September 2002
Do Consolidated Trials Favor Plaintiffs in Litigation?
The large number of asbestos personal injury claims filed in many different courts have caused many judges to adopt procedural "innovations" intended to clear their dockets by encouraging mass settlements that cause outcomes to change in plaintiffs' favor and in many cases increase plaintiffs' return. As a result, the innovations make the asbestos crisis worse by giving plaintiffs' lawyers an incentive to file large numbers of additional claims. Michelle J. White, a professor of economics at University of California at San Diego and a research associate for the National Bureau of Economic Research, discussed and supported her hypotheses at AEI on September 18, 2002. Michael S. Greve, John G. Searle scholar at AEI provided commentary on White's findings.
Michelle J. White
University of California, San Diego
This paper is part of a larger body of ongoing research into the consequences of asbestos litigation within the United States. Asbestos was used from the 1940s to the 1970s in a myriad of applications due to its fire retardant capabilities. Later doctors determined that the inhalation of asbestos can cause lung cancer, as well as asbestosis and mesothelioma, both of which are only attributable to the inhalation of asbestos. Due to the prevalence of its use, doctors estimate that approximately 100 million people have been exposed. The high number of exposures combined with the fact that both the incidence and severity of asbestos related diseases increases with time, means that there remains an almost unlimited supply of potential future litigants.
To date, approximately 600,000 people have filed claims against roughly 6,000 individual defendants. The aggregate cost of these claims is estimated to be $54-78 billion with an eventual final cost of $150-270 billion. This has led to an increasing number of firms filing for bankruptcy. This increase in litigation and bankruptcies comes despite the fact that the majority of primary producers have already filed for bankruptcy, signifying that asbestos litigation is spreading to more tangential defendants.
Even though over 600,000 individuals have filed claims, a majority of them have yet to, and may never, present symptoms of any asbestos related diseases. These potential claimants have chosen to file early before the award money runs out.
The majority of asbestos claims have been filed in a few courts, thus threatening judicial gridlock. In order to ameliorate this, three innovations have been put forward to resolve the cases with a minimum of court time:
- Case consolidation, different than a class action, is a common procedure that has been used in airplane crashes and breast implant cases. In these cases a single jury will hand down decisions for each plaintiff/defendant pair, unlike a class action where a decision is given for the all the parties involved. Normally, in consolidated cases all the claimants share similar injuries and circumstances. However, in consolidated asbestos litigation, plaintiffs are grouped by attorneys, not by circumstances or severity of injury
- Reverse bifurcation is a type of trial where the jury decides the damages in the first phase and determines liability in the second. Settlement negotiations, normally with judicial participation, occur between the phases. Since the value of damages is predetermined this type of trial saves both sides valuable time. Plaintiffs are able to settle out of court for lower amounts while saving trial costs and time.
- Bouquet trials occur when a small group of claims, between eight and twenty, is used to represent a much larger body of plaintiffs. This is done by holding a consolidated trial for the small group to determine the liability and then is immediately followed by settlement negotiations relating to the larger group of claimants. To force a settlement, the judge can threaten to use the same jury to decide more or all of the potential cases using another trial format. Unlike reverse bifurcation, bouquet cases are accepted practice outside of asbestos litigation, an example being the recent tobacco trials. Furthermore, the Supreme Court recently chose to allow this format to proceed in an upcoming West Virginian asbestos tort.
The evidence suggests that the judges most likely adopted these procedural innovations to save trial time and clear their dockets through the encouragement of mass settlements, thereby avoiding judicial gridlock. A consequence of these innovations is that trial outcomes are now more favorable to the plaintiffs. Therefore, plaintiffs' lawyers have an even greater incentive to file an increasing number of cases, ensuring that judicial gridlock is actually worsened by these innovations.
I developed a model to evaluate the three types of innovations for their ability to save trial time, their effects on settlement probability, and on trial outcomes. I used a data set of approximately 5,500 asbestos trials from 1987 to mid-2002. The data showed that plaintiffs have a 69 percent probability of winning their trials. Further, successful plaintiffs are awarded an average compensatory award of $804,000 and an average punitive award of $1,123,000.
The model demonstrated that consolidated trials of two or three plaintiffs were 15 percent more likely to win compensatory damages than was an individual plaintiff. Furthermore, the bifurcated and bouquet trials were respectively 29 percent and 21 percent, more likely to award compensatory damages than individual trials. Furthermore, the model shows that plaintiffs in consolidated trials were 11 percent more likely to win punitive damages, and 54 percent more likely in bifurcated trials, than were individual plaintiffs.
When translated into 1987-dollar amounts these results show that, plaintiffs in bouquet trials can expect $2,780,000 in damages more in compensatory damages than the average individual plaintiff. However, plaintiffs in bifurcated trials were awarded on average $154,000 less than the typical individual plaintiff, when the court awarded both compensatory and punitive damages. Furthermore, consolidation has had mixed effects on compensatory damages. When two to five cases are consolidated the court awarded a greater settlement. However, if more than eight are consolidated then the court awarded lower amounts of both compensatory and punitive damages. An average loss of $272,000 below the average individual plaintiff's combined award.
While the procedural changes have come about as remedies to crowded courtrooms, they have in fact encouraged plaintiffs' lawyers to file additional claims.
Michael S. Greve
AEI
The paper is terrific. It demonstrates that marginal reforms can have paradoxical consequences. However, the paper does not address the issue of inefficiency within the defense teams. This could lead them to not argue for the cheapest or best possible trial format for their clients. This possible contributing factor could partially explain the data presented.
Part of the reason that defense teams are not coordinated is that there is a vast universe of defendants in current asbestos litigation. If they were able to present a coordinated defensive strategy, this could help them in court.
A foreseeable problem though, is that some of the rational defendants may wish to rid themselves of these lawsuits as cheaply as possible. For some companies, the only way to guarantee this will be to declare bankruptcy. In addition, most companies also want to minimize each asbestos event and ameliorate the problem as quickly as possible, and have not found an easier way than bankruptcy or consolidated trials.
AEI staff assistant Sean Gupta and AEI intern Eric Krause prepared this summary.
