Last week, I wrote about a commonplace problem in product liability lawsuits: when courts forbid plaintiffs’ lawyers from sharing relevant discovery evidence amongst themselves, they inadvertently enable the defendants to engage in discovery fraud by cherry-picking which evidence they produce in each case. A new article by the federal judge (and the special masters he appointed) who oversaw the 9/11 Responders litigation reveals another critical component of a successful and fair resolution of high-stakes litigation: the cases need to move.


The article, Managerial Judging: The 9/11 Responders’ Tort Litigation (via TortsProf), is one-part guidance for future courts in similar situations and one-part a defense of Judge Hellerstein’s unorthodox methods in the case, which included his rejection of the initial proposed settlement — an exercise of judicial power that, while common in class actions, is unheard of in individual personal injury cases. (Judge Hellerstein himself notes in the article that his power was disputed, and says, “if I was right in asserting supervisory control of the litigation and rejecting the initial settlement, then those powers should be clearly set forth” by future statutes and rules.)


On the one hand, the 9/11 Responders litigation was indeed “unprecedented,” but, then again, so are most mass torts. Pharmaceutical liability mass torts are somewhat routine these days, but, for example, the consolidated asbestos litigation presented many of the same problems of scientific causation and varied individual exposure as the 9/11 Responders cases. Each case presents new and unique challenges.


In many ways, the most unique aspect of the 9/11 First Responders was the defendants’ interest in settling — the biggest defendant was the “Captive” billion-dollar insurance fund created by the government for the purpose of settling the claims.  That certainly didn’t make the case easy, but it added an element missing from most mass torts: some willingness among the defendants to settle for a reasonable amount. Usually, defendants want to tell people to take their cancer, their uncontrollable hemorrhaging, their heart attacks, and go home penniless.  


The part I found encouraging was the authors’ recognition of the reality of mass torts litigation as a war of attrition in which the defendant usually has far more money and far more time, than the plaintiffs:


Defendants exert leverage by pressuring the plaintiffs’ contingent fee structure. Defendants’ counsel are paid on a current and hourly basis and staff liberally. The result is extensive discovery, numerous motions, and a general prolongation of proceedings. It becomes expensive for plaintiffs’ counsel to fund the litigation, and a practice has grown of financing mass tort actions at high compound interest rates with repayment deferred until a settlement or recovery is accomplished.


As the article notes, the Responders’ lawyers, from the plaintiffs’ firms Napoli Bern Ripka Shkolnik and Worby Groner Edelman, “borrowed by 2010 more than thirty million dollars to help finance over seven years of litigation,” in loans personally guaranteed by the partners of the firm, with interest rates ranging from 6% to 18%, ultimately resulting in approximately $11 million dollars in interest fees alone. Carrying tens of millions of dollars in debt around your neck for years, without receiving a penny of income meanwhile, unsurprisingly has an effect on how you pursue the cases, and your evaluation of the cases’ settlement value. As Judge Strine in Delaware rightly recognized, the “real risk” in litigation grows the longer the case is in suit.


In contrast, the defendant and their lawyers profit from the delay. The defendant gets to keep their money invested in the market making a nice and steady return (which means it’s still worth it, even if they are paying legal fees for additional hours of work), while the defense lawyers keep their practices flush with work. And that’s my biggest quibble with Judge Hellerstein’s article: in discussing leverage sought by the parties, he equates the leverage plaintiffs supposedly have in sheer numbers with the leverage defendants’ genuinely have by virtue of their superior resources. Consider this passage:


Plaintiffs exert leverage by bringing large numbers of cases, often with inadequate regard to the merits of the claims. They believe that the interrorem effect of mass claims may lead to quick settlements. Plaintiffs’ counsel’s assumption is that large numbers of claims produce added exposure to defendants, in potential liability and defense expenses, increasing incentives to settle. Plaintiffs’ counsel also tend to join as many defendants as possible to increase the number of potential contributors to settlement and to create opportunities for cross–pleadings by defendants against one another, adding additional expense to defendants and creating risks of one defendant seeking to prove fault against other defendants.


The “in terrorem” effect is real in some types of litigation, and it’s part of what drives patent trolls. When a small business or mid-sized business is facing with an uninsured claim, and thus potentially hundreds of thousands of dollars in legal fees, it can feel pressured to settle.


But that analysis has nothing to do adequately insured defendants or with mass torts litigation against solvent entities. In the 9/11 Responders case, the defendants — most of them government entities — had a billion-dollar government-funded war chest. The in terrorem effect of 10,000 claims on a billion-dollar war chest is like the in terrorem effect of a rubber ducky charging a battleship.


