| |
Long before the court of appeals reversed Judge Parker’s trial plan, two commentators,
representing plaintiffs in a nationwide class action of asbestos litigants, proposed
using the Cimino approach on a national level. After common issues trials established
liability, and a representative number of damage cases were tried in each federal district,
the results would be extrapolated to other cases on a district-by-district basis.216
Judge Parker’s approach in Cimino has been used as part of a trial plan on at least two
occasions. In a set of consolidated cases filed in the 8th Judicial District Court for Clark
County, Nevada dealing with approximately 17,000 property damage subrogation lawsuits
arising from a chemical explosion, counsel for one of six defendants proposed a trial
plan using stratified sampling of the insurance claims at issue. Because the cases settled
before trial the plan was not used.217
In In re Chevron USA,218 the district judge faced claims filed by 3,000 plaintiffs and
intervenors relating to personal injuries, wrongful death, and property contamination
allegedly caused by defendant’s knowing sale of contaminated land for residential development.
The district court approved a trial plan that proposed a bellwether trial of
thirty claims, fifteen selected by plaintiffs and fifteen selected by defendants “to establish
bellwether verdicts to which the remaining claims could be matched for settlement purposes.”
219 The court rejected defendant’s proposed plan of taking a stratified sample of
the claims and defendants filed a petition for a writ of mandamus, arguing that the plan
to use unrepresentative bellwether plaintiffs was an unfair method of determining its
liability in a unitary trial.
The Court of Appeals granted the writ in part and denied it in part. Circuit Judge
Robert Parker, now sitting as a member of the Fifth Circuit, wrote the opinion for the
court. The court of appeals barred the district court from applying the results from the
bellwether trials to the remaining 2,970 cases. The court also ruled that the district court
had discretion to proceed with the 30 cases to produce individual judgments. In reaching
that result, the court stated that “the results that would be obtained from a trial of these
thirty (30) cases lack the requisite level of representativeness so that the results could
216. See Arthur R. Miller & Price Ainsworth, Resolving the Asbestos Personal-Injury Litigation Crisis, 10
Rev. Litig. 419, 446–47 (1991).
217. Howard Ross Cabot & Alan A. Matheson Jr., The Use of Statistics to Wrest Control Over the Trial of
Mass Damage Claims, 7 Inside Litig. (Mar. 1993) at 16.
218. 109 F.3d 1016 (5th Cir. 1997). For a thorough discussion of the context and arguments in that case,
written by an attorney for the defendant, see Richard O. Faulk et al., Building a Better Mousetrap? A New
Approach to Trying Mass Tort Cases, 29 Tex. Tech L. Rev. 779 (1998).
219. Chevron, 109 F.3d at 1017.
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permit a court to draw sufficiently reliable inferences about the whole that could, in turn,
form the basis for a judgment affecting cases other than the selected thirty.”220
Judge Edith Jones concurred in Chevron on “the narrow basis that the court’s adoption
of nonbellwether methods for conducting a bellwether trial is uniquely harmful and
unauthorized.”221 She expressly declined to endorse the use of statistical sampling, asserting
that “the technique may deprive nonparties of their Seventh Amendment jury trial
right.”222
Statistical sampling was also used in the case of Hilao v. Estate of Marcos,223 a class
action composed of individuals with claims against the former president of the Philippines
for damages resulting from official torture, summary execution, and disappearance.
This is a unique mass tort, one that might be considered both immature and somewhat
elastic, but contained in time and place, with cases identifiable enough to be aggregated.
More than 10,000 claims were submitted.
A random sample of 137 claims was selected and those claimants were deposed. Their
claims and depositions were reviewed by a special master who found 6 (about 4%) to be
invalid. He issued a report setting damage levels for the 131 sample claims, calculating the
average awards for torture, execution, and disappearance categories and extrapolating
those averages to the class as a whole, recommending a total award of $767,491,493. A
jury that had found liability and a punitive damages multiplier in previous trials reconvened
to hear testimony from the 137 sample claimants and from a statistical expert. The
jury was instructed that it could accept, modify, or reject the special master’s award. After
five days of deliberations, the jury “generally adopted the [special] master’s recommendations,
although it did not follow his recommendation in 46 instances.”224
Defendant’s appeal was limited to the method used to determine the number of invalid
claims, not the method of finding total compensation. The court of appeals, in a 2-
1 ruling, held that the “unorthodox” methodology “can be justified by the extraordinarily
unusual nature of this case.”225 The court applied the Mathews v. Eldridge226 three-part
220. Id. at 1020.
221. Id. at 1023.
222. Id. But see Paul D. Rheingold, Ethical Constraints on Aggregated Settlements of Mass-Tort Cases, 31
Loy. L.A. L. Rev. 395, 401 (1998) (indicating that the Chevron plan is “unlikely to ever pass muster”). This
judgment, of course, does not apply to stipulated use of statistical sampling based on bellwether cases.
223. 103 F.3d 767 (9th Cir. 1996). For further background on the case, see Sol Schreiber & Laura D.
Weissbach, In re Estate of Ferdinand E. Marcos Human Rights Litigation: A Personal Account of the Role of the
Special Master, 31 Loy. L.A. L. Rev. 475 (1998).
224. Hilao, 103 F.3d at 784.
225. Id. at 786.
226. 424 U.S. 319 (1976).
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balancing test, examining (1) the private interests affected, (2) the risk of erroneous deprivation
and the probable value of additional safeguards, and (3) the interests of the party
seeking the procedure as well as any ancillary government interests. While the court found
that statistical sampling of valid claims “obviously presents a greater risk of error in comparison
to an adversarial adjudication of each claim,” it found that, on balance, the procedure
did not violate due process.227 Unlike Cimino, the Hilao case did not include a Seventh
Amendment challenge or an issue of state law, and the Cimino court distinguished it
on those grounds.228 Dissenting in Hilao, Judge Rymer focused on the compensatory
damage awards and argued that “even in the context of a class action, individual causation
and individual damages must still be proved individually.”229
In Cimino, Judge Parker set out to create a solution to an overload of asbestos cases on
his docket. In the course of addressing that problem, he necessarily dealt with another
problem, that of variability of case outcomes arising from differences in decision making
by juries. Social scientists, lawyers, and law professors have studied the use of sampling
and extrapolation in Cimino and arrived at mixed evaluations, with assessments that suggest
the limits of the techniques employed as well as ways of improving the process. While
the tone of these assessments varies, there is considerable, indeed comforting, consensus
on some basic points. The appraisals were conducted by scholars with varied backgrounds,
including law, philosophy, social psychology, and statistics. We now summarize their assessments.
Michael Saks and Peter Blanck are most optimistic in their appraisal of the potential
of the Cimino process. They conclude that “aggregation adds an important layer of process
which, when done well, can produce more precise and reliable outcomes.”230 Starting
from the premise that jury verdicts in individual litigation are highly variable,231 Saks and
Blanck argue that under some conditions, sampling can reduce variation in damage awards.
“The aggregation process refines the decision by averaging out of existence the undesirable
variations and bringing the systematic and legally relevant relationships into sharper
227. Hilao, 103 F.3d at 786–87.
228. Cimino, 151 F.3d at 319. The district court in Hilao rejected a Seventh Amendment claim on the
grounds that “the jury did determine the facts of the case,” that there “would be no benefit to either side in
having the entire class testify given the repetition in the claims,” and that “Rule 23 of the Federal Rule of Civil
Procedure does not mandate the presence of each member of the class.” In re Estate of Marcos, 910 F. Supp.
1460, 1468–69 (D. Haw. 1995). Apparently, the defendant did not appeal from that decision.
229. Hilao, 103 F.3d at 788.
230. 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).
231. This premise is supported by experimental research: see Bordens & Horowitz, supra note 208, at 59.
48
Appendix C: Mass Torts Problems & Proposals
relief.”232 They indicate, however, that the more the cases within a disease category or
other grouping “vary from each other in legally relevant ways, the more we move away
from aggregation’s accuracy-producing benefits and move toward its error-producing
harms.”233
Examining participatory values underlying due process, such as having control of the
presentation of one’s own case and the opportunity for a “day in court,” Saks and Blanck
emphasize that these values have to be compared to the reality of the current system of
deciding individual mass torts cases. They cite findings from Deborah Hensler’s study of
mass torts to the effect that
tort lawyers and their clients in mass tort cases communicate remarkably little about
their cases and that clients have little control over the course of the litigation. Even in
the absence of formal aggregative procedures, lawyers informally aggregate cases by
representing hundreds or thousands of clients and meeting with them in large groups.234
In their judgment, “[s]uch informal aggregation is dangerous because it lacks the procedural
safeguards of formal aggregation.”235
Saks and Blanck suggest several ways of improving the sampling process, such as attending
to changes in the mix of cases (e.g., by settlements or dismissals), that might
convert a representative sample into an unrepresentative one;236 grouping like cases together
(e.g., by type or severity of injury);237 using larger samples for heterogeneous categories
of cases;238 and using more juries, assigned randomly to the subgroups, for the
purpose of reducing the risk that single juries will alter their decision making in the course
of hearing a host of cases as well as the risk that a single jury may itself be an outlier.239
Kenneth Bordens and Irwin Horowitz are both social psychologists who have done
extensive experimental research on the effects of procedural differences on jury decision
232. Saks & Blanck, supra note 230, at 836.
233. Id.
234. Id. at 840 (citing Deborah Hensler, Resolving Mass Toxic Torts: Myths and Realities, 1989 U. Ill. L. Rev.
89, 92–97).
235. Id. at 840.
236. Id. at 841–42.
237. Id. at 844–45 (citing Francis E. McGovern, The Cycle of Mass Tort Litigation 15 (Yale Program in
Civil Litigation Working Paper No. 122 (1990)), for the proposition that in Jenkins v. Raymark “fewer than
ten variables . . . can explain approximately 90% of the variation among case values”).
238. Id. at 845.
239. Id. at 849.
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Appendix C: Mass Torts Problems & Proposals
making.240 They examined the court’s approach in Cimino v. Raymark, using data from
the jury decisions in Cimino and comparing those data with results from their experiments.
In general, Bordens and Horowitz express sympathy with the Saks and Blanck
analysis, but their bottom line appears to be that their reservations about the procedure
used in Cimino “may vitiate the force of the Saks and Blanck logic.”241
In their review of the Cimino data, Bordens and Horowitz found that one of the “other
cancer” cases presented to one of the jury groups was an “outlier,” a case in which the
injuries were considerably more severe than other “other cancer” cases (plaintiff had his
jaw removed because of the cancer and was awarded $1.5 million, substantially more
than others in the group), possibly contaminating the decision making of that jury in
relation to other members of that group and subsequent groups.242 Bordens and Horowitz
also were critical of the structure of the juries’ consideration of groups of cases, observing
that the juries started with the mesothelioma cases and proceeded from the more severe
to the less severe injury groups. Knowledge of the serious injuries experienced by some
may have influenced the juries’ judgments about the merits of the later groups.243 Finally,
Bordens and Horowitz criticized the procedure because it averaged the outcomes of the
two juries’ decisions. Such a procedure raised questions for them about the underlying
validity of the process because the two juries exhibited two different verdict patterns. One
jury generally gave higher monetary awards than the other. Bordens and Horowitz conclude
that “[s]eparate juries, comprised of different individuals, cannot be expected to
produce verdict patterns uniform enough for any reasonable combination of their
awards.”244
To address these problems, Horowitz and Bordens suggest remedies quite similar to
those proposed by Saks and Blanck. For example, Bordens and Horowitz recommend
that a court “have the plaintiffs in each sample [subgroup] judged by a separate jury” and
make the groups “as homogeneous as possible” by looking at multiple variables (such as
240. In the interest of full disclosure, I should mention that I have collaborated with Professors Horowitz
and Bordens on a number of projects over the past twenty years and that the three of us are coauthors of
Irwin A. Horowitz, Thomas E. Willging & Kenneth S. Bordens, The Psychology of Law (1998).
241. Bordens & Horowitz, supra note 208, at 44.
242. Id. at 61. This concern is based on experimental findings in which Horowitz and Bordens examined
the effect a high-damages outlier’s inclusion in a consolidation had on jury awards in other consolidated
cases and found (1) that the outlier received a lower award in a consolidated trial than would have been
received in a separate trial and (2) that the presence of an outlier in a consolidated trial increased the awards
for other plaintiffs. See generally Horowitz & Bordens, supra note 40.
