Will the ALI opt for baby steps on new aggregate settlement principles?

Remember that 1L who talked in class all the time?  The one whose hand shot up even if the prof hadn’t asked a question?  The gunner who made you wish Socrates kept his method to himself?

Every law school section had an individual like that.  If you ever wondered where they all went, speculate no more.  They joined the American Law Institute.  And they have gathered at The Mayflower — the sometime home-away-from-home of a Blawgletter law classmate, Eliot Spitzer, and until Wednesday the temporary headquarters of law geekdom.

(Note the they.)

The session yesterday devoted several hours to chapters 1 and 3 in Principles of the Law of Aggregate Litigation, Tentative Draft No. 1 (Apr. 7, 2008).   Members aimed comments, criticisms, and a few barbs at the Reporter and Associate Reporters, who handled them in good cheer.  The discussion produced several revisions and clarifications.  It also resulted — with a big exception — in consensus approval of both chapters.

The sections dealing with aggregate settlements — 3.17, 3.18, and 3.19 — failed to gain general acceptance.  At the suggestion of ALI’s Director, Lance Liebman, they didn’t go up for a vote.  The reporters will instead revisit the provisions and present them again at the next annual meeting in 2009.

Sections 3.17-3.19 would make a major change to what people call the "aggregate settlement rule".  The ASR in general invalidates an agreement by multiple clients to abide by a majority vote on accepting an aggregate settlement.  Section 3.17(b)-(d) would reverse the ASR, allowing enforcement of such agreements if the joint clients knowingly consent, in writing, to an approval mechanism by a "substantial majority" of the clients.

The consensus broke down over concern that the new rule would cede undue authority to mass tort lawyers.  Some commenters suggested support for the rule in the context of business litigants but worried that many personal injury claimants lack enough information and sophistication to give effective consent at the time of hiring counsel.  A third group supported the rule as an improvement over the ASR, which now impels plaintiffs’ lawyers to abandon representation of clients who refuse to take their share of an aggregate settlement (think fen-phen and Vioxx as examples).

We can’t predict how the reporters will navigate the fault lines within the ALI, but two options look possible if not likely:  First, they will build even more client protections into Sections 3.17-3.19 and, second, they will scale back their ambitions — for now — and deal only with classes of clients that satisfy a test for sophistication. 

The latter strikes us as a prudent incremental step towards a better regime for handling settlements in aggregate litigation.  If experience proves it good, the ALI and courts may extend it to other situations.

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