Settlement Formulas

Ordinarily, one would expect that parties who repeatedly litigate large numbers of cases with each other would develop formulas to resolve disputed cases on a routine basis.208 Such formulas exist, and some lawyers have little difficulty setting values for asbestos cases.203 Asbestos cases have, however, shown resistance to univer­sal application of formulas to dispose of a backlog of cases.204 What are the barriers to use of settlement formulas? The primary barrier to the disposition of cases is the absence or paucity of trial dates in some courts.208 Conversely, in those districts with firm trial lists and calendaring systems, dispositions are relatively high.

Formulas are evident in several contexts in asbestos litigation. Low-visibility evidence of formulas can be found in districtwide and even nationwide settlements between clients of one plaintiffs attor­ney and a single defendant. Examples of this type of settlement were evident in at least half of the jurisdictions in this study. Be­cause it is not a complete termination of the case, this type of set­tlement will not appear in statistical analyses of the disposition of asbestos cases. Before the creation of the Wellingtonfacility, dis­trictwide settlements were a major feature of the asbestos litiga­tion landscape. Nonparticipants in Wellingtoncontinue to employ them. For example, a recent agreement between Raymark Indus­tries, Inc., and the law firm Blatt & Fales of Barnwell, South Caro­lina, may result in the settlement of 10,000 to 15,000 claims against Raymark around the nation. In their agreement, the parties cre­ated a fund to pay claimants an average of $2,821 per case, to be allocated under judicial supervision in a settlement class action,206 Raymark has issued a call for similar settlements on a nationwide basis,207

In other agreements with single defendants, there is an estab­lished figure that will be paid when plaintiff submits evidence of a specific diagnosis and evidence of plaintiffs exposure to one of de-

  1. See, e.g., T. Willging, supra note 4, at 9-10.
  2. Cf. Hensler, supra note 1, at 95 (discussing “block settlements”).
  3. Id. at 87-89.
  4. Id. at 97-108. See also T. Willging, supra note 4, at 24-28.
  5. Raytech, Blatt & Fates Agreement May Settle 10-15,000 Cases, Mealey’s Litig.
    Reps,: Asbestos, Dec. 12, 1986, at 5,435; 5,496. The mechanism used is the creation of
    a trust fund and filing of a motion for class certification of a settlement class to
    obtain judicial approval of the settlement. Id. at 5,500. The case has been, filed in
    the District of Kansas. Wells v. Raymark Indus., Inc., No. 87-1016-K (D. Kan. filed
    Jan. 12, 1987). The procedure was recommended by a law professor who specializes
    in legal ethics.
  6. Raymark Threatens Bankruptcy; Asks To Pay $2,000 Each Case, Mealey’s
    Litig. Reps.: Asbestos, Apr. 11, 1986, at 4,090.

fendant’s products. The amount may vary with the type of diagno­sis, but not with any further characteristics of plaintiffs case. Plaintiffs attorney simply allocates the same amount to all plain­tiffs with the same diagnosis.

Defendants’ incentives for such agreements appear to be an effort to hold down litigation costs and to establish a firm basis for financial planning to accommodate a known liability. Defendants’ attorneys may gain valuable business by showing that efficient legal services will lower litigation costs, perhaps beyond that at­tained by counsel in other regions of the country who handle simi­lar cases. A further incentive, of course, is that early settlements are at a discounted rate, as much as one-half less than the value at the courthouse steps.

Plaintiffs generally have an interest in prompt payments to meet ongoing living expenses. Plaintiffs’ counsel may also have a need for settlements with some defendants to finance the litigation. This seemed particularly important in districts like Massachusettsand New Jerseywhere few cases had been scheduled for individual trials at the time of the districtwide settlements. Unless plaintiffs fee is adjusted for the stage of the case at disposition, the attorney will benefit from the savings in transactions costs.208 Plaintiffs also have an interest in dealing individually with defendants be­cause they feel that they are able to obtain a larger overall settle­ment than group negotiations would bring.209

Another type of formulaic settlement is that in which all or most of the plaintiffs in a jurisdiction settle with all or most of the nonbankruptcy defendants. In the recent class action in the East­ern District of Texas, 741 cases settled for a total of approximately $138 million.210 The underlying settlement formula was linked to the average value of prior settlements or verdicts achieved by each plaintiffs’ attorney for each category of disease. A computer data base compiled by Special Master McGovern was used to calculate the final amount. Allocation of the settlement was achieved by order of the court, exercising its power to review class action settle­ments, based on allocations recommended by plaintiffs’ counsel.

Allocation of settlements among defendants has created prob­lems in the past.211 Creation of theWellington facility has resulted

  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.

Chapter VI

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