243. See Bordens & Horowitz, supra note 208, at 60–61.
244. Id. at 65.
50
Appendix C: Mass Torts Problems & Proposals
severity of injury or strength of the evidence) as opposed to simply the category of the
disease.
If the disparity in verdicts between multiple juries, as happened in Cimino, is indeed a
problem,245 a remedy seems readily available: use only one jury for each subgroup. The
problem, however, does not seem that straightforward. Variability could arise from variations
in the facts of the cases in the two groups or from variability in the decision-making
styles of the different juries. If we take as a given the variability of jury verdicts that Horowitz
and Bordens have shown in the laboratory and which the Cimino experience seems to
confirm, one could argue that averaging two or more juries’ verdicts in cases from each
subgroup would reduce the variability that otherwise exists in resolving ordinary civil
litigation.
Social scientists posit other remedies for dealing with the variability of jury verdicts.
In a thorough review of the social science literature on jury variability, Professor Neil
Vidmar of Duke Law School found that several studies linked variability of verdicts to the
seriousness of the underlying injuries.246 Other studies found, however, a wide range of
jury damages verdicts within categories of injury severity, albeit not wider than lawyers’
estimates of damages.247 Vidmar suggests several approaches to dealing with variability
in assessing damages, including: (1) providing jurors with a matrix of values that would
fix damages according to the seriousness of the injury and the age of the plaintiff; (2)
giving jurors a set of scenarios with associated dollar values that would serve as nonbinding
benchmarks for the jury; and (3) employing a series of flexible floors and ceilings
that vary with severity of injury and plaintiff age rather than setting a single statutory
cap.248
In reviewing the Cimino experience and the Saks and Blanck hypotheses, law professor
Robert Bone combines his knowledge of philosophy and statistics. Philosophically, a
case for sampling can be made rather easily on utilitarian grounds, while it is more difficult,
but not impossible, to make a case on rights-based grounds.249 Statistically, like Saks
245. Saks and Blanck did not identify the use of two juries as a problem, but this may be because they did
not have the data that were available to Bordens & Horowitz. They may have assumed that there was little or
no disparity between the two juries—or that any disparity was not relevant to their presentation.
246. Vidmar, supra note 58, at 895–96.
247. See id. at 896.
248. Id. at 881–82.
249. See Bone, supra note 88, at 595–617. He finds sampling “is especially troubling from a rights-based
perspective because of its tendency to produce biased error,” especially if sample averaging rather than regression
is used. Id. at 599.
Like Horowitz & Bordens’s experimental finding described supra note 242, Bone asserts that in many
situations, “sampling virtually guarantees that at least some high damage plaintiffs will receive verdicts substantially
lower than the verdicts they would receive from an individual trial.” Id. at 600.
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and Blanck and Horowitz and Bordens, Professor Bone stresses that attempting to reduce
heterogeneity of the groups or subgroups of cases is essential in seeking an acceptable
level of accuracy of outcomes. Under those rationales, he concludes that the following
conditions should be met:
• “verdicts should be calculated in the same way for all plaintiffs, including those in
the sample group;”250
• “costs should be spread equally over the entire plaintiff population;”251 and
• a regression model should be used, determining damages by looking at factors
such as age, previous health history, future lost earnings, and medical expenses.252
Analysis from a process-oriented perspective, however, is a different matter. The “strongest
objections” to sampling, he asserts, “have nothing to do with outcome accuracy;”
rather, they derive from “a process-oriented view of adjudication that values participation
for its own sake, not just for its impact on outcome quality.”253 Nevertheless, after a
lengthy jurisprudential analysis, he concludes that there are conditions under which sampling
can be justified even though it diminishes individual rights to control litigation and
participate in decisions that determine the outcome of individual cases.
Because litigants have equal rights to participate in litigation, courts should only limit
process-oriented claims in ways that are consistent with the equality of such rights. A trial
judge should “create as large an aggregation as possible,” allow the widest ranges of participation
possible, perhaps by appointing litigation committees, and distribute participation
rights either by auction or by random lottery if an auction is not feasible.254
Plaintiffs’ attorneys Joseph Rice and Nancy Davis reviewed the Cimino approach, which
they called the “virtual verdict.” They noted that the Cimino approach has been hailed as
efficient and statistically accurate, yet criticized as placing limitations on the opportunity
for an individual trial and as using a small number of sample cases.255
250. Id. at 650–51. Saks & Blanck, supra note 230, at 849 make the same point, based on a different
reasoning process. (“The best protection [from error based on the order in which cases were heard] would
actually come from giving even tried cases the mean aggregate award rather than the one arrived at for it by
the jury that heard the particular case.”).
251. Bone, supra note 88, at 651.
252. See id. at 584–87, 651. This recommendation seems comparable to Saks & Blanck’s recommendation
that multivariate analysis be used to define the sample as well as to Bordens & Horowitz’s recommendation
that multivariate analysis be used. Both regression and cluster analyses are multivariate statistical analyses.
253. Id. at 617, 619.
254. See id. at 651. An auction might not be feasible, for example, because it would interfere with the
randomness of the selection of a sample of cases from which to extrapolate damages and, as a result, skew the
accuracy of the outcomes. See id.
255. Rice & Davis, supra note 151, at 134–35.
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Appendix C: Mass Torts Problems & Proposals
In sum, statistical, socio-psychological, philosophical, and legal reviews of Judge Parker’s
process in Cimino converge in finding both that the procedure is problematic and that
problems can be addressed. The primary guidance from these analyses is that:
• outliers, such as cases with extraordinarily serious injuries, create problems and
should be treated specially;
• judges should seek to stratify samples into groups that are as homogenous as possible;
• multivariate analyses should be used to assist judges in both identifying the sample
group and in applying the verdicts to the rest of the cases; and
• separate juries should be used to consider each subgroup of cases.
In addition, apparently inspired by Judge Parker’s Cimino trial plan, two University of
Virginia law professors, Glen Robinson and Kenneth Abraham, propose an even widerreaching
application of aggregation approaches in tort law.256 Their proposal would extend
to all damage calculations in personal injury cases, not just mass torts. Their approach
contemplates using statistical claim profiles to establish the value of tort claims.
Profiles, resembling schedules for workers’ compensation plans, would be built from data
obtained from previous verdicts or settlements, incorporating all legally relevant information,
such as the duration and severity of an injury, plaintiff ’s knowledge of a product’s
dangers, and the like.257 Their proposal is designed to address the distortions that result
from focusing on the idiosyncratic features of individual claims or on factors that should
be irrelevant, like race, gender, and economic status. It would seem to do to damage calculations
what sentencing guidelines have done to criminal sentencing, shifting from an
individualized to a collective approach.
The above is not to imply that all of the commentators have been as positive as those
summarized above. A sample of the critiques of aggregation give a sense of the centrality
of the principles and values at stake. For example, Professor Martin Redish asserts that
“even a casual examination of the aggregation devices employed by courts or suggested
by commentators reveals that most of them threaten core elements of due process
theory.”258 Contrary to the above commentators, he contends that aggregative devices
256. Glen O. Robinson & Kenneth H. Abraham, Collective Justice in Tort Law, 78 Va. L. Rev. 1481 (1992);
see also Kenneth S. Abraham & Glen O. Robinson, Aggregative Valuation of Mass Tort Claim, 53 L. & Contemp.
Probs. 137 (1990); Kenneth S. Abraham, Individual Action and Collective Responsibility: The Dilemma of Mass
Tort Reform, 73 Va. L. Rev. 845 (1987).
257. See Robinson & Abraham, supra note 256, at 1490–92.
258. Martin H. Redish, Procedural Due Process And Aggregation Devices in Mass Tort Litigation, 63 Def.
Couns. J. 18–19 (1996).
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Appendix C: Mass Torts Problems & Proposals
(including mass consolidation, issue consolidation, statistical sampling, and settlement
class actions) “undermine both the goals of achieving an accurate decision and of legitimizing
the adjudicatory process in the eyes of the litigants.”259
In Redish’s analysis, discussing the Mathews v. Eldridge test applied in Hilao260 (and
disagreeing with its utilitarian focus), “[t]he connecting link between accuracy and due
process is the belief that the adjudicator is more likely to find the facts correctly if the
parties possessing both the strongest interest in the outcome and the greatest access to the
relevant information are provided a meaningful opportunity to present their cases to the
fact finder.”261 He also finds “non-instrumental” values to be implicated by aggregation.
Values such as the appearance of fairness, equality, predictability, transparency, rationality,
participation, and revelation are all “central to the maintenance of individual dignity
or necessary to the legitimacy of the judicial process in the eyes of litigants.”262
As to statistical sampling, Professor Redish finds it “the most controversial of all aggregation
devices,” and that “[r]easonable people may differ concerning on which side of
the constitutional line sampling falls.”263 At least to a certain extent, “the constitutionality
of sampling may turn on the statistical accuracy of the samples chosen as predictors of
the absent plaintiffs’ actual damages . . . an issue over which scholars have differed.”264 He
concludes, however, that incorporating statistical sampling into mass torts adjudication
may require substantive law changes, along the lines of a workers’ compensation program.
Finally, sampling procedure “does deprive defendants of the opportunity to challenge
the actual damage claims of each plaintiff,” undermining significant interests served
by the procedural due process guarantee.”265
Along similar lines, Professor Roger Trangsrud states the case against aggregation of
mass torts claims. Though written before the Cimino case, his arguments are certainly
relevant to the debate about statistical sampling. Trangsrud starts from the proposition
that our common-law tradition has continuously supported individual autonomy for
259. Id. at 19.
260. See discussion supra notes 225–229.
261. Redish, supra note 258, at 20.
262. Id. at 21 (citing Martin H. Redish & Lawrence C. Marshall, Adjudicatory Independence and the Values
of Procedural Due Process, 95 Yale L.J. 455, 483–91 (1986)).
263. Id. at 23 (citing and applying Mathews v. Eldridge, 424 U.S. 319 (1976), which emphasizes the risk of
erroneous deprivation of property as a major element of due process).
264. Id. at 25 (citing Saks & Blanck, supra note 230, and Bone, supra note 88).
265. Id. at 25.
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Appendix C: Mass Torts Problems & Proposals
cases involving substantial personal injury and wrongful death.266 Justifications for individual
autonomy draw both from natural law values and from the “assumption that economic
decisions are best made by the true owner of property.”267 Trangsrud also critiques
the rationales used to support aggregation—largely efficiencies in costs to the parties as
well as consistency of results—as being dubious in the context of mass torts. Tort law has
never held that all participants in the same accident should be treated the same. Nor are
the savings clear. Savings are calculated as if all cases would be tried, whereas generally
early trials will lead to settlement of similar cases.268
Finally, Professor Trangsrud asserts that mass trials are unfair because they impair the
ordinary function of the jury by using procedures like trifurcation and special verdict
forms.269 They also distort the attorney-client relationship, causing tension between a
lawyer’s substantial investment in the litigation and the client’s interests.270 Finally, aggregation
creates incentives for improper behavior by trial judges, such as questionable rulings
on the underlying claims and incentives to press the parties to settle.271
Trangsrud proposes that the “better course is to coordinate and consolidate pretrial
discovery and motions practice but then individually try the tort cases in an appropriate
venue. After a number of cases have been tried substantial incentives will operate to encourage
the private settlement of many of the remaining claims.”272
In summary, statistical sampling has generated controversy in case law as well as academic
writing. It pits polar values of individual and collective justice against each other.
Whether some reconciliation is possible remains to be seen. If parties find sampling to be
a viable approach to establishing settlement values, that alone would justify its careful
consideration. Whether courts can fashion forms of statistical sampling that are sufficiently
intertwined with jury decision making to satisfy Seventh Amendment concerns
appears to be the central legal issue. The procedure used by the Hilao court had elements
of jury activity that differed from Cimino, but those elements of Hilao have not been
266. See Roger H. Trangsrud, Mass Trials in Mass Tort Cases: A Dissent, 1989 U. Ill. L. Rev. 69, 70–71
[hereinafter Trangsrud, Mass Trials](citing S. Yeazell, From Medieval Group Litigation to the Modern Class
Action 211 (1987)). See also Trangsrud, Joinder Alternatives, supra note 76, at 782 (“balancing of efficiency
versus fairness leads to the conclusion that the substantial damage claims of mass tort victims deserve an
uncompromised due process . . . joint discovery on common issues is desirable in most mass tort cases”).
