Resolving the Mass Tort Problem: Part I: Aggregating Cases in a Single Forum Under § 157(b)(5)

By Corinne Ball and Christopher DiPompeo

For at least the past three decades, practitioners and parties have been searching for an answer to a problem that has vexed both corporate and nonprofit entities alike: How to fairly and efficiently resolve mass torts, taking into account both the needs of plaintiffs for resolution of their claims and the needs of defendants to move on from the harmful conduct of their predecessors. Various means have been tried to solve this problem.

Recently, the focus has been on bankruptcy courts — specifically on the process of resolving mass torts through a chapter 11 plan that addresses, and releases, all claims related to the events giving rise to the mass tort situation. A central component of that strategy has been the nonconsensual third-party release, which allows a third-party defendant that is related to the debtor to make a substantial contribution to the bankruptcy in exchange for a release of all current and future claims related to the mass tort.

As has been widely discussed, the U.S. Supreme Court recently ruled in the Purdue case that the Bankruptcy Code does not allow nonconsensual third-party releases that have been typical in mass tort bankruptcies for the past 30 years.1 This ruling promises to dramatically change how parties approach mass tort situations.

This two-part article aims to highlight one of the underutilized tools for the resolution of mass torts in the bankruptcy system: 28 U.S.C. § 157(b)(5). Part I discusses the history of attempts to resolve mass torts, ultimately leading to the widespread use of the third-party releases rejected in Purdue. It also discusses how § 157(b)(5) works and how it was part of the toolkit to resolve mass torts in bankruptcy. Part II, which will appear in a future issue, will discuss how § 157(b)(5) can be used to help resolve mass torts in a world without nonconsensual third-party releases by creating a sort of super-multi-district litigation (MDL) in connection with an underlying bankruptcy case.

Efforts to Resolve Mass Torts Through the Courts

The explosion of mass tort litigation in recent decades has presented problems for plaintiffs, defendants and society as a whole. Inaction by lawmakers has prompted parties seeking relief to look for it in the court system, which has led to the development of novel approaches to resolving mass torts.

Class-Actions Settlements

Class action settlements were an early effort. A class action’s multi-jurisdictional reach and ability to bind nonconsenting (and nonpresent) class members initially proved very effective. However, the Supreme Court put an end to this effectiveness through its 1997 decision in Amchem Products Inc. v. Windsor, which effectively held that mass tort claims cannot satisfy the commonality requirement of the class action statute.2

MDLs

Following Amchem, MDLs emerged as a vehicle to resolve mass torts. The MDL statute empowers the Judicial Panel on Multidistrict Litigation to transfer cases pending in any federal district court to a single district court for coordinated pretrial proceedings.3 While the statute contemplates that the transferred cases will be remanded after pretrial matters are resolved, in practice MDLs nearly always conclude with a global settlement. The lack of class action-like hurdles, judges willing to take an aggressive approach to encourage resolutions, and the opportunity for final resolution through a settlement have all made MDLs attractive to mass tort lawyers and claimants. MDLs have some limitations, however.

First, MDLs are an exclusively federal forum. Cases pending in state court, including actions commenced by state officials, cannot be consolidated within an MDL. This essentially ensures that there will be parallel litigation in multiple fora, promoting a “race to the courthouse” by parties seeking to obtain a more favorable decision from a friendly state court than might be expected in an MDL.

Second, MDLs are allowed only to oversee pretrial proceedings of consolidated cases and may not hold trials or enter final judgments.4 Thus, the MDL court’s role is limited to resolving pretrial issues before transferring cases back to the home court for trial.

Third, MDLs have no way to deal effectively with “future” claims in mass tort cases. Even a “global” settlement of claims subject to the MDL is not legally binding on future claimants.

Chapter 11 Bankruptcies

Bankruptcy has increasingly been used as a mechanism to fill the void left by class actions and MDLs. Bankruptcy is essentially another aggregation device, bringing all claims — past, present and (sometimes) future — into one forum for final resolution. The Bankruptcy Code offers various tools for mass tort defendants seeking to achieve a global resolution of all claims against them, including the automatic stay, bankruptcy courts’ equitable powers, and — until Purdue — nonconsensual third-party releases in a chapter 11 plan.

As a result, beginning with asbestos cases in the late 1980s, mass tort defendants utilized bankruptcy to stop the flood of litigation and resolve it comprehensively. Although this approach was pioneered in the asbestos context, it quickly expanded to other mass tort situations. While early cases involved intrauterine contraceptive devices and silicone breast implants, in the decades since, debtors as diverse as Roman Catholic Dioceses, ear-plug manufacturers and the Boy Scouts have all sought to resolve mass torts through bankruptcy.