Indeed, as the Court swiftly figured out, over 40% of the plaintiffs did not even claim to have suffered a serious injury. Even the serious cases, involving death, cancer, or heart attacks, were, as the article admits, “likely to be vulnerable to Daubert motions on causation.” The judge and the special masters concluded,


Even if only half of the claims for death, cancer, and heart attack were likely to be weak, then another 4.25% of all plaintiffs presented no serious litigation threat to defendants, bringing the total of relatively weak cases to 73.15%.


In other words, right off the bat, it was clear that less than one-third of the cases even had a chance of producing a substantial verdict. So much for that  in terrorem effect; if anything, the sheer number of claims weighed more against the plaintiffs’ lawyers — because it’s an administrative nightmare, and each case adds thousands of more dollars in costs — than against the defendants.


So what did prompt settlement of the cases? The article admits, “Neither Judge Hellerstein nor the special masters [i.e., the authors of the article] were privy to the negotiations between the parties and therefore cannot speak definitively as to what brought them to settle the case,” but they believe six factors were involved:


(1) issuance by the court of a core discovery order requiring responses to a number of important questions; (2) agreement on objective medical criteria to be incorporated in a Severity Chart that ranked injuries according to relative severity; (3) development of a comprehensive, electronically-searchable database; (4) adoption of a schedule for early discovery and trials; (5) selection of plaintiffs, using the database, for early trials; and (6) comprehensive, big-picture correlations of data from the database.


Each of those was probably a good idea for the court to do itself to aid in settlement negotiations, and each is important in the management of a mass tort, but, in my humble opinion, one of those factors stands out above all the others: “adoption of a schedule for early discovery and trials.”


As I have said before, most cases revolve around the three Ds of corporate insurance defense: deny, delay, defend. I didn’t coin the phrase; it’s well-known among plaintiffs’ lawyers of all stripes, from those handling car accidents, to medical malpractice, to multi-million dollar mass torts.


With that in mind, here’s the timeline ordered by the court:


Parties could engage in extensive discovery as soon as the plaintiffs for early discovery and trial were chosen. Discovery for this first group of six plaintiffs was to be completed by November 21, 2009; all pre-trial motions were to be filed by January 5, 2010 and argued by February 4, 2010. Trials were to begin on May 17, 2010.


When was the settlement first reached? March 2010, or, to use a phrase common to plaintiff’s lawyers, “on the courthouse steps.” After seven years of litigation, the cases finally settled just two months before trial, just like most injury cases. The defendants denied, delayed, and defended until judgment day was upon them.


As commendable as Judge Hellerstein and the special masters efforts were, we shouldn’t lose sight of the big picture here: defendants and their insurance companies don’t willingly make reasonable settlement offers. The only thing that brings them to the table is the immediate threat of trial. If judges want to resolve these cases, they need to move them along to trial.


  • gts109

    I haven’t checked your blog in a while, but you have a flurry of interesting stuff. You were working the holidays for the love of game!

    I think you’re right about trial dates forcing settlements.

    I quibble with another point, though. The judge here identified, conservatively, 3/4 of the cases that were weak on causation or claimed no injury. You don’t seem to contest that point, and I’m sure the defense lawyers would peg the “weak claims” figure much higher.

    You use this point to bolster the notion that trial dates, not masses of claims, leverage settlement. But, why would the plaintiffs’ attorneys file all these claims involving plaintiffs with no injury or weak medical causation, if not to create an “in terrorem” effect or, at least, earn a lot more fees in cases of questionable merit?

    I think you’re missing part of the analysis. Yes, the trial date will determine when settlement is reached. (As an aside, why should trial judges be in a hurry to set cases for trial, the bulk of which they believe to have been filed “with inadequate regard to the merits”, or in violation of ethical rules, one might say?).

    The bulkiness of the mass tort, however, will decide the size of the settlement. And, size matters for contingency plaintiffs’ lawyers with huge debt hanging over them. For every strong case they have to work up hard, the future (perhaps weaker) claims that are settled with virtually no work are pure gravy. If you remove the “mass” from the tort, a big company might be more willing to risk a verdict because there are no repeat consequences for losing. In a mass tort, however, losing (even in a strong case) could have massive financial consequences by increasing the value of all the future claims. So, litigating those first claims to verdict is much riskier for the defendant in a mass tort scenario. Now, there are companies that take on this risk, but often times, their strategy is to win early, so that the future claims can be settled on the cheap. In other words, the “in terrorem” effect is very much driving the decision making.

    • Good to see you back.

