Wall Street Journal Article on the Decline in Mass Tort and Class Action Lawsuits

The weekend edition of the Wall Street Journal (subscription required) has a interesting story entitled "Class Inaction: Plaintiffs' Lawsuits Against Companies Sharply Decline."   The alleged decline in mass tort and class action lawsuits does not come for a single empirical study.  Rather, the reporter cobbles together several disparate trends that ultimately support the story.

What really got my attention, however, was the comment by Geoffrey Miller (NYU Law) that "[t]he future of mass torts and class actions is very much in question."  Miller, who has authored numerous empirical studies on large scale litigation over last two decades (his more recent work posted here), is indisputably one of most qualified experts in the country to much such an claim.

Some of the trends cited in the story include:

• The indiction of Milberg Weiss (securities fraud filings are down 45% from 2005);
• A scathing 2005 opinion of U.S. District Court Judge Janis Jack that exposed rampant fraud in the silicosis, which has produced greater scrutiny by other courts.  (The story notes, "About 60% of the plaintiffs in the silica case had previously been plaintiffs in asbestos suits, even though it is extremely rare to get both silicosis and asbestos.  One doctor has made roughly 88,000 asbestos diagnoses over the years ... .")
• The Class Action Fairness Act of 2005, which diverts most class action cases into federal court, where the case law on class action certification is much tougher for plaintiffs.
• Numerous state tort law reforms,  such as medical criteria laws in Florida, Georgia, and Texas, which require doctor certification of asbestos or silica causation of illness in the early states of litigation, or punitive damage reform in Mississippi, which curtailed a previously attractive venue for plaintiffs' lawyers.
• Inspired by a rising tide of corporate friendly state and federal court rulings, Merck's willingness--and and success at--litigating Vioxx cases on a one-by-one basis, which has discouraged plaintiffs and lawyers from pursuing 60,000 of the estimated 100,000 potential Vioxx claims.

It is certainly true that some areas of class action and mass tort litigation have been tainted by massive abuse.  But it is also true that much of the recent class action and tort reform has been based on extremely shaky and exaggerated empirical claims.  See, e.g., Ted Eisenberg, Use it or Pretenders will Abuse It: The Importance of Archival Legal Information (short essay that discusses how major litigation reforms have often been at odds with the best available information).   The SSRN pages of Eisenberg and Miller, among others, have several studies that back this up.   

Over the last several decades, large scale plaintiffs' lawsuits have been a strong deterrent against dangerous or fraudulent conduct.  What, exactly, are the social costs of curtailing this litigation? Ultimately, legal empiricism is the key to striking the right balance. 

Comments

[AustinContrarian]

I just found this blog, and I know this post is ancient measured in blogosphere time.

Still, I must comment.

I think empirical analysis of tort law is long overdue. But from the stuff I've seen, the authors are asking the wrong question, or at least a secondary question. Rather than ask, "Do we really have a mass tort crisis?", we should ask, "Do mass torts really do any good?"

For example, you state, "Over the last several decades, large scale plaintiffs' lawsuits have been a strong deterrent against dangerous or fraudulent conduct." I know that's the popular perception. Is that true? If true, do these lawsuits provide the optimal amount of deterrence, or do they over- or under-deter?

Is there one scrap of evidence that pharmaceuticals are safer because of our products liability laws? Or, a better question, Do the benefits of our products liability laws to drug safety outweigh their costs? The costs include the massive transaction costs -- 60% or more of the settlement value of the claim, when both plaintiff and defense costs are included. There is also a cost for drugs needlessly withheld from the market due to overdeterrence. This is the cost of unnecessary death and disease.

In sum, do we really maximize welfare by pinning the loss on the putative "cheaper cost avoider?"

We need empirical analysis of the auto industry; empirical analysis of the pharmaceutical industry; empirical analysis of the lawnmower industry.

Is the increase in safety worth the cost?