The following transcript, never previously published, is of an appearance by Elizabeth Warren at a conservative Manhattan Institute think-tank event, at the New York City Harvard Club on March 18, 1999.

JUDY PENDELL: Good to have you with us here today. I’m Judy Pendell, and I head the Center for Legal Policy at Manhattan Institute. We’re here today to hear about Mass Torts and Bankruptcy.

The issues of Mass Torts and Class Actions are priority issues for the Center of Legal Policy. Today’s lunch is the first of a series of events and publications that will focus on these issues. The definitions of Mass Torts vary. The general definition is many law suits over an event, or series of related events, allegedly injuring a large number of people–or damaging their property. The American Bar Association Commission on Mass Torts defined it more specifically as, “involving at least 100 Civil Tort Actions, arising from the single act or use of, or exposure to the same Product or Substance, each of which involves a claim in excess of $50,000.00 for Wrongful Death, Personal Injury, or Physical Damage to–or destruction of–Tangible Property.

Single-Event Catastrophes such as Airplane Crashes or Collapses of Buildings sometimes are included by some groups in that definition, and sometimes not. Other groups choose to limit the Term to Multiple / Diverse-but Related Events. The Consumer Class Action, with which we have become all too familiar, involving small damages per Plaintiff–but many Plaintiffs–is generally not considered a Mass Tort. Some further limit the definition of Mass Torts to Product Liability Cases.

Some examples of Mass Torts, of which you may have some familiarity, are: Asbestos, Benedictine (a drug for Morning Sickness), Breast Implants, Phen-Phen (a weight-loss drug), Dalcon Shield and other IUD’s, and Lead Paint.

Mass Torts often present very difficult problems for the Courts that go beyond the large numbers of Plaintiffs and Claims. Many depend upon scientific evidence to establish causation. That evidence may be highly uncertain or unreliable. Many involve a latency period between Exposure to the Product and Manifestation of Harm. For this reason, actual Exposure may be questionable due to its having occurred a long time ago. Or, for more recent Exposures, it may be unclear as to whether in an Individual Case will ultimately be any harm. In some cases, there may be Illness and Exposure, but the specific Manufacturer of that Product causing the Individual Exposure may be unknowable.

The problem of Elasticity troubles the Courts and Defendants. Elasticity refers to the fact that the very emergence of a Tort may result in more claims than would otherwise have been filed. Potential Claimants may be inspired by the success of other Plaintiffs, or see the opportunity to be part of a very large settlement. The problems are yet further complicated by Coverage Disputes over Insurance–which often involve many different factors over a long period of time for one Defendant–and those are usually highly contentious disputes.

These problems strain the Courts’ ability to deal very effectively using the traditional methods of adjudication. In a very few cases, the Congress is actually creating special Administrative Teams to deal with the problems. Two examples are Illness from Black Lung Disease, caused by exposure to coal dust, and Adverse Reactions to Vaccines. There have been a number of unsuccessful attempts to pass an Administrative Compensation Scheme for Asbestos Claimants in the Congress.

The Courts have tried to deal with these problems by creating some ad-hoc devices. Such as Registries for People Exposed to Asbestos (but not yet harmed), and Cooperative Procedures among judges and State and Federal Courts who have heavy backlogs of a particular type of Mass Tort. There is general agreement that the system is ill equipped to deal with Mass Tort Litigation, but there is little agreement on what the solution should look like. For this reason, the Judicial Conference created early last year a Mass Tort Working Group to lay out Options for Change in Courts. We are pleased to have with us here today the Reporter for that Working Group–Fran McGovern, from Duke Law School. Look forward to your comments later in the question and answer period, Fran.

The only alternative today, however, notwithstanding the significant deliberation over changes in the Courts, is Bankruptcy. Bankruptcy is far from a preferred solution. But for many Defendants, it has become a better alternative than Case by Case Litigation for what becomes a “Bet-the-Company” Mass Tort.

