Richard Nagareda’s object in Mass Torts in a World of Settlement, his only book-length theoretical work, was to show how settlements operate in a world in which aggregated litigation is common, and trial almost unheard of.
One of Nagareda’s primary observations is that settlements of mass torts are best handled by some administrative apparatus. In the meantime, the legal system is evolving to become more administrative in response to these mass torts.
Nagareda starts from the premise that mass torts deal with "generalized" wrongs. (He argues that this phenomenon arises largely from industrialization, which allows for both wide distribution of products, and large-scale accidents. In other words, mistakes are bigger in the industrialized world.) He also points out that the vast majority of tort claims are resolved by settlement rather than trial, and that the settlement agreement "describes a business transaction." That fact, the transformation of legal controversy into business transaction, explains much about how class-action and mass-tort firms operate.
So, according to Nagareda,
Mass torts accentuate the role of lawyers as agents. As in traditional tort litigation, the endgame for a mass tort dispute is not trial but settlement. But the scope of the settlement differs. Here, the most ambitious settlements seek to make and enforce a grand, all-encompassing peace in the subject area of the litigation as a whole. Lawyers, once again, act as the designers of these deals, and the strategic motivations of lawyers on both sides shape the design of the peace.
(Emphasis added.) On the plaintiff side, entrepreneurial lawyers create the connections among individual mass-tort plaintiffs. As a result, they wind up with the best information about the "price" of the legal claims each plaintiff is asserting. That price is the price the defendant pays for a release from all claims related to the subject matter of the litigation. So the business deal that these lawyers are looking to strike is cash for the plaintiffs (and their lawyers) in exchange for peace from litigation for the defendants.
These transactions take considerable resources to set up. Plaintiffs’ firms have to invest considerable resources into demonstrating causation, which they generally separate into "general" and "specific" causation. General causation shows the capability for harm. (There is a link between cigarettes and lung cancer.) Specific causation shows the harm actually occurred. (These cigarettes caused this case of lung cancer.)
But developing a theory of causation–particularly general causation–takes money. Experts need to be paid. So do those people who process the discovery the plaintiffs get from defendant corporations. It also points out that it costs money to recruit clients (which helps explain the rise of plaintiff "referrer" firms).
Moreover, plaintiffs who assume control of mass-tort litigation are asserting control not just against the defendant, but also against other plaintiffs’ lawyers and even–to some extent–against the courts. And, if mass torts go on long enough, the endgame for the litigation may not be settlement, but bankruptcy, another administrative-like function of the courts.
So why do plaintiff lawyers spend so much money? Because it pays, richly. As several legal scholars have revealed, the "effective hourly rate" [http://www.manhattan-institute.org/lawyer_barons/index.html] of mass-tort lawyers is usually in the tens of thousands of dollars. (More about Professor Brickman’s work next month.) As a result, Nagareda observes, a law firm’s investment in litigation does not necessarily track the specific substantive merits of the case. Instead it tends to track the likelihood that a specific litigation will pay off in fees.
On the defendant side, the largest influence on settlement strategy is insurance. So Nagareda spends considerable time on the role of insurance in creating mass tort settlements and, in particular, the phenomenon of "stacking insurance." Stacking insurance means buying primary insurance, then excess insurance. Insurers in turn will buy reinsurance. What all this means is that a number of entities beyond the defendant may have an interest in the final settlement. And many of them have to invest resources in monitoring the progress of the litigation. (This is not always the case. In smaller class actions or mass torts, the defendant may be effectively self-insured.)
Nagareda does address classwide settlements specifically: he considers them good enforcement mechanisms for bought peace. (This is, in fact, how Amchem and Ortiz wound up in front of the Supreme Court; each case involved a court that took legal shortcuts in order to resolve a mass tort through a classwide settlement.) The primary problem with class settlements, however, (as Judge Easterbrook once pointed out) is that there’s no chance to go through the "pricing" phase. But what classwide settlements do offer is preclusive effect. If the settlement doesn’t prevent further lawsuits, it’s not of much value to the defendant. (And this helps to explain the rash of recent cases involving preclusion.)
In general, Nagareda’s insights are useful for defense attorneys. The more a defense attorney understands the "business plan" that drives plaintiffs in aggregated litigation, the better equipped she is to defend against it.
Nagareda’s book also helps to explain why attempts at true administrative settlements, such as the BP spill fund, are not more successful. The plaintiffs’ trial bar has a powerful financial incentive to oppose more administrative settlement mechanisms. Those mechanism may be more efficient, and they may get more money to claimants in less time and with less conflict, but they do so at the expense of attorneys’ fees.