267. Trangsrud, Mass Torts, supra note 266, at 75.
268. See id. at 78–79.
269. See id. at 80–82.
270. See id. at 82–84.
271. See id. at 85–86.
272. Id. at 69.
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reviewed by courts faced with a Seventh Amendment challenge or evaluated by commentators.
Statistical sampling may be a concept in search of a means of integrating it with
traditional legal values of due process of law and trial by jury.
2. Use of court-appointed experts
Federal Rule of Evidence 706 provides a mechanism for courts to appoint experts to address
issues of scientific uncertainty. Inherent judicial power also allows a judge to appoint
a technical advisor to assist the judge in understanding complex technical information.
273 Both powers have been used occasionally in mass torts contexts.
Extensive use of court-appointed experts and technical advisers has been made in the
breast implant litigation. Two federal judges have used court experts in two distinctly
different ways. In May 1996 in the MDL consolidated litigation, Judge Sam C. Pointer,
Jr.(N.D. Ala.), acting pursuant to Fed. R. Evid. 706, appointed a national panel of neutral
experts to provide evidence on scientific questions relating to the reliability of evidence
linking systemic diseases with silicone gel breast implants.274 The panel issued its report
on November 30, 1998, finding that there was no strong scientific evidence that silicone
gel breast implants are statistically associated with immune system or rheumatological
diseases. Now that the report has been issued, the court plans to preside over videotaped
depositions of the experts, which will be made available to all litigants. Given that a substantial
amount of the breast implant litigation has been adjudicated or settled, questions
have been raised about the timeliness of the process.
Also in 1996, Judge Robert E. Jones (D. Ore.) appointed four technical advisors in
various scientific disciplines to assist him in his district’s breast implant litigation (Hall v.
Baxter Healthcare Corp.).275 In a case-specific process that was quite distinct from Judge
Pointer’s multidistrict process, Judge Jones used the four expert-advisors to furnish him
273. See Reilly v. United States, 863 F.2d 149, 158 (1st Cir. 1988). See also Ex parte Peterson, 253 U.S. 300
(1920) (“[c]ourts have (at least in the absence of legislation to the contrary) inherent power to provide
themselves with appropriate instruments required for the performance of their duties”) Id. at 312. See, e.g.,
the Fed. R. Evid. 706 Advisory Committee Note (noting that “[t]he inherent power of a trial judge to appoint
an expert of his own choosing [was] virtually unquestioned” as the rules were adopted). See generally Joe S.
Cecil & Thomas E. Willging, Accepting Daubert’s Invitation, Defining a Role for Court-Appointed Experts in
Assessing Scientific Validity, 43 Emory L.J. 997 (1994).
274. See In re Silicone Gel Breast Implants Prod. Liab. Litig. (MDL-926) (No. CV 92-P-10000-S) (Order
No. 31E) (Oct. 31, 1996).
275. 947 F. Supp. 1387 (D. Or. 1996).
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with reports and consultations on the reliability and admissibility of complex scientific
evidence under Fed. R. Evid. 104(a) in a Daubert hearing. Based in part on the experts’
reports, Judge Jones decided to exclude plaintiff ’s proffered expert testimony.276 While
some critics of the use of court experts decry the influence of the experts on judges,277 in
Hall the court was criticized for not following the experts’ reports closely enough.278
Court-appointed experts have also been used in asbestos litigation. Judge Jack Weinstein
appointed a panel of experts to assist him in estimating future claims as a central part of
his effort to restructure the original Manville Personal Injury Settlement Trust.279 The
panel estimated that 450,000 future claims could be expected between 1990 and 2049, but
their estimate was accompanied by a 50% margin of error.280
Judge Carl Rubin appointed a standing panel of experts to review asbestos cases and
give an opinion as to the presence or absence of asbestos-related disease. In approximately
80% of the cases, the experts found no asbestos disease, and in thirteen of sixteen
cases in which the expert testified, the jury agreed with the expert.281
A Federal Judicial Center study examined cases in which judges had appointed experts
and identified beneficial uses and limits in the use of court-appointed experts. Judges
who used experts considered them to be helpful in extraordinary cases in which the
adversarial system, for one reason or another, failed to generate sufficient information for
the judge or jury—more often the judge—to render a reasoned decision.282 Judges have
used experts infrequently primarily out of respect for the adversarial system, but also
because of difficulties in identifying the need for an expert in a timely manner, in locating
a suitable expert, and in obtaining funding to compensate the expert.
Just as Rubin and Ringenbach found a strong relationship between the court-appointed
experts’ conclusions and jury verdicts, the FJC study concluded that “judges and juries
276. Id. Judge Jones deferred the effective date of his decision “pending the reports of the national Rule
706 Panel” in the MDL litigation. Id. at 1415.
277. See discussion infra notes 278–280.
278. See Joseph Sanders & D.H. Kaye, Expert Advice on Silicone Implants: Hall v. Baxter Healthcare Corp.,
37 Jurimetrics J. 113, 120–23 (1997).
279. See In re Joint E. & S. Dist. Asbestos Litig. 151 F.R.D. 540 (S.D.N.Y. 1993).
280. See Coffee, supra note 69, at 1361 n.59. Several years after the expert panel’s report, Judge Weinstein
estimated that between 300,000 and 600,000 claims could be expected by the year 2050. See Weinstein, Ethical
Dilemmas, supra note 30, at 510 n.164.
281. See Carl B. Rubin & Laura Ringenbach, The Use of Court Experts in Asbestos Litigation, 137 F.R.D. 35
(1991). In their words: “The conclusion is inescapable: A Court’s expert will be a persuasive witness and will
have a significant effect upon a jury.” Id. at 41.
282. Cecil & Willging, supra note 273, at 1069–70.
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alike tend to decide cases consistent with the advice and testimony of court-appointed
experts.”283 Given that a major reason for appointing experts is the absence of a clear
basis for decision, it was not surprising that decision makers relied on the appointed
experts to supply such a rationale.284
The FJC report outlines a pretrial procedure that judges may find helpful in addressing
scientific issues in mass torts litigation. The suggested procedure, which will not necessarily
lead to appointment of an expert, focuses on (1) early identification of issues
likely to require expert testimony, (2) specification of disputed issues of science and technology,
and (3) screening expected testimony by parties’ experts to determine admissibility.
285 In this post-Daubert era, those recommendations now seem commonplace.
Two programs—one established by the American Academy for the Advancement of
Science (AAAS) and the other by the Private Adjudication Center (PAC) at Duke Law
School—have as their goals identifying candidates for appointment as experts. The AAAS
program will concentrate on matching experts with a judge’s needs in a given case while
the PAC will focus on creating a roster of suitable experts for use in any number of cases.
These programs address a major issue identified in the FJC report, the difficulty for a
judge to identify neutral experts.
3. State-federal cooperation
Most mass torts claims are based on state law; state and federal courts have concurrent
jurisdiction. The well-known result of sharing jurisdiction is that many mass torts lead to
filings in both federal and state courts. In the next section, we review proposals to address
the problem of multiple state-federal forums by expanding federal jurisdiction, creating
federal substantive law for mass torts, or adding new opportunities to aggregate cases in
the federal courts.286 In this section we look first at innovative ways in which courts have
dealt with cases filed in both federal and state courts, and then look at a closely related
legislative proposal to alter the structure of federal-state relationships in mass torts cases.
283. See id. at 1041.
284. See id. at 1044–45.
285. See id. at 1058–65.
286. See discussion infra sections II.B.1 through II.B.7 (comprehensive proposals) and II.B.9.a (“Federal
substantive law”).
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a. Voluntary innovations
Judge Schwarzer and co-authors from the Federal Judicial Center documented a host
of innovative state-federal cooperative practices, most in the mass torts area.287 Statefederal
cooperation has occurred in
• discovery, in the form of joint scheduling, planning, using special master in common,
using common discovery output, ruling jointly on disputes, and creating
joint document depositories;288
• settlement, in the form of joint alternative dispute resolution (discussed more
fully in the next subsection), joint settlement conferences, delegation of power to
one judge or settlement master to supervise settlement discussion, and coordination
of settlement approaches;289
• pretrial management, by establishing joint pretrial orders or joint management
plans, conducting joint pretrial hearings, and resolving conflicts between federal
and state procedural rules;290 and
• joint trial planning.291
In general, the state and federal judges who coordinated their activities found the
experience to have promoted “economy, efficiency, and consistency.”292 Conditions for
effective coordination include appropriate, usually early, timing of the initial contact,
often by the federal judge; maintaining continuous contact throughout the pretrial process;
establishing a personal working relationship with the other judges; and enlisting the
aid of the attorneys in identifying related cases and cooperating with each other.293 Judges
found some settings more conducive to effective coordination than others: where the
courts are in close physical proximity, have aggregated their cases within each system, and
have created a supportive judicial and legal community.294
287. William W Schwarzer et al., Judicial Federalism in Action: Coordination of Litigation in State and
Federal Courts, 78 Va. L. Rev. 1689 (1992) [hereinafter Schwarzer, Federalism in Action].
288. See id. at 1707–14.
289. See id. at 1714–21.
290. See id. at 1721–26.
291. See id. at 1727–32. While no joint trials were held in the cases studied, one judge who planned to
have a joint trial said that “I’m sure if we had had the trial, we wouldn’t have had any problems.” Id. at 1728.
292. Id. at 1732.
293. See id. at 1733–40.
294. See id. at 1740–42.
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In a cooperative effort at the national level, the Federal Judicial Center, the National
Center for State Courts, and the State Justice Institute have published a manual to guide
state and federal judges in their relations with each other in a variety of cases.295 The
manual discusses the issues described above in our summary of the FJC case studies296
and includes sample pretrial case-management orders and a sample order for a joint trial.297
The state-federal manual also includes a brief history of the Mass Tort Litigation Committee
[MTLC], a standing committee of the Conference of Chief Justices.298 MTLC,
funded at one time by the State Justice Institute, brought together a dozen or more state
judges to discuss and coordinate mass torts cases in their respective jurisdictions. Generally,
one or more federal judge would attend as liaison. Judge Sandra Mazer Moss, MTLC
chair, has documented a number of cooperative activities undertaken in the asbestos,
breast implant, orthopedic bone screw, Norplant, and L-Tryptophan litigations.299MTLC’s
funding expired in March 1998, and the group now has no funding for face-to-face meetings.
b. State-federal legislative proposal
Judge Schwarzer formulated a proposal to empower federal judges to consolidate state
and federal discovery as part of the multidistrict litigation process. His proposal adds
these elements to the MDL procedures: (1) limited removal of related state court cases in
which there is at least minimal diversity of citizenship (i.e., between two parties); (2)
retaining merits decisions, including choice-of-law, in the state courts for state cases; (3)
making the results of the coordinated discovery process binding in all subsequent proceedings;
and (4) remanding the case to state court when it is ready for trial or summary
judgment.300 In Judge Schwarzer’s words, “The purpose of the instant proposal is to pro-
295. James G. Apple et al., Manual for Cooperation Between State and Federal Courts (Federal Judicial
Center 1997).
296. Id. at 15–30.
297. Id. at 119–49.
298. Id. at 31–34.
299. Sandra Mazer Moss, Response to Judicial Federalism: A Proposal to Amend the Multidistrict Litigation
Statute from a State Judge’s Perspective, 73 Tex. L. Rev. 1573, 1573–76 (1995). For a discussion of the
advantages and disadvantages of state–federal judicial cooperation, see generally Francis E. McGovern, Rethinking
Cooperation Among Judges in Mass Tort Litigation, 44 UCLA L. Rev. 1851 (1997); Mark C. Weber,
Complex Litigation and the State Courts: Constitutional and Practical Advantages of the State Forum Over the
Federal Forum in Mass Tort Cases, 21 Hastings Const. L.Q. 215 (1994).
