Global Convergence in Settlements (the Class Action Kind!)

by Peggy McGuinness

My brilliant St. John’s colleague Adam Zimmerman recently posted his thoughts on global trends in the area of mass settlements at Prawfsblawg.  He argues that American-style “bottom up” approaches to class actions has been converging with the “top down” approach prevalent in Europe and other jurisdictions.  Questions about how to compensate large groups of claimants (e.g., victims of the BP oil spill, or the global mortgage crisis) tend to blur distinctions between private and public law and raise complex questions of the role of courts in managing settlements:

The new model, today, involves many different players–class action lawyers, agencies, prosecutors, non-profits and other institutions–all vying to prosecute the same defendant, for the same conduct, and with power to compensate victims on a massive scale.  As I’ve noted for the past few weeks while blogging here at Prawfs, the United States increasingly relies on states attorneys general, federal prosecutors, agencies, and legislative compensation funds to compensate victims on a massive scale in ways that compete with class actions.  Institutional players, like large mutual funds and state retirement systems, relying on changes to United States securities laws in the 1990s, have also taken a larger leadership role in class action lawsuits.  In many cases, the end result is a large fund managed by the same private administrators who commonly oversee class action settlements.

And so it is outside the United States.  As the United Kingdom amends its class action procedures, it also has clarified and expanded the power of its Financial Service Authority (FSA) to seek consumer redress under the 2010 Financial Services Act.  As Sweden, Norway, and Denmark adopted class action procedures over the last decade, they also expanded the authority of state agencies, consumer associations and other non-governmental organizations to bring “representative actions” on behalf of victims. See, e.g., Swedish Group Proceedings Act § 5; Norwegian Dispute Act, Ch. 35, § 35-3(1)(b);  Robert Gaudet, Earth to Brussels: Lessons Learned from Swedish, Danish, Dutch and Norwegian Class Actions, White Paper (July 14, 2008).  Public authorities and NGOs continue to play an active role in large collective actions in common law systems, like Canada and Australia, and civil law systems, like Argentina.

The convergence of “top down” and “bottom up” approaches to settling large-scale problems — from the United States mortgage crisis, to British Petroleum, to the September 11 Litigation — raises a host of new questions for the future: Is it fair for prosecutors or agencies, whose primary aim has generally been associated with criminal punishment or regulation, to coordinate or compete with private attorneys who seek to compensate victims?  In those countries with federal systems, how should the federal government coordinate with states or provincial authorities?

But, in my view, convergence presents the greatest challenge for judges charged with overseeing different players, with different state, institutional or personal interests in a final resolution.  How should a judge coordinate or consolidate such cases, if at all?  What level of judicial review does a court apply to settlement brokered by other players in government, if any?  And, finally, in a world where courts must reconcile competing interests of victims, states, agencies and federal authorities, with different civil, regulatory and criminal enforcement obligations, what level of deference does the court owe to each decisionmaker in that settlement?

For those of us who track other areas of “convergence” in the law — e.g., human rights adjudications in domestic and international courts — it is useful to think about the ways in which adjudication of mass claims in the U.S. has influenced and is influenced by global trends.  And, of course, highlights the need in all cases for judges and other institutional players in settlements to think about convergence in substantive outcomes across national borders.  What to do, for example, when the other players are foreign prosecutors or administrative agencies? Or international dispute resolution bodies or regional agencies? (The Costa Concordia case is illustrative, with the possibility of payouts to victims through an Italian criminal proceeding with a class-action tort action continuing apace in U.S. court.)   Read the whole thing over at Prawfsblawg.

26 Responses

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