Blawgletter wrote this comment to the American Law Institute last week:
Congratulations on your excellent progress towards making Principles of the Law of Aggregate Litigation a reality. I appreciate and commend your dedication to such a challenging project.
So I ask your indulgence for my suggestion of what I see as an improvement to a draft that I otherwise embrace. My suggestion relates to section 3.17, which as you know prescribes the "circumstances required for aggregate settlements to be binding". Subsection (a) says that lawyers may settle non-class claims "on an aggregate basis provided that each claimant gives informed consent, in writing." So far so good, I think.
But the accompanying Comment should, and yet does not, address the situation — familiar to me — in which clients agree in advance to (a) pay a specific contingent fee and (b) split any aggregate recovery according to a mechanical formula.
Section 3.17 contemplates an entirely different set of circumstances — where the prospect of an aggregate settlement gives the plaintiffs’ lawyers a powerful incentive to accept the settlement regardless of its impact on individual clients and the value of their unique claims.
The section makes me think of fen-phen, breast implants, Vioxx, and other mass action cases involving personal injury. In those cases, clients generally lack sophistication and have claims that may vary widely in value. Plus they engage counsel without reference to clients that the lawyer already represents and those the lawyer may agree to represent in the future.
Commercial litigants, by contrast, can assess the value of their claims relative to others’ at the outset and intelligently agree to split any proceeds of a lawsuit according to a formula. In a price-fixing case, for example, clients enter into an agreement that sets each client’s share of any recovery in terms of a percentage. The agreement may, and probably should, specify a voting mechanism for deciding whether or not to accept an aggregate settlement. The only question at that point concerns the adequacy of the total settlement — not how the clients will divide the proceeds.
Forcing commercial clients onto the Procrusetean bed of section 3.17 would not further the ALI’s aim of protecting clients from their lawyers’ indifference to individual circumstances once defendants offer enough aggregate money to buy the lawyers off. Clients should have the option of entering into an effective agreement (usually pre-litigation) for a formulaic division of aggregate proceeds, if any. That will facilitate their retention of counsel.
I therefore suggest adding to the Comment the following language:
For purposes of this section, clients may give "informed consent, in writing" to a methodology for dividing the benefits of any aggregate settlement when they hire counsel. This section therefore does not prevent clients from agreeing, at the time of retaining counsel, to divide any aggregate recovery on the basis of a formula, such as a percentage for each client.