300. William W Schwarzer et al., Judicial Federalism: A Proposal To Amend the Multidistrict Litigation
Statute To Permit Discovery Coordination of Large-Scale Litigation Pending in State and Federal Courts, 73 Tex.
L. Rev. 1529, 1533 (1995).
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vide a procedure for coordination of discovery in cases dispersed in state and federal
courts without implicating substantive law choices or delaying trials in state court.”301
Judge Pointer raises concerns about whether the proposal will be as innocuous a first
step as its proponents claim and whether “the benefits achieved through such legislation
justify the risk that it might divert and dissipate support for more effective solutions to
the problems of large-scale multiforum litigation.”302 Judge Pointer also expressed concern
that the operation of the proposal would deprive federal courts of valuable resources
that state judges have provided under a voluntary system.303
4. Alternative dispute resolution
a. Background
In this discussion, we use the term alternative dispute resolution [ADR] to refer to
activities and programs that afford litigants alternatives to traditional dispute resolution,
such as trials or judge-hosted settlement conferences. Common examples of ADR include
arbitration, mediation, early neutral evaluation, and summary jury trials, but the
list is limited only by the imagination of ADR sponsors. Some would define ADR narrowly
to include only those programs that “compared with the traditional litigation process
of adversarial negotiation and trial, enhance parties’ control over litigation outcomes
or processes.”304 Others define ADR to include judicial settlement efforts.305 We use our
definition—which excludes traditional judge-hosted settlement conferences and does not
require that the alternative enhance litigant control—for clarity, not to resolve the differences
noted above.
A key feature of mass torts is that they have a “high degree of commonality,” which
means that “the outcome of any one case within the litigation . . . highly [influences] the
outcome of other cases.”306 Determining the value of individual cases—whether by trial
or alternative means—opens the door to resolving large numbers of other cases. For that
reason, ADR has found an integral place in federal courts’ management of mass torts
litigation, often as a means of applying known values to the mass of the litigation. In
301. Id. at 1532.
302. Sam C. Pointer, Jr., Reflections by a Federal Judge: A Comment on Judicial Federalism: A Proposal to
Amend the Multidistrict Litigation Statute, 73 Tex. L. Rev. 1569, 1570 (1995).
303. Id. at 1571.
304. Hensler, A Glass Half Full, supra note 63, at 1619.
305. See Judith Resnik, Procedural Innovations, Sloshing Over: A Comment on Deborah Hensler, A Glass
Half Full, a Glass Half Empty: The Use of Alternative Dispute Resolution in Mass Personal Injury Litigation,
73 Tex. L. Rev. 1627, 1627–29 (1995).
306. Hensler, A Glass Half Full, supra note 63, at 1596.
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some jurisdictions, ADR has also been used to determine case values in the first instance.
This seem especially apt when a mass tort arises from a single incident.
Early ADR mass torts efforts concentrated on gathering information to support evaluation
of individual asbestos cases. For example, in 1982 Judge Thomas Lambros appointed
Professors Francis McGovern and Eric Green as special masters to help address a backlog
of asbestos litigation in the Northern District of Ohio. McGovern and Green devised a
plan to streamline discovery to yield settlement-related information, and they devised a
computer model containing hundreds of variables that could be used to compare the
values of settled and pending cases.307 Called the Ohio Asbestos Litigation (OAL), this
system pioneered a method for identifying variables that could be used to evaluate mass
torts cases. After extracting a range of individual case values from a computer, the parties
and lawyers participated in a settlement conferences. Using computer-generated data for
similar cases, lawyers would argue briefly, in the presence of the plaintiff, about the similarities
and differences between the previous settlements and the plaintiff ’s case. Plaintiffs
were reported to have been satisfied that the settlement conference provided them a
“day in court.”308 In an environment in which trials were increasingly unlikely, alternatives
to trials became the most that litigants could expect.
As asbestos caseloads grew, ADR programs expanded to meet the demand for alternative
approaches that could be applied more globally in mass aggregations, bankruptcy
reorganizations, and even so-called global settlements. For example, McGovern organized
a database to support jury decision making in a class action trial.309 McGovern and
other ADR professionals devised plans for administering claims resolution facilities.310
With the consent of the parties, Judge Parker created an arbitration-based ADR program
307. See Francis E. McGovern, Toward a Functional Approach for Managing Complex Litigation, 53 U. Chi.
L. Rev. 440, 478–91 (1986) (describing the Ohio Asbestos Litigation).
308. See Trends, supra note 49, at 67.
309. See Jenkins v. Raymark, 782 F.2d 468 (5th Cir. 1986). In Jenkins, the court used aggregate computerbased
data about class claims to aid the jury in deciding a ratio of punitive damages to compensatory damages.
Trends, supra note 49, at 63 n.148.
310. See generally, Francis E. McGovern (ed.), Symposium, Claims Resolution Facilities and the Mass Settlement
of Mass Torts, 53 Law & Contemp. Probs. 1 (1990); Francis E. McGovern, The Alabama DDT Settlement
Fund, 53 Law & Contemp. Probs. 61 (1990) [hereinafter McGovern, DDT Settlement ]; Kenneth R. Feinberg,
The Dalkon Shield Claims Trust, 53 Law & Contemp. Probs. 79 (1990). For more recent descriptions of the
operation of the Dalkon Shield Claimants Trust, discussed infra at notes 334 to 346, see Georgene M. Vairo,
Georgine, the Dalkon Shield Claimants Trust, and the Rhetoric of Mass Tort Claims Resolution, 31 Loy. L.A. L.
Rev. 79, 153–56 (1997) [hereinafter Vairo, Georgine]; Georgene M. Vairo, The Dalkon Shield Claimants Trust:
Paradigm Lost (Or Found)?, 61 Fordham L. Rev. 617 (1992) [hereinafter Vairo, The Dalkon Shield].
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to handle the backlog of case remaining in the Eastern District of Texas after a class action
trial in Jenkins v. Raymark.311 Judge Lambros and others adapted summary jury trials to a
mass torts context.312 In the L’Ambiance Plaza building collapse, a federal and state judge
jointly interviewed witnesses and plaintiffs, evaluated each case, and recommended settlement
amounts that came to be incorporated in a global settlement.313 Before L’Ambiance,
Judge Louis Bechtle in the MGM Grand Hotel fire litigation had established the foundation
for a global settlement by meeting individually with plaintiffs to assess the value of
their cases.314 ADR was clearly an integral part of the creative response of federal and
state judges to the flood of mass torts litigation that suddenly appeared on their dockets.
b. Proposals and critiques
A number of proposals are directed at managing the volume of cases involved in mass
torts litigation. Other proposals focus on enhancing the quality of mass torts dispute
resolution, and, not surprisingly, a number of proposals address both aspects of ADR. We
concentrate on ADR approaches to resolving individual claims. We do not discuss other
possible applications of ADR techniques, which extend to the full range of litigation management,
including pre-litigation mediation, insurance coverage disputes, alternative approaches
to discovery and science issues, appointment of special masters, and other alternative
judicial case-management techniques.315
Deborah Hensler challenges policy makers to “shape aggregative procedures to enhance
litigant control and participation within the bounds of what is financially and
logistically possible.”316 She suggests appointing plaintiffs’ panels to represent diverse interests,
including future claimants, in a given litigation. Such panels would monitor the
311. See Linda S. Mullenix, Beyond Consolidation: Postaggregative Procedure in Asbestos Mass Tort Litigation,
32 Wm. & Mary L. Rev. 475, 490–92 (1991) (describing ADR program); see also Trends, supra note 49, at
79–81.
312. See Trends, supra note 49, at 76–79 (reviewing summary jury trials in asbestos litigation and discussing
concerns about unpredictability and efficiency).
313. See Schwarzer et al, Federalism in Action, supra note 287, at 1715–18.
314. See id. at 1719–20.
315. See generally Feature, ADR Recommendations for Mass Torts, 52 Disp. Resol. J. 78 (1997) (reporting
twelve recommendations of an American Arbitration Association task force chaired by Kenneth Feinberg);
see also Kenneth R. Feinberg, Response to Deborah Hensler, A Glass Half Full, a Glass Half Empty: The Use of
Alternative Dispute Resolution in Mass Personal Injury Litigation, 73 Tex. L. Rev. 1647 (1995) (“What I do is
not really ADR. It is CJM—creative judicial management . . . .”).
316. Hensler, A Glass Half Full, supra note 63, at 1624.
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litigation and negotiation process, “offer suggestions, and report back to the plaintiffs
whom they represent.”317 Hensler suggests that courts “could also use electronic bulletin
boards and similar technologies to provide up-to-date information on the progress of a
settlement negotiation.”318 These suggestions would provide a way to begin to address
the question of what claimants want from the civil justice system, particularly “how claimants
would assess the justice of alternative compensation schemes . . . [or] what they
might be willing to give up in order to provide more equitable compensation to others
who share their injuries and experiences.”319
Social psychologist Tom Tyler echoes Hensler’s premise that mass torts claimants want
to have procedures that call for their participation and give them an element of control
over the type of procedure that will be used to resolve their case.320 He finds that the
design of mass torts claims resolution facilities “has not been based on an understanding
of what claimants want from legal procedures” and concludes that “[m]ore careful attention
to existing psychological research on claimants’ reactions to legal procedures could
lead to substantial gains in both satisfaction with the disposition of mass torts cases and
the acceptance of decisions resolving mass torts claims.”321
Attorneys Barry McNeil and Beth Fancsali have found that “valuation of claims is
perhaps particularly suitable for mediation and arbitration” because “a facilitator can
commit time and attention to reviewing considerable data and understanding the basis
of each claim, in a manner and on a schedule simply unavailable to the court.”322 They
caution, however, that “the process should not be allowed to get ahead of itself” by being
used before there is a “history of jury verdicts yielding a range of outcomes.”323
McNeil and Facsali’s caution has broad support and may represent a consensus on the
use of ADR, at least for immature, elastic mass torts. John McGoldrick, an attorney, argues
that “ADR can make a mass tort out of no tort” and that it can play a role in “creating,
sometimes just stirring, but even creating the feeding frenzy that is often the begin-
317. Id.
318. Id. at 1624. Some forms of group communication have been employed in the Agent Orange and
breast implant litigations. Id. at 1625.
319. Id. at 1626.
320. See Tom R. Tyler, A Psychological Perspective on the Settlement of Mass Tort Claims, 53 Law & Contemp.
Probs. 199, 200–04 (1990) (citing empirical studies of litigant satisfaction in general civil litigation and a
comparative study of asbestos victims in England and the United States).
321. Id. at 204–05.
322. McNeil & Fancsali, supra note 7, at 506.
323. Id.
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ning of mass tort.”324 Such comments lead commentators to conclude that ADR has its
best application as a means of resolving the tail of mature mass torts litigation.
Another ADR model—called into question because of experiences with elasticity of
some mass torts325—concentrates on class-wide litigation of common issues, such as liability
and product defect, followed by ADR approaches to individual issues, such as specific
causation and damages. Professor Carrie Menkel-Meadow recommends using “fasttrack
ADR procedures” like those used in the Dalkon Shield settlement trust to provide
an opportunity for mass torts claimants to have individual hearings that are less than
full-scale adjudications.326 She would offer litigants a choice of such a hearing, on the
rationale that “some claimants will want personal contact with some third party” and
that other claimants “will simply want their money.”327
Similarly, Judge Weinstein sees a place for ADR in resolving the “residual disputes”
that remain after an aggregated settlement, such as allocating shares of responsibility among
defendants or arbitrating individual damage claims against a settlement fund.328 And
Professor John Coffee calls for “combining the class action with arbitration (and/or other
alternative dispute resolution techniques) on the limited issues of damages and individual
causation.”329 He concludes that even though this approach would leave the final price
tag for damages open-ended, the cost savings would give defendants a “substantial incentive”
to accept such a process.330
As noted above, some commentators urge caution in using aggregation prematurely
to achieve a comprehensive settlement.331 McGovern, for example, advocates “letting the
marketplace of litigation play out in the early stages and using more comprehensive casemanagement
techniques as the mass tort matures.”332 Whatever the mechanism for resolving
the common issues, both sides of this debate concur that ADR is appropriate in
addressing individual issues at the tail of the litigation.
