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Alternative dispute resolution has become a firmly entrenched tool in today’s judicial system. For the courts, ADR provides effective relief for overburdened dockets. For plaintiffs, ADR allows them to air their grievances and receive immediate redress. ADR makes a plaintiff’s claim stronger through economics of scale, increased bargaining power and the other advantages of collective representation that so frequently provide clients the benefits that exceed the costs of not being individually represented. For the defendant, ADR is an efficient means for managing caseloads, discovery, and providing for fair and equitable resolution at minimal cost. Nowhere is this truer than in the arena of mass toxic torts where prosecution and defense costs may exceed the damages. However, a shadow has been cast on the use of the most common forms of ADR in the context of mass torts. Burrow v. Arce, a 1999 Texas Supreme Court decision, was a suit following a catastrophic explosion at a Houston-area chemical plant. It was alleged that, among other disciplinary infractions, plaintiffs’ attorneys entered a settlement agreement in violation of Texas Disciplinary Rules of Professional Conduct 1.08(f). Rule 1.08(f) essentially holds that a lawyer who represents two or more clients shall not participate in making an aggregate settlement of the claims of or against the clients without a full disclosure of all relevant facts. In the context of mass torts, this requires lawyers to consult with each client prior to agreeing to an aggregate settlement of claims. When a lawyer has thousands of clients, meaningful consultation with each of them regarding the terms of the settlement is difficult if not impossible. Additionally, clients have the right to individualized privacy, and disclosing to each client the relevant facts necessary for each to make an “informed decision” only serves to violate this trust and results in increasing the transaction cost as the lawyer tries to explain the difference in amounts received by other clients. Finally, the rule prohibits the lawyer from accepting an aggregate settlement unless each client approves the settlement after learning its terms. Although some lawyers have attempted to circumvent this rule by having the plaintiffs agree in advance to be bound by the ADR agreement upon a majority vote, the courts generally have been reluctant to enter such agreements over the minority’s objection citing the aggregate rule. ( See Hayes v. Eagle-Picher Industries Inc., a 1975 case decided by the 10th U.S. Circuit Court of Appeals.) PREFERABLE APPROACH For defense counsel, not having a unanimous settlement defeats the purpose of the settlement if the case is still going to have to be tried for the small number of dissenting members. The preferable approach is settlement on an “all-or-none” basis. Plaintiffs’ lawyers face the possibility of a settlement falling apart and an ethical dilemma is raised if there are holdouts in that it is unclear whether it is ethically permissible to withdraw as to the holdout plaintiffs. Further, plaintiffs’ counsel also face the language of Burrow v. Arce in possibly losing all the attorneys’ fees if there is no compliance with the aggregate rule. In Burrow, the court held that even without actual damages, counsel is subject to a fee forfeiture if he or she violates the clients’ trust. Concerns by plaintiffs and defense counsel over the integrity of a global settlement arrived at through mediation or other forms of ADR have narrowed the options available in mass torts. Attention is needed to modernize the Texas Disciplinary Rules of Professional Conduct to bring them in line with the modern trend of using alternative forms of ADR in the mass tort context and having the ability to settle such cases without clogging the judicial system. Given the edict of the Texas Arbitration Act and the ethical requirements of counseling all clients as to the use of ADR, counsel operating in the context of mass torts should not be faced with ethical dilemmas in trying to settle. The rule should be clearly laid out, allowing the aggrieved parties to decide how to settle their case and that should include the ability of such plaintiffs the right to enter into the group and be governed by the majority. Jack C. Brock and Fred D. Raschke are partners in the Galveston, Texas, office of Mills, Shirley, Eckel & Bassett and specialize in the defense of toxic torts. Mark E. Ruckstuhl is an associate with the firm and assisted in the preparation of this article.

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