This contribution to a Symposium in honor of Francis McGovern's life and accomplishments is a natural occasion on which to assess some of the normative arguments for and against private claims resolution facilities (CRFs). He was one of the most prominent figures in the world of multi-claimant litigation and settlements. We were privileged to work alongside him in various matters and to consider him a friend. We miss him dearly. The Article begins, in Part II, by describing three core models of private CRFs that are commonly observed in mass tort settings, often in combination: individual settlements by in-house counsel, victim compensation funds, and group settlements (inventory and global). Our view is that variations in the design of CRFs often have functional explanations as responses to the desires and needs of the parties. When the parties differ in their preferred arrangements, the design of a CRF will inevitably reflect inequalities in bargaining power between the parties. That is expected, as each CRF is the product of compromise. With regard to each of the three core models, this second Part will discuss when and why the defendant might prefer it, then go on to discuss its benefits and costs to the plaintiffs (and plaintiffs’ counsel). Part III then addresses two criticisms that scholars have levied against one or more of these types of private CRFs: that private CRFs deny claimants corrective justice, and that judicial supervision is needed to protect claimants’ autonomy and to police agency failures on the plaintiffs’ side. We argue that the first criticism is mistaken because it wrongly contends that corrective justice requires the use of courts, and that the second is erroneous because market forces should encourage plaintiffs’ attorneys to protect claimants’ autonomy as fully as claimants want and tend to reduce agency costs to an efficient level in multi-claimant settlements no less than in single-client matters. The Article concludes in Part IV with some final thoughts on the limited potential of judicial review to improve private CRFs.
The problems governments face in regulating consumer finance fall into two categories: normative and cognitive. The normative problems have to do with the way that some governments, particularly those adhering to an American model of household finance, have financed social mobility and intergenerational welfare through debt, a tenuous and socially risky policy choice. Credit has a substantial social aspect to it in the United States, where the federal government has in some way engaged in subsidizing about 1/3 of consumer credit, particularly in the residential mortgage market, feeding into a substantial capital markets dimension through government-guaranteed securitization. Most Americans think they “choose” and “earn” their wealth only through their own efforts, but in fact a substantial institutional apparatus of government assistance supports wealth creation, particularly for higher income households, including substantial disguised subsidies supporting home mortgage credit. Access to credit in such a system becomes a social primary good in need of regulation to ensure compliance with equality principles appropriate to the society in question. Governments have poor records in regulating access to credit and in some cases enact law or support social structures going in the opposite direction, towards injustice, substantially impairing the life chances of persons and families in historically disadvantaged groups, compounding status and material inequality. No government has as yet developed appropriate policy tools to evaluate the effects of financial regulation on equality. Rather, most policies have historically entrenched and even promoted inequality. The cognitive problems have to do with the dilemma of trading off between paternalism and autonomy in consumer financial regulation. Disclosure approaches fail because they do not adequately take the cognitive limitations of persons into account. Debtors do not read or understand terms and conditions. Paternalism can fail because capital can freely exit a market and engage in regulatory arbitrage in seeking out the best returns. If credit is what in a Rawlsian framework can be understood as a social primary good in a society then all of these problems are all the more serious. The solutions to these twin normative-cognitive problems are in either taking the distributive justice of access to credit seriously or in decoupling debt from its role in producing social mobility when this cannot be done. Debt can be ill-suited for allocating basic means to a good life in a society. It converts collective duties of justice owed to individuals to private duties of contract owed by individuals, aggravating power and domination dynamics in a society and worsening inequality.