These mass tort bankruptcies tended to follow a predictable pattern: (1) Upon a bankruptcy filing, the automatic stay halted all litigation against the debtor; (2) the bankruptcy court enjoined cases against related nondebtor defendants, sometimes for months or years, while the bankruptcy was pending; and (3) once litigation had been suspended, the debtor negotiated with the key constituencies in the case, including tort claimants, creditors’ committees and insurers.

To help satisfy plaintiffs’ claims, debtors would often look to nondebtor co-defendants and their insurers, who would make a “substantial contribution” to the estate or a settlement trust in exchange for a full release of all current and future liabilities. These “third-party releases” included in a chapter 11 plan were typically “nonconsensual” because they released claims against nondebtors held by parties not present in the bankruptcy case.

In mid-2024, the Supreme Court put an abrupt end to this strategy in Purdue. The case’s facts and holding have been well-documented in this publication, but essentially in Purdue, the Court ruled 5-4 that the Bankruptcy Code does not authorize the nonconsensual third-party releases often employed to resolve mass torts.

Rediscovering § 157(b)(5)

Purdue sent shockwaves through the mass tort system because it removed what had become the principal tool in the toolbox for resolving mass torts. Parties must now develop new approaches to address the mass tort problem. As they do, one possible response could include the rediscovery of an old tool: the aggregation mechanism of § 157(b)(5), which provides:

The district court shall order that personal-injury tort and wrongful-death claims shall be tried in the district court in which the bankruptcy case is pending, or in the district court in the district in which the claim arose, as determined by the district court in which the bankruptcy case is pending.

Section 157(b)(5) allows the district court to transfer cases related to a debtor’s estate to a single forum. Its purpose is “to centralize the administration of the [bankruptcy] estate and to eliminate the ‘multiplicity of forums for the adjudication of parts of a bankruptcy case.’”5 By centralizing cases under § 157(b)(5), the court “increases the debtor’s odds of developing a reasonable plan of reorganization, which will ‘work a rehabilitation of the debtor and at the same time assure fair and nonpreferential resolution of the ... claims.’”6 Several aspects of § 157(b)(5) make it a powerful tool for aggregating cases related to a mass tort bankruptcy in a single forum for resolution in conjunction with the bankruptcy.

First, § 157(b)(5) has an exceptionally broad reach. It extends to any cases over which bankruptcy courts have jurisdiction under 28 U.S.C. § 1334. This is important because § 1334 gives district courts broad bankruptcy jurisdiction. This jurisdiction includes not only the chapter 11 case itself, but also any matters that arise in or under the chapter 11 case, and any cases that are “related to” the bankruptcy.

Courts have defined this “related to” jurisdiction broadly to cover any case that could conceivably affect the bankruptcy estate. Because the scope of bankruptcy jurisdiction sets the extent of the district court’s power under § 157(b)(5), the broad sweep of § 1334 means that the district court’s power under § 157(b)(5) is similarly broad. Any case over which a bankruptcy court could exercise related-to jurisdiction is potentially a candidate for transfer to the district court under § 157(b)(5).

Second, § 157(b)(5) allows for a direct transfer of cases from state court to federal court without requiring antecedent removal. Thus, unlike in an MDL, which can only sweep in cases already pending in federal court, a § 157(b)(5) transferring can consolidate all cases in the federal district court, regardless of whether they are pending in state or federal court.

Third, courts have recognized that § 157(b)(5) reflects a strong preference from Congress in favor of transfer and consolidation in the district court where the bankruptcy is pending. In fact, the text of § 157(b)(5) is phrased in mandatory terms, providing that “[t]he district court shall order that personal injury tort and wrongful death claims shall be tried in the district court in which the bankruptcy case is pending.”7 Section 157(b)(5) makes clear that the mandatory abstention provision in § 1334(c)(2) does not apply to personal-injury tort suits, even those involving third-party defendants, reflecting an important policy judgment that personal-injury cases related to a bankruptcy belong in one centralized forum closely connected to the underlying bankruptcy case. Thus, while courts have held that a district court still has power to exercise discretionary abstention in appropriate circumstances, they have recognized that in most cases, the district court should order the transfer.