324. Kenneth R. Feinberg (Moderator), Debate: The Role of ADR in Mass Torts, 53 Disp. Resol. J. 19, 21
(1998).
325. See generally McGovern, Mass Torts for Judges, supra note 15.
326. See Menkel-Meadow, supra note 184, at 1204–05.
327. Id. at 1216.
328. Jack B. Weinstein, Privatization of Justice, supra note 192, at 288.
329. Coffee, supra note 69, at 1439.
330. Id. at 1441.
331. See McGovern, Mass Torts for Judges, supra note 15, at 1841–45 (discussing stages in maturation
process); McNeil & Fancsali, supra note 7, at 506 (call for a history of jury verdicts before using ADR).
332. McGovern, Mass Torts for Judges, supra note 15, at 1844.
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In fact, ADR has been used extensively in building claims facilities to process mass
torts claims, especially in the context of a bankruptcy or a class action settlement.333 An
experienced consultant, B. Thomas Florence, Ph.D., has identified a set of standards that
have emerged from establishing and operating a host of claims facilities. He summarizes
these standards under the heading of affording equality of treatment, developing confidence
among constituents, promoting settlement over litigation, and enhancing efficiency
of operations.334 We discuss the first three standards.
“Equality of treatment among claimants is the cornerstone of success in any mass tort
facility,” says Florence.335 He notes that methods of achieving equality “are contrary to the
methods employed in normal tort settlement” in which “adversarial relationships . . .
position each side to obtain the most favorable outcome in a single case.”336 In the claims
facility, the goal is to develop procedures “to guarantee that a claim receives the same
settlement offer regardless of when the claim is filed, who receives it, or when it is reviewed.”
Professor Georgene Vairo, Chairperson of the Dalkon Shield Trust Fund, documented
efforts to implement equality of treatment, noting its corollaries that claimants
without lawyers would be assisted in filing claims, that lawyers’ claims would be treated
the same as those of unrepresented claimants, and that there would be no negotiation of
the trust’s best final offer.337
Critics have charged that the approach leaves little room for meaningful participation
by claimants because the arbitration offered had a relatively low cap and “the procedure
may offer the mere appearance of ADR without much substantive reward.”338 That view,
as noted above, is based on a definition of ADR that contemplates an increase in client
control.339 Goals of equal treatment and consistency of outcomes, however, appear to be
in conflict with client control in this instance. One wonders whether claimants in a mass
torts setting expect to be treated individually and whether participation by representatives
(e.g., consumer groups and attorneys) and neutrals (judges and special masters) in
establishing a fair system would satisfy expectations for procedural justice. The bottom
line is that there is no empirical research on these points.
333. See generally McGovern, DDT Settlement, supra note 310.
334. B. Thomas Florence, Mass Tort Claims Processing Facilities: Keys to Success, 31 Loy. L.A. L. Rev. 503
(1998); see also Vairo, supra note 310, at 130–31 (stating similar principles of fairness, efficiency, and settlement).
335. Florence, supra note 334, at 505.
336. Id.
337. Vairo, supra note 310, at 130–32.
338. Hensler, A Glass Half Full, supra note 63, at 1622.
339. See discussion supra, at notes 304–05.
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Dr. Florence’s second standard is that the facility develop confidence among claimants
and other constituents that settlements are fair and equitable. In addition to the equal
treatment goal, this requires “frequent and open communication with claimants and counsel,
and . . . user friendliness.”340 Meeting this goal entails regular newsletters, correspondence
with claimant and counsel, telephone banks with staff who can give prompt answers,
and procedures that simplify the claims process.341 Again, we do not know at this
time whether such communications satisfy claimants’ desires for procedural justice, but
evaluation of the Dalkon Shield trust might generate useful information.
As to the third standard, according to Florence “[v]irtually all facilities are designed to
promote settlement over litigation.”342 Devices to accomplish that goal include “court
orders channeling all claims to the claims facility; alternative dispute resolution mechanisms
which the claimant must utilize prior to filings for litigation; and disincentives to
litigate, such as award caps, elimination of punitive damages, court certification prior to
entering a complaint in the tort system, and staggered payment of litigation awards.”343
Whether these devices are successful in achieving the stated goal of promoting settlement
needs to be evaluated empirically.
In describing the Dalkon Shield Claimants Trust, Professor Vairo underscores the importance
and difficulty in arriving at an accurate estimation of the amount and value of
the claims to be expected.344 After a notice process generated about 200,000 timely active
claims, court appointed experts “sent a detailed questionnaire to a scientific sample of
claimants”345 and used that information to extrapolate to the claimant population. The
resulting estimate created a fund that has proved to be more than sufficient to pay the
claimants at the projected levels.346
In summary, there appears to be a consensus that ADR would be most useful in resolving
individual claims for damages after the liability and general causation issues have
been resolved. Architects of claims resolution facilities have articulated standards that are
designed to achieve fairness and consistency in compensating individuals for their injuries.
Whether they satisfy claimants’ needs and interests in having a “day in court” remains
in doubt. Claims of success in meeting these standards should be rigorously evaluated.
340. Florence, supra note 334, at 508.
341. Id. at 508-09; for a discussion of how the Dalkon Shield Claimants Fund implemented this standard,
see Vairo, The Dalkon Shield, supra note 310, at 640–41.
342. Florence, supra note 334, at 509.
343. Id.
344. Vairo, Georgine, supra note 310, at 124–26.
345. Id. at 126.
346. Id.
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5. Bankruptcy 347
a. Introduction
The bankruptcy process has certain unique advantages in resolving mass torts liability
for a single defendant. Bankruptcy’s advantages flow from, to name a few, the nationwide
jurisdiction of the court and from a statutory structure that is designed to establish fair,
equitable, and reasonably clear priorities among competing classes of interested parties
(e.g., of creditors over equity holders; secured creditors over unsecured creditors; unsecured
priority creditors over unsecured non-priority creditors) and to treat classes of
claimants equally, vis-à-vis other members of the same class (e.g., present tort claimants
and future tort claimants).
Despite these favorable features, the Bankruptcy Code obviously was not drafted with
the resolution of mass torts liability in mind. Like other aggregative procedures, including
the class action, treatment of future claimants in bankruptcy cases is a distinct, but
not unsolvable, problem. In this section we will address the current treatment of future
claims in bankruptcy as well as statutory proposals to improve bankruptcy’s approach to
future claims. Examining future claims necessarily involves looking at procedures for estimating
the number and value of such claims.
b. The bankruptcy process
First, we present some background on the procedures prescribed for Chapter 11 reorganization
plans. The Bankruptcy Code explicitly requires that a Chapter 11 reorganization
plan identify and designate separate classes of creditors’ claims and equity holders’ interests,
specify the treatment to be afforded each class of claims or interests affected by the
plan, provide equal treatment for each claim or interest within a particular class, and
avoid benefiting directors, officers, and trustees at the expense of creditors and interest
holders.348 The latter rule, known as the principle of absolute priority, assures tort claimants
of having their claims satisfied before equity claimants receive any value for their
interest in the company. Another rule, known as the best interests of the creditor principle,
guarantees that a Chapter 11 plan cannot be confirmed over the objection of a single
347. Brian Lang, a third-year law student at Ohio State University Law School, provided substantial research
and drafting assistance for the bankruptcy section of the report, and Chief United States Bankruptcy
Judge David S. Kennedy (W.D. Tenn.) provided insightful and invaluable comments on an earlier draft of this
section.
348. See 11 U.S.C. §§ 1123(a)(1)–(7) and 1122(a)–(b). For a discussion of the policy underlying the
absolute priority rule, see Elizabeth Warren, Business Bankruptcy 134–36 (Federal Judicial Center 1993).
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creditor (i.e., a dissenting member of a class) who would receive a better return in a
chapter 7 liquidation case than in the proposed Chapter 11 reorganization.349
The Bankruptcy Code requires the court to conduct a confirmation hearing and determine
whether a plan satisfies thirteen statutory requirements, including that the plan
is feasible and that it satisfies the best interests of creditors test described above.350 Judicial
review of the plan must take place even if every impaired class of claims or interests
has affirmatively accepted the plan.351
Even if an impaired class of claims or interests votes not to accept a proposed plan, the
court nevertheless may confirm the plan (cram down is the term of art) if the court finds
that the plan does not discriminate unfairly, and is fair and equitable.352 For example, a
Chapter 11 plan will be considered fair and equitable if dissenting unsecured creditors
either receive the full value of their claims, as of the effective date of the plan, or if no
claims that are junior to their own (generally equity claims) receive or retain any property.
353
c. Defining future claims under current law
Defining when a “claim” arises serves as the linchpin of the bankruptcy system, especially
in the mass torts arena. Unless future claims are included, they cannot, of course, be
treated equally nor can the debtor achieve final resolution of liability for such claims.
Congress clearly expressed an intent that the term “claim”354 be given “the broadest definition
possible . . . [contemplating that] all legal obligations of the debtor, no matter how
remote or contingent, will be able to be dealt with in the bankruptcy case.”355
349. See 11 U.S.C. § 1129(a)(7). For a discussion of the policy underlying the best-interests test, see
Warren, supra note 348, at 139–40 (“If a Chapter 11 plan will reduce the payout to creditors then it cannot be
confirmed without the consent of those injured. The best-interest test reinforces the goal of using reorganization
to enhance value, not to diminish it.”).
350. See 11 U.S.C. §§ 1128(a) and 1129; see also Warren, supra note 348, at 30.
351. See Gerald F. Munitz & Karen M. Gebbia, The Chapter 11 Plan, Confirmation and Cramdown, in
Basics of Bankruptcy and Reorganization 339, 355 (1992).
352. See 11 U.S.C. § 1129(b)(1)–(2); see also Warren, supra note 348, at 134–36.
353. See 11 U.S.C. § 1129(b)(2)(B)(i)–(ii), cited in Munitz, supra note 351, at 375.
354. 11 U.S.C. § 101(5) defines claim as a:
(A) right to payment, whether or not such right is reduced to judgment, liquidated or unliquidated,
fixed, contingent, matured, unmatured, disputed, undisputed, legal, equitable, secured, or unsecured; or
(B) right to an equitable remedy for breach of performance if such breach gives rise to a right to payment,
whether or not such right to an equitable remedy is reduced to judgment, fixed, contingent, matured, unmatured,
disputed, undisputed, secured, or unsecured.
355. H.R. Rep. No. 595, 95th Cong., 2d Sess. 309 (1997), cited in Barbara J. Houser et al., Mass Torts and
Other Future Claims, Chapter 11 Business Reorganizations 99 (1997) (brackets in original).
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Two prominent mass torts cases—Johns-Manville and A.H. Robins (Dalkon Shield)—
employed a conduct test to determine when claims arose.356 “Under the ‘conduct test,’ a
right to payment, and thus a bankruptcy ‘claim,’ arises when the debtor’s conduct giving
rise to the alleged liability occurred.”357 However, the conduct test defines “claim” so broadly
that it would be possible for individuals who have had no contact with a debtor—for
example, purchasers of a defective product that was manufactured before the bankruptcy
filing, but purchased after a reorganization plan had been confirmed—to have their rights
determined under the plan.358 When a creditor’s claims are proposed for discharge before
the creditor comes into contact with the debtor, constitutional due process concerns are
magnified. How can such future claimants be notified and heard? Can a future claims
representative adequately represent them? Some courts have formulated a prepetition relationship
test to avoid such conundrums.
The prepetition relationship test requires that the “tortious conduct still must occur
prepetition, but the future claimant must also have some relationship with the debtor.”359
The classic prepetition relationship test was articulated in the Piper Aircraft case.360 In
Piper, the debtor attempted to define claimants to include unknown—and even unborn—
persons who might, after Piper’s Chapter 11 reorganization plan was confirmed, assert a
claim relating to aircraft or parts manufactured and sold by Piper before the plan was
confirmed.361 After objection, the bankruptcy court held that the definition of future
claims was too broad. The district court affirmed, holding that a claim can arise only
when there has been some sort of pre-petition relationship between the parties—“some
way to connect the future claims to the debtor today.”362
Applying the prepetition relationship test would not have precluded recovery in asbestos
or Dalkon Shield cases because even future claimants had been exposed to poten-
356. See Grady v. A.H. Robins Co., 839 F.2d 198 (4th Cir.), cert denied sub nom. Joynes v. A.H. Robins Co.,
487 U.S. 1260 (1988); In re Johns-Manville Corp., 36 B.R. 743 Bankr. (S.D.N.Y. 1984). See also Richard B.
Sobol, Bending The Law: The Story of the Dalkon Shield Bankruptcy 108 (1991).