It can be safely considered common knowledge that it is difficult to consistently predict a judicial outcome. The term by which these situations are best described is legal uncertainty. Professor Anthony D’Amato defines legal uncertainty in a mathematical sense, as meaning that a legal rule is expected by informed attorneys to have an official outcome at or near the 0.5 level of predictability, which means that the outcome is barely indistinguishable from random prediction. Other definitions have been introduced, but they all refer to legal uncertainty as a vice. Legal uncertainty is routinely blamed for undermining both the rule of law in general and the law’s ability to achieve specific objectives, such as deterring anti-social conduct or encouraging trade and investment. Research has pointed to diverse explanations for this lack of predictability, such as the inherent ambiguity of human language that is used to describe legal rules, the use of open norms (for example, the reasonable person standard in tort
Consolidating mass tort cases in federal multidistrict litigation (MDL) has been a successful strategy for efficiently managing, facilitating the maturation of, and resolving nationwide disputes. This has been particularly true for cases involving single-event mass disasters or defective products sold by a single defendant, even when thousands of plaintiffs are involved. But in mass torts--those involving multiple defendants and multiple products and activities over an extended period of time (e.g., asbestos, silicone gel breast implants, opioids)--comprehensive resolution in an MDL has proven elusive. In these mega mass torts, the MDL judge can become a bottleneck, as there are only so many motions, discovery disputes, and bellwether trials a single judge can decide. But while these types of mega mass torts may be too varied for a single simultaneous trial or global settlement, eschewing aggregation would result in massive losses of efficiency and consistency. Here we propose a model of MDL case management for these sorts of mega mass torts that takes full advantage of the nationwide scope of the federal judiciary to relieve pressure at the bottleneck. The idea is to initially consolidate all related cases in a single MDL (the hub) for common discovery and pretrial management. In the course of managing the hub MDL, the hub MDL judge will identify sensible groupings of parties and claims to recommend to the Judicial Panel on Multidistrict Litigation for strategic disaggregation as test cases. Those test cases will then be remanded to other federal judges (the spokes) to allow the litigation to move forward through further pretrial development, bellwether trials, and potential piecemeal settlements. The spoke cases can proceed in parallel with the cases still in the hub MDL to speed the process of maturation, much in the same way that a computer can handle complex tasks faster through parallel processing than through serial processing. The hub MDL judge may also retain jurisdiction over a common issue or party to provide a ready forum for a potential global resolution should the information generated in the spokes make one possible. In this article, we discuss the problem of bottlenecks in mega mass tort litigation. We then describe the hub-and-spoke model, the advantages it offers over other approaches to mega mass tort litigation, and the ways in which it can increase the chances of finality in mega mass tort cases through a variety of settlement structures. Finally, we analyze an example of the hub-and-spoke model in action in the ongoing National Prescription Opiates MDL.
Francis McGovern was teaching at Hastings when he died. When I learned the shocking news of his death, I immediately wrote to our Chancellor about him: Francis McGovern was a legend. He deserved to be. He was a legend with judges. He was a legend with lawyers. He was even a legend with law professors. As one who has been deeply involved in American complex litigation for nearly 40 years, I can say that Francis got there first and made more of a difference than anyone else in the American legal academy.
Outstanding student loan indebtedness in the United States exceeds $1.67 trillion and it is projected to exceed $2 trillion by 2021 or 2022 (varying by source). The United States has decided that broad access to higher education is an important social policy, and a decision has been made to primarily lean upon student loan indebtedness to finance higher education. There is much to unpack with regard to this choice, including the sustainability of heavy reliance upon debt and the intergenerational equity of shifting debt from this generation to the next. This Essay takes one step forward in addressing that gap through the framing of the student loan debt pool as a common pool resource (CPR)—contemplating the need for cooperative management and resource allocation to avoid the inevitable “tragedy” that accompanies overuse or exhaustion of a CPR. Sustainable management of a resource is a core outcome for success in the CPR theoretical framework, and to the extent that our society exists as part of an intergenerational continuum where the future matters as much (if not more) than the present, it is imperative that higher education policy in the United States is shaped with an eye towards future needs. Or to couch this in terms of a metaphor, a bill that is due today must not be ignored and shuffled off to be paid tomorrow.
There is a vast literature on the modern class action, but little of it is informed by systematic empirical data. Mindful both that there have been few Supreme Court class certification decisions and that they may not provide an accurate picture of class action jurisprudence, let alone class action activity, over time, we created a comprehensive data set of class certification decisions in the United States Courts of Appeals consisting of all precedential panel decisions addressing whether a class should be certified from 1966 through 2017, and of nonprecedential panel decisions from 2002 through 2017. In Section I, through a literature review, we identify both prior empirical scholarship and commonly asserted claims concerning federal class action activity and jurisprudence over time. In Section II we present our data and explore the light they shed on questions that have been raised, and assertions that have been made, about class action certification decisions in the U.S. Courts of Appeals. Our findings show that, contrary to conventional expectations, in the period since Wal-Mart and Comcast, plaintiffs have been winning certification appeals more frequently than they were formerly, and Rule 23(f) contributed to this recent success. This growth in pro-certification outcomes occurred on both Democratic- and Republican-Majority panels. We find that final-judgment appeals, at least in precedential decisions, played a larger role in this landscape prior to Rule 23(f) than has often been asserted or assumed, and that in all decisions since 2002 they continue to play a major role. We also find that final-judgment appeals involving (b)(3) issues are common among appeals, which casts doubt on the conventional wisdom concerning the class certification decision as the “death knell” for plaintiffs or defendants in such cases. We find significant variation over time in appeal outcomes under Rule 23(f), with defendants far more successful than plaintiffs prior to Wal-Mart and Comcast, and relative parity after. This variation suggests the hazards of generalizing about operation of that rule from experience in any particular period. Our models also show that, for reasons about which we can only speculate, interlocutory appeals since around 2000 have elicited more ideological voting behavior by judges, leading to greater polarization.
