Abstract
Over the last decades, United States federal courts have sharply curtailed the ability of parties to reach a global resolution, including through voluntary settlement, in mass tort and similar class action lawsuits. As a result, the multidistrict litigation (MDL) statute continues to play an ever-increasing role in the resolution of these mass claims. Primarily, this is because the MDL process forgoes the more strenuous requirements for class certification under Federal Rules of Civil Procedure 23(a) and 23(b). In an MDL proceeding, the Judicial Panel on Multidistrict Litigation (JPML) can order individual cases, either sua sponte or on the request of one or more parties to the litigation, to be consolidated in a single transferee district court for pretrial proceedings, including settlement negotiations. The JPML can then decide when to remand the cases back for trial in the original transferor court for each individual claim. By some recent estimations, claims aggregated for pretrial proceedings pursuant to the MDL statute make up a staggering portion of the federal docket, with a reported 437,102 claims pending in an MDL proceeding as of June 2024. A clear plurality of pending MDL proceedings sound in products liability and tort law—claims whose substantive standards and rules of decision, outside of certain particular circumstances, will be governed by state law. Despite its rise in popularity as an alternative forum for mass tort, products liability, and other aggregate dispute resolution, MDL proceedings lack a unique and valuable protection for plaintiffs and defendants alike—the Rule 23(e) class action settlement fairness hearing. Rule 23(e) grants broad authority for the trial court to conduct a sweeping inquiry as to whether the class settlement is “fair, reasonable, and adequate.”
Neither the MDL statute nor the federal rules contain a provision authorizing trial courts in non–class action proceedings to exercise the formal procedural power to review aggregate settlements for both procedural and substantive fairness. Nevertheless, judges presiding over MDL and other aggregated proceedings have asserted such a procedural power despite a lack of formal authority. There is no shortage of existing critiques of this approach, with the primary issue being the lack of a positive, enacted source of procedural authority for the trial judge to conduct a fairness inquiry into settlements between present, private parties.
There are two distinct issues that arise with the use of the federal judicial power to review non-class settlements. First, if not from the federal rules, then where does the procedural authority for a judge to review (and ultimately approve or disapprove) a private, non-class settlement come from? Second, if that procedural authority exists, then what substantive standards determine whether the settlement meets some threshold level of fairness such that it can be approved? Part I of this Note will examine that first question and argue that the procedural authority to approve settlements in non-class aggregate proceedings is justifiable under existing models of federal common law. Part II will analyze the substantive standards that govern settlement approval and ultimately conclude that, under the broad guidelines of Erie Railroad Co. v. Tompkins, trial courts must apply state law in determining the fairness of aggregate settlement agreements in diversity jurisdiction suits. The overall fairness of a settlement agreement is a product of its procedural fairness (i.e., the fairness of the settlement contract’s formation) and its substantive fairness (i.e., the fairness of the settlement contract’s terms). Part III will survey potentially adequate sources of state law for such findings if trial courts choose to assert the procedural authority to police aggregate settlements. Finally, Part IV will briefly offer a practical work-around applicable to some high-profile, non-class aggregate settlements as tested in the recent 3M earplug litigation.
Recommended Citation
John D. Spengler Jr.,
Erie and Aggregate Settlement in Diversity Jurisdiction Suits,
100
Notre Dame L. Rev.
897
().
Available at:
https://scholarship.law.nd.edu/ndlr/vol100/iss2/8
