In 1976, a decade after the complete overhaul of Rule 26 class action procedure, Abram Chayes observed that the amended rule had accomplished a significant paradigm shift from “traditional” litigation to a new model of public law adjudication. Chayes described five characteristics of traditional litigation: (1) the lawsuit is bipolar, (2) the litigation is retrospective, (3) the right and remedy are interdependent, (4) the lawsuit is a self-contained episode, and (5) the process is party-initiated and party-controlled. The new public law model is sprawling and amorphous, subject to change over the course of the litigation, suffused and intermixed with negotiating and mediating processes at every point, with the judge as the dominant figure in organizing, guiding, administering, and implementing relief. Arthur Miller observed the same paradigm shift that year, noting that critics of the new procedural model characterized it as a Frankenstein’s monster. The label has stuck.
Professor Maya Steinitz introduces a new appellation into the lexicon of aggregate dispute resolution: “Zombie litigation.”
In this interesting and compelling article, Steinitz describes twenty-first century shift in aggregate litigation to a model employing complicated financial arrangements implicating significant ethical and professional responsibility issues. Novel financial transactions have created portfolio financiers who collect multiple similar cases and who desire to continue aggregate litigation, while individual and group claimants may have no desire to initiate, be part of, or to continue with an aggregate litigation. This phenomenon of financiers working on behalf of their own interests and against the interests of clients creates Zombie litigants.
Steinitz’s article is part of the growing commentary inspired by the advent of third-party financing in class action and MDL litigation in recent years. She traverses critiques and builds on the ethical conflicts and professional responsibility issues outsider intermeddling in aggregate litigation create. Steinitz’s more-nuanced model layers on new actors who create portfolio funding and secondary trading in legal claims to explain how self-interest compromises the attorney-client relationship and, more broadly, undermines the public civil justice system.
To illustrate how Zombie litigation develops, Steinitz hypothesizes a litigation scenario consisting of four actors: “BigCorp,” a repeat player in large scale litigation; its outside counsel “BigLaw,” which approaches BigCorp with a financing deal from “BigFin,” a leading player in the outside litigation financing industry; and “BigPartner,” a rainmaking partner at BigLaw who serves as lead counsel. Steinitz traces the interaction of these players and their conflicting interests as litigation proceeds, eventually showing how BigFin might attempt to block a settlement that BigCorp, BigLaw, or Big Partner desires. BigFin’s pressure continue litigation against other actors’ interests makes BigCorp and its adjuncts Zombie litigants, not wanting to continue in litigation it initiated but forced to do so.
Steinitz canvasses the array of conventional ethical and professional responsibility issues. She hones on plaintiff autonomy over a case and the concomitant problem of third-party funder power over settlements. She discusses the problems relating to litigant control over individually funded cases and in aggregate litigation. The article analyzes the difficulties raised by undisclosed portfolio financing, secondary claims markets, unregulated aggregation devices, and moral hazards.
The remainder of the article explores ethical and professional responsibility issues that the new portfolio financial models and BigFin financial meddling in complex dispute resolution raise. She argues for resuscitating champerty to address the burgeoning problems of complicated financing arrangements and third-party claim dealing. In states that have abolished that doctine, she endorses more robust application of unconscionability, equity, and public policy to rein in abuses leading to Zombie litigation. She also invokes doctrines of abuse of process and the real party-in-interest rule as procedural avenues to curb portfolio financier. She highlights the public policy in favor of settlements, arguing that granting third-party control over settlement decisions runs afoul of this strong public policy.
Finally, Steinitz endorses enhanced judicial supervision as an additional and perhaps ultimate means for dealing with a “Zombie Apocalypse”. Taking an old page from an old procedure book, she invokes managerial judging–the fiduciary role that the judiciary is supposed to play in protecting the interest of plaintiffs, especially in aggregate litigation. She argues for more robust supervision through case-specific orders and standing orders.
While Steinitz’s article fits comfortably within the corpus of legal analysis of litigation financing, her article is worthwhile reading for its nuanced explication and analysis of the complicated phenomenon of BigFin’s portfolio financing and its impact of litigant autonomy and control. At any rate, multiple points to Steinitz for introducing the label “Zombie litigation,” which, if nothing else, is fun.
