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Comments

Bill Childs

Evan,

Thanks for a thoughtful and honest posting. A couple of minor comments:

I'm not sure that your post really disputes the idea that the money is better in state court than in federal court; rather, it seems to explain, at least in part, why that is the case. "Risk" and "costs" and "impractical" are words that fit quite precisely into my idea of expected value of cases -- and I chose that language carefully, to be clear that I was not limiting the issue to verdicts, but instead to overall expected value, incorporating the various risks and costs, to the attorneys involved.

Where I think you diverge is on the idea of how much, if at all, likely verdicts go into the federal expected value being lower than that in state court. You disagree, I think, with the notion that the expected verdicts are higher in state court than in federal court. But I don't think your reference to high federal settlements gets you very far in proving that point -- what that proves to me is that federal court is a good place to have large settlements, rather than reflecting the actual risks to defendants in federal court. There are a variety of reasons that a large settlement might end up being in federal court that do not relate to the dangers of high verdicts in those courts. My recall of the results of the diet drug litigation thus far is that the big verdicts were in state court and the big settlements in federal court, but I'm sure there are exceptions and I'm always open to correction on that.

So I'm reading this as being your answer as to why it is a good thing to have the money be better in state court, and that's the final point in your post: fewer wrongs will be righted when the money isn't as good. From a market perspective, that makes sense, but I'm still not sure that it's proof of it being a bad thing.

But it still leaves -- to me anyway -- the open questions of (a) whether the risk to defendants is greater (e.g., expected verdicts are higher) in state court than federal court, and (b) whether that is good or bad. Given your view that the money is just as good in federal court on that point, it's not a question you have a need to answer to (b). But I have yet to see good data on (a).

Bill Childs

Oh, one more thing that I think was implicit: I'm well aware that most of the money comes from settlements. My point on that issue is that the threat of large verdicts (coming from, I suspect, state courts) is what drives the large federal settlements -- and that's why pointing to large federal settlements doesn't convince me that the money is good there.

Evan

Bill: To make sure that we aren't mixing apples and oranges, I should point out that when I've written about the new class-action law, I've been looking at it from the standpoint of state-law-based class actions (usually consumer class actions) and not mass torts.

In a mass-tort situation, the better money for plaintiffs almost always comes by way of individual cases, not class actions. Even in federal court, mass torts are largely a collection of individual cases, consolidated only for discovery purposes. In the diet-drug litigation, there was a class-action settlement consumated in the federal court, and this settlement included all people who had taken Pondimin or Redux--but the bigger-money litigation continued, as individuals opted-out of the class-action settlement and proceeded to trial in state and federal courts on their individual cases. The verdicts in those cases had relevance for determining the settlement value of the remaining opt-outs, but not the class action, which had already been settled.

I don't think the new class-action law will really affect the way mass-torts like diet drugs or Vioxx are litigated, since mass torts are by and large filed as individual cases. Even after the new class-action law goes into effect, plaintiffs' lawyers will do what they can to keep their individual cases in state court under the existing diversity rules. Defendants will then remove the cases to federal court, arguing that the non-diverse defendants were fraudulently joined (or whatever), and the cases may or may not be remanded back to state court. The new federal class-action law won't change this standard procedural story.

As to your question about whether a state-law-based class action has a higher expected value in state or federal court, I think the question is so fact specific as to be unanswerable. On the other hand, it makes more sense that a state court would, by and large, be more receptive to a state-law-based case. It follows that federal courts would be less receptive--although this will change, I think, with the new law. Right now, though, before the new law goes into effect, it's true that defendants almost always try, through removal, to get their case into federal court. It must mean they think the expected value of the case will be less in federal court. (Although other factors could be at work--the desire to get numerous cases consolidated by the MDL, the desire to have a final result that will definitely be binding, etc.) Defendants that desire federal court must be thinking that they'll have a better chance at fighting certification in federal court. In addition, if the class is defined as a multi-state class, the defendants might be thinking that a federal court will be less receptive to the idea of a multistate class under a state-law-based claim.

In summary, I still don't think I've answered your question, but this might be the best I can do.

Bill Childs

You're certainly right to distinguish the two (and I should have been more clear about that) -- but your reference to Vioxx got me off on that track. I'm fairly sure I remember there being substantial verdicts in individual cases prior to the diet drug settlement (and there surely have been in other mass tort class settlements), but you're right that they are different. I think my underlying point is still sound -- that the size of federal settlements does not support the view that the money is good there.

You may well be right that the question is unanswerable at least in the class action context. I suspect that one could evaluate more generic cases elsewhere in order to do something like a case study to make a determination. And certainly your observation that defendants almost always remove is relevant, as is the fact that plaintiffs almost always seek remand.

And that leaves us with indicators that attorneys certainly believe that the money is better in state court than in federal court, without any answer as to whether that is, if true, a Good Thing(tm).

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