Mass Tort Funds and the Election of Remedies: The Need for Informed Consent

Abstract

The twenty-first century may very well mark both the advent and triumph of fund approaches to resolving mass tort litigation. After more than forty years of attempted class action resolution of mass tort claims―with often controversial and problematic results―the use of no-fault alternative compensation systems styled as “funds” may emerge as the most efficacious, if not the most preferred, technique for settling aggregate litigation. The fact that various actors involved in mass tort disasters have converged in  support of fund approaches to resolving aggregate claims heralds a new chapter in the resolution of mass tort litigation. 

The unprecedented attacks on the World Trade Center towers on September 11, 2001 gave rise to the creation and implementation of the equally unprecedented World Trade Center (WTC) Victim Compensation Fund. The WTC Victim Compensation Fund was the first large-scale use of a no-fault, non-litigation fund approach to resolve massive tort claims in the United States, apart from previous class action settlements, such as the “Agent Orange” fund. Less than a decade later, following the explosion of the Deepwater Horizon oil rig in the Gulf of Mexico, the BP oil company, in loose coordination with the government, set up the Gulf Coast Claims Facility (GCCF), patterned after the WTC Victim Compensation Fund.

The WTC Victim Compensation Fund and the GCCF have both been widely praised as well as criticized on various grounds, ranging from detailed critiques of implementation criteria to more wide-ranging discussions of fundamental fairness and justice. The purpose of this paper is not to revisit that commentary and those debates, of which assessments undoubtedly will continue to emerge over time as scholars produce more considered analyses of the success and failure of the WTC Victim Compensation Fund and the GCCF.

Instead, this article focuses on a narrower, but perhaps more fundamental issue inherent in fund approaches to resolving mass tort claims. Both the WTC Victim Compensation Fund and the GCCF operated alike in requiring potential claimants, at some fixed deadline, to make an election of remedies: either to participate in the Fund and waive the right to litigate in the tort system, or to decline to receive remediation through the Fund and thereby preserve any rights to adjudicate claims in the future.

This election of remedies and waiver of the right to sue is, obviously, essential to the success of the fund alternative; the very purpose of the fund resolution of mass tort claims is to avoid the tort litigation system. As will be discussed, close to 97% of eligible WTC claimants agreed to a Fund award and therefore signed a waiver of their right to sue. Similarly, thousands of Gulf Coast claimants who received final awards from the GCCF also waived their rights to sue. Moreover, the very essence of the fund approach to resolving mass tort claims theoretically has been grounded on the voluntary nature of the funds; or, as their advocates urge, no one is forcing anyone to take an award from a fund.

This article discusses the election-of-remedies requirement inherent in fund approaches to resolving mass tort claims and takes issue with the argument that the fund resolution of mass tort claims is in no way coercive or involuntary. Instead, this article argues that more consideration ought to be given to whether mass tort claimants―often under pressure or physical or psychological distress―have received sufficient neutral, dispassionate information to make an informed judgment concerning whether they should elect to receive compensation from the fund and forgo litigation or other alternative dispute resolution options. The experience of the WTC Victim Compensation Fund and the GCCF present interesting, contrasting examples concerning how potential claimants were situated to make their election of remedies and execute a waiver of their right to sue.

As will be discussed, although WTC Victim Compensation Fund claimants seemingly had relatively good information and assistance of counsel available to make an informed decision about their election of remedies, an overwhelming number of claimants instead chose to delay making this decision until the latest possible deadline. Moreover, strong inertial pressures emanating from the Fund's special master, Kenneth Feinberg, in concert with the federal judge (Hon. Alvin Hellerstein) presiding over the WTC litigation, ultimately prodded many WTC claimants into electing their awards from the Fund rather than choosing to litigate. The somewhat controversial role of the WTC Fund special master, his surrogates, and the presiding federal judge in urging claimants to elect Fund relief bears some critical scrutiny.

The GCCF election-of-remedies provision and its implementation raise even more compelling concerns about the waiver of the right to sue. Unlike WTC claimants, Gulf Coast claimants did not have counsel readily available to provide assistance in making an informed decision, against a background cacophony of misinformation. The GCCF waiver and release was extraordinarily comprehensive, releasing not only BP from potential liability litigation, but the liability of dozens of other potential defendants, as well. In addition, the GCCF administrator, Ken Feinberg, served as the primary conduit for advice about the election of remedies, obviously urging potential claimants to seek relief from the Fund and to eschew litigation. The GCCF administrator's conflicted status, coupled with his extreme efforts at urging claimants to elect relief from the Fund, finally prompted a judicial rebuke and restraining injunction.

Moreover, the potential litigation landscape for Gulf Coast claimants was (and continues to be) much more complicated than after the World Trade Center events; this array of options made it difficult for a layperson to navigate. Finally, the presiding judge over the Gulf Coast MDL litigation has played an entirely different role than the WTC judge in relation to the parallel fund, raising further questions about the intersection of alternative remediation mechanisms.

This article concludes that the examples of the WTC Victim Compensation Fund and the GCCF suggest the need for the requirement of intelligent, knowing, and informed consent prior to a claimant's waiving the right to sue and electing relief from a mass tort fund. The concept of informed, intelligent waivers of rights is well established in many areas of law. Victims of mass disasters  ought not, under deadline pressure and without adequate counsel, information, or neutral advice, be tacitly coerced into electing a fund award and waiving any future rights to litigation.

To this end, this article suggests that when funds are created in the wake of future mass disasters, such fund mechanisms ought to include a requirement that neutral counsel be provided to assist potential claimants in assessing the advisability of electing fund relief. Claimants have a right to complete and transparent information in order to make a reasoned decision whether it is better, in their personal circumstances, to receive a fund award or to retain the option to sue culpable parties. This information would include some estimation of the fund award as compared to a potential litigated judgment, incorporating a meaningful risk assessment of either option.

Only after claimants have received adequate information and counsel by which to assess their options should claimants accede to waivers of the right to sue. Although it is not perfect, the WTC Victim Compensation Fund offers an example of pro bono legal assistance in the wake of the WTC events. But, as will be discussed below, both the WTC and the GCCF experiences provide problematic examples of coercive efforts to induce claimants to forgo litigation rights. The experience of the GCCF especially―in which many claimants had to make decisions without counsel or helpful information―provides further support for this proposal.