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Article Excerpt
INTRODUCTION
I. HOW WE GOT HERE: THE HYBRIDIZATION OF COMPLEX CLAIMS RESOLUTION A. Mass Tort Litigation as Public Law Litigation B. The Hybridization of Claims Resolution 1. The need for private individuals in complex claims resolution 2. The politicization of claims resolution 3. Nonjudicial adjudication can promote fairness II. WHO SHOULD BE APPOINTED? A. The Degree of Discretion B. The Repeat Player Issue C. Solving the Repeat Player Problem 1. Selection of trustees 2. Accountability D. The Dalkon Shield Claimants Trust: Paradigm Lost Revisited--A Story CONCLUSION
INTRODUCTION
When reading about the Iraq war and its aftermath, I wondered, "Who is Paul Bremer?" Nobody elected him. Few people had heard of him before he became the administrator of the Coalition Provisional Government of Iraq. (1) When thinking about my role in this Symposium, it occurred to me that my position as a trustee of the Dalkon Shield Claimants Trust ("DS Trust") (2) was in some ways akin to that of Paul Bremer. Few people had heard of me. Nobody had elected me, either. Although the DS Trust did not have as high a profile as the Iraq war and its aftermath, the person on the street may well have wondered why a relatively unknown law professor was given the job of developing standards for distributing over $2 billion to hundreds of thousands of claimants. Similarly, although better known, Kenneth Feinberg, a private lawyer who served as a trustee of the DS Trust, more recently was appointed by the Attorney General of the United States to a high-profile post to administer the September 11th Victims Compensation Fund (VCF) created to compensate the victims of the attacks on the World Trade Center and the Pentagon. (3)
This Article explores whether private persons, as opposed to a judge or, perhaps, another governmental official, should have the authority to exercise a high degree of discretion in developing standards for compensation and determining compensation awards for claimants. It is important to look directly at this issue because the question whether administrative trusts are an appropriate alternative to litigation cannot be answered without a discussion about the private persons who develop the compensation standards and administer an administrative trust and how they should be selected.
The role of private persons in the adjudication process has been the subject of some critical academic commentary (4) and has been critiqued implicitly in the literature casting concerns about the alternative dispute resolution (ADR) movement. (5) However, it is unrealistic to expect judges to resolve the claim of each plaintiff in complex cases, particularly mass tort cases. Thus, the relevant concern is whether processes can be put into place to ensure that when private decisionmakers act, they promote and protect the various goals ordinarily served by litigation before a judge.
Part I of this Article provides a brief history of the "hybridization of complex claims resolution." This discussion shows that the use of private persons to control the process of determining compensation levels is a natural outgrowth of the development of the "public law" model of litigation and the ensuing "privatization" of the dispute resolution process. What has emerged is a hybrid system in which mass claims litigation that is commenced in courts results in an administrative claims resolution facility with standards for determining compensation developed by and administered by private individuals.
The Article further raises the possibility that the politicization of state and federal judiciaries creates a climate in which private decisionmakers are perhaps in at least no worse a position than judges to provide impartial, disinterested justice. Next, the Article rejects the argument that judicial adjudication is necessarily the superior means for resolving disputes. Rather, it suggests that administrative trusts run by private persons can provide a laboratory for innovative dispute resolution processes, the evolution of the law, and, ultimately, the fair administration of justice.
Given that most trust funds that have marked the legal landscape over the last twenty years have emerged out of litigation of some kind, or the expectation of litigation, (6) Part II of the Article discusses who from the private realm should be chosen to run administrative trusts. It examines the degree of discretion that the trustees ought to enjoy and the degree of judicial supervision that ought to be required. After making a case for the appointment of independent trustees, the Article raises the repeat player problem: a relatively small group of private individuals serves as the designers or administrators of the administrative trusts that have emerged in response to complex litigation, such as in mass tort cases.
The Article suggests that the arguments for using private persons as the proxy for the judicial system begin to lose force when the same private individuals are chosen by another set of repeat players--the judges and lawyers that appear so regularly in complex litigation. The Article concludes that more appropriate selection processes can help solve the issues created by the use of repeat players. It borrows from the literature regarding judicial selection methods to propose innovative approaches to the selection of a broader range of private persons. The introduction of some competition in the selection of trustees should result in administrative claims resolution facilities that are an appropriate substitute for litigation. The processes such private persons develop can result in efficiency, impartiality, and appropriate levels of innovation.