We are pleased to have with us today, to talk about Bankruptcy and Mass Torts, Elizabeth Warren. She is the Leo Gottlieb Professor of Law at Harvard Law School. She recently served as Advisor to the National Bankruptcy Commission. She is the author or co-author of four books on Bankruptcy in Commercial Law, including two casebooks used in law schools throughout the country–and a number of scholarly and popular articles about Business Law. She serves on the Council for the American Law Institute, and she advises the Federal Judicial Center on Bankruptcy issues. She is a member of the National Bankruptcy Conference, and has been named to the American College of Bankruptcy. Professor Warren and her frequent co-author, Professor Westbrook, are currently engaged in the Business Bankruptcy Project. This is a study of 3500 businesses that filed for Bankruptcy in 1994. I welcome Elizabeth Warren.

[applause]

ELIZABETH WARREN: Thank you very much. I’m very pleased to be here to talk with you about Mass Torts today. What I’d like to do is–I’d like to start by just talking about a few examples of Mass Torts. You give it a wonderful generic description, but sometimes the more specific is helpful in thinking about this. Because they present different kinds of issues that the Courts have to wrestle with. So I thought it might be helpful as just a starting point. So we have something of a common language as we talk about this.

I suppose the one most people know about and talk about the most has been the Asbestos one. You have to remember that there are kind of two issues that go on with Asbestos. One is a pretty wide concession that Asbestos is injurious. There are differences about it injures more or less depending on whether one smokes or doesn’t smoke. There are differences about whether or not once it’s already in and embedded behind ceilings and behind paint, does it injure someone? But a lot of concession about, or at least some concession about Liability. The serious problem in the Mass Tort area with Asbestos is you can’t tell who was exposed. Can’t tell how much they were exposed. Can’t tell when the problem, if there IS a problem, is going to manifest itself. So you’ve go this real problem of Identification of the Injury.

Contrast that with what happened in the Dalcon Shield Case. There again, ultimately, even more concession that the Product was a Product that injured, and had Victims who could self-identify it. You could close. When you stopped selling them, there were no more of them. There was not a question of more and more people continuing to be exposed accidentally to a Dalcon Shield. You can debate at the margins, but by and large, that was so.

In the Dow-Corning Case, and the Benedictine Cases, by contrast, there’s a real question about dispute about whether or not you had a Product that even caused injury. Were we dealing with people who made claims that were just not well-founded and not supported by science? You’ve got an enormous dispute over that, when science is very much in question. That raises this powerful problem about trying to deal when lawsuits are outrunning the scientific community in terms of establishing Causation. And with the Dow-Corning and the Benedictine Cases, no self-identification problems. People usually knew if they took it, knew if they had implants. So you had again, a limited group that you were dealing with.

Then I just mention it–it’s not always mentioned in Mass Tort Cases–I mention it in part because I think it’s a very serious problem. In part, because I think it’s a very interesting problem. It’s a problem posed by Cases like Piper Aviation and Fairchild Aviation; both Manufacturers of private planes. The problem you had there is that they had manufactured planes for a very very long time.

The Companies are no longer economically viable if they have to meet what we refer to as “Tail” Liability. The “Tail” Liability for all those planes they manufactured a long time ago. They know that planes will continue to crash. Every time a plane crashes, (we had some Federal Legislation on this) every time many planes crash, the Law Suits are going to go back to the Manufacturer–the person who Manufactures. It doesn’t matter how many times it’s been serviced by other people in-between. Among the people who are going to get named in this Law Suit will be the Manufacturer of the airplane.

It’s enormously expensive to ultimately prove that it was not a design defect. It’s enormously expensive to have to come in and litigate these. So that you end up with a possibility, and I want to do these as hypothetical numbers, (but I will tell you, they’re not far off), from numbers I’ve learned about. That is, you end up with the possibility of a Company like a Piper or like Fairchild who has a plan for the future, and the plan for the future is [unintelligible] out of the American Tort System. The way they do it is they say, “We’re going to make some great airplanes, and we’re only going to sell them abroad. We’re only going to sell them abroad, but with the understanding that they can never be brought back into the United States. So if they ever fall out of the sky, they’re not falling out of an American sky.”

That, and a notion of making them for commercial aviation, which will carry its own insurance possibilities. They said, “We think what we can do is we can have a Company that (let’s just say) has Gross Revenues of $20 million. Expenses without counting Insurance for Liability, $15 million. Insurance for All Future Liability: $1 million a year. But Insurance for Tail Liability–if this is the same Company that’s responsible for all those planes that got made since World War II–Insurance for Tail Liability is $5 million. Add the numbers up. If you have to pay for Tail Liability, you have a Company that’s not viable; you don’t have to pay for Tail Liability, you do have a Company that’s viable.