357. Sobol, supra note 356, at 100.
358. See id. at 101.
359. Houser, supra note 355, at 101.
360. See In re Piper Aircraft 162 B.R. 619, 627 (Bankr. S.D. Fla.), aff ’d sub nom. Epstein v. Official Committee
of Unsecured Creditors of Estate of Piper Aircraft Corp., 168 B.R. 434 (S.D. Fla. 1994), aff ’d, 58 F.3d 1573
(11th Cir. 1995).
361. See In re Piper Aircraft, 162 B.R. at 627 n.1.
362. Piper, 168 B.R. at 439. “The bankruptcy court provided four examples of a prepetition relationship,
namely ‘contact, exposure, impact, or privity between the debtor’s prepetition conduct and the claimant.’ ” Id.
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tially dangerous products before Chapter 11 petitions were filed. In dealing with harmful
chemical, drugs, material, or intrauterine devices, courts would presume that some injury
occurred at the time of initial contact.363
After Piper there remain serious gaps and uncertainties in the Bankruptcy Code’s treatment
of mass torts claims. Piper, after all, is a single case and it did not arise in a mass torts
context. Several different approaches have been recommended.
d. Defining future claims: NBRC and NBC proposals
In an attempt to resolve disputes over what constitutes a future claim, the National
Bankruptcy Review Commission (NBRC) proposed in October 1997 the following statutory
definition of “mass future claim:”
[a] claim arising out of a right to payment, or equitable relief that gives rise to a right to
payment that has or has not accrued under nonbankruptcy law that is created by one or
more acts or omissions of the debtor if: (1) the act(s) or omission(s) occurred before or
at the time of the order for relief; (2) the act(s) or omission(s) may be sufficient to
establish liability when injuries are ultimately manifested; (3) at the time of the petition,
the debtor has been subject to numerous demands for payment for injuries or
damages arising from such acts or omissions and is likely to be subject to substantial
future demands for payment on similar grounds; (4) the holders of such rights to payments
are known or, if unknown, can be identified or described with reasonable certainty;
and (5) the amount of such liability is reasonably capable of estimation.364
There has been little published commentary to date on the NBRC proposal. Judge
Edith H. Jones (5th Cir.), a member of the NBRC, published an incisive critique of the
mass torts proposals. Summaries of her comments will be interspersed throughout this
discussion.365
To illuminate the issues in defining future claims, we will examine a prior proposal
and some of the ensuing commentary. In 1994, the National Bankruptcy Conference (NBC)
proposed an amendment to the definition of “claim” in section 101(5) to “provide that
363. Piper, 168 B.R. at 438 n.5.
364. National Bankruptcy Review Commission, Final Report: Bankruptcy: The Next Twenty Years (October
20, 1997) [hereinafter NBRC Report]
365. Edith H. Jones, Rough Justice in Mass Future Claims: Should Bankruptcy Courts Direct Tort Reform?,
76 Tex. L. Rev. 1695 (1998). In addition to the commentary discussed in the text, the Business Bankruptcy
Committee of the American Bar Association has reviewed the NBRC proposals. G. Eric Brunstad, Jr. et al.,
Review of the Proposals of the National Bankruptcy Review Commission Pertaining to Business Bankruptcies:
Part One, 35 Bus. Law. 1381 (1998). In general, the committee’s comments are that the recommendations on
mass torts “constitute an improvement over the current law,” id. at 1450, and that “the essential details of the
proposals remain vague,” id at 1451 (referring to the mechanics of appointment of a future claims representative,
the standards for issuing a channeling injunction, and the estimation procedures).
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the occurrence of one or more material acts or failures to act at the time of or before the
order for relief creates a claim, if the plan proponent identifies with reasonable certainty
the acts upon which the claim is based.”366 Note that the NBC proposal does not include
the NBRC requirements that there be numerous demands for payment, that future claimants
be identifiable and that their claims be capable of estimation. Nor does the NBC
proposal appear to require a prepetition relationship between the claimant and the debtor.
It is also worth noting that in 1994 Congress adopted the “Manville Amendments” to
the Bankruptcy Code.367 These amendments authorized courts to issue a channeling injunction
in an asbestos-related reorganization, steering all claims and “future demands”
to a trust that must meet statutory qualifications.368 Congress did not take the opportunity
to define claims to include future claims, but instead used the concept of future
demands, a new statutory term that introduced new difficulties.369
Ralph Mabey and Peter Zisser are attorneys who advocate using bankruptcy extensively
to deal with future claims.370 They define a “future claim” as “‘a claim against a
debtor for an injury or disease that has not yet become manifest at the time the debtor has
filed for bankruptcy, but is based upon the occurrence, prior to the bankruptcy, of one or
more material events, acts, or failures to act.’ ”371
With the above definition in mind, Mabey and Zisser compare the Manville Amendments
to the proposed NBC amendments, illuminating the advantages of the NBC proposals.
First, as noted above, the Manville Amendments view future claims as future “demands,”
thereby denying them statutory rights, especially voting rights, that flow from
having a “claim” under the Bankruptcy Code.372 Further, a single dissenting holder of a
present claim may block the plan if recovery in liquidation would be greater than in the
Chapter 11 proposed plan under the best interests of the creditor test noted above, but the
holder of a future demand has no such right.373
366. National Bankruptcy Conference, Reforming the Bankruptcy Conference’s Code Review Project,
Final Report (1994) [hereinafter NBC].
367. Pub. L. No. 103-394, 108 Stat. 4106 (1994) (codified at various parts of 11 U.S.C.).
368. See generally 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, 498–99, 502–05 (1995) [hereinafter
Mabey & Zisser].
369. Id. at 502–03.
370. See generally id.
371. Id. at 477–78 (citing Mabey & Gavrin, supra note 70, at 749–50).
372. See id. at 502–03.
373. See id.
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Mabey and Zisser prefer the NBC proposed amendment because it would make clear
that future claims are statutorily recognized claims.374 Under both the NBC and the NBRC
definitions future claimants would have a right to share in the distribution of the property
of the estate, the right to vote for or against the plan, and the rights to protection
under the best interests of the creditor test and the absolute priority rule.375 Further,
future claimants would be subject to due process considerations and protections, and
their claims also would be subject to discharge—thereby relieving the debtor of future
liability.376
When considering the value of the NBC proposed amendments, Mabey and Zisser
state that future claimants must be treated fairly with respect to present claimants and
that a limited funds value would be maximized by including in the plan as many future
claims (those arising from prepetition conduct although not yet manifested) as possible.
This approach limits the possibility that futures will assert claims later—so-called
“overhang[ing]” liabilities.377
Judge Jones finds the NBRC proposals a departure from precedent by “crafting a bankruptcy
definition of a claim that is untethered to state law.”378 The proposal thus introduces
additional uncertainty about claims. Unlike class action jurisprudence, the definition
contains “[n]o requirement of commonality of legal or factual issues, typicality, or
predominance of common issues exists in this definition.”379 The only advantage over
class action approaches is that “the Commission proposal would arguably create enough
of a controversy to overcome justiciablity concerns” that have accompanied future claims
issues.380
Professor Kathryn Heidt thinks that the NBC proposed amendments do not go far
enough. Her critique would also apply to the NBRC proposal. While approving of the
bankruptcy court as a forum for resolving future claims, Heidt argues that the Bankruptcy
Code should be amended “to make clear that obligations arising from culpable
374. See id. at 504–05.
375. Whether future claimants should be considered part of the present class of claimants or a separate
class remains open to debate. Traditionally, futures were treated as a separate class from present claimants
(e.g., the Manville Amendments specify that future participants possess demands but not claims). This was
not the case, however, in Robins. See id. at 496–97 (“In A.H. Robins, on the other hand, future claims were
accorded the same treatment as present claims”).
376. See id at 503–04.
377. See id.
378. Jones, supra note 365, at 1707.
379. Id. at 1708.
380. Id. at 1709.
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actions which are not yet manifested, and perhaps have not yet even occurred, are ‘claims’
that ‘arise’ at the time the debtor commits the act on which liability is based.”381 In effect,
this would codify the conduct test for determining when a claim arises.
Heidt believes that Mabey and Zisser’s definition of what constitutes a “future claim”
is unclear about whether that term would include persons who at the time of the filing
had not yet come into contact with the product (e.g., the future claimants in Piper who
had no pre-bankruptcy relationship with the debtor or its product).382 Heidt argues that
if these persons are not included then both principles of fairness and maximizing a fund
for claimants by eliminating future demands on the debtor outside the fund—principles
upon which Mabey and Zisser rely—will be violated.383
The NBC Report states that “the difficulty underlying . . . bankruptcy cases is the
expectation of future claims based upon injury which arises out of this debtor’s earlier
conduct, but has not yet manifested itself.”384 This indicates that those who have not yet
come into contact with the product would not be covered by the NBC amended definition
of “claim.”
While agreeing with Mabey and Zisser that the approach in the NBC proposed amendments
is far superior to the Manville Amendments, Heidt expressed concern that the
NBC’s definition of future claimant would exclude Piper-like claimants who had not yet
come into contact with the product at the time of reorganization but are later injured.385
Further, Heidt disagrees with the NBC proposal that the plan proponent may decide
whether future claims should be in or out. “Future claims” should be clearly defined, and
future claimants should be free to participate in the bankruptcy—it should not be left up
to a plan proponent to decide whether future claims are in or out.386
Heidt suggests that the best manner in which to go about resolving the problem is to
focus first on bankruptcy principles.387 The first principle is that of treating similar creditors
similarly (“equality is equity”), and the second is the principle of a fresh financial
start for the debtor.388 Under the first principle, future claimants injured by the same act,
381. Kathryn R. Heidt, Future Claims in Bankruptcy: The NBC Amendments Do Not Go Far Enough, 69
Am. Bankr. L.J. 515 (1995).
382. See id. at 518.
383. See id at 518–19
384. NBRC Report, at D, Introduction, at P1, cited in id. at 518.
385. See Heidt, supra note 381, at 518.
386. See id. at 519.
387. See id. at 520.
388. See id.
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defect, or omission as present claimants should be included in the bankruptcy process.
Presents and futures, she contends, are similarly situated and should be treated similarly.
To leave out futures not only treats them differently but devalues the going concern value
of the business by exposing it to future lawsuits. Heidt believes that the Piper distinction
of contact between the debtor and creditor unduly detracts from this policy of treating
similarly situated creditors similarly.389 It should be noted, however, that at least one commentator
does not view present and future claimants as similarly situated.390 Under the
second principle, excluding future claimants exposes the going concern to liability. This
exposure plainly violates the congressional policy of giving a reorganized business a fresh
financial start.391
Heidt does not necessarily find fault with the present definition of a “claim” in the
Bankruptcy Code. She asserts that the real problem is not with whether or not there is a
“claim” (she argues that futures are included in the definition) but when a claim “arose.”392
Heidt believes the Bankruptcy Code ought to specify that claims “arise” “when the debtor
did the acts on which the obligation is based, usually when it manufactured the product.”
393
The NBRC test is really a conduct test with added tests to limit its application to mass
torts claims in which claimants are knowable and the value of claims is capable of estimation.
Its proposed definition of claim requires that the conduct that ultimately gives rise
389. See id. at 521.
390. See Jeffrey Davis, Cramming Down Future Claims in Bankruptcy: Fairness, Bankruptcy Policy, Due
Process, and the Lessons of the Piper Reorganization, 70 Am. Bankr. L.J. 329 (1996). Davis sees an important
difference in one who is presently living with an injury and aware of that injury as opposed to one who has
not yet manifested the injury and is not aware of the potential injury. Further, Davis argues that treating
present and future claims as equal would violate principles of maximizing the estate for distribution. See id.
at 332. Davis relies on Manville as an example to demonstrate that often the creation of a fund may be
unworkable—he further notes that many companies are simply too small to deal with the costs of paying a
representative to investigate potential future claims. Davis points out that future claims are rarely a serious
difficulty for a reorganizing business. See id.