I. HOW WE GOT HERE: THE HYBRIDIZATION OF COMPLEX CLAIMS RESOLUTION
The traditional paradigm for civil dispute resolution envisions a judge who makes legal rulings and a jury that determines the facts after a trial. Trials have been characterized as "the central institution of the law as we know it" (7) and as "one of our great cultural achievements." (8) However, as Gillian Hadfield has shown, the percentage of civil cases resolved by either a bench or jury trial has declined from 11.5% in 1962 to 1.8% in 2002. (9) Not coincidentally, with increasing pace during the last several decades, civil dispute resolution has moved from the "private law" model of adjudication to the "public law" model. (10) At the same time, private persons have become an integral part of the claims resolution process, especially in complex litigation such as mass tort litigation. These developments may be described as the "hybridization of complex claims resolution." By hybridization, I mean that the resolution of a complex litigation requires the participation of the judiciary, government officials, the parties to the litigation, and private individuals not only during the litigation and the settlement process, but in the claims distribution process as well.
This Part discusses the evolution of these developments. First, it shows how mass tort and similar complex claims resolution became a species of public law litigation and how complex claims resolution came to be characterized by the participation of not only public, but also private actors: not simply as parties and their attorneys, but also as adjuncts of the judiciary, in setting standards and making awards. Next, it examines the political dynamics that undermine the state and federal judiciaries, which lead to the claim that such private adjuncts or adjudicators may be capable of being at least as impartial as judges. This Part also suggests that the use of private persons can lead to the development of innovative approaches to dispute resolution and help advance the evolution of law. Thus, the question is not whether private persons should play a discretionary role in resolving claims, but who those persons should be and how they should be selected.
A. Mass Tort Litigation as Public Law Litigation
In his famous (11) article, The Role of the Judge in Public Law Litigation, (12) Abram Chayes examined the emergence of institutional litigation and the changes in the makeup of such litigation, such as school desegregation cases. He described the "new model of civil litigation" (13) that had emerged, and noted various characteristics of this new model: (1) "the party structure is sprawling and amorphous, subject to change over the course of the litigation"; (14) (2) "[t]he judge is the dominant figure in organizing and guiding the case, and he draws for support not only on the parties and their counsel, but on a wide range of outsiders--masters, experts, and oversight personnel"; (15) and (3) the judge has "has increasingly become the creator and manager of complex forms of ongoing relief, which have widespread effects on persons not before the court and require the judge's continuing involvement in administration and implementation." (16)
Almost twenty years later, Judge Jack B. Weinstein noted that Chayes's description of modern public law litigation applied to private mass tort litigation as well. (17) He explained the similarities between mass tort cases and classic public law institutional litigation. Both "implicate serious political and sociological issues." (18) Mass tort cases and public law litigation also both have "strong psychological underpinnings" and both "affect larger communities than those encompassed by the litigants before the court." (19) He further explained that mass tort cases, like public law cases, raise important issues about modern society. (20) He noted that there often arises in mass tort cases "a near paranoid terror of an unknown 'them' in the large corporation" and a sense of "extreme anxiety" like that which arises in public law cases involving government agencies. (21) These characteristics in turn require courts to take a more active role in managing the litigation. It also requires courts and attorneys to exercise a higher degree of sensitivity so that irrational disagreements do not undermine the resolution of the litigation. (22)
Linda Mullenix has criticized Judge Weinstein's vision of mass tort litigation as public law litigation. (23) She argues that "Judge Weinstein's assertion is an analytical finesse" (24) because mass tort cases generally do not involve constitutional rights. (25) Rather, she continues, mass tort litigation is essentially a collection of individual personal injury cases. Accordingly, she argues that the public law paradigm is inapplicable because "mass tort cases do not pit downtrodden, defenseless claimants against such big, impersonal governmental institutions as prisons, school systems, and mental health facilities. Further, there is no state action involved in any of these cases that would justify triggering Judge Weinstein's desired judicial activism." (26)
Literally, Mullenix is correct. However, in 1997 the Supreme Court decided Amchem Products, Inc. v. Windsor, (27) in which it vacated the class action settlement of the asbestos litigation, and in 2003 it split 4-4 in Dow Chemical Co. v. Stephenson, (28) which allowed veterans who otherwise would have been precluded from seeking compensation by the class action settlement that created the by-then-defunct Agent Orange settlement facility to sue Dow Chemical for injuries allegedly caused by their exposure to Agent Orange. Both cases were decided on due process grounds. Thus, issues of constitutional law seem to loom larger than ever in the mass tort context. Moreover, the essence of Judge Weinstein's argument as to why mass tort cases should be analogized to public law litigation is that such litigation has such a huge impact on the public at large. (29)
