A New Model for Mass Torts?

President Obama's treatment of BP doesn't worry me much, but a general shift of responsibility for mass torts from the courts to the executive branch certainly would.
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I have to laugh when I hear Minority Leader John Boehner and other Republicans say that "BP should be held accountable for the full cost of [the] disaster" in the Gulf of Mexico. These are the same politicians who have forced tort reform down our throats for decades. The object of tort reform, in case anyone has forgotten, is to reduce, cap or eliminate liability for the costs of accidents. The only principled Republicans appear to be Senators Lisa Murkowski and James Inhofe, both of whom have blocked Democrats' efforts to lift the $75 million ceiling on liability for economic losses imposed in the Oil Pollution Act of 1990. Apparently, their loyalty to the U.S. Chamber of Commerce exceeds their fealty to Mitch McConnell, their party's leader in the Senate. McConnell joined Rep. Boehner in saying that BP should pay for "every part of the cost of this disaster."

I also chuckle when Republicans like Joe Barton and Michele Bachmann attack President Obama for convincing BP to establish an independent fund for paying claims. They contend that courts should determine BP's liability. How refreshing to hear Republicans defend a role for the courts. Since the days of Dan Quayle, they've said that the American civil justice system is "spinning out of control" and they've sought to replace litigation with regulation. Yet, they now seem to think that judges and juries are better placed than President Obama to resolve tens of billions of dollars in claims stemming from a national disaster caused by a technical mishap involving the conduct of a member of a regulated industry. Suddenly, judges and juries are dispassionate, competent, and reasonable people who can be trusted with important policy matters. What's next? A ringing endorsement of contingent fees?

Republicans are suddenly court-friendly for two reasons. First, when it comes to processing large volumes of related claims, courts are slow and sloth helps defendants. The Exxon Valdez litigation lasted 20 years. The oil spill in the Gulf of Mexico is a much bigger disaster, so litigation involving it will presumably take longer. Courts are stingy too. Although the business world complains mightily about class actions and other aggregate lawsuits, these proceedings often help defendants resolve claims for pennies on the dollar. Rather than bear enormous litigation costs fighting well-heeled opponents who will put off the day of reckoning for years, many plaintiffs collapse. They take the pittances offered by defendants or their insurers and move on. Their lawyers go along because they don't get paid until money comes in.

Political solutions, by contrast, are generous and fast. Compare the fortunes of the victims of the 9/11 attacks with those of the first responders and workers who helped clean up after the disaster. Most of the victims were compensated quickly and generously from a fund created by Congress. They didn't even have to pay attorneys. By contrast, even now most of the workers injured in the rescue and clean up efforts haven't seen a dime. They've been caught up in litigation with New York City and a host of contractors all this time. A settlement of their cases was just announced--after the defendants spent about $300 million trying to defeat the workers' claims. The workers will also pay about $175 million in fees, if the settlement goes through.

Second, when arranging for the payment of claims from an account funded by BP, President Obama will be strongly motivated to insist on full compensation. Every dollar paid to a resident of a Gulf state is a dollar for which a voter may one day express gratitude in an election. Republicans dominate all of these states, and they don't want voters to turn Democratic. So, Republican Governors Haley Barbour, Charlie Crist, Bobby Jindal, and Bob Riley have all jumped on the compensation bandwagon. For the same reason, influential Republicans quickly denounced Texas GOP Congressman Joe Barton for describing BP as the victim of a $20 billion "shakedown." The train is about to leave the station, they want to be on it, and they'll throw Barton onto the rails, if need be.

Politics aside, the creation of the BP compensation fund forces one to ask whether a new process for handling mass torts has emerged. I used to think that the compensation fund for victims of the 9/11 attacks was a one-off creation. It was President Bush's way of apologizing for his first nine months in office, which he spent making the U.S. a safe place for faith-based organizations but not for Americans. But now the BP compensation fund is in the works, and most people seem to think that's fine. Kenneth Feinberg, the 9/11 fund administrator, will also dole out BP's money. Can the coincidence not be a portent?

BP is an industrial polluter, not a terrorist group, and the U.S. is home to more polluters than one can count. If the executive branch can force BP to create an independent compensation fund, why can't it do the same for, e.g., mining companies whose tailings pollute streams or aquifers? And why stop with polluters? Drug companies endanger thousands when they sell pharmaceuticals with dangerous side effects. Thousands or millions of Toyota owners lost money when safety defects diminished the value of their cars. Can the executive branch force drug companies and automakers to pony up too?

President Obama's treatment of BP doesn't worry me much, but a general shift of responsibility for mass torts from the courts to the executive branch certainly would. Once empowered to transfer money from businesses to potential voters, elected officials might make lots of bad decisions. Think "Hugo Chavez." Some disasters require more speed than courts can muster, as the BP oil spill does, but not all torts are emergencies. And even in emergencies, public officials should have good reasons for taking control of private funds. The point of due process is to prevent officials from acting arbitrarily.

Given that a new approach for handling urgent mass torts is emerging, Congress should elaborate the model. It should enact a statute specifying when the Executive Branch may order a suspected wrongdoer to set up a compensation fund, subject to what procedural requirements, how much a wrongdoer must pay, which victims may collect, and with what consequences for subsequent litigation. The statute should also obligate the federal government to reimburse any suspected tortfeasor that eventually exonerates itself in court. Once upheld by the Supreme Court, the statute would ensure that even terrible disasters like this one the Executive Branch will be guided by law.

The international business community may even support legislation of the sort I propose. Right now, the CEOs of other oil companies must be wondering how their companies will fare if a catastrophe occurs. They might be grateful for a vehicle that would enable them to avoid some litigation by putting money into a compensation fund over a period of years. The CEO of other types of companies with significant environmental exposures may feel the same way. Businesses like predictability, and predictability is what the rule of law delivers.

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