You’d think it’s immoral or something—or
- at least it’s in violation of some constitutional principle of great and foundational importance . . . like due process or First Amendment or separation of powers.
I’m talking about tort claimants being denied payments for their injuries, through a bankruptcy plan process, where a super-majority of claimants vote in favor of payments under a plan.
Why should they be denied payments for their tort claims? I say, “They shouldn’t.”
What follows are some examples and illustrations of my point.
Purdue Pharma
In Purdue Pharma, more than 95% of voting tort claimants want to get paid—promptly—from a $7 billion fund, under a heavily-negotiated and mediated plan. But their opponents (including one tort claimant) decry the desire of such tort claimants for prompt payments from the $7 billion fund, using such morally-charged terms as “abuse” and “bad faith.”
But all morally-charged words used in opposing the tort claimants’ wishes are misleading—as is any suggestion of a constitutional concern.
Granted, a five-justice U.S. Supreme Court majority opinion rejected the super-majority tort claimants’ wishes in Purdue Pharma. But it did so on a technicality. The technicality surrounds the meaning of the term “appropriate provision” in § 1123(b)(6) of the Bankruptcy Code:
- the majority opinion goes through a lengthy grammatical and contextual analysis, in Purdue Pharma, of the “appropriate provision” term and resolves that “we do not think paragraph (6) affords a bankruptcy court the authority the plan proponents suppose.”
By contrast, the four-justice dissenting opinion starts with this proposition:
- “Today’s [majority] decision is wrong on the law and devastating for more than 100,000 opioid victims and their families. The Court’s decision rewrites the text of the U. S. Bankruptcy Code and restricts the long-established authority of bankruptcy courts to fashion fair and equitable relief for mass-tort victims. As a result, opioid victims are now deprived of the substantial monetary recovery that they long fought for and finally secured after years of litigation.”
So . . . if you are one of the super-majority tort claimants in Purdue Pharma who voted to promptly get your share of the $7 billion fund (or you are a family member of one of those deceased claimants), you’ve got to be saying to yourself:
- “What the heck?!!! They don’t care about me?!!! They care more about disputed grammar and technical niceties like ‘ejusdem generis’ . . . and are more than happy to screw me?!!!!”
And the response from the opponents to you, as a super-majority claimant, is something like this:
- “Yes.”
Johnson & Johnson
In Johnson & Johnson, more than 75% of voting tort claimants want to share in a negotiated $8 billion settlement fund, with payments to them occurring as soon as possible.
But the opponents of such payments (many of whom are not tort claimants) are crying foul and using such morally-charged and inflammatory language as “Texas Two-Step” [that’s my attempt at sarcasm].
- You’d think by the hyperbole involved that a “Texas Two-Step” is akin to robbing a bank or even murder.
But the reality is this: $8 billion is a lot of money that’s available to pay tort claimants, and a super-majority of tort claimants want their share of that money . . . now!
But, again, the opponents are more concerned about enforcing their view of technical-and-disputed niceties . . . than they are about the financial plight of people with cancer (or of families who lost a family member to cancer).
Yet, there are good reasons for tort claimants against Johnson & Johnson to want a settlement and their money . . . now! One significant reason is this: the tort claims of many such claimants have already been zeroed-out.
There are a variety of reasons why zeroing-out has happened. One of the most-significant reasons is this: courts often find the evidence of causation to be flimsy-at-best and inadequate. In other words, the evidence of causation is found to be what’s commonly called “junk science.”
Even when tort claimants prevail against Johnson & Johnson at trial, appellate courts have reversed, by concluding that the expert evidence presented on causation is nothing more than junk science.
So . . . if you are a tort claimant with an opportunity to share in an $8 billion settlement fund, you have an incentive to accept that opportunity.
And why would anyone oppose your opportunity to make that choice?!!! And why would they do so on a technicality?!!!
I don’t know the answer.
Other Factors
–Tort Claimant Incentives
Over the decades of my legal practice, I’ve represented a variety of tort claimants. In almost every case, the incentive of each claimant is, (i) to get a recovery that’s on the high side of what is reasonable, and (ii) avoid the risks of a trial in pursuing that goal, if possible.
It is a rare client who rejects settlement discussions in favor of going to trial. Almost always, tort claimants want a reasonable settlement now, rather than taking the risk of getting something substantially less (or losing everything) at trial. That’s why the vast majority of tort lawsuits settle, instead of going to trial.
The super-majority tort claimants in both Purdue Pharma and Johnson & Johnson are no exception. They are analyzing their settlement alternatives in exactly the same way as the vast majority of other tort claimants in other contexts.
And why should they be deprived of the opportunity to choose a settlement, especially when the grounds for rejection are technical-and-disputed niceties? The answer is this:
- “They shouldn’t!!!”
–Over-The-Top Legal Fees
On this legal fees point, I’ll simply quote from the U.S. Fourth Circuit Court of Appeals, in its opinion rejecting a motion to dismiss an asbestos bankruptcy (emphasis is added):
- “[W]hile Claimant Representatives complain that the over four-year preliminary injunction proceeding has impeded the resolution of asbestos-related claims, the main interference with the timely resolution of the claims in Bestwall’s bankruptcy proceeding appears to be Claimant Representatives’ challenge to the preliminary injunction, thereby prolonging the bankruptcy process and preventing the claimants from obtaining prompt relief”; and
- “It is not clear why Claimant Representatives’ counsel have relentlessly attempted to circumvent the bankruptcy proceeding, but we note that aspirational greater fees that could be awarded to the claimants’ counsel in the state-court proceedings is not a valid reason to object to the processing of the claims in the bankruptcy proceeding.”[Fn. 1]
Note: This Fourth Circuit opinion was appealed on a Petition for Writ of Certiorari to the U.S. Supreme Court (in Case No. 23-675), and the U.S. Supreme Court denied the Petition on May 13, 2024.
Conclusion
Why is our federal legal system opposed to super-majority tort claimants choosing to settle and get money on their claims promptly? And how can it be that the opposition is on technical-and-disputed niceties, instead of on strong moral or constitutional policies?
The answer is: “I don’t know, but it’s a shame!”
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Footnote 1. In re Bestwall, LLC, 71 F.4th 168, 183-84 (4th Cir. 2023).
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