Embedded Aggregation in Civil Litigation

Richard A. Nagareda - Vanderbilt University Law School

Posted in , , , , , , , , , , , ,

In debates over civil litigation, class actions have long garnered considerable attention.  Controversy continues to rage over efforts to certify class actions in the face of objections from defendants.  Debate also swirls over their use as a vehicle for settlement, with the defendant’s consent.  All of this ferment suggests that the big question about aggregate procedure today concerns when it should be superimposed—when, in other words, to deviate from the traditional model of civil litigation, whereby conventional named parties sue conventional named parties and the preclusive effects of litigation track formal party status.  This debate tends to convey the impression that the world neatly divides itself into the mass effects unique to class actions and the confined realm of litigation between individuals, each standing alone and each separately represented.  As a result, a closely related set of issues has gone curiously underexplored.

Here, the concern is not over some deviation from the one-on-one lawsuit.  Rather, the basic suggestion is to circumscribe what an ostensible individual action may do, by way of litigation or settlement, in order to prevent that lawsuit from exerting some binding force upon nonparties who are broadly similar to the parties involved.  The idea, in other words, is to constrain what individual litigation may do, precisely because such a proceeding is not a de facto class action empowered to act upon nonparties.

In recent years, variations of this concern have surfaced across seemingly unrelated contexts:  in the Supreme Court’s 2008 decision in Taylor v. Sturgell,1 concerning preclusion principles and the procedural doctrine of “virtual representation”; in the Court’s 2007 decision in Philip Morris USA v. Williams,2 regarding the constitutional due-process limits on punitive damages; and with respect to the widely-reported $4.85 billion deal in 2007 to resolve mass tort litigation over the prescription pain reliever Vioxx.3  Each of these situations merits scholarly attention in its own right.  My suggestion is that something deeper is going on here, but that its nature and implications remain undertheorized.

Each instance involves a situation of “embedded aggregation.”  In each, a doctrinal feature of what is ostensibly individual litigation—the scope of the right of action the plaintiff asserts, the nature of the remedy that the plaintiff seeks, or the character of the alleged wrong—gives rise to demands for the suit to bind nonparties in some fashion, beyond the ordinary kind of stare decisis effect that any case might exert.  An aggregate dimension, in short, is embedded doctrinally within what appears to be an individual lawsuit; and that aggregate dimension, in turn, gives rise to demands for a binding effect of a commensurately aggregate scope.

Taylor v. Sturgell provides the perfect backdrop for this set of issues.  Taylor involved the Freedom of Information Act (FOIA), which confers an undifferentiated right upon “any person” to request the disclosure of “records” that the federal government holds.4  The difficulty that this undifferentiated right presents is that, as to any given record, the universe of potential claimants who might assert a right to disclosure is without legal limits.

The Taylor Court held that constitutional due process forbids the judgment in one FOIA requester’s losing effort to compel disclosure from exerting preclusive effect upon a subsequent requester of the identical record, at least absent agreement or collusion between the two requesters.5  To hold otherwise—as some lower courts had attempted to do by developing a doctrine of virtual representation—would be to enable courts to “create de facto class actions at will.”6

The concern over nonparties in individual actions, however, extends well beyond FOIA litigation.  Under current doctrine, the limits on punitive damages as a matter of federal constitutional due process bespeak a similar concern.  In Philip Morris USA v. Williams, the Supreme Court held that the “Due Process Clause forbids a State to use a punitive damages award to punish a defendant for injury that it inflicts upon nonparties.”7  To do so, the Court reasoned, would be to punish the defendant “for injuring a nonparty victim”—in Williams, the many other Oregon smokers of the defendant’s cigarettes—without an “opportunity to defend against the charge” based upon the particulars of those nonparties.8  The Oregon court had never certified Williams to proceed as a class action.

On its face, the discussion of nonparties in Williams seems to dwell on the inputs to a punitive damages award in individual litigation rather than on the outputs in terms of nonparty effects.  With respect to allegations of extreme market-wide misconduct, however, the two cannot be so cleanly separated.  Prior to Williams, serious concern had emerged that punitive damages awards in seriatim individual lawsuits over the same course of extreme market-wide misconduct might amount, in the aggregate, to multiple punishment, such as to warrant a clampdown on the availability or application of punitive damages for later plaintiffs.