Unquestionably, mass tort cases have had a dramatic impact on the judicial system and society over the last two decades. (30) Mass tort litigation is extraordinarily expensive. (31) As a particular litigation becomes more protracted, shareholder value may be diluted and jobs may be lost. (32) Since the Supreme Court's decisions in Amchem (33) and Ortiz v. Fireboard Corp. (34) made it more difficult for companies seeking global peace in resolving a mass tort to use Rule 23 settlement class actions, (35) more asbestos defendants have sought to use the bankruptcy laws to obtain such peace, and more companies involved in various mass torts may be likely to do so in the future. (36) The traditional model of litigation often overly rewards some plaintiffs, but may leave others with little or nothing as corporate defendants' assets are depleted through the litigation process. (37)
Rather than compare the harms suffered by victims of discrimination in a traditional public law case or characterize them as downtrodden as compared to victims of a defective product or drug that causes serious injury, it is more apt to compare the scope of harm in terms of the large numbers of persons affected by the same or similar conduct. Indeed, under the corporate law of most states, the boards of directors of public companies are required to maximize profits for the benefit of shareholders. Thus, they make decisions that generally do not necessarily inure to the benefit of the consumers of their products. The result can be a mass tort such as those we have seen and see now in the case of the painkiller Vioxx. Just as traditional public law cases are seen as a deterrent to governmental abuses, mass tort cases raise a similar need to constrain the single-minded approach to profit maximization. (38) In that sense, mass tort litigation unquestionably takes on the attributes of traditional public law litigation. All such litigation is complex litigation and, as such, invites nontraditional methods of resolution. (39)
Indeed, over the last twenty years, judges aggressively have used numerous procedural devices to steer mass tort cases to resolution without trial. Federal judges are armed with powerful aggregation tools to assist them in resolving complex cases, such as the multidistrict litigation statute, which allows the transfer of related cases to one district court for pretrial purposes, (40) and Federal Rule of Civil Procedure 23, which permits class action litigation. (41) More dramatically, the Class Action Fairness Act of 2005 will allow most state-claim-based class actions filed in state court to be removed to federal court. (42)
In the bankruptcy context, 28 U.S.C. [section] 1334, which vests the federal district courts with subject matter jurisdiction over cases "related to" a bankruptcy case, may be used to support removal of state cases involving the debtor and third parties to federal court, and, ultimately, their aggregation there. (43) In addition to these aggregation rules, courts invoke the court-made preclusion doctrine to bar relitigation of the same issues, (44) institute docket control mechanisms, (45) create case management consortia, (46) and issue injunctions against state court litigation that raises the same claims as those in federal court. (47) It is not a well-kept secret that judges use these tools to drive the parties to settlements. (48) In the aftermath of settlement, as a general matter, an administrative fund of some kind is established to pay all claimants, with the fund generally administered by a private individual rather than a judge.
Although Amchem makes it more difficult to resolve mass tort claims in class action settlements, federal and state courts still approve such settlements. (49) Indeed, many scholars have criticized the aggressive use of judicially managed, aggregated settlements of mass torts because such resolution impairs individual autonomy and the role of the judiciary. (50) Nonetheless, it seems clear that the aggregated settlements of mass tort litigation are here to stay, one way or the other, unless tort reform succeeds in eliminating the plaintiffs' mass tort bar. Just two recent examples highlight this trend: the use of [section] 524(g) prepackaged plans of reorganization that lead to the establishment of trust funds administered by private individuals to resolve asbestos liability, which have assumed paramount importance in the last few years; (51) and the establishment of the VCF. (52)
B. The Hybridization of Claims Resolution
Based on my experience as chairperson of the DS Trust, I have written that aggregated settlements of mass tort cases are the preferred alternative to traditional one-on-one litigation. (53) But I have not discussed the propriety of my role or that of others similarly situated--such as Ken Feinberg, as Special Master of the VCF, or other trust fund administrators--as a private individual rather than a governmental official, in actually resolving claims. Although one can argue that such private persons have become governmental actors--the administrators of an ad hoc administrative agency--by the simple act of appointment, the concern remains that heretofore private individuals have assumed an ad hoc judicial mantle by such appointment.
When a settlement provides a funding vehicle that essentially dictates the terms of each settlement, such that the fund administrator exercises little to no discretion on the settlement amount, perhaps the use of private individuals to serve as trustees raises little concern, although such individuals are likely to command a higher fee for this work than would clerks of the court, magistrate judges, or other governmental officials. (54) However, when the parties to the settlement have relied on their own private experts to develop detailed rules for paying claims, or when the settlement terms, instead, provide a high degree of discretion to the fund administrator, as the A.H. Robins Plan of Reorganization did in connection with the DS Trust (55) and as the Act establishing the VCF did, one might wonder why private persons ought to be charged with such a task.
Peter Schuck has described this privatization of mass tort resolution:
The same elite group of plaintiffs' lawyers turns up on the management committees of one mass tort litigation after another. Much the same is true on the defendants' side. This "repeat player" phenomenon creates a high degree of informal coordination, continuity, and learning across different mass torts. It also causes litigators...
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