Bankruptcy v. Multidistrict Litigation for Mass Torts

A recent spate of major mass tort bankruptcies has renewed interest in Chapter 11 as a tool for resolving mass torts. Mass tort bankruptcy proponents argue that even highly solvent defendants should be able to take advantage of bankruptcy because it is a better procedural system for resolving mass tort controversies than multidistrict litigation (MDL). Bankruptcy has tools for delivering closure that MDL lacks, and closure in mass tort litigation creates value. Of course, mass tort defendants have no right to closure, but if the resulting surplus is shared, it can leave defendants and plaintiffs better off. This Article accepts the premise that bankruptcy can be an appropriate vehicle for resolving mass torts so long as it leave tort victims no worse off than they would have been outside of bankruptcy. But it shows that when there is enough money to go around, tort claimants are unlikely to do better in bankruptcy than in MDL for two reasons. First, MDL is not as bad as mass tort bankruptcy proponents portray it. And this Article corrects their misperception by painting a more realistic picture of how MDL operates in mass tort cases. Second, if tort claimants are going to share in any surplus created by the move to bankruptcy, they need leverage to bargain for it. And many features of bankruptcy systematically shift bargaining leverage from mass tort plaintiffs to defendants. Most fundamentally, control over the terms of aggregation is a source of leverage. MDL enables tort claimants and their lawyers to aggregate on their own terms, while bankruptcy empowers the defendant to impose aggregate resolution unilaterally. As a result, bankruptcy is not an appropriate forum for resolving mass torts when the defendant is not in financial distress.