Now, of course, the trick in here, before we get overly sympathetic about the question of people wanting to be able to sue the Manufacturer, is that if the Company’s not viable, then the Company–and this is a valid Bankruptcy Case–is in Chapter 11 for Liquidation. It was a Recommendation by its Trustee that it be liquidated. So, it is the end. In neither Case, if one had a rule that bound, or if the Company is liquidated–will there be anyone, will there be any possibility of imposing Tail Liability?

But, having said that, the reason I give it as the fourth example (because I think it is)–it’s the one (that draws the most extreme Cases out of the Asbestos and so on) is that it reminds us of the Case where we don’t know who the Victims are.

So we’ve got the question about how to deal with Liability that is–in its strongest sense of the word–Future Liability. Keeping in mind it’s not only everyone who owes Piper Aircraft or Fairchild. It’s everybody who may ride in one, and everybody who may be on the ground the next time one of them falls out of the sky.

So those are the kinds of problems that come up in these Mass Tort Cases. It’s not just that they are simple Mass Tort Cases. Somebody slipped and fell on the ice and now we’ve got to establish Liability and figure out the appropriate Compensation and pay. These are really (a) difficult problems, and (b) problems that are different from each other. So that means we are trying to craft solutions around a much more complex set of problems than it would appear at first blush.

Now, the question that I came with today is: Is Mass Torts, is Bankruptcy the answer?” You know what I’m going to say–I teach Bankruptcy. So it must be the answer to everything. That’s what I always tell my students. Right? When you get stuck in class and I say, “What should they do?”

The student’s supposed to say, “File Bankruptcy!”

“Good!” (background laughter)

“All right!” “Come on! Why do you think I get four Credits for teaching this?” I mean…

Well, only today, I’m not talking to a group of students. Okay? So let’s talk just a little bit. I think that the answer to the question isn’t bankruptcy. The answer does not begin anywhere in 11USC–that is, in the Bankruptcy Code. I think the answer to that question begins everywhere other than Bankruptcy. So let me just run through the other answers. Because the rightness or wrongness of Bankruptcy as an answer depends powerfully on, “What are your alternatives?”

Well, we don’t have to say much about Litigation one at a time. How powerfully expensive and how powerfully wasteful that process is. I read a recent estimate. It stated that if 5,000 Tobacco Claims were filed in one (the estimate was that would be filed in the State of Texas alone) that it would take the twenty-two judges to be in County Court–every single one of them–working all 52 weeks out of the year, sixty years, to be able just to resolve one big flurry of filings. One at a time is not going to work.

But everyone in the room knows that. We’re already moving off that model and trying to find other ways of dealing with Mass Torts. The obvious one, and the one people talk most about is Class Action. Will Class Action work? Here we have to remember–and I think we have to remember through all of this–that we’re talking about systems that were designed for other purposes.

Class Action was designed for other purposes. It was designed to aggravate Small Claims. To give meaningful enforcement like people who took small amounts away from lots of people. It was for a way to try to get them together and to get them bound into a meaningful Law Suit. What we try to do is we take that car built for one purpose, and then we try to do something different with it. We try to turn it into an all-terrain vehicle and see if it will work for these Mass Tort Cases.

Now, there are some real structural problems with Mass Torts. I’m just going to hit a couple of the highlights. The first is that you can’t get the Mass Torts all into a single action. You can’t get a single resolution under Mass Tort. State Courts have permitted their own Class Action Rules. As we all know, you’re only in Federal Court if you’ve got diversity. One of the joys of the Mass Tort Case is there tend to not only be Multiple Plaintiffs, but there tend to be Multiple Defendants in these Cases.

The consequence of Multiple Defendants, as Dow-Corning has learned for example, in its problems with Breast Implants, is that you join the local doctor, diversity is destroyed when you look back down in Mississippi State Court and Texas State Court or in Kansas State Court. So what that means is that we have the potential if we try to use a Class Action approach is that you’ve got 50 sets of Class Actions. Then you’ve got Federal Class Actions, and then you’ve got, of course, the DC Class Actions. It’s got its own separate one. You’ve got Puerto Rico. That’s a lot of Class Actions by the time you get through. Okay.

