Originally uploaded at SSRN.

Abstract

As class certification wanes, plaintiffs’ lawyers resolve hundreds of thousands of individual lawsuits through aggregate settlements in multidistrict litigation. But without class actions, formal rules are scarce and judges rarely scrutinize the private agreements that result. Meanwhile, the same principal-agent concerns that plagued class-action attorneys linger. These circumstances are ripe for exploitation: few rules, little oversight, multi-million dollar common-benefit fees, and a push for settlement can tempt a cadre of repeat players to fill in the gaps in ways that further their own self-interest.

Although multidistrict litigation now comprises 36 percent of the entire federal civil caseload, legal scholars have offered little sustained theoretical or empirical analysis as to how repeat players’ enforcement efforts shape litigation or claims resolution. We wade into this increasingly controversial territory to offer the first comprehensive empirical investigation of private attorneys’ efforts in multidistrict leadership on both the plaintiff and defense side. We found that transferee judges regularly appoint the same lead attorneys.

To then uncover what the naked eye cannot see, we employed a social-network analysis to reveal repeat actors’ connections to one another. No matter what measure of centrality we used, a key group of attorneys maintained their elite position within the network. This matters considerably, for lead lawyers control the proceeding and negotiate settlements. They can bargain for what may matter to them most: defendants want to end lawsuits, and plaintiffs’ lawyers want to recover for their clients and receive high fee awards along the way.

By identifying settlement provisions that one might argue principally benefit the repeat players, we examined the publicly available nonclass settlements these elite lawyers designed. Over a 22-year span, we were unable to find any deal that didn’t feature at least one closure provision for defendants, and likewise found that nearly all settlements contained some provision that increased lead plaintiffs’ lawyers’ common-benefit fees. Bargaining for attorneys’ fees with one’s opponent is a stark departure from traditional contingent-fee principles, which are designed to tie lawyers’ fees to their clients’ outcome. Based on the evidence available to us, we found reason to be concerned that when repeat players influence the practices and norms that govern multidistrict proceedings — when they “play for rules,” so to speak — the rules they develop may principally benefit them at the expense of one-shot plaintiffs.

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