The effect of all this is that § 157(b)(5) effectively means that all litigation pending in either state or federal court that is related to a mass tort bankruptcy can presumptively be transferred to the federal district court where the bankruptcy is pending, without regard to questions of removability, mandatory abstention, or the existence of federal question and/or diversity jurisdiction. This is one of the most powerful venue-transfer provisions in the entire U.S. Code.

Section 157(b)(5) Was Formerly a Key Tool in the Mass Tort Lawyer’s Toolkit

Section 157(b)(5) is not a new innovation. It was put into the U.S. Code in 1984 and has been a feature of bankruptcy law ever since. Many of the early cases using the Bankruptcy Code to resolve mass torts used this device.

For example, in A.H. Robins, one of the earliest cases using the Bankruptcy Code to resolve a mass tort, the debtor used § 157(b)(5) to obtain a transfer of all personal-injury cases to the applicable district court. The case involved the Dalkon Shield, an intrauterine contraceptive device that had been alleged to have caused birth defects. In addition to the claims against the debtor, the plaintiffs had also sued related companies who had developed the Dalkon Shield, as well as doctors and hospitals that had prescribed it.

At the time of the bankruptcy filing, there were 6,000 cases pending against the debtor and nondebtors in federal and state courts around the nation. The debtor sought to transfer all of these cases to the district court where its bankruptcy was located under § 157(b)(5), and the district court granted the request. On appeal, the Fourth Circuit upheld the district court’s decision. The Fourth Circuit held that § 157(b)(5) “expressly confers” on the bankruptcy court overseeing bankruptcy proceedings “the power to fix the venue of any tort case against the debtor pending in other districts.”8

According to the Fourth Circuit, § 157(b)(5) was specifically crafted to permit courts to address personal-injury tort claims against a debtor, no matter where they might be pending. In that scenario, regardless of what rules might otherwise control in bankruptcy, § 157(b)(5) “is supreme.”9

Similarly, the district court in Dow Corning also ordered the transfer under § 157(b)(5) of tens of thousands of cases involving silicone breast implants. Similar to A.H. Robins, these cases also included many cases against third parties, including cases where the debtor was not itself named. Also as in A.H. Robins, the transfer in Dow Corning was upheld on appeal, this time by the Sixth Circuit, as a permissible use of § 157(b)(5).10

A.H. Robins and Dow Corning show that in the early bankruptcy cases addressing mass tort situations, there were at least three tools in the bankruptcy toolbox for resolving mass torts: (1) preliminary injunctions of related cases; (2) § 157(b)(5) transfers of those cases to a single forum for consolidated treatment; and (3) third-party releases and channeling injunctions through a confirmed plan. Over time, as preliminary injunctions and third-party releases gained additional prominence, § 157(b)(5) became overshadowed and fell into disuse. It is not difficult to see why: If the bankruptcy court has the power to preliminarily enjoin state court litigation during a bankruptcy case, then release all those claims through a plan that contains a third-party release and channeling injunction, there is not really a need to consolidate all of the cases in one forum.

As courts increasingly approved of the preliminary injunction/third-party-release framework, it became less necessary for debtors to seek § 157(b)(5) transfers. Gradually, the § 157(b)(5) tool fell completely out of the mass tort lawyer’s toolkit.

As previously noted, this paradigm has been substantially undercut by the Supreme Court’s decision in Purdue, as it removed the nonconsensual third-party release from the toolbox, leaving a gap for some other strategy and/or procedural device to fill.11 It seems likely that § 157(b)(5) — which is Congress’s specifically chosen approach for dealing with mass personal-injury cases — will be rediscovered as a mechanism to fill part of the gap left by nonconsensual third-party releases.

Through § 157(b)(5), a debtor can consolidate all litigation related to the mass tort event in a single forum, creating a sort of super-MDL in which the district court and the bankruptcy court can work together to bring final resolution to the situation. Part II, appearing in a future issue, will discuss how this strategy can be effectively employed to help resolve mass torts in bankruptcy.

Corinne Ball co-leads Jones Day’s Business Restructuring and Reorganization Practice in New York and leads the firm’s European Distress Investing and Alternative Capital Initiatives. She is a past member of ABI’s Board of Directors. Chris DiPompeo is a partner in the firm’s Washington, D.C., office.

Editor’s Note: ABI held a webinar shortly after the Supreme Court issued its decision in Purdue. To listen to the abiLIVE recording, please visit abi.org/newsroom/videos. ABI also published a digital book, The Purdue Papers, a compilation of 3,500+ pages of amicus briefs, petitions and other related background material. To order your downloadable copy, visit store.abi.org.