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Explaining the Flood of Asbestos Litigation: Consolidation, Bifurcation, and Bouquet Trials

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  • Michelle J. White

Abstract

The number of asbestos personal injury claims filed each year is in the hundreds of thousands and has been increasing rather than decreasing over time, even though asbestos stopped being used in the early 1970's. Eighty firms have filed for bankruptcy due to asbestos liabilities including 30 filings since the beginning of 2000. This paper examines why asbestos claims are increasing over time. Because large numbers of asbestos claims are filed in particular courts, judges in these courts have adopted procedural innovations intended to clear their dockets by encouraging mass settlements. These innovations cause trial outcomes to change in plaintiffs' favor. As a result, the innovations make the asbestos crisis worse by giving plaintiffs' lawyers an incentive to file large numbers of additional claims in the same courts. The paper uses a new dataset of asbestos trials to test the hypothesis that three important procedural innovations--consolidated trials, bifurcation, and bouquet trials--favor plaintiffs and therefore encourage the filing of additional claims. I find that bifurcation and bouquet trials nearly triple plaintiffs' expected return from trial, while consolidations of up to seven lawsuits raise plaintiffs' expected return from trial by one- third to one-half.

Suggested Citation

  • Michelle J. White, 2002. "Explaining the Flood of Asbestos Litigation: Consolidation, Bifurcation, and Bouquet Trials," NBER Working Papers 9362, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9362
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    References listed on IDEAS

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    1. Landes, William M, 1993. "Sequential versus Unitary Trials: An Economic Analysis," The Journal of Legal Studies, University of Chicago Press, vol. 22(1), pages 99-134, January.
    2. Eisenberg, Theodore, et al, 1997. "The Predictability of Punitive Damages," The Journal of Legal Studies, University of Chicago Press, vol. 26(2), pages 623-661, June.
    3. Howard F. Chang & Hilary Sigman, 1999. "Incentives to Settle Under Joint and Several Liability," NBER Working Papers 7096, National Bureau of Economic Research, Inc.
    4. Priest, George L, 1997. "Procedural versus Substantive Controls of Mass Tort Class Actions," The Journal of Legal Studies, University of Chicago Press, vol. 26(2), pages 521-573, June.
    5. Kathryn E. Spier, 2002. "Settlement with Multiple Plaintiffs: The Role of Insolvency," Journal of Law, Economics, and Organization, Oxford University Press, vol. 18(2), pages 295-323, October.
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    Cited by:

    1. At, Christian & Gabuthy, Yannick, 2015. "Moral hazard and agency relationship in sequential litigation," International Review of Law and Economics, Elsevier, vol. 41(C), pages 86-90.
    2. Michelle J. White, 2004. "Asbestos and the Future of Mass Torts," Journal of Economic Perspectives, American Economic Association, vol. 18(2), pages 183-204, Spring.
    3. Taillard, Jerome Ph. A., 2008. "Thriving in the Midst of Financial Distress? An Analysis of Firms Exposed to Abestos Litigation," Working Paper Series 2008-12, Ohio State University, Charles A. Dice Center for Research in Financial Economics.
    4. Michelle J. White, 2004. "Asbestos and the Future of Mass Torts," NBER Working Papers 10308, National Bureau of Economic Research, Inc.
    5. Eric Helland & Jonathan Klick & Alexander Tabarrok, 2005. "Data Watch: Tort-uring the Data," Journal of Economic Perspectives, American Economic Association, vol. 19(2), pages 207-220, Spring.

    More about this item

    JEL classification:

    • K1 - Law and Economics - - Basic Areas of Law
    • K4 - Law and Economics - - Legal Procedure, the Legal System, and Illegal Behavior

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