On The Case

A handful of plaintiffs' lawyers dominates MDL litigation. Is that a problem?

(Reuters) - Consolidated multidistrict litigation comprised 36 percent of the entire civil caseload of the federal court system in 2014, up from 16 percent in 2002. If you exclude social security cases and suits by prisoners, nearly half of all civil cases in the federal courts – 45.6 percent – were in MDLs in 2014.

It’s nearly impossible, in other words, to overstate the civil justice significance of MDLs. Like class actions, they affect hundreds of thousands of plaintiffs, if not more. But unlike class actions, MDLs aren’t governed by strict procedural rules that, among other things, require judges publicly to assess the fairness of proposed settlements and to award attorneys’ fees.

Instead, as legal scholars Elizabeth Burch of the University of Georgia and Margaret Williams of the Federal Judicial Center document in a forthcoming paper for the Cornell Law Review, MDL judges have come to rely on lawyers with experience in wrangling complex cases into settlements. In particular, that’s reflected on the plaintiffs' side because judges select MDL lead counsel. (Defendants, of course, pick their own lawyers.)

MDL leadership is extremely concentrated in the plaintiffs’ bar, Burch and Williams found in “Repeat Players in Multidistrict Litigation: The Social Network,” which is part of a presentation Burch is making this week at an MDL conference at George Washington University. By examining 73 product-liability and sales-practices MDLs pending as of May 2013, the profs were able to document that repeat players were appointed to nearly 63 percent of all leadership roles. The 50 lawyers who were named as leads in five or more MDLs, the profs found, occupied 30 percent off all leadership posts on the plaintiffs’ side.

The plaintiffs’ lawyers with “the highest degree of centrality,” in the lingo of the study, have names you’ll probably recognize: Richard Arsenault of Neblett Beard & Arsenault, Daniel Becnel, Dianne Nast of NastLaw, Christopher Seeger of Seeger Weiss and Jerrold Parker of Parker Waichman. The entire list of the 50 plaintiffs’ lawyers who’ve held leadership positions in five or more MDLs is an appendix to the paper; the paper also notes repeat defense firms.

But Burch and Williams went beyond simply identifying repeat players. To examine the influence of the leadership network, they obtained 13 private settlement agreements from 10 MDLs. They scrutinized the agreements’ provisions on what they call closure – defendants call it global peace – and on attorneys’ fees, two broad categories that could show if the MDL plaintiffs’ bar is putting its own interests first.

What they found, they said, is “a relatively small cadre of high-level, well-connected repeat players … who actively designed and implemented” settlements with a “surprising” degree of similarity on closure and fee provisions.

The template, according to Burch and Williams, was set back in 2004 and 2005, in a pair of settlements involving the gastric reflux drug Propulsid. The plaintiffs’ lawyers in the case described their settlements as the first global resolution of mass tort claims without the use of a class action, a device the U.S Supreme Court discouraged in personal injury litigation in rulings in the 1990s. The Propulsid settlements gave the defendant, Johnson & Johnson, a right to bail on the deal unless a high percentage of plaintiffs agreed to participate in the settlement program – apparently the first use of the now-common walkaway provision – and offered incentives to encourage plaintiffs (and their lawyers) to participate. Lead plaintiffs’ lawyers also negotiated fees directly with J&J – another feature that has become commonplace in subsequent MDL settlement.

Plaintiffs’ lawyers, according to Burch and Williams, were richly rewarded for the Propolsid deals, receiving fees of more than $26 million based on settlements with a nominal value of more than $70 million. But according to Burch and Williams, the claims process was so rigorous that only a handful of plaintiffs actually recovered at all. Total payouts to claimants were less than $7 million. Much of the settlement money ended up reverting to J&J.

And meanwhile, Propulsid did indeed pave the way for future MDL settlements with walkaway provisions, negotiated attorneys’ fees and common benefit provisions that tax all settling plaintiffs for the work of lead lawyers. The concern in these MDLs – which take care of defendants’ desire for global resolution and lead counsel’s desire to be fairly rewarded – is that individual MDL plaintiffs may wind up worse off than they would be if they were litigating one-off cases.

“Unlike typical settlements between plaintiffs and defendants, these deals were made between lead lawyers and the defendants, and most of them explicitly required the plaintiff’s individual attorney to become a signatory if she wanted to enroll a single client in the settlement program,” the law profs said. “By shifting the dealmaking entity from the client to the lawyer, these offers leveraged the attorney-client relationship itself to achieve closure and tied plaintiffs’ attorneys’ financial self-interest to one another as opposed to a particular client. Put differently, we saw a uniform departure from the conventional contingent-fee model where an attorney’s fees increase solely based on a particular client’s outcome.”

I called Chris Seeger, one of the lead plaintiffs’ lawyers in the Propulsid case and one of the most successful MDL lawyers in the business, to ask about the Burch and Williams hypothesis. Seeger said first of all that their paper does not tell the whole story of the Propulsid litigation, in which J&J spent “many millions” to settle thousands of cases in state court before the MDL settlement. The MDL settlement program, he said, was just to close out remaining cases, which may not been as strong as cases J&J settled earlier on. Seeger also said the fees for lead counsel were based on lodestar billings and, if anything, underpaid the leadership group for its contributions to the litigation efforts that produced all of the Propulsid settlements.

More broadly, Seeger said, Burch and Williams have offered “naïve analysis of a complicated problem.” Defendants won’t make deals unless they can obtain a near-complete resolution of the litigation. So it’s up to lead counsel to figure out how to leverage defendants’ desire for global peace, Seeger said.

Seeger told me MDL plaintiffs’ lawyers and judges who oversee the consolidated cases are doing a much better job than they get credit for. “One of the problems in the MDL world is that information is not easy to get,” he said. “Defendants don’t want it out there.” If critics and academics were able to see the recoveries MDL plaintiffs receive with, for instance, drug companies, Seeger said, they might change their minds about the cases.

“We have to do a better job of getting information out,” Seeger said. “We’re trying, between the bench and the bar. But look where we are now compared to 15 years ago.”