Reevaluating Proposals for Tort Claims Markets in a World of Mass Tort Litigation

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I. Permitting the Sale of Tort Claims as an Alternative Form of Litigation Financing.............301

A. The History of Prohibitions Against the Sale of Tort Claims...................301

B. Evaluating Proposals to Establish Tort Claims Markets....................303

C. Common Arguments for the Sale of Tort Claims................305

1. Increased Victim Compensation.................305

2. Equalizing the Power Disparity Between Plaintiffs and Defendants...................307

3. Existing Forms of Claim Transfer...........................308

D. Common Arguments Against Tort Claims Markets.........................310

1. Tort Claims Markets Would Spur Frivolous Litigation............310 2. Tort Claims Markets Raise Legal Ethics Problems.311

3. Alienability of Tort Claims and Individual Justice..312

II. Reevaluating the Debate over Tort Claims Markets in Light of the Rise of Mass Tort Litigation............314

A. An Overview of Mass Torts..............314

B. Reevaluating the Debate over Selling Tort Claims in Light of Features of Mass Tort Litigation...............316

1. The Trend Towards Aggregation and Settlement in Mass Torts..................316

2. How a Market for Tort Claims Comports with Mass Tort Litigation..................317

a. Economies of Scale and Reducing Transaction Costs..............318

b. Reducing Organizational and Ethical Difficulties.................318

3. Individual Justice in Mass Tort Litigation...............320

4. Systemic Effects of Tort Claims Markets on Mass Tort Litigation................321

III. Conclusion.............322

Third-party financing of litigation has, in recent years, emerged as a heated area of debate. 1 Proposals to relax state champerty restrictions and legal ethics rules in order to allow investors to purchase and then pursue tort claims have not traditionally found receptive audiences for a variety of reasons.2 The concept of selling one's tort claim is discomforting; it conflicts with our traditional notion of a lawsuit.3 Furthermore, there are concerns that such reform would spur frivolous litigation, an objection often applied to third-party financing as a whole.

With the rise of mass tort litigation, however, proposals that would open up a market for tort claims deserve réévaluation. Mass tort litigation is different than the traditional single-party dispute, especially with regard to aggregation and settlement, and it implicates different public policy concerns.5 In this Note, I argue that permitting the sale of mass tort claims comports with the framework of mass tort litigation, and that such proposals deserve serious consideration as possible solutions to some of the problems posed by mass torts.

In Part I, I give an overview of the restrictions on the assignment of tort claims and examine both sides of the debate over whether these restrictions should be repealed to allow a market for tort claims to develop. In Part II, I describe the unique features of mass tort litigation and, in light of them, reevaluate the debate over tort claims markets. I conclude that, with the rise of a streamlined litigation model that emphasizes efficiency, aggregation, and settlement, at the expense of individualized litigation, the objections to the sale of tort claims lose traction. Moreover, creating a market for tort claims aligns with the concerns posed by mass tort litigation, and, therefore, such proposals warrant consideration as attempts to address the issues facing mass tort litigation.

I. Permitting the Sale of Tort Claims as an Alternative Form of Litigation Financing

A. The History of Prohibitions Against the Sale of Tort Claims

Modern prohibitions against the acquisition of part or all of a tort claim have their roots in the ancient English common law prohibitions of maintenance and champerty. Maintenance is an "officious intermeddling in a suit that no way belongs to one, by maintaining or assisting either party with money or otherwise, to prosecute or defend it. …