Honoring the contributions of Frances McGovern, this essay builds on his early work as a special master in a volatile litigation about fishing rights in the Great Lakes. After litigation involving the United States (on behalf of federal Indian tribes) and Michigan, and regulations that had lapsed by 1981, conflicts intensified. In 1984, three tribes — the Bay Mills Indian Community, the Sault Ste. Marie Tribe of Chippewa Indians, and the Grand Traverse Band of Ottawa-Chippewa Indians — returned to federal court to enforce what they understood to be their legally-recognized right to take fish in an amount necessary to “maintain reasonable tribal living standards.” In response, Michigan argued that equitable allocations required considering other fishers’ economic needs. Sports fishers argued they had distinct interests, a claim that affected Michigan as well in that it garnered revenues and reputational benefits from being a destination for tourists. Frances McGovern worked with the parties during a short time-frame before a scheduled trial to develop information and used an innovative computer method (“a scorable game”) for each party to disaggregate and then assess its own interests and priorities as well as to sharpen parties’ focus on negotiating to differentiate concerns so as to maximize what was most valued. McGovern changed the party configuration by insisting on the inclusion of more disputants (potentially expanding the conflict), and he helped steer the group into arriving at a settlement that had appeal because it was time-limited, initially for fifteen years, with a provision for the court’s jurisdiction to continue “thereafter.” Instead of seeking what today is often called “global peace,” McGovern aimed for a consent decree that was renewable but initially limited to fifteen years. By making a multi-party case more multi-party and by asking participants not to bind themselves and their successors to a world they could not foresee, McGovern found enough common ground that the parties agreed to see how they could manage under a settlement that could sunset within two decades. And indeed, conflicts emerged within that time and thereafter, even as aspects of the agreement continued. A few years after the Michigan fishing litigation settlement, McGovern wrote an article that he entitled Resolving Mature Mass Tort Litigation. That 1989 analysis coined the phrase “mature tort” to capture McGovern’s argument that aggregation ought only to occur after many individual cases had been filed and litigated. That term applies to him. Early on, McGovern was the “mature” person who focused on how to generate remedies that would be workable, even if not enduring forever. He aimed to help disputants in the here and now. Aggregation itself has gained a maturity that merits reconsidering its forms and practices. Here, I build on the fishing conflict and McGovern’s other work to bring to the fore examples of coordination that alter the composition of disputants, including by crossing the formal jurisdictional boundaries with this federation. I do so to provide more reasons why aspiring for a “partial peace” — as McGovern taught the parties to do in Michigan — is preferable to thinking that one is wrapping a problem up for good. What is needed, whether the remedies sought are equitable, legal, or an amalgam thereof, is recognition that results are often partial, with the potential for related conflicts to emerge or continue. Aggregate resolutions can, in various situations, be temporizing in that a delineated resolution can provide a time-frame in which (one hopes) disputants can learn to accommodate, live within its parameters as information develops and stakes can change, and revisit aspects of the agreement thereafter. To do so, aggregate settlements need to articulate ongoing roles for courts, lawyers, and affiliated actors during the post-settlement life of complex lawsuits. Even as such a process entails time and resources, it can be generative for the parties as they work out whatever interactions remain in the wake of their dispute. Moreover, building out this third phase is generative for courts and the body politic. When judges shoulder the obligations of overseeing the implementation of remedies and engage on the record with the disputants, third parties have opportunities to understand what has transpired and to see the normative utility and procedural integrity entailed in trying to make material the outcomes of judicially-sanctioned resolutions.