It’s not as many Law Suits as one at a time for every one of these people who comes along, but it really is a problem. Which of course means it’s time-consuming. It’s expensive and it leaves us with a lot of inconsistent judgement. We’re with inconsistent judgements in part because you’re indifferent [unintelligible] and different [unintelligible] have different rules.

So we’ve got the problem about not the same set of rules are being applied to people who have otherwise similar injuries. It also means if these do go to juries, the ultimate black box, so that same facts, same injuries, same set of allegations–and this is like Las Vegas big time. You roll it, and sometimes it comes up good for one Party, and sometimes it doesn’t come out good for one Party. It also means that a Company on a Class Action route is stuck in a position of defending simultaneously what really can be Litigation that threatens the entire Firm.

So, although I suppose if I’m going to keep turning up meeting lawyers year after year, I should be in favor of full employment for lawyers. I’m not really sure that this is the best way that these folks should be employed.

Now, in addition to that, we had some recent decisions out of the United States Supreme Court that have probably made Class Actions even less valuable than they used to be. Or than they were thought to have been. For settling Mass Tort Actions. The principle problems the Supreme Court focused on recently is a question about Attorney conflicts. Because you remember the problem Liability of the Future.

In many cases, you’ve got both Principle Claimants–those who already have a manifestation of the disease, for example. They’ve got Asbestosis they’re currently manifesting Asbestos. And all those people who’re concerned with “in the future.” Having been to a grade school, where there was Asbestos in the walls. Having been a worker in a place where Asbestos was handled. I may have manifestation of this disease in the future.

The Supreme Court has been very constrained in letting lawyers represent both kinds of interests in the Class Action. Now, that is not a Constitutionally Mandated problem, so it’s an area where one could think about Form and could think about changing the Statute. But the point is that it points out some of the technical difficulties of trying to get a big group into a single area and get something settled.

The last thing I’ll just mention here is there’s a big problem in the Class Action area, as well. I think the Public is become much more concerned about an open notion of Settlement Suits that Class Actions are brought just to erase Liability. That there’s not really serious representation of enough people on the other side. I think it’s a problem worth considering. It’s a problem that undermines confidence in whether or not Class Action is a way to go.

I know. Let’s go down to a favorable jurisdiction and get a local “friend” who will bring an action against us. Let’s talk big. Let’s set up lots of lawyer fees–pittance for the people on the other side. It’s all been resolved legally. It’s all fair and square and above-board. To the extent that that’s starting now to perk up the republic conscience in my own view, Class Actions are dead for a way to resolve Mass Tort Problems. Because there simply won’t be the confidence that this really was a fair forum that got to a resolution that represented both the Victims and the Company that’s producing the Product. So that’s the problem we’ve got there.

MDL–Multi-District Litigation. That’s been the new creation, new way of how we were going to deal with Mass Tort Cases. The real thing to remember, though, about MDL–it’s got an acronym to describe it. So, it sort of sounds like somebody’s weapon. The biggest problem with it is to remember that the power in an MDL is really only the power in an ultimate sense. It’s a lot like the power of mediation. It’s the power to call you in and channel you and hold you here. I’m not saying that’s not a considerable power. You can’t go forward with your Law Suit while I’m holding you here to talk to each other. But in an ultimate sense, all it can do is threaten Plaintiffs with delay. All it can do is threaten Defendants with delay, and with expense. But it can’t bind them to each other. In that sense, MDL is structurally not a very strong alternative.

Then I come to what is, I think, the most-likely, biggest other answer. The one that both interests me the most and frightens me the most. That is the Black Lung-Vaccine approach. What I mean by that is this is the one that says–the Government steps in and says, “I see a problem.”

The problem is people who’ve been with the Asbestos for a long time. Problem is people have had implants that we didn’t know the science. Now we know the science. It turns out it injured them. And so, says the Government, “We will tax the whole Industry.” Having taxed the whole Industry, we will now give Compensation to everybody who’s injured. Not to prove Causation. Don’t have to show anything more than Manifestation of the Injury. Then there will be certain Compensations that will come to the Victim. It has the advantage, obviously. It gets Compensation into the hands of people who’ve been injured. But the political route has its own price. That’s what that one is. Because that one is the route through Washington. It has a couple of implications. It has a lot of implications, but let me just go to a couple that I’ll point out.

