Asbestos class action certification

The legal system has developed for resolving mass torts is the class action settlement. In a class action, judge certifies a class consisting of all plaintiffs having a particular type of claim against one or more defendants that produced a harmful product. If the class action goes to trial, the judge or jury makes a single decision for each defendant that is, all plaintiffs either win or lose against each defendant. But most class actions are resolved by settlements rather than trials, and class actions frequently are certified only after a settlement is reached. As in a bankruptcy, class action settlements often involve setting up a compensation trust to pay present and future tort claims, using assets provided by the defendant and its insurers. Class action settlements can be used to resolve mass torts that involve multiple defendants. If multiple defendants produced a single dangerous product and individual plaintiffs cannot identify which defendant’s product harmed them, a class action settlement can set up a single compensation trust to pay all plaintiffs’ claims, with defendants and insurers agreeing on a formula for dividing the cost. Unlike bankruptcy filings by individual defendants, a class action settlement of this type prevents the mass tort from spreading.

The Supreme Court overturned another asbestos class action certification that involved only a single large defendant. After the two decisions, defendants concluded that no class action settlement of asbestos claims would succeed. Economists have strongly criticized the federal rules that determine when a class action can be certified, arguing that judges certify class actions too frequently. Their concern is that class actions are often certified even when plaintiffs’ claims are very weak and they would lose in a trial. However, once a class is certified, defendants nearly always settle, since going to trial is too risky when losing could force the firm into bankruptcy. But economists have overlooked a benefit of certifying class actions in the mass tort context, which is that they can be used to resolve multi defendant mass torts collectively and can therefore stop the spread of mass torts to new defendants. In the asbestos context, even if some U.S. Supreme Court justices changed their minds and the Court allowed a large class action of all asbestos claimants to be certified, it would probably be impossible for the parties to agree on a settlement. Plaintiffs and defendants would have to agree on how much is needed to compensate all present and future claimants and defendants and insurers would have to agree on a formula for dividing the cost. The agreement concerning the cost allocation would have to be voluntary, since class action settlements have no mechanism for forcing dissenting defendants to agree.