Decoupling Deterrence and Compensation Functions in Mass Tort Class Actions for Future Loss

Mass tort cases involving serious personal injury are generally deemed inappropriate for class action treatment. It is presumed that in these cases adjudicative costs of determining non-common questions to individualize class members' recoveries negate judicial economies from trial of common questions on a class-wide basis. This presumption defies logic, lacks empirical substantiation, and most troubling for a legal system devoted to enhancing individual welfare, takes no account of the adverse tort deterrence and insurance consequences of relegating claims to the standard process of separate actions. Indeed, the presumption seems less the product of analysis than habit - the convention of resolving class actions by "integrated" final judgment that cumulates the results of common and non-common question trials. Under this form of judgment, success for the class and its counsel is contingent not only on their collectively winning class-wide trial of the common questions, but also on the extent to which each class member recovers damages in separate trial of the non-common questions. In effect, the integrated judgment holds class action deterrence benefits hostage to the costs and contingencies of individualizing compensation for class members, and in the process thwarts both objectives. This essay proposes to solve this problem by decoupling deterrence from compensation functions of mass tort class action. In particular, decoupling would result in two, separate final class rulings and related fee awards. The first ruling would issue upon class-wide trial of the common questions that determines aggregate liability and damages. This determination is sufficient for deterrence purposes. Because mass torts arise from the systematic risks of mass production processes and goods (products and services), the only questions of relevance to deterrence are common and indeed mostly statistical. The second ruling (assuming the class wins the first) would take the form of an insurance fund judgment that prescribes the terms and conditions for distributing the aggregate damage award (or the commercial insurance coverage that the award purchases) to compensate specified losses as far as practicable and if and when class members incur them. Distributing the fund for maximum insurance benefit eliminates much of the costly individualization. Significantly, even if the costs of individualizing severity of loss and deterrence incentives (e.g. contributory negligence) for insurance purposes preclude or reduce compensation for some fraction of class members (smaller than in the more costly and risky separate action process), decoupling fully achieves deterrence goals and thus makes everyone better off.