      Let’s start with your direct question first: “why would the plaintiffs’ attorneys file all these claims involving plaintiffs with no injury or weak medical causation, if not to create an ‘in terrorem’ effect or, at least, earn a lot more fees in cases of questionable merit?” There are several related answers to this question, all of which arise from the fact that were talking about an environmental exposure case, where the line between “obviously injured by the exposure” and “obviously not injured by the exposure” is anything but clear.
      We’re not talking about hundreds or thousands of people lying about taking a particular medication or buying a particular product and then falsely joining a mass tort. We’re talking about people who were genuinely exposed to the contamination but who either don’t yet have symptoms or whose symptoms may not have been caused by the contamination.
      For the people who don’t have symptoms, they may nonetheless have claims for medical monitoring (it’s my understanding this tort is hotly disputed in NY, with no controlling precedent from the Court of Appeals) or they may develop symptoms in the future. If you were sitting in the shoes of the plaintiff’s lawyer, would you confidently tell these people “don’t worry about it, but if you have symptoms, come back and we’ll hope you don’t have statute of limitations problems” or would you just plain file the claim and avoid the statute of limitations entirely? I know I’d pick the latter.
      For the people who do have symptoms with a debatable connection to the exposure, well, a defense lawyer’s “so weak it shouldn’t be filed” case is a plaintiff’s lawyer’s “strong enough they’re entitled to their day in court” case. If a 9/11 Responder started developing, say, chronic migraines after the exposure, that would be a “weak” case under the judge’s reasoning (much weaker than, say, COPD in a non-smoker), but does that mean the case was frivolous and was filed solely to extract leverage? I say not: it’s an arguable claim, one worthy of discovery and, assuming some admissible evidence in support of the claim, trial.
      But I think where we differ the most is in this statement of your’s: “The bulkiness of the mass tort, however, will decide the size of the settlement.” Numerosity of claims is a factor, but only a factor: the core tort issues of liability, causation, and damages drive the case. 10,000 claims that a prescription drug caused brief indigestion are worth a tiny fraction of 1,000 claims that a prescription drug causes cancer. Similarly, the stronger liability and causation are, the higher the settlement value.
      You are partly right that strong claims which prevail pave the way for similarly strong claims, but they do not pave the way for weak claims. Claims are evaluated on the basis of how similar claims worked. That’s how mass torts, after a few bellwhether cases, end up with “the grid,” which factors in various strengths and weaknesses of the case. The weak cases remain difficult to prove. As an example, consider the Vioxx settlement. Vioxx cases in which a individual took Vioxx for over 18 months were very, very strong, while Vioxx cases in which the patient took it for less than 60 days were comparatively weak, even though there was medical evidence to back up those claims as well. The settlement factored time of usage in heavily (along with a host of other factors, see the calculator). Thus, winning causation on “strong” cases didn’t necessarily enhance causation on the “weak” cases except to prove liability, which is what we hope and expect mass torts bellwhether cases do: resolve common issues. There were, as you know, several Vioxx trials in which the plaintiffs lost entirely on causation grounds.

      • gts109

        Don’t get me wrong, the strength of the claim certainly drives its value. But, I think that the follow-on claims add to the mixture of risk for the defendant, and can drive up the total settlement amount. Although the overall amount received for each claim may be small, if those claims are settled as a group with more serious injury or death cases, they can add a lot to the bottom line of plaintiffs’ counsel. That’s a game that was played in asbestos litigation for a very long time, and bankrupted a lot of companies, perhaps prematurely.

        I wasn’t suggesting, either, that non-injury claims are sanctionable filings, but rather that their filing, which can be explained with principle (as you have), correlate with the financial interest of the plaintiffs’ attorneys to get money for nothing on part of the overall case load.

        • Perhaps aggregating a bunch of nuisance value claims can “add to the bottom line of plaintiffs’ counsel” in some situations (I can tell you, though, that making a couple grand off of each of a couple thousand cases isn’t nearly as profitable as it sounds — the administrative costs, in terms of having staff around to handle that load, are huge), but that misses the point. We’re taking about the supposed “in terrorem” effect of thousands of cases. It just isn’t there.
          In the 9/11 case, it was 10,000 plaintiffs against multiple government entities and a billion-dollar insurance fund; in other words, the case had a limitless defense, and no chance of liability even affecting the defendants’ bottom line. Even in your typical prescription drug or medical device case, there are at most a couple thousand cases, up against a company with billions in revenue and billions in insurance coverage. The “in terrorem” effect of a couple thousand low-value cases, a large number of which would lose at trial or on appeal (the deck is stacked against most plaintiffs in product liability cases), is trivial.