Williams holds that punitive damages are, at least in theory, exclusively about punishment of the defendant for the extremity of its wrong as to the particular plaintiff at hand, not as to nonparties.9  The Court nonetheless added that the jury still may consider harm to nonparties to assess the reprehensibility of the defendant’s misconduct vis-à-vis the plaintiff.10  As a result, after Williams, an ostensible individual action for punitive damages as to market-wide misconduct will continue to have at least some nonparty dimension—again, even though nonparties have not been brought into the suit.  The important point remains that Williams, too, grapples with how to regulate a kind of embedded nonparty dimension in individual litigation—here, under the Court’s due-process jurisprudence for punitive damages.

The concern that the disposition of ostensibly individual cases might gravitate over to a kind of class action in disguise is not limited to adversarial litigation.  The Vioxx settlement took the form not of a class action settlement but, rather, of a contract between the defendant manufacturer Merck & Company, Inc., and the small number of law firms within the plaintiffs’ bar with large inventories of Vioxx clients.  The contract described a grid-like compensation framework, but Vioxx claimants themselves literally were nonparties to that contract.  The enforcement mechanism for the deal consisted not of preclusion but, rather, of contractual terms whereby each signatory law firm obligated itself to do two things:  to recommend the deal to each of its Vioxx clients and—to the extent permitted by applicable ethical strictures—to disengage from the representation of any client who might decline the firm’s advice to take the deal.  Absent a signatory law firm’s commitment of its entire Vioxx client inventory to the deal, Merck would have the discretion to reject the firm’s enrollment, meaning that none of the firm’s clients would be eligible to participate.

The Vioxx settlement garnered (by a comfortable margin) the overall rate of participation from Vioxx claimants that Merck had specified as a precondition for its funding obligations.  In a public speech, one of the key dealmakers on the plaintiffs’ side explicitly touted the arrangement as a form of “mass settlement without class actions.”11  Along similar lines, the federal district judge who shepherded the Vioxx litigation toward settlement went on to describe the proceedings as a “quasi-class action.”12  The terminology here is revealing.  The reference to a “quasi-class action” is the counterpart in the Vioxx setting to the Taylor Court’s concern over the creation of a de facto class action.  This is precisely the problem for critics of the Vioxx deal.

Absent a judgment capable of yielding class-wide preclusion, the glue to hold the Vioxx deal together ultimately consisted of individualized consent from each Vioxx claimant when the time came to accept (or reject) her signatory lawyer’s advice to enroll in the deal.  For critics of the deal, this individualized client consent is illusory—a kind of consent obtained only through the leveraging of mass client representation against itself.  On this account, the deal effectively pitted the economic interest of the signatory firms against their obligation to render advice that they tailored to their individual clients’ particular situations.  Further, the deal threatened dissenting clients with the prospect of having to start anew with alternate counsel, if the client could find any.  For all its details, however, the central thrust of this criticism should sound curiously familiar.  The insistence upon individualized client consent, unburdened by the strictures of Vioxx settlement contracts, is the counterpart in the world of mass-tort settlements today to the insistence upon individualized procedure in Taylor and Williams.

The doctrine of virtual representation, the constitutional law of punitive damages, and the settlement of mass torts via contracts with plaintiffs’ law firms clearly are not the same thing.  Still, cohesive consideration of these situations brings into focus the notion of embedded aggregation as an underexplored category within our modern civil-justice landscape.  I seek to initiate such a conversation by understanding embedded aggregation in terms of the right of action that a plaintiff asserts, the remedy a plaintiff seeks, and the wrong on the merits that the litigation concerns.  A situation of embedded aggregation arises whenever any of these features extends beyond the plaintiff in an individual lawsuit.  If so, then demands will tend to arise to bind, in some fashion, nonparties who are similarly situated, so as to bring the scope of resolution into line with the doctrinal feature that has an aggregate dimension.

The most revealing aspect of the concern that individual litigation somehow is verging into a quasi or de facto class action is this:  The features of Taylor, Williams, and the Vioxx litigation that make them situations of embedded aggregation—ironically enough—also, in all likelihood, would defeat efforts to aggregate them overtly as class actions.  The result is to leave the law today in a kind of procedural Catch-22, whereby embedded aggregation seemingly invites class action treatment, but such treatment is unavailable due to the very features that make the situation one of embedded aggregation.

