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Wednesday, February 01, 2012

The Convergence of Global Settlements

Is the American-style class action going global?  The conventional wisdom is "no," as Professor Byron G. Stier of the Mass Tort Litigation Blog writes.  It is true that, over the past decade, courts around the world have opened their doors to class actions and group litigation (even as the United States Supreme Court imposed more obstacles to them).  See, e.g., Deborah R. Hensler, The Future of Mass Litigation: The Global Class Action and Third Party Funding, 79 Geo. Wash. L. Rev. 306 (2011) (observing that over the past decade 21 countries adopted some type of class action and 6 countries adopted some form of "consolidated group proceeding"). See also The Global Class Action Exchange (collecting law review articles, empirical reseach and case studies).  But despite the spread of innovative devices to aggregate litigation--from The Netherland's settlement-only approach to mass torts to Mexico's recent adoption of class actions--Stier correctly observes that many headwinds will slow their growth abroad, including: (1) bars on contingency fees and punitive damages; (2) "loser-pay" rules that increase the financial risk of class action practice; and (3) the unwillingness to adopt "opt-out" class actions (many countries require absent plaintiffs to affirmatively "opt-in" to a class action, which limits the scope, stakes and finality of any large settlement). 

This trend reflects, in some ways, what Judge Weinstein long ago called the uniquely "bottom-up" nature of American litigation.   See, e.g., Jack B. Weinstein, Compensating Large Numbers of People for Inflicted Harms, 11 Duke J. Comp. & Int'l L. 165 (2001).  Writing over a decade ago, Judge Weinstein observed that reliance on the government to compensate victims was a commonplace feature of the “top-down” justice systems outside the United States like those, for example, in Europe, South America, and the Far East.  The U.S. system, in contrast, traditionally relied on individuals and their private attorneys to prosecute claims against corporations and others, to obtain compensation, while satisfying other socially valuable goals, like deterrence and corrective justice.

In this way, perhaps a better characterization of this new trend in mass litigation can be thought of as "convergence."  The "bottom up" approach of the United States to aggregate litigation appears to be converging with other countries' "top-down approach."  The new model, today, involves many different players--class action lawyers, agencies, prosecutors, non-profits and other institutions--all vying to prosecute the same defendant, for the same conduct, and with power to compensate victims on a massive scale.  As I've noted for the past few weeks while blogging here at Prawfs, the United States increasingly relies on states attorneys general, federal prosecutors, agencies, and legislative compensation funds to compensate victims on a massive scale in ways that compete with class actions.  Institutional players, like large mutual funds and state retirement systems, relying on changes to United States securities laws in the 1990s, have also taken a larger leadership role in class action lawsuits.  In many cases, the end result is a large fund managed by the same private administrators who commonly oversee class action settlements. 

And so it is outside the United States.  As the United Kingdom amends its class action procedures, it also has clarified and expanded the power of its Financial Service Authority (FSA) to seek consumer redress under the 2010 Financial Services Act.  As Sweden, Norway, and Denmark adopted class action procedures over the last decade, they also expanded the authority of state agencies, consumer associations and other non-governmental organizations to bring "representative actions" on behalf of victimsSee, e.g., Swedish Group Proceedings Act § 5; Norwegian Dispute Act, Ch. 35, § 35-3(1)(b);  Robert Gaudet, Earth to Brussels: Lessons Learned from Swedish, Danish, Dutch and Norwegian Class Actions, White Paper (July 14, 2008).  Public authorities and NGOs continue to play an active role in large collective actions in common law systems, like Canada and Australia, and civil law systems, like Argentina. 

The convergence of "top down" and "bottoms up" approaches to settling large-scale problems -- from the United States mortgage crisis, to British Petroleum, to the September 11 Litigation -- raises a host of new questions for the future: Is it fair for prosecutors or agencies, whose primary aim has generally been associated with criminal punishment or regulation, to coordinate or compete with private attorneys who seek to compensate victims?  In those countries with federal systems, how should the federal government coordinate with states or provincial authorities?

But, in my view, convergence presents the greatest challenge for judges charged with overseeing different players, with different state, institutional or personal interests in a final resolution.  How should a judge coordinate or consolidate such cases, if at all?  What level of judicial review does a court apply to settlement brokered by other players in government, if any?  And, finally, in a world where courts must reconcile competing interests of victims, states, agencies and federal authorities, with different civil, regulatory and criminal enforcement obligations, what level of deferrence does the court owe to each decisionmaker in that settlement?  

In short, the global convergence of class action attorneys, regulatory agencies, state attorneys general, and even criminal prosecutors commencing overlappying actions create new pressures on what we want and expect from our courts.   Professor Chayes long ago argued that the growth of civil rights and other public litigation placed increasing pressure on courts to adopt an increasingly public law perspective--taking on more of a "legislative" than "adjudicative" approach to large lawsuits.  Abram Chayes, The Role of the Judge in Public Law Litigation, 89 Harv. L. Rev. 1281 (1976).  Since that time, commentators have alternatively described courts as "managers,"  actively overseeing and brokering settlement discussions with the assistance of special masters, or distant overseers of enormous business mergers, where the core judicial function involved simply "blessing" the transaction.  See, e.g., William B. Rubenstein, A Transactional Model of Adjudication, 89 Geo. L.J. 371, 371 (2001) (class action settlements as "transactions"); Judith Resnik, Trial as Error, Jurisdiction as Injury: Transforming the Meaning of Article III, 113 Harv. L. Rev. 924 (2000) (describing the "managerial" approach adopted by the Manual for Complex litigation).   But, as public and private actors increasingly take on overlapping roles, before the same judges, on a global scale, courts may have to adopt yet another model to balance the interests of individual and collective justice in mass litigation. 

Posted by Adam Zimmerman on February 1, 2012 at 02:02 PM | Permalink


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