How Mass Tort Litigation Is Gaming the Judicial System

Mass tort litigation is entering a dangerous new phase. Plaintiffs’ lawyers are generating massive numbers of highly questionable claims against companies to force huge settlements, and now some companies are filing for bankruptcy to cap liability and manage the claims.

At a recent hearing in one such case, a plaintiffs’ lawyer called a company’s turn to bankruptcy for help “a contrivance by clever lawyers” to gain “leverage.” For some, this statement dripped with irony.

Wall Street

A contrived mass tort generation machine has developed in the past decade. Wall Street businesses invest billions of dollars —largely against pharmaceutical, medical device, and consumer product manufacturers—for a share of the proceeds.

Companies fund marketing campaigns with TV, radio, and internet ads to produce numerous plaintiffs from their customer base—even those who aren’t injured or haven’t used the product. Nevertheless, lawsuits are often filed in their names.

The sheer quantity of claims is intended to create a presumption among judges, juries, and the media that there must be merit to the litigation. Where there is this much smoke, there must be fire.

Court Response

Courts have found the overwhelming number of these claims are meritless. They are manufactured to feed a business model that takes advantage of imbalance, inefficiencies, and transaction costs of the civil justice system.

Claims are produced by lead generators and filed by lawyers, often without vetting. They’re then consolidated into federal multi-district litigations so pre-trial proceedings can be coordinated.

But there is no way for courts to try all cases. For many companies, the only way out is to settle en masse—even when claims have no factual or legal basis.

Judge Clay Land of the US District Court in Georgia was the first jurist to call out these dynamics. In 2016, he was administering an MDL over mesh medical devices and found most claims stockpiled in his MDL “should never have been brought in the first place.” They were “fueled” by television solicitations, filed “with so little pre-filing preparation,” and couldn’t “stand on their own merit.”

The lawyers were banking that the claims would be swept into a global settlement, Land said, thereby “allowing them to obtain a recovery without the individual merit of their case being scrutinized.”

Money Generator

A key problem is that lead generators don’t necessarily adhere to ethical restraints that restrict attorneys when recruiting clients. For example, some offshore call centers have used data mining to target people individually.

Money fueling the mass tort litigation machine has exploded, particularly with the rise of litigation financing. X Ante, a firm tracking plaintiff-lawyer advertising, found annual spending on lawsuit TV ads more than tripled in the past decade.

In turn, the number and size of MDLs have grown considerably. There were 73 active MDLs in 2013—now there are 300, and 90% involve mass tort cases. Where earlier MDLs had a few dozen or hundreds of claimants, MDLs now regularly have thousands. Given these dynamics, many judges view their job as trying to find the right size for a mass settlement.

For some companies, there is no right size. They may not have wrongfully caused anyone’s injury—the alleged wrongdoing, scientific foundation for causation, or individual claims of injury may have no merit.

Sometimes, the whole impetus for a mass marketing campaign is a study that also was manufactured for the litigation.

Bankruptcy and Settlement

In some cases, the sheer size of the settlement given the mass of claims may be prohibitive. That’s why some companies have turned to bankruptcy as a way out.

In 2021, Johnson & Johnson faced tens of thousands of claims in its talcum powder litigation. It invoked Texas’s divisive merger statute to aggregate its talc-related liabilities into a new separate entity, LTL Management, which filed for bankruptcy to provide a single forum—and funding—to permanently resolve all pending and future claims.

After that, 3M invoked the bankruptcy code in a different way to provide funding for some 200,000 claims in its earplug litigation to reach finality.

As the company said, “The combination of advertising-induced filing of masses of unvetted claims and a preordained expectation of settlement often create a high-volume cudgel that inflates settlement value, or—as is the case with the Combat Arms MDL—precludes any reasonable settlement.”

Recommendations

These cries for help shouldn’t go unheeded. The in terrorem effect of mass MDLs isn’t different from what the US Supreme Court said about abusive class actions: Litigating them “may so increase the defendant’s potential damages liability and litigation costs that he may feel it economically prudent to settle and to abandon a meritorious defense.”

The challenge for MDL judges is to look through the fog of cases and determine whether they see real claims or, as Land did, a smoke machine. Early vetting of the veracity of each claim and the scientific evidence for whether the product can even cause the harms alleged are critical first steps.

When masses of claims are generated to overwhelm the courts from doing their jobs, courts must take necessary measures to counter those tactics and allow the judiciary to administer justice.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Philip S. Goldberg is office managing partner of Shook Hardy & Bacon in Washington, D.C. and co-chair of its public policy practice group.