The first is that it means people are paying for injuries–or entities are paying for injuries they may not have caused. That has all sorts of problems. Questions like how you run your business and how careful you are with your business. In fact, it’s all going to be externalized to the whole Industry, anyway. I’m not sure that’s the direction. That’s a powerful shift from where we had tried to go with Tort Law. The notion that you paid Damages was so that you internalized the injuries and had reached the appropriate level of Safety. This is one that undercuts it at some level.

Second is that this is, in my view, on the slippery slope for socializing Risk. In a way that large business have often, when they get into trouble, encouraged us to do. Some of you may be old enough to remember when Chrysler was in terrible financial trouble in the late 1970’s. Do you remember Chrysler’s answer? Chrysler’s initial answer was to get together with all those whom they owed money. To get together with the employees. To get together with its small suppliers all around the country. To lock arms and to go to Washington. To say, “What we want from you is we want (do you remember the words? They were the Chrysler Bail-Out.) We want to be bailed out. We want you to do something for us. Because this puts both those who would be injured–those who have financial claims against the Company and on the same side, saying in effect, externalize the risk to all the rest of the world. Back it up with your tax dollars and bail us out.”

Now, in one sense, Chrysler turns out to be a terrific answer, as we know it. Federal Government did not lose money. Lee Iacocca, can still remember pictures of him. I don’t know, I could never understand why that check was so big. (laughter)

Do you remember that? I think it had to do with Federal Law, but I might be wrong.

Maybe there was a reason. When you write a check with that many zero’s, maybe you really do need a great big piece of paper to do it. I remember those pictures of Lee Iacocca paying back. What I also remember was the profound concern that he was laying the path through the forest for every time you get into trouble, and you either have lots of people who look very sympathetic because they’ve been injured and you may not have enough money to pay to have it all go around–or lots of employees. Either one of those. Lots of employees will lose their job. The appropriate route is the route through Government guarantees. This is the answer the Europeans by and large took for a very long time, with consequences on their economy. So that is at least one other answer to Mass Tort.

I find it actually somewhat remarkable, given the Mass Tort Cases we have had so far, the Government has resisted the bail-out. When the Asbestos Companies came only three years after Chrysler had gotten its bail-out, the Asbestos Companies’ initial response was, they knew the answer, “go to Washington.” Asbestos claims were starting to gather on the horizon. They figured, and it’s really very interesting to read some of the early documentation on this. They had an easier deal than Chrysler did. Because they not only had lots of employees in their Industry, they had a Claim that the Government had originally participated in this. Lots of Asbestos had been used in the ship-building during World War II. So the Government really had profited from what these Companies had done in the use of asbestos. Remember the white submarines and battleships? And that they had very sympathetic Victims. They had good solid, working-class America that was in serious trouble and was dying from injuries. And yet, Congress resisted in that Case.

Now, it may be that Congress resisted not because of the moral point of not wanting to get involved in socializing risk in this way. But because you may also remember, the Federal Government was also in deep financial trouble at exactly the same time. So they came to call on a group that saw itself in even worse trouble than the Asbestos Companies. So, the answer was, in effect, “Keep this problem private. Bounce the problem back to Private.” And established the principle–although they eventually did Black Lung–that you’re going to have to Privatize these Laws. Even if it means losses to your Shareholders. Even if it means liquidation of your business. You’re going to have to keep this on the Private side of the house.

We cannot forget when we talk about Mass Torts is that if it’s bad enough and we can’t find the right legal system to solve it, that is one of the alternatives that will always work out there. It will go one at a time, but that’s one of the alternatives.

What do I want to say about Bankruptcy? I want to say the same thing about Bankruptcy as I’ve said about Class Actions. It is not designed for Mass Tort. One can read most of the legislative history of the 1978 Code. That’s a Reformed Code from the 1898 Act. What you see is that it was designed for Crises, for Distress, but Crises and Distress that are brought on principally by Business problems and Balance Sheet problems. You’ve either got a problem in the Operations of your business or you’ve got a problem on the Balance Sheet of your business. You’ve over-leveraged this business. Or, with many, you’ve done both.

