Allocations to Plaintiffs

Concerns have been expressed about the allocations of global or group settlements to individual plaintiffs.214 The major concern appears to be that plaintiffs’ counsel may bow to pressures from more aggressive clients with less serious injuries and allocate greater damages than their injuries would otherwise warrant. The source of the difficulty lies in the absence of an authoritative judg­ment (i.e., verdict) fixing the value of each claim. Because this problem is inherent in any group settlement of claims, the treat­ments devised by lawyers and judges deserve attention.

The most direct treatment of the issue is to find a credible substi­tute for the authoritative jury verdict. In some cases, this may not be possible without a separate set of trials or minitrials. In limited circumstances, however, judicial involvement in the allocation allays concerns that plaintiffs’ counsel is acting unethically by uni­laterally distributing the proceeds of a group settlement. The recent settlement between Raymark and Blatt & Fales relies on ju­dicial supervision of the allocations, using the procedural mecha­nism of judicial certification of a class action pursuant to Fed. R. Civ. P. 23. Under rule 23(e), the court has an explicit duty to review the settlement of a certified class action. Similarly, in theNew Jersey settlement of a group of plantworker cases, the federal district  court  appointed  a  retired  state court judge  as  special

  1. Wellington, supra note 5, at 388: “[T]he producers in our group . . . devel­
    oped a formula based on data relating to their past litigation experience. The for­
    mula allocates a liability share to every subscribing producer for all claims brought
    to the Facility.” Outside of Wellington, defendants have established settlement pat­
    terns that are predictable. For example, Manville estimates that its share of future
    settlements will be approximately 27 percent.  Wellington Said To Be Paying an
    Average of $7$,000 Per Case, Mealey’s Iitig. Reps.: Asbestos, Dec. 26, 1986, at 5,513.
  2. Cf. In re “Agent Orange” Prods. Liab. Litig., 597 F. Supp! 740 (E.D.N.Y.
    1984), aff’d, Nos. 1140 et al. (2d Cir. Apr. 21, 1987).

    1. See Hensler, supra note 1, at 96-97.

master to review each of the cases and make allocations from the settlement fund.215

Judge Lambros also reports that he reviews allocations made by the plaintiffs before having his clerk enter the data on the com­puter. Judge Parker reviewed the settlement in Jenkins as part of his role of presiding over the class action. Because of the numbers involved, he reports that he randomly sampled plaintiffs’ counsel’s recommendations to test their fairness. Access to the computer data undoubtedly bolstered this process. Judge Stanley Brotman in the District of New Jersey reports that he reviews the final settle­ment amount with each individual plaintiff, on the record, immedi­ately after the settlement conference. The familiarity of these judges with the cases and their systematic collection of information about prior settlements gives them the ability to evaluate the fair­ness of an individual allocation.

In other jurisdictions, the amounts of settlements from prior de­fendants have to be reported to the court before trial of a case so that contributions issues can be managed in the trial. This gives a judge the opportunity to review the fairness of allocations if any question arises from any source.

In addition to judicial monitoring of allocations, the parties and lawyers have opportunities to ensure that allocations are fair. Most lawyers indicated that they started and ended their negotiations with discussion and evaluation of individual cases. Plaintiffs’ law­yers generally have two or three members of the law firm review the files and estimate a value for the case. Differences are dis­cussed within the firm. If cocounsel is one of the national firms that specialize in asbestos litigation, another layer of review is added. Similarly, defendants review cases individually and set a value.216 In the case ofWellington defendants, regional counsel’s appraisals are subject to review at a national level. At least in some jurisdictions,Wellington insists on having an individual allo­cation for each plaintiff. Presumably, checks are made out to each individual and waivers or releases received from each plaintiff.

In the course of negotiations involving a major group of cases, it may be that defendants accede to evaluations and allocations by plaintiffs’ attorneys as long as the average value does not exceed what the client is willing to pay. In this case, the allocation ap­pears to be primarily that of plaintiffs’ counsel, and there is a pro­fessional ethical concern that can only be fulfilled by full disclosure

215, Austinv. Johns-Manville, No. 75-754 (D.N.J. filed May 6, 1975).

216.  One of the lawyers interviewed says that he uses the defendant’s worksheets
from the negotiations to help make the final allocations.

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to the clients.217 In the OAL, all clients participate in the settle­ment process so that full disclosure of the allocations is a natural outgrowth of their experience.

Overall, the allocations problem seems to be primarily theoreti­cal. There are no reports of complaints to bar grievance committees about allocations. Allocations problems have their origin in the clustering of cases according to plaintiffs’ counsel, a system that is vital to the evaluation and settlement of large groups of cases. That specialist lawyers and judges make the allocations in lieu of a jury verdict renders the system more workable, predictable, and re­sponsive to the needs of individual plaintiffs. Changes should not be imposed without concern for the centrality of clustering to the case management system.

  1. See Kritzer, Felstiner, Sarat & Trubek, The Impact of Fee Arrangement on
    Lawyer Effort, 19 Law & Soc’y Rev. 251 (1985).

    1. See, e.g., Hensler, supra note 4, at 95-97,
    2. Jenkins v. Raymark Indus., Inc., No. M-84-193-CA (E.D. Tex. 1986), See also
      Texas Class Action Settles for More Than $100 Million,
      Mealey’s Litig. Reps.: Asbes­
      tos, Apr. 11, 1986, at 4,089.
    3. Hensler et al. found that “defendants in most jurisdiction have not been able
      to agree  on  a  routine or  formula for allocating damages among themselves.”
      Hensler, supra note 1, at 89. See also T. Willging, supra note 4, at 9-10.

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in an internal allocation process for those defendants who signed the Wellington agreement.212 External allocations continue to be worked out in each jurisdiction. In the New Jersey settlement of the Manville plantworker cases, the parties and the court devel­oped a market-share formula for allocation of damages: Defend­ants’ shares of the total settlement amount were based directly on the tonnage of asbestos that had been shipped into the plant by that defendant.213