University of Kansas Law Review
When defendants settle litigation involving multiple plaintiffs, they often insist that they will settle only if they obtain releases from all or nearly all of the plaintiffs in the group. If a defendant is going to spend money to resolve claims, it prefers to take its hit and move on. As one experienced settlement administrator puts it, when a defendant approaches plaintiffs' lawyers to discuss the settlement of a mass dispute, the "subject might be broached in various terms, [but] the underlying message is the same-'How much will it cost us to get out of all of these cases?" A settlement that leaves significant exposure-or worse, that invites new claimants to join the fray by displaying easy money-holds little appeal. All-or-nothing settlements, however, cause a lot of mischief. Instances of unethical and even criminal conduct by plaintiffs' lawyers may be traced to defendants' insistence on fully comprehensive deals. Although the demand for comprehensive settlements is driven primarily by defendants and their insurers, plaintiffs' lawyers bear the brunt of the problem because all-or-nothing settlements put plaintiffs' lawyers in an ethically shaky position. This Article employs a broad definition of "all-or-nothing settlements." It includes not only settlements with explicit clauses that condition the entire deal on full participation, but also settlements with other provisions that reveal an expectation of full participation or create pressure to bind every member of the claimant group. For example, it includes settlements that are not fully funded by the defendant until after the defendant receives releases from all of the claimants. It also includes settlements in which the plaintiffs' lawyers agree to be retained by the defendant upon the completion of the settlement, and those in which the plaintiffs' lawyers agree to withdraw from representing any clients who decline the settlement. The point of this Article is not to arrive at a precise definition of an all-or-nothing settlement, but rather to understand the ethical pressures created by various settlement structures that attempt to ensure full participation by a group of claimants. This Article examines the ethical downside of all-or-nothing settlements. Part II tells the stories of lawyers who have faced trouble in recent years over their handling of such settlements. The stories reveal the opportunities and pressures created by defendants' insistence on bringing all claimants into a settlement. Part III catalogues the ethical problems created by demands for fully inclusive settlements. At least seven types of problems arise: (1) conflict of interest problems, (2) allocation problems, (3) the holdout problem, (4) the slush fund problem, (5) the loyalty problem, (6) the informed consent problem, and (7) the collusion problem. Pointing out the trouble with all-or-nothing settlements does not mean that such settlements should never be allowed. Nor does it mean that comprehensiveness is an unworthy goal in mass dispute resolution. Defendants have good reason to seek peace, and inclusive settlements provide value for claimants as well as for defendants.16 Rather, this Article's catalogue of troubles suggests that the current love affair with global settlements-evident in academic writings, judicial pronouncements, and defendant demands-should be tempered by a realistic appreciation of the ethical downside.
Howard M. Erichson,
Trouble with All-or-Nothing Settlements, The Symposium: Aggregate Justice: Perspectives Ten Years after Amchem and Ortiz, 58 U. Kan. L. Rev. 979
Available at: http://ir.lawnet.fordham.edu/faculty_scholarship/372