That’s what causes you to end up in Bankruptcy. Bankruptcy is something that has been pressed into service. I remember some of the early conversations. I was only 12 at the time, but I remember some of the early conversations about [unintelligible] going to Bankruptcy. Some of you may recall. It was a serious question. That was a bad-faith filing. Because they had enough dollars to still keep the lights on and pay the employees, and so how could it be that this Company was doing anything more than taking a clever legal maneuver to try to stave off those sick people whom they have injured? I think that was pretty much the line in talking about this. And there was a very serious question about whether one could use Bankruptcy at all to deal with Mass Tort Cases. Well, we resolved it. Yes, they can.

What makes it work? They not only can, but they can do it and they can sometimes make it work. Many of you may be familiar with Bankruptcy, but again–to make sure we’re all on the same language–let’s run over some of the key features of Chapter 11, and let you see how they fit in and why they work–to help resolve problems in Chapter 11.

First, and best, is the Automatic Stay. The Automatic Stay is a device built into the Bankruptcy Code that says, “By Operation of Law.” The instant that you pay that Filing Fee and you drop that Petition down, and a Court stamps it in, an enormous legal even has just taken place. That is that Protection has gone around the Assets of this Estate. That means that all efforts to collect against the Estate must stop, and must stop immediately. It means no more law suits, even if you’re in mid-loss. Even if you’re on your feet to say, “I object,” you’ve got to stop now. The Automatic Stay has gone into place.

If you’ve already repossessed goods, it’s a really powerful tool. Don’t. Got to give them back. This is a really powerful tool. What it does is creates a lock around it and it’s very important in Mass Tort Cases. If the Company is being overwhelmed not by the rightness or wrongness of the Litigation, but just from the fact of the Litigation. Too much Litigation. We can’t be in all these places defending at one time. The Automatic Stay is there to stop that part of the process. It stops the multiple lawsuits.

The second thing that happens simultaneously is that an Estate is created. And again, this is by Operation of Federal Law. It’s a state created very much like a Descendant’s Estate. When someone dies, everything instantly passes by Operation of Law to this legal Estate that’s been created. What the Estate does is it has access to all of the assets of the Business. It’s there for the Court, ultimately to supervise the Distribution of these Assets. So, unlike outside Bankruptcy Law, what it means is not only can you stop lawsuits and do it automatically–no hearing, no anything–it happens by Operation of Law. You also can tell people who have claims against the Estate that they need not be so alarmed that all of the Property of the Estate will be accounted for. Nothing is making it out the back door to a foreign jurisdiction to be dissipated to prefer the Mississippi Claimants over the Nevada Complainants. None of that business will be going on. We’ll get it all metaphysically into one place, into account. Figure out what’s here. Figure out what we have to preside over. Everyone can rest comfortably with that.

The third thing that happens in Bankruptcy that makes it a somewhat effective or plausible tool–I suppose I’ll describe it that way–in dealing with Mass Tort Cases, is Claimants are now forced to deal in Classes. That means that Tort Victims–if they are–those with business claims, those whose bonds haven’t been paid, they get put into Classes, and they all deal collectively with the Debtor. There are several reasons this happens in Bankruptcy. One reason was the idea that the more money we spend on a lawyer’s fees, the less money there will be to distribute to everyone else. The presumption is that whenever someone comes into Bankruptcy, it means they’re already financially stressed. The chances that you’re going to be able to pay everybody 100 cents on the dollar are already something less than perfect, or you wouldn’t be in this system.

So Bankruptcy was designed as best it could to be a system where people could act collectively. Indeed, not only could act collectively–hire a single Representative to come in and deal with the Company–but also would be forced. So that we don’t have the hold-out problem. The people who say, “Gee, I have a Small Claim. Why don’t you pay me 100 cents on the dollar? Just get me paid off and I promise I’ll go away. Of course, we all know how very difficult that is, because everybody else in the room says, “If you’re paying that one a hundred cents on the dollar, I want a piece of that action, too.” So by binding people into Classes, it also has the very powerful effect of binding the Dissenters, and saying, “Look–it’s going to work the same for all of you.”

Another thing that this does is by working through Classes, it means that we do Pro-Rata Distribution. So, having decided that this is the priority that this Class has for collecting the Assets from this Business, everybody in the Class gets a Pro-Rata Distribution. It’s easier to figure out, of course, in the case of Debt. That one’s easy. We come in and we say, “What are you owed? Oh, you’re owed a million. You’re owed a hundred thousand. Each of you gets ten cents on the dollar for whatever’s there.” Right now, it’s using the model of Chapter 7. I’ll bury that in just a second.