Much has changed in the scale and reach of class actions since the major reforms of Rule 23 in 1966. This article addresses the driving force as being the growing ability of courts to manage cases in order to realize the benefits of collective resolution. Although not as much the focus of case law as the “predominance” requirement that attracts objectors claiming individual entitlements, often to legal claims of little economic substance standing alone, Rule 23’s “superiority” requirement asks about the efficiency of aggregate proceeding. Framed in terms of systemic efficiency, this facet of the Rules invites a cost/benefit assessment of the likely gains from proceeding in coordinated fashion. As judicial experience with large class actions has grown, courts have come to appreciate the value of global peace as providing greater benefits than could ever be realized in isolated litigation, even were that to be pursued. The discussion is presented with regard to some of the largest class actions of recent years, as well as to the political theory of coordination, as exemplified by David Hume. The core argument is that the open-textured language of the Rules invites judicial experimentation and that this experience becomes the lifeblood of the evolution of the law. This article forms part of a volume dedicated to the legacy of Francis McGovern, who helped pioneer the contemporary understanding of the importance of global closure in mass harm cases.
The federal MDL statute may concentrate more power in the hands of a single person than any other part of our judicial system. A single judge can end up resolving hundreds, thousands, or even hundreds of thousands of individually viable cases. This has benefits—most notably efficient case processing, uniformity of results, and the facilitation of global peace—but it also has costs. In this essay, I argue that one of these costs could be less accurate adjudication of legal claims and defenses. Drawing on the “many-minds” literature that proceeds from the Condorcet Jury Theorem, I argue that the legal decisionmaking in MDLs could be improved if the cases were transferred to a panel of judges instead of just one judge. In large MDLs, the cost of increased judicial time should be easily outweighed by the benefit of increased accuracy. No law reform is needed to implement panels: it is already authorized by the current statute.
In this Article, Professor McKenzie distinguishes between two types of governance problems in aggregate litigation: internal and external governance concerns. Internal governance concerns focus on the organization of the collective—how it is structured, who represents it, and how best to protect the interests of those within it. For these problems, there is a robust governance model drawn from the literature on organizations. In that model, exit, voice, and loyalty provide a stable set of considerations. External governance concerns, by contrast, focus on the proper role of litigation within the larger polity. Rather than addressing the relationship among members of the collective, external governance concerns test the relationship among the state, civil society, and the individual. For these problems, exit, voice, and loyalty provide less traction. When external governance concerns arise, there is no comparable framework to match the organizational model that guides courts and scholars when internal governance concerns arise. Using this vocabulary, Professor McKenzie considers a number of puzzling class action decisions, including In re National Prescription Opiate Litigation, the Sixth Circuit opinion that reversed the certification of a “negotiation class.” The Article suggests that the unsatisfying nature of these decisions can be explained in part by the absence of a helpful external governance model. This absence leads to two types of distortions in cases that raise potential external governance concerns. Courts either resort to excessive formalism in the application of Rule 23 or try to shoehorn anxieties about the outward effects of the class action into the internal governance framework, which is ill suited to resolve them.
An implication of the incompleteness of contracts is that there are going to be gaps and ambiguities that either side can exploit. We ask whether the expectation that a counterparty is likely to act aggressively in its use of contract language impacts the price that market participants attach to that contract. To do our analysis, we look at how markets price contract terms for the perennial “bad boy” of the sovereign debt markets, the Republic of Argentina. The results are consistent with a market penalty for cheeky contracting.
Financial inclusion involves the integration of economic agents into the financial system by providing them with useful and affordable financial products and services delivered in a responsible and sustainable way. Although access to financial services has increased in the last decade in both developed and developing countries, approximately one-third of the world’s adult population does not have a transaction account through a regulated financial institution or mobile money provider. In many emerging and developing countries, the share of those without financial accounts has increased to nearly ninety percent. Yet, seventy percent of people in these countries—approximately one billion people—have access to a mobile phone, which technically enables them to access financial products and services. Although financial inclusion is often closely associated with increased access to financial products and services, they are not the same. Some individuals may have access to financial services, but may not
Although financial inclusion as a policy objective has multiple dimensions, the focus of the debate on financial inclusion for SMEs has largely been on the issue of enhancing SME access to finance. This article argues that more attention needs to be paid to the issue of reshaping lender practices to make the delivery of finance to SMEs more responsible and sustainable. The terms of SME financing agreements offer considerable scope for lenders to engage in opportunistic or predatory behaviour and, as this article shows, there is evidence to suggest both that this is a problem, and that it causes material financial distress to SMEs and beyond. Against that background, this article argues that the law needs to take a less neutral approach that is more favourable to relational lending practices. It suggests a range of techniques, grounded in the established models of negotiated economies and corporate pluralism, which can help achieve this end. Although the challenge of fostering responsible and sustainable lending practices is not a simple one, it is one that can be met with the right combination of approaches.