However, Davis also argues that future claims should not simply be disregarded. Treating future claims as
unequal to present claims does not mean that they have to be treated unfairly. “Fair treatment of future
claims requires that they be protected from the diversion to present claimants of funds or value that could
meaningfully be distributed to future claimants.” See id. at 367. Davis believes that there are protections for
future claimants inherent in the cramdown process (e.g., market forces and legal representatives). See id. at
368–69.
391. See Heidt, supra note 381, at 521–22.
392. Id. at 522.
393. Id.
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to the injury have occurred before the bankruptcy petition is filed. The NBRC proposal
does not require a pre-petition relationship as such if there are mass claims involving
identifiable claimants. Requiring that the claimants be identifiable seems designed to serve
as a substitute for requiring a prior relationship between claimant and debtor.
However, the NBRC definition limits a bankruptcy court’s ability to channel liabilities
away from a reorganized entity that are “so unforeseeable or speculative that they are not
reasonably capable of approximation.”394 The NBRC further points out that it has purposely
not required a showing of insolvency so as to encourage the settlement of mass
torts liability through the bankruptcy process. The requirement that future claimants be
identifiable should ameliorate the due process concerns raised by a pure conduct test.
The requirement that the liability be estimable is intended to act to filter out debtors
dealing with highly speculative liabilities. 395
e. Estimating claims
Once future claims have been defined, it becomes essential in a mass tort case to estimate
the size and number of all present and future claims, and the code provides authority
to do so.396 This figure will determine how large a trust will need to be to pay such
claims fully or to provide a pro rata share. Estimations of classes of claims also allow
reorganization proponents to provide fairly and equitably for creditors in different classes
(e.g., by providing for the same pro rata share to be given personal injury creditors and
trade creditors).
Estimation of claims is not to be confused with liquidation—liquidation requires a
conclusive finding of a specific sum while estimation is a device used to keep the case
moving forward. Estimation’s goals are to “provide greater certainty of recovery and resolution
of contingent and unliquidated claims during the bankruptcy process.”397 A bankruptcy
court is prohibited from estimating “contingent or unliquidated personal injury
tort or wrongful death claims against the estate for purposes of distribution in a case under
title 11.”398 A jury trial may be requested to determine the actual amount of a claim for
394. NBRC Report, supra note 364, at 327.
395. Id. at 327–28.
396. 11 U.S.C. § 502(c) provides:
“There shall be estimated for purposes of allowance under this section— (1) any contingent or unliquidated
claim, the fixing or liquidation of which, as the case may be, would unduly delay the administration of
the case; or (2) any right to payment arising from a right to an equitable remedy for breach of performance.”
397. Harvey R. Miller et al., Formulation and Confirmation of Chapter 11 Plans Under the Bankruptcy
Code, Chapter 11 Business Reorganizations 173, 285 (1988), referring to In re Baldwin-United Corp., 55 B.R.
885, 898 (Bankr. S.D. Ohio 1985).
398. 28 U.S.C. § 157(b)(2)(B) (1994) (emphasis added).
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distribution purposes.399 Courts have estimated potential personal injury liability in the
mass torts context.400
The estimation process may be particularly useful if future claimants are included in
the bankruptcy process.401 We will look at a mass torts estimation to examine further
how the process works.
f. Estimation of claims in the A.H. Robins reorganization case
The A.H. Robins case was one instance in which an estimation process played a central
role. Richard Sobol, an attorney, has written a book called Bending the Law that is devoted
exclusively to the Robins reorganization case and is the primary source for this discussion.
Robins, the equity committee, Aetna, and the Dalkon Shield claimants’ committee all
employed processes of (1) identifying the women in the sample deemed to be entitled to
compensation at historic levels; (2) determining the values of their claims, generally by
reference to databases containing information taken from resolved cases; and (3) projecting
these values to the universe of eligible claims.402 Sobol points out some serious methodological
concerns with regard to how these accepted methodologies were implemented.
Sobol’s main critique is that the experts made non-scientific assumptions about precisely
how many women would file claims and about the criteria to be used in the evaluating
a claim.403 Sobol notes:
A serious shortcoming with the methodology concerned the identification of the
claims in the sample to which historic value would be accorded. Ideally, in statistical
sampling the pertinent information is determined concerning the sample and the assumption
is made that the same factual pattern will be replicated in the universe. If 25
percent of the homes in a statistically valid sample are tuned to the “Cosby Show,” it is
assumed that 25 percent of all the homes in the universe from which the sample was
drawn are tuned to the “Cosby Show.” The comparable methodology for estimating the
399. See 11 U.S.C. § 1141(a), cited in Miller, supra note 397, at 294.
400. See A.H. Robins v. Piccinin, 788 F.2d 994, 1012–13 (4th Cir. 1986).
401. See Houser, supra note 355, at 115 (“The claims estimation process is particularly well-suited to
future claims, which by their very nature could delay the administration of a bankruptcy case.”). Houser also
finds that the estimation process will be of more value if it can be used to set a limit on the amount to be
distributed to future claimants than if it used solely to decide whether a proposed plan is feasible. Id.
402. Sobol, supra note 356, at 181. Added to the estimation was the cost of nuisance payments for claimants
that were excluded, future claimant costs, costs to nonuser claims, and administration costs. See id.
403. See id.
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value of the universe of Dalkon Shield claims would be actually to liquidate the claims
in a sample, using the procedures that would be used to liquidate claims under the plan
of reorganization, and to project the liquidated value of the sample to the universe.
That was not done. Rather, the parties’ experts made assumptions concerning the
number of women in the sample who would present their claims for payment, and
concerning the criteria by which the claims that were presented would be evaluated and
paid. The differences among the estimates depended almost entirely on the differences
in these assumptions. The witnesses had no expertise relative to these matters, and no
evidence or even opinion was offered in support of the assumptions that were made.
The witnesses simply made the assumptions that would support the result favored by
their employer.404
As an example, Sobol points to a witness who assumed that every member of the
sample who did not return a questionnaire and health records would not file a claim for
damages. This number was nearly 50%. Another expert assumed that every woman in the
sample would participate in the trust. Sobol asserts that there are many reasons that more
women would participate in the claims resolution process than would participate in the
estimation questionnaire process. For example, the questionnaire asked numerous questions
about a woman’s sexual history. Further, the sample procedure discounted responses
if they were deficient in any way. Finally, participating in the sample did not lead to financial
compensation while participating in the claims resolution process would.405
Plaintiffs’ attorneys attempted to introduce several victims’ testimony in order to give
the judge a sample of “the actual impact on women’s lives.” District Judge Robert R.
Merhige, Jr. ruled that such evidence was irrelevant to the estimation process because it
related only to one individual’s claim.406 Ultimately Judge Merhige only allowed counsel
from the official claimants’ committee to participate in the estimation proceeding.407
The parties testimony resulted in estimates ranging from $1.215 billion (Robins) to
$2.5 billion (Aetna) to $7.167 billion (claimants’ committee).408 After the parties’ experts
testified, Judge Merhige encouraged the parties to agree on an estimation of the claims.
After settlement negotiations bogged down, Judge Merhige, reportedly “[f]rustrated and
angry,” announced his estimate of the claims to be $2.475 billion. He did not offer reasons
for this figure, but its proximity to Robins’ insurer’s estimate suggests a rationale. After
404. Id. at 181.
405. See id. at 182.
406. While plaintiffs’ counsel actually called one of these witnesses at trial arguing the testimony was
applicable to every claim, their efforts were once again rebuffed by Judge Merhige. See id. at 179–80.
407. See id. at 179.
408. See id. at 183–96, esp. Table 13.1.
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the judge rebuffed efforts to get an explanation of the above figure, the court of appeals
affirmed his estimate and rejected claimants’ argument that they were entitled to an explanation
of the figure.409
g. NBRC claims estimation proposal
The NBRC has also proposed an amendment to the Bankruptcy Code that specifically
recognizes a bankruptcy court’s authority to estimate mass future claims for purposes of
allowance, voting, and distribution.410 The NBRC deliberately avoided proscribing any
particular method of estimation in order to maintain flexibility in the process. Courts
would retain discretion in articulating the purposes for which they estimate future
claims.411
This recommendation would not interfere with the right to a jury trial for personal
injury or wrongful death claims, which the Seventh Amendment and the Bankruptcy
Code preserves. The estimate would be used only to decide how large the trust must be to
compensate those making claims against it. The reorganization plan will generally specify
the manner in which jury awards become obligations of a claimants’ trust.
Judge Jones finds it an “extraordinary proposition . . . that a bankruptcy court—hardly
a forum that routinely decides injury cases—could fix and liquidate perhaps thousands
of tort or contract claims without conducting a single jury trial.”412 On the other hand if
there is to be an estimation process, she would mandate its use in every case so that it
“would perform the same role as a class action fairness hearing on settlement.”413
h. Channeling injunctions
The NBRC also recommended that section 524 of the Bankruptcy Code authorize a
bankruptcy court to issue a channeling injunction, which “steers claimants toward a trust
or pool of assets to compensate claimants as it simultaneously steers those claimants
away from the reorganized entity.”414 The NBRC notes that channeling claims reinforces
the effect of discharge in that the debtor does not have to deal with individual creditors.
The NBRC further notes that it has not explicitly set out a precise form for channeling
injunctions because a court should be free to fashion a channeling injunction that best
fits the situation at hand. For example, alternative ways of assuring adequate funding of a
trust or of distributing excess funds can be explored under the broad authority the NBRC
409. See In re A.H. Robins Co., 880 F.2d 694, 697 (4th Cir.), cert. denied, 493 U.S. 959 (1989).
410. NBRC Report, supra note 364, at 341–44.
411. Id. at 343.
412. Jones, supra note 365, at 1714.
413. Id. at 1715.
414. NBRC Report, supra note 364, at 345.
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proposes.415 Judge Jones warns that the NBRC channeling injunction, “by definition, would
prevent future claimants from suing not only the debtor, but whatever third parties to the
debtor’s liability the court thought it equitable to protect.”416
i. Due process and future claims
In discussing class actions, Professor Richard Marcus addresses problems related to
notice of future claimants.417 Marcus argues that while class actions have involved serious
efforts to notify class members, there must be a more serious effort to notify those who
have been exposed to a dangerous product but have not yet manifested injury. In his
words:
Unless claimants with unmanifested claims are absolutely protected against having
to decide now whether to exclude themselves from a class action, the ultimate question
for mass tort class actions is whether they can adequately identify and inform absent
class members of their rights. Given the underlying Erie issues and the nature of these
claims, intense scrutiny of both the efforts and their results is warranted. Given the
immense amounts at stake in the current settlements, even the multi-million dollar
efforts mounted by their proponents may not suffice. Moreover, where there are requirements
(such as those in Silicone Gel) that claimants take affirmative action by
registering to protect their rights, the attention to notice should be even more exacting.
There are certainly indications that even the million-dollar notice efforts in the recent
cases may be found inadequate.418
Such concerns might be even greater in the bankruptcy context where the statutory
framework grants more specific rights to claimants, including the right to vote on a proposed
plan and to invoke the absolute priority rule and the best interests of creditors
rule.419 Approaching due process issues from their bankruptcy experiences, Bankruptcy
Judge Russell Eisenberg and attorney Frances Gecker suggest using the class action standard
to evaluate the fairness of notice in the bankruptcy context because of the similarities
between limited fund class actions and bankruptcies with regard to due process concerns.
420
415. See id. at 347.
416. Jones, supra note 365, at 1717.
417. See Marcus, supra note 70, at 894–95.
418. Id. at 894–95.
419. See discussion supra notes 348–349. The Business Bankruptcy Committee of the ABA expressed
concern that the NBRC proposals invite analysis of “difficult and complex issues,” especially “the due process
rights of holders of mass future claims.” Brunstad et al., supra note 365, at 1451.
