During my law school reunion I recently attended a very interesting panel discussion entitled “The Democratization of Mass Litigation,” which focused on identifying problems that often occur in adjudication and settlement of mass torts and other mass litigation, and possible solutions. The impressive panel included a slew of experts in this area — Prof. John Coffee as moderator, Judge Jack Weinstein, Judge Alvin Hellerstein, Ken Feinberg (a mediator/special master who has played a central role in resolving claims arising from 9/11 and the BP oil spill), prominent plaintiffs’ attorney Elizabeth Cabraser, Pfizer CEO Amy Schulman and Prof. Bert Huang. It struck me that many of the issues raised applied to the litigation of insurance coverage lawsuits involving Hurricane Katrina and Hurricane Ike, and likely will apply to insurance litigation following the recent rash of tornados. These are not class actions but mass actions — hundreds of lawsuits, often filed by one plaintiffs’ firm or group of firms, involving insurance claims arising out of a catastrophe. Last year I wrote an article with Louisiana lawyer Seth Schmeeckle for the ABA’s Coverage publication addressing the management of catastrophe litigation by insurers, focusing on lessons learned from Katrina.
The problems identified by the panel that I think apply to mass insurance litigation are:
- Claimants need an opportunity to be heard in their own voice, not through a lawyer, and sometimes don’t get that opportunity. People who have lived through a disaster often want an opportunity to tell their story. That can sometimes be just as important or more important than the relief they are seeking. Some people file lawsuits because they want someone to listen to what they went through. Given that few cases are (or can be) tried, the opportunity for people to tell their story often happens during a mediation, if individual claimants are allowed (or required) to participate in mediation. There needs to be a mechanism for claimants who want to do so to tell their story, and the sooner the better.
- It is fairly common that claimants who have unmeritorious claims receive more than they deserve, typically because either the aggregation of numerous claims against a defendant by one plaintiffs’ firm tends to give unmeritorious claims more settlement value than they deserve. Conversely, sometimes claimants with meritorious claims receive less than they deserve, perhaps because they hired a weaker lawyer, the true facts were not adequately aired, or because payments made on unmeritorious claims leave less money available for meritorious ones. These incongruous results can cause people to lose confidence in our legal system if the system starts looking like a game where outcomes (settlements) are based more on which lawyer you hire or how you play the “game” (including whether you exaggerate your claim) than whether your claim has merit. Good insurers want to pay their customers what is fairly owed and they don’t want to pay frivolous claims, but the way that litigation plays out and the personalities and tactics involved can lead to outcomes inconsistent with those objectives.
- Mass litigation can lead to breakdowns in the attorney-client relationship and unhealthy incentives for lawyers. Plaintiffs’ lawyers who take on hundreds of clients’ catastrophe claims often fail to keep their clients adequately informed. It’s not uncommon for a plaintiffs’ lawyer to believe he has signed up a particular client and the client to later claim (sometimes even after a settlement has been “agreed” to) that the lawyer does not represent them. After plaintiffs’ attorneys have financed litigation for two or three years, they have a strong incentive to settle in order to recoup their investment, which may not align with some of their clients’ interests. This incentive is exacerbated if the plaintiffs’ attorney has taken out a loan (typically at a high interest rate, and with personal guarantees that put partners’ personal assets at risk) to finance the litigation or keep their office running while waiting for anticipated settlements.
What will help solve these problems? Several solutions were proposed during the discussion, some of which I agree with, others I disagree with:
- Require that judges approve settlements in non-class action mass litigation. I don’t think this is a good idea. It puts too much power in the hands of a single judge, and which judge you happen to draw. It seems unlikely that appellate courts would be able to provide serious scrutiny of these decisions given how many settlements would require approval. One judge’s idea of what is “fair” for a particular claimant may be very different from another judge, and disparate results based on which judge you draw, while somewhat inevitable in litigation generally, does not improve confidence in the legal system.
- Require that in mass litigation, each plaintiff submit, early on, a sworn fact sheet setting forth necessary (but not unduly burdensome) details of their claim along with pertinent backup documents. It would have to be sworn by the plaintiff, and could not be delegated to a plaintiffs’ attorney via power of attorney or otherwise. This is something like a Lone Pine order. I think this is a very good idea, it allows lawyers on both sides to triage cases early on, requires claimants to personally participate in the legal process, puts claimants on more equal footing regardless of their selection of a lawyer, and may deter exaggeration of claims. This is part of the process by which claimants can tell their story, but they should, if possible, have an opportunity for an oral presentation as well (typically at an early mediation).
- Use bellweather trials to help parties make more informed settlement decisions, but use a random method to select cases for trial (because trials of cases selected as “good” cases for one side or the other are not particularly helpful). This might work, but in insurance litigation each case really is different and trying to peg cases as “similar” to ones that have been tried can be difficult. This may be more appropriate for personal injury suits from a mass tort.
- Use court websites and other techniques to make sure claimants are kept informed, even if their lawyers don’t do an adequate job of that. I think courts are generally doing this in mass litigation and it is a good idea.
Should there be a new rule for mass litigation, laying out how these cases should be handled, or should we continue to leave it entirely in the discretion of the judge handling the litigation as to which special mechanisms, if any, to employ? I think a new rule on this or something in the Manual for Complex Litigation on it would be a great idea.