Sir Winston Churchill famously remarked that “democracy is the worst form of Government except for all those other forms that have been tried from time to time.” The witticism endures because the flaws and failures of democracy (in its many forms) are obvious and omnipresent, yet it is hard to defend replacing democracy with pretty much anything else. The same might be said of modern aggregate litigation: it is the worst form of resolving mass harms except for all those other forms that have been tried from time to time. As with democracy, paradigmatic aggregate litigation (class actions and multi-district litigation (MDL) actions) seem to be under perpetual threat, as critics, lawmakers, rulemakers, and judges seek to limit their scope, weaken their effectiveness, or supply alternative means of resolution altogether.
Bankruptcy has emerged in the past few decades as a viable forum for global resolution of mass claims that once were within the exclusive province of state and federal class actions and MDLs. As Lindsey Simon documents in Bankruptcy Grifters, using bankruptcy to aggregate and resolve certain mass harms originates in a fundamental problem of outsized litigation. Sometimes, injured claimants’ present and future claims threaten to overwhelm a defendant who is already insolvent or would be pushed into insolvency in satisfying the claims. This is particularly troublesome in cases involving long-term harm or exposure to toxic products, where the earlier claimants may exhaust the defendants’ existing funds, leaving nothing for later claimants. Bankruptcy offered an attractive forum for aggregating and resolving or settling such claims, and courts cut their teeth on bankruptcy-as-mass-tort-aggregator in the large asbestos cases that overwhelmed courts in the second half of the twentieth century. But while bankruptcy offers limited solutions to aggregate litigation problems in certain situations, the tools to assist the resolution of claims against insolvent or genuinely struggling defendants have attracted an increasing number of “grifters.” Bankruptcy Grifters is a must-read for anyone interested in modern aggregate litigation. It is no longer enough to master the ins and outs of class actions and MDLs; attorneys and scholars must possess a command of bankruptcy tools and procedures that have become an essential element of the aggregate-litigation landscape.
Simon begins with a thorough and compelling description of how defendants can use procedures such as channeling injunctions and nondebtor releases to siphon mass-tort litigation out of state and federal courts and into settlement trusts and bankruptcy mechanisms created by bankruptcy proceedings. These efforts do not entail unjust procedures and outcomes; Simon praises and details judicial and litigant efforts to create solutions within Chapter 11 proceedings, providing an assuring array of procedural protections to mass-tort claimants. But the titular “bankruptcy grifters” too often seek (and bankruptcy judges approve) access to tools and remedies reserved for struggling debtors, in such a way that minimizes procedural protections and potential recovery for present and future mass-tort claimants. Simon offers compelling critiques, leading to a set of cogent and practical reforms that Congress and courts should make to retain the benefits of bankruptcy as aggregator while ensuring greater fairness and better outcomes for claimants.
One must note the larger background against which these developments have taken place—the real shortcomings of other aggregate litigation. Perhaps the door has been so open to bankruptcy grifters because other forms of aggregate litigation have become so difficult, restrictive, and unappealing; judges administering plans with broad relief and nondebtor releases view bankruptcy aggregation as Churchill viewed democracy—the worst form of aggregation except for all the others that have been tried.
But this is not a particularly fair or accurate view of class actions, MDLs, statutory settlement funds, and other forms of aggregation, although it is hard to ignore their shortcomings and failures, which have increased over time. State and federal class actions often require a degree of commonality that forecloses treatment of mass harms raising individualized inquiries into causation and damages. The jurisdictional and applicable-law hurdles for class actions make aggregation and resolution fractured and difficult. MDLs do not fare much better. To the extent one critiques aggregation in bankruptcy for the overreach of equitable power, inherent powers of the court, and ad hoc procedure, MDLs are the poster children for (seemingly) inscrutable proceedings and resolutions. While Rule 23 and similar state and federal law provisions codify procedural protections for claimants and absent parties, governance problems are well-documented. Finally, critics view the judgments and settlements of many class actions and MDLs as far from optimal. Dismal settlement participation rates, for example, suggest that class actions do not achieve the goal of full or adequate compensation to harmed parties.
Simon rightly encourages Congress and courts to implement some “gatekeeping for grifters” by improving the formal and informal mechanisms for protecting claimants in bankruptcy. But other forms of mass litigation cannot limp alongside, positioned as vastly superior alternatives. Otherwise, the grifters might drift back, exploiting the weakest of the systems and finding the path of least resistance.
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