It’s a little tougher, obviously, in the Case of the Tort Claimant because we’ve got to figure out what the right dollars are for Pro-Rata Distribution, notwithstanding the technical difficulty of doing that. Yes, if somebody died from using a Product, then it is. If somebody had a scratch from using a Product, and we can at least have some kind of different treatment for those people. The point is, it establishes the Principle of Pro-Rata Distribution; the concept we deal with right from the beginning. All of you with the same legal Claims against the Company are going to be treated the same.

It also does one more thing on that. It means, to the extent we can get all of the Claimants in a single form like this, the first Case brought will be treated the same as the last Case brought. So it doesn’t matter whether or not you saw an advertisement faster than anyone else, or the Mississippi Courts move faster than the Nebraska Courts. However much money is there, you will get equal access to it, whether you’re early in the queue or late in the queue. Something that is not necessarily true with State Law. No one wants to come once all the meat’s been picked off the bone. So it changes the drama of what goes on there.

Then, Bankruptcy is about, at its heart, what it was designed for. Not for this purpose, but for all purposes, for Companies in financial trouble. It’s designed to create a global solution. It’s about saying, “Come on down.” (I always hear Monte Hall.)

The minute that a Bankruptcy gets filed, because it really says, “We’ve got to get everybody in here, and we’re going to make a deal. We’re going to make a deal that binds everybody. The Tort, the Trade, the Commercial, the Shareholders, the Insurance Company, all of the Claims against this Company, all the Claims this Company has against Others. We get it resolved in a single form. We get this done in one big vat.”

This is genuinely a re-organization of what this Company was. We get it done, get it all packaged together, and then, physically–if this is a Chapter 11– a new Company emerges on the other side. If a new Company cannot emerge on the other side, at least we did the Order of Priority and the Distributions according to an organized Principle of Law, rather than according to “first-come-first-serve” or “you got lucky that there were Assets in your jurisdiction.” So at least it was a principled approach to it. That’s what we try to do.

It turns out to have other effects, as well. So that individual Courts–especially the first Court to jump up–or individual Juries who see something called a Multi-Billion-Dollar Corporation and say, “Gee, if we award this Plaintiff only millions, they’ll never even notice. You know? What a gnat on a very large elephant. So, I want to show how to punish.” A lot of that disappears in this process, because as it was in the Asbestos Case, once it’s clear to about everyone in the room, I think it’s perfectly clear what’s going to happen in terms of Punishment to this Company.

So the notion of using Punitives to discipline a Company–a lot of that drops out in the Bankruptcy process. In fact, there is some dispute, I should say, in Bankruptcy. I think this is another place where the Law should be amended. That even in Punitive Damage Claims that have been awarded should be given at best an inferior treatment in Bankruptcy. Some people believe they should go away altogether.

Now, I’ll mention one other thing about Chapter 11’s that we have learned in the Mass Tort Cases that I don’t’ think we thought about specifically when Chapter 11 was first being designed. But it’s turned out to have that effect. That is through the device of the Trust that’s been developed in Chapter 11. This is the way to compensate people who have Claims against the Company, is that it’s given access to the Legal System to people who are not well-represented by lawyers. That actually turns out to have interesting impact in an area like this. It removes the Big-Case bias.

There are a lot of Tort Lawyers who are only interested in those who have a large and preferably visual injury of some kind. Which means that lots of other kinds of injury actually doesn’t get compensated and doesn’t get dealt with through the legal system. One of the things that’s happened in these Trust Cases is that a substantial portion (and an example Trauma is a substantial portion of the women) had access to Compensation through the Trust, without having to hire attorneys.

I’ll also point out that the Bankruptcy Courts, long accustomed to their power in a Commercial

setting to deal with Lawyers and Costs–I will say this: it’s my belief that Bankruptcy Judges in general (not all, but in general) are what are referred to as real green-eye-shade kind of judges. They keep a close watch on the fees. Partly because, as a matter of Statute, they’re required to. Fees–all. All dinner fees and fees that are going to be charged to the Estate have to go through approval by a Bankruptcy Judge. Now, anyone who’s paid them, it always depends on whose ox is being gored in this debate–right?

