On March 15, 2013, Assistant Professor Adam S. Zimmerman spoke at the University of Cincinnati College of Law’s 26th Annual Corporate Law Symposium. This year’s symposium was entitled Addressing the Challenges of Protecting the Public: Enforcement Practices and Policies in the Post-Financial Crisis Era. You can find out more about the symposium here.
Adam appeared on a panel focusing on the policy implications of public enforcement and presented a paper called Mass Settlement Rivalries. Here is the abstract:
From cases involving securities fraud to Ponzi schemes to consumer scams, private attorneys in class actions and civil bankruptcies increasingly compete with federal prosecutors, agencies, and state attorneys general, for the same funds, from the same defendant, for the same harm, and often, on behalf of the same groups of people. To some, government attorneys offer less expensive and more accountable representation for victims of widely disbursed harm. To others, politically insulated private attorneys in class actions and bankruptcies offer more effective representation for parties. But few have examined the dynamic way public and private settlements impact each other when they are implemented at the same time.
This Article argues that dueling public and private settlements offer several potential advantages—including more efficient representation, more oversight, and more complete forms of compensation to different subgroups of victims. In their current form, however, settlement rivalries fall far short of these goals. Among other things, rival settlements: (1) waste resources as duplicative actions proceed on separate tracks without coordinated judicial oversight, (2) introduce new uncertainty into litigation financing by unpredictably affecting the number of victims who ultimately participate in a class settlement, and accordingly, the fees that private attorneys recover, and (3) confuse unrepresented victims with separate, rival settlement offers.
Accordingly, this Article recommends three reforms that tap settlement rivalries’ potential benefits. First, courts should formally or informally coordinate review over dueling public and private settlements. Second, courts should streamline notice and opt-out provisions to reduce victim confusion or unintended waivers of rights. Third, government lawyers should adopt the distribution guidelines proposed by the American Law Institute in large-scale litigation to consistently balance victims competing interests and reduce strategic behavior among parties.