420. See Russell A. Eisenberg & Frances Gecker, Due Process and Bankruptcy: A Contradiction in Terms?,
10 Bankr. Dev. J. 47 (1993).
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Obviously, both limited funds and bankruptcies deal with classes or groups of individuals,
and in bankruptcy individuals tend to act “in homogeneous groups, establish
official and unofficial committees, and take many actions as a group of people.”421 Judge
Eisenberg and Ms. Gecker point out that Fed. R. Bank. P. 7023 incorporates Rule 23 which
states, “[i]n any class action maintained under subdivision (b)(3), the court shall direct to
the members of the class the best notice practicable under the circumstances, including
individual notice to all members who can be identified through reasonable effort.”422
Rule 23(c) is designed to alert parties of pending class actions and to give parties in interest
an opportunity to decide whether or not to participate.423 Judge Eisenberg and Ms.
Gecker assert that this standard should be used in bankruptcy matters. Failure to provide
notice to future asbestos claimants, for example, has been held to invalidate a proposed
discharge of their claims.424 A party in bankruptcy who is on notice and does nothing
should lose his or her rights just as a party in a limited fund class action would.425 If there
are known but not identifiable future claimants, a representative should be appointed to
act on their behalf; notice by publication will not suffice in such circumstances.426
To provide due process for future claimants, the NBRC proposal calls for appointment
of a representative for future claimants. According to Judge Jones, the future claims
representative would have “extraordinary exclusive power . . . to file and compromise
class claims,” would operate “without the supervision or control of real clients,” and possess
only “inherently weak” bargaining powers.427 The NBRC proposal stipulates that the
future claims representative not hold any interest adverse to the class,428 but Judge Jones
questions whether this would satisfy the adequacy of representation standard in Rule
23(a)(4) which the Supreme Court applied in Amchem.429
In summary, constitutional due process applies with full force in bankruptcy cases
and proceedings. The importance of the interests of future claimants and the need for
prompt action on those interests demands special efforts to provide actual notice or fiduciary
representation.
421. Id. at 96.
422. Fed. R. Civ. P. 23(c).
423. See Eisenberg & Gecker, supra note 420, at 97.
424. See id. at 105–06, citing Waterman Steamship Corp. v. Aguiar, 141 B.R. 552 (Bankr. S.D.N.Y. 1992).
425. See id.
426. See id. at 107.
427. Jones, supra note 365, at 1713.
428. NBRC Report, supra note 364, at 332.
429. Jones, supra note 365, at 1713.
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j. Bankruptcy and limited fund class actions compared
When balancing the relative strengths and weaknesses of resolving mass torts through
the bankruptcy process or through class actions, the most obvious strength of the bankruptcy
court is its jurisdictional reach. Mabey and Zisser point out that in a Rule 23 class
action the court “(i) lacks personal jurisdiction over unwilling plaintiffs, (ii) is arguably
unable to enjoin proceedings pending in other courts, and (iii) does not now have removal
jurisdiction from state to federal courts absent complete diversity.”430 A bankruptcy
court does not have to deal with any of these obstacles. All personal injury and wrongful
death tort actions must be removed to the district court (in which the bankruptcy case is
pending), and the bankruptcy court has personal nationwide jurisdiction over every creditor
of the debtor.431 Further, Mabey and Zisser comment, the bankruptcy court has the
power to enjoin all actions that may impact the estate.432 Finally, Mabey and Zisser point
out that the bankruptcy courts’ treatment of future claims emanates from the Bankruptcy
Clause of the Constitution and the Bankruptcy Code itself.433
John Coffee has argued that the Chapter 11 reorganization process has both substantive
and procedural advantages over class actions in reaching a fair resolution for tort
creditors.434 As noted above, bankruptcy reorganization cases follow the absolute priority
rule. Bankruptcy principles also follow a norm of temporal equality, the equitable principle
that requires all claimants or interests in the same class be treated equally even if
their claims did not mature at the same time.435
Coffee goes on to point out that class actions settlements violate these two principles.436
A Rule 23(b)(1)(B) limited fund class action is essentially a bankruptcy in thin disguise.
In a bankruptcy, tort creditors would receive full payment before stockholders would
receive any compensation (except to the extent they agree to a different treatment). However,
in the limited fund class action that settles, which it is very likely to do given the
430. Mabey & Zisser, supra note 368, at 489 (footnotes omitted).
431. See Mabey & Zisser, supra note 368, at 489–90. Cases are to be tried in the district court in which the
bankruptcy case is pending or in the district court in the district in which the claim arose. For a discussion of
the possible reach of bankruptcy jurisdiction to codefendants of the debtor, see Note, Why Bankruptcy “Related
to” Jurisdiction Should Not Reach Mass Tort Nondebtor Codefendants, 73 N.Y.U. L. Rev. 1627 (1998).
432. Id. at 489 n.7.
433. Id. at 490. Mabey and Zisser state, “Thus, in applying procedural due process balancing tests, because
the governmental interest is greater, the bankruptcy court’s treatment of future claims is more likely to pass
constitutional muster than is similar treatment by a class action court.” Id. at 490–91 (footnotes omitted).
434. See Coffee, supra note 69, at 1458.
435. See id.
436. See id. at 1459.
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Appendix C: Mass Torts Problems & Proposals
attorney incentives, tort claimants often get a percentage of the value of their claims while
stock value soars because of the release from the liability.437 Further, mass torts settlements
often violate temporal equality. Future claimants suffer at the hands of present
claimants if more present claimants come forward than expected and deplete the trust
fund.438
All is not necessarily fair in all mass torts bankruptcies either. Thomas Smith comments
that mass torts bankruptcies suffer keenly from distributional problems.439 While
Smith recognizes that the bankruptcy process does recognize principles such as absolute
priority and temporal equality, he notes that “[s]trong forces militate against equal treatment
of present and future claimants.”440 Smith examines three factors affecting allocation
decisions.441 The first category he calls psychological factors which he capsulizes in
the phrase “vividness effect.”442 Present claimants have psychological advantages over futures
because they have visible and often urgent needs for compensation to pay medical
debts or personal expenses after being incapacitated. On the other hand, futures are “statistical
probabilities.”443 In Smith’s view, it is inherently difficult as a representative of
future claimants to persuade a judge to forgo compensating present plaintiffs in favor of
unknown future claimants.
Second, Smith points out that there is some evidence that judges overvalue reorganized
firms and tend to feel that any reorganization gives debtors adequate compensation.
444 Overvaluing reorganization may lead to a result that encourages judges to see
437. See id.
438. See id. at 1459–60.
439. Thomas A. Smith, A Capital Markets Approach to Mass Tort Bankruptcy, 104 Yale L.J. 367, 371 (1994).
440. Id. at 372.
441. See id. at 383–91.
442. Id. at 383.
443. Id.
444. Id. at 384, citing J. Ronald Trost, Corporate Bankruptcy Reorganizations: For the Benefit of Creditors or
Stockholders?, 21 UCLA L. Rev. 540, 544–46 (1973) (discussed below); Walter J. Blum, The Law and Language
of Corporate Reorganization, 17 U Chi. L. Rev. 565, 577–78 (1950) (discussing the differences between reorganization
value and market value).
Trost states that the most basic question in the valuation of a corporation is how much the reorganized
corporation is likely to earn. First, one must estimate average annual future earnings. Second, one must
estimate the length of life the reorganized business will have. Finally, one must decide the appropriate rate of
return on earnings. Trost goes on to state that “[s]ome courts and commentators are more candid than others
about the difficulties inherent in the valuation problem.” Particularly, the choice of capitalization rate is
difficult to estimate with any certainty. “By a slight change of the capitalization rate, an insolvent company in
which shareholders are denied participation becomes a solvent company in which shareholders are entitled
to some kind of interest.” See Trost at 546.
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Appendix C: Mass Torts Problems & Proposals
treatment of futures in a rosy light. Whether future claimants are being treated fairly or
not, the judge may just want to get rid of the problem to push the plan through the
confirmation hearing. Further, juries in a mass tort case are only deciding the value of the
present value claims. Bankruptcy requires that a conscious decision be made to deprive
present claimants of certain compensation in favor of the probability that future claimants
might benefit.445 Smith also points out that attorneys representing present claimants
in a Chapter 11 case often benefit more financially from a plan than the representative of
future claimants. Representatives of futures are typically paid from the estate itself, and a
judge eager to push a plan through is more likely to appoint a representative that the
judge believes may be more accommodating to a plan that does not treat futures fairly. 446
Finally, Smith points out that strategic behavior in bankruptcy clearly advantages
present claimants over future claimants. The only safeguard for future claimants is the
court itself whose role, Smith believes, “is less to ensure that future claimants receive the
maximum possible or even a fair share, than it is to ensure that the parties reach some
agreement.”447 Smith points out the advantages to equity in delaying the bankruptcy’s
completion and the pressure this creates for present claimants who often need a quick
resolution. Present claimants may choose to participate in a compromise with equity
holders that disadvantages future claimants.448
Smith’s solution to what he sees as structural disadvantages for future claimants is to
create a new structure—a “capital markets approach” to the estimation of liability to future
claimants and the distribution of value to all claimants. Under such an approach,
claimants would be paid in shares of a trust fund or bonds issued by a solvent company.
Market forces would establish the value of the shares or bonds, creating financial incentives
for the accurate assessment of future liability.449 Evaluation of Smith’s proposals,
which call for a total restructuring of Chapter 11,450 is beyond the scope of this review.
445. See Smith, supra note 439, at 384.
446. See id. at 384.
447. Id. at 385.
448. See id. John Coffee has suggested that many of these problems of lack of fairness with regard to
future claimants may be resolved by (1) requiring courts to find that future claimants interests will be fairly
protected in a class action as a part of the superiority requirement, (2) certifying limited fund class actions for
purposes of liability only, and (3) giving future claimants the deferred right to opt-out in a class action (e.g.,
even after a settlement has been approved). See Coffee, supra note 69, at 1433.
449. Smith, supra note 439, at 394–433.
450. See id. at 429–31, 439. For a succinct summary of the vibrant and extensive literature supporting and
criticizing the current Chapter 11 reorganization approach, see id. at 430 n.188. For a creative proposal to
improve protection for future claimants through a system of pro rata distribution of funds to compensate
mass tort claimants, see Note, Is There a Future for Future Claimants After Amchem Products, Inc. v. Windsor?,
107 Yale L.J. 2545 (1998).
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Along the same lines as Smith and contrary to Coffee and Mabey and Zisser, Judge
Jones is skeptical of the advantages asserted for bankruptcy courts vis-à-vis class actions.
The absolute priority rule, voting rights, and protections against cram downs, she asserts,
are “overrated as applied to the unique status of a class of mass future claims.” Because
“most plans are ultimately consensual, a mass future claims class, like other senior creditor
classes, will eventually compromise its interests with those of equity holders.”451 Overall
Judge Jones raise a rhetorical, but key question: “whether the mass future claims proposals
have anything to do with bankruptcy, or whether they are a contrivance to shoehorn
mass torts litigation into a coercive, collective settlement that preserves management control
and shareholder equity.”452
We have no intention of attempting to resolve the debate about the relative advantages
and disadvantages of bankruptcy and limited fund class actions. The Supreme Court
may clarify some of the due process issues for us in the near future. Suffice it to say at this
point that bankruptcy and class actions each face challenges in dealing with due process
and the fair and equitable treatment of future claimants.
k. Delays and emergency medical procedures
Finally, a major criticism of the bankruptcy process arises out of the long delays experienced
in the Manville453 and Robins454 reorganization cases. One consequence of such
delays is that tort victims without insurance or other resources may not be able to obtain
emergency medical procedures. For example, in Robins, some of the infertility caused by
the Dalkon Shield could have been reversed surgically if action had been taken before the
women reached the age of forty.455 Claimants’ counsel put together a plan to fund emergency
surgery that achieved the consent of all but the shareholders’ committee. Judge
Merhige’s order implementing the plan was reversed by the court of appeals.456
451. Jones, supra note 365, at 1719–20.
452. Id. at 1722.
453. See, e.g., Frank J. Macchiarola, The Manville Personal Injury Settlement Trust: Lessons for the Future,
17 Cardozo L. Rev. 583, 627 (1996) (“It is a shame that it took fourteen years for these lessons to be learned.”).
454. In Robins, the Chapter 11 petition was filed in August 1985. The claimants’ trust received full funding
in December 1989. See Vairo, Georgine, supra note 310, at 155. Administration of the trust “is likely to
effectively comple |
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