Sorting Bugs and Features of Mass Tort Bankruptcy
27 Pages Posted: 13 Jan 2023 Last revised: 31 May 2023
Date Written: May 31, 2023
Abstract
In 1997, after two years of study, the National Bankruptcy Review Commission recognized bankruptcy’s potential as a forum to address mass tort problems. It emphasized, however, that Congress needed to do much more to ensure due process, address major risks of under-compensation and inconsistent compensation, and reduce uncertainty about the lawfulness of these cases. United States Supreme Court cases invalidating particular limited-fund class actions raised the stakes, casting doubt on certain analogous bankruptcy practices.
Congress adopted neither the Commission’s proposals nor others on the topic. Mass tort bankruptcy practice continued without legislative clarifications or improvements, culminating in recent high-profile and controversial cases.
Revisiting earlier reform discussions helps reveal how much bugs, rather than features, drive some mass tort bankruptcies. Defendants gravitate to bankruptcy to do extraordinary things that have weak statutory and constitutional support and are in tension with principles of due process, not to mention federalism and separation of powers. The design of mass tort bankruptcies also tends to blunt the effective operation of standard Chapter 11 protections meant to empower individual creditors—tools that often are cited as making bankruptcy “better” for mass tort than other aggregate litigation fora. That makes the system overly reliant on group representation measures in mass tort cases in ways that are inconsistent with both bankruptcy law and constitutional principles. The analysis here invites skepticism about whether the system can lawfully and fairly deliver
Keywords: bankruptcy, mass tort, talc, asbestos, chapter 11, Boy Scouts of America, Purdue Pharma, opioid, due process
JEL Classification: K13, K41, G33
Suggested Citation: Suggested Citation