contingent fee. Obviously, the PMC also does better by bargaining down A's fee.
296. In re Guidant Corp. Implantable Defibrillators Prods. Liab. Litig., MDL No. 05-1708, 2008 WL 682174, at *15 (D. Minn. Mar. 7, 2008) (capping lead lawyers' rates at $400 per hour and paralegals' rates at $150 per hour, when the highest submitted charges were $745 and $290, respectively).
297. see Jonathan R. Macey & Geoffrey P. Miller, The Plaintiffs' Attorney's Role in Class Action and Derivative Litigation: Economic Analysis and Recommendations for Reform, 58 U. CHI. L. REV. 1, 105-16 (1991).
298. See In re Cendant Corp. Litig., 264 F.3d. 201, 278-79 (3d Cir. 2001) (rejecting auction approach in private securities litigation);
299. Lucian Arye Bebchuk, The Questionable Case for Using Auctions to Select Lead Counsel, 80 WASH. U. L.Q. 889, 891-99 (2002) (criticizing the use of auctions for selecting class counsel);
300. Jill E. Fisch, Lawyers on the Auction Block: Evaluating the Selection of Class Counsel by Auction, 102 COLUM. L. REV. 650, 695-702 (2002) (arguing that optimality of auctions depends on key assumptions that are not met when selecting class counsel).
301. But see Geoffrey Miller, Competing Bids in Class Action Settlements, 31 HOFSTRA L. REV. 633, 643-50 (2003) (advocating ex post auctions for lead counsel rights at the time of settlement).
302. See Michael A. Perino, Markets and Monitors: The Impact of Competition and Experience on Attorneys' Fees in Securities Class Actions 23 (St. John's Legal Studies Research Paper No. 06-0034, 2006) (finding that fees in securities class actions tend to be lower when lead counsel rights are auctioned), available at http://papers.ssrn.com/sol3/papers. cfm?abstract-id =870577#.
303. For a discussion of how existing practices compromise judges' independence, see supra text accompanying notes 126-129.
304. This tendency is reflected in many policies regulating lawyers, including restrictions on advertising and referral fees.
305. Opponents of lawyer advertising contend that it damages the profession's reputation. Empirical studies have not borne this out. Richard J. Cebula, Does Lawyer Advertising Adversely Influence the Image of Lawyers in the United States? An Alternative Perspective and New Empirical Evidence, 27 J. LEGAL STUD. 503, 514 (1998);
306. Richard J. Cebula, Historical and Economic Perspectives on Lawyer Advertising and Lawyer Image, 15 GA. ST. U. L. REV. 315, 33334 (1998).
307. WILLIAM H. RIKER, THE THEORY OF POLITICAL COALITIONS 32 (1962).
308. See Rheingold, supra note 67, at 123-24 (1968) (describing the operation of the plaintiffs' lawyers).
309. See, e.g., Christian Berthelsen & Victoria Colliver, Tenet Settles Surgery Probes: Hospital Giant Agrees to Pay $54 Million, S.F. CHRON., Aug. 7, 2003, at B1 (Tenet settling federal investigation); Reuters, $395 Million Payment to Settle Unnecessary-Surgeries Suits, N.Y. TIMES, Dec. 22, 2004, at C10(Tenet settling private claims).
310. The details that follow were provided in two memoranda by Richard Frankel, an attorney involved in the litigation. We are grateful for the information Mr. Frankel provided and for his views on the economics of mass tort representations and cooperation among groups of attorneys.