The Quasi-Class Action Method of Managing Multi-District Litigations: Problems and a Proposal

Article excerpt

This Article uses three recent multi-district litigations ("MDLs") that produced massive settlements-Guidant ($240 million), Vioxx ($4.85 billion), and Zyprexa ($700 million)-to study the emerging quasi-class action approach to MDL management. This approach has four components: (1) judicial selection of lead attorneys, (2) judicial control of lead attorneys' compensation, (3) forced fee transfers from non-lead lawyers to cover lead attorneys' fees, and (4) judicial reduction of non-lead lawyers' fees to save claimants money. These procedures have serious downsides. They make lawyers financially dependent on judges and, therefore, loyal to judges rather than clients. They compromise judges' independence by involving them heavily on the plaintiffs' side and making them responsible for plaintiffs' success. They allocate moneys in ways that likely overcompensate some attorneys and undercompensate others, with predictable impacts on service levels. The procedures used in Guidant, Vioxx, and Zyprexa also lack needed grounding in substantive law because the common fund doctrine, which supports fee awards in class actions, does not apply in MDLs. Academics have not previously noted these shortcomings; this is the first scholarly assessment of the quasi-class action approach.

This Article proposes an alternative method of MDL management. It recommends implementation of a default rule that would vest control of an MDL in a plaintiffs' management committee ("PMC") composed of the attorney or attorney-group with the most valuable client inventory, as determined objectively by the trial judge. The PMC, which would have a large interest in the success of an MDL, would then select and retain other lawyers to perform common benefit work ("CBW") for all claimants. The PMC would also monitor the other lawyers' performance. The new approach would thus use micro-incentives, rather than judicial control and oversight, as the means for organizing the production of CBW in MDLs.

This proposal would be a default rule that would govern in the absence of an alternative agreement by or among the PMC and other lawyers with cases in an MDL. In other words, lawyers would be free to create a governance structure for an MDL knowing that the default rule would apply if they were unable to come to terms. This would permit lawyers to design governance structures superior to that created by the default rule. The court would stand back from the process, exercising only a limited backup authority to prevent abuses. The proposal would restore judicial independence; preserve lawyers' loyalties; provide the requisite legal foundation for fee awards; and encourage fairer, more efficient, and more appropriate representation of claimants in MDLs.

I. INTRODUCTION

The preferred way of handling mass tort lawsuits in the federal courts has long been for the Judicial Panel on Multi-District Litigation ("JPML") to transfer and consolidate the cases in a single federal district court.1 Federal judges have handled over one thousand multidistrict litigations ("MDLs"), the biggest of which have involved tens of thousands of plaintiffs with billions of dollars in liability claims.2 Given this wealth of experience, one would expect MDL procedures to be highly developed, carefully considered, and transparent. In some respects, they are.3 But procedures that are central to the operation of MDLs on the plaintiffs' side are rudimentary and opaque. These procedures also raise serious policy concerns that have not previously been identified or addressed. Consider four examples.

Appointment of Lead Attorneys. Judges appoint the lawyers who run MDLs on the plaintiffs' side. Their choices can be puzzling. For example, judges sometimes give lead positions to lawyers with few or no clients in an MDL, passing over other lawyers whose clients number in the hundreds or thousands. Judges also wield the appointment power with unfettered discretion. They need not explain why they choose some lawyers rather than others, and rarely do. …

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