In decades past, much debate centered upon the aspiration for the class action more or less to occupy the field of aggregate procedure.  The elaboration of a distinctive body of procedural doctrine on what the class action realistically may and may not do in the decades since the adoption of Rule 23 in its modern form have brought the remaining gaps in the world of aggregation into sharper focus.  I contend that the constraints on class certification that courts have elaborated over decades of real-world experience with the device are not hypertechnical bugaboos.  Rather, they stem from a well-taken notion of preclusive symmetry—an insistence that the plaintiff class ought not to be positioned to wield the bargaining leverage of a class-wide trial without, at the same time, affording to the defendant the assurance of a commensurately binding victory, were the defendant, rather than the plaintiff class, to prevail on the merits.

Drawing on the FOIA, punitive damages, and Vioxx examples, the law may frame an emerging prescription for situations of embedded aggregation in a world in which the modern class action does not, and will not, realistically shoulder the entire regulatory load.  The way out of the procedural Catch-22 in which the law finds itself consists of hybridization—the combination of individual actions with some manner of centralizing mechanism, just not always or inevitably the unity of litigation that the class action device generates.

For FOIA, the law might make such a move to specify what one might call a unity of forum for litigation that involves an undifferentiated right of action.  The practical goal would be largely to disable seriatim lawsuits over the same government-held record in courts spread across the country by specifying a single forum for such actions.  For punitive damages, developments in tobacco litigation contemporaneous with Williams embody a nascent and underdeveloped aspiration toward what one might call a unity of party—the notion that situating as plaintiff the government itself (with the aid of private whistleblowers empowered to litigate on its behalf) might best accomplish supra-compensatory relief.

The Vioxx deal underscores that the drive to identify some manner of centralizing or unifying mechanism in situations of embedded aggregation is not just the stuff of academic pipedreams.  In seeking to deploy mass client representation in mass tort litigation as a mechanism for closure, the Vioxx deal effectively crafts a near-unity of representation—if not of all Vioxx claimants by a single law firm (ala class representation), then in substantial part, due to the concentration of large Vioxx client inventories in the hands of a small number of signatory firms.  Further reform in the ethical strictures for what are known as aggregate settlements can refine and better regulate the use of this approach.

In sum, moving outside the parameters of the class action—to quasi, de facto versions that one cannot realistically fold into the class action device—means shifting into new settings a similar need for a centralizing mechanism and, crucially, for legal regulation of the manner in which that mechanism may exercise coercive power.  By bringing into sharper view situations of embedded aggregation in which the class action cannot shoulder the regulatory load, I seek to break down the prevalent supposition of a neat division between the perceived need for legal regulation of class actions and the supposedly benighted world of autonomous individual lawsuits.

For situations of embedded aggregation, the answer does not lie in a roving, undifferentiated mandate for class actions.  But neither does the answer lie uniformly in undifferentiated insistence upon notions of individual autonomy from the ancestral past of one-on-one litigation.  The elaboration in decades past of what is now a distinctive law of class actions has opened up a welcome conceptual space for experimentation with hybrid forms of rights, remedies, and wrongs that call for a commensurately hybrid approach on the part of the civil justice system.  The time has come, in short, to move the conversation about aggregation beyond the class action device—to broaden the menu of approaches available for our modern world of mass civil claims.

Acknowledgments:

Richard A. Nagareda is a Professor of Law and Director of the Cecil D. Branstetter Litigation & Dispute Resolution Program at Vanderbilt University Law School.

This Legal Workshop Editorial is based on Mr. Nagareda’s Article: Richard A. Nagareda, Embedded Aggregation in Civil Litigation, 95 CORNELL L. REV. ___ (forthcoming 2010).

Copyright © 2010 Cornell Law Review.

  1. 128 S. Ct. 2161 (2008).
  2. 549 U.S. 346 (2007).
  3. See Settlement Agreement Between Merck & Co., Inc., and the Counsel Listed on the Signature Pages Hereto (Nov. 9, 2007), available at http://www.merck.com/newsroom/vioxx/pdf/Settlement_Agreement.pdf.
  4. 5 U.S.C. § 552(a)(3)(A) (2006).
  5. 128 S. Ct. at 2167, 2179–80.
  6. Id. at 2176.
  7. 549 U.S. at 353.
  8. Id.
  9. See 549 U.S. at 349, 352–54.
  10. Id. at 355.
  11. Christopher Seeger, “The Vioxx Story: Mass Settlement without Class Actions,” speech at Benjamin N. Cardozo School of Law (Mar. 11, 2008).
  12. In re Vioxx Prods. Liab. Litig. 574 F. Supp. 2d 606, 611 (E.D. La. 2008).

Post a Comment (all fields are required)

You must be logged in to post a comment.