Any good Bankruptcy or Debtor’s Lawyer will tell you they keep far too sharp an eye on it, and pinch far too hard. Anyone who’s ever had to write the checks for the bills will tell you they don’t keep a sharp enough eye, and are willing to approve too much in fees. But the point is the principle’s in there, and the principle is sometimes used even with Tort Lawyers. That is, in the A H Robbins Case, part of the Trust told how much the lawyers could get.

There were many lawyers who were dismayed to discover they could not get their customary 49% of the Victim’s Recovery. They would be limited under the Terms of the Trust I think in most cases, to 25%. In fact, there was a wonderful case later in A H Robbins where the Estate had more money than it thought it was going to have. So it made an initial Distribution. It had more money than it thought it was going to have, and so it said it was going to go back and distribute to those who had Claims for Personal Injury against A H Robbins.

You all know what the law-suit was. The attorney said, “I want my (fill-in-the-blank). I want my third quarter if that’s all I can have under the Statute. But if there’s an Additional Distribution, of course an Additional Distribution has to go to the attorneys, as well.” The judge said, “No, it doesn’t. I can make Distributions directly to those who claim Injury by the Company, and I can bypass payment to Counsel under those circumstances. So, obviously, it makes some difference in what’s going on.

I want to say one more thing about what I think is an effect. I don’t even have to put an enormous spin on it. I’m just going to say from a positive perspective That is that the presence of a Chapter 11 System—that is the opportunity to come in and get some of these devices to deal with the Mass Tort Cases–profoundly effects how a Mass Tort Case works outside Bankruptcy. In part, it gives guidance. This has been an experimental area. So, the notion of using Trusts. Most of the experience with this has been a back-and-forth.

The Bankruptcy world learns from MDL and other things that have set up Trusts. But they learn from the experience of the Bankruptcy Trust. So, it’s worked in that sense, to help guide. But it also has worked principally, in a sense. Parties understand now in the negotiations that there is an alternative. There is an alternative to blowing this Company up. The alternative is Bankruptcy. Now, the real question is, what kind of alternative is that, and what do the negotiations look like?

Professor Westbrook and I have a Casebook in which we describe these negotiations as The Debtor stands in the window of a very tall office building saying, “If you won’t work something out with me, I’m going to jump.” And The Claimant says, “And if you won’t work something out with me, I’m going to push you.”

(laughter)

So, it’s, let’s put it this way–it’s high-stakes negotiation, but it’s there. I actually did an article recently arguing that in some sense, it may become an avenue for Tort Reform. Tort Claimants can only do so much when the alternative is Bankruptcy. Having said that, I do have to admit, and I must talk about–Bankruptcy is not a great place to be. I remember when my dear friend, and I see her here today, Barbara Houser came to speak to my Advanced Seminar in Chapter 11. And she walked in to talk to the kiddies. The first thing she said, which I thought was so wonderful, was, “If I look a little tired today, it’s because I just finished mailing was it 500,000 Objections to Proof of Claim.” Or more than that. Whatever the number was. My kids were impressed. She said it took two mail trucks just to carry them off. The big mail trucks. The 18-wheelers. Yes, the big ones. She said, “Even in Bankruptcy, you have to understand the kind of numbers we may be talking about.” Can you imagine Barbara having to lick all those stamps? (laughter) I mean, she’s stunning. Stunning. That’s right. I love it. The second part to this, and the reason I mentioned Barbara, was that I recall Barbara saying to my class, “O, Bankruptcy works great, right?” Because they’ve been spending all this time learning how to use this new tool. Right? And they wanted to try it out. They just couldn’t wait. Barbara said, “You have to understand…”

She looked at my class and they all got quiet. She said, “Bankruptcy in the Dow-Corning Class was not the “A” answer, but it was not the “B” answer, it was not the “C” answer, it was not the “D” answer.” She said, “Is there a Double-Z answer for how everyone felt about having to take this step?”

All I could say to my class, when Barbara said this, (because she just sort of leaned back) was, “Then that simply means they were well-advised and understood the difficulties of what they were about to undertake.

I would say that the principle problem of Chapter 11 is that Companies in Chapter 11 are busy doing Chapter 11. That is the number one cost. Their business becomes Chapter 11. Read the books on any of the Chapters 11. CEO’s are starting to learn terms, like the 11-11B Election. A 5-23 Objection. Right? It’s crazy. They’re about the business of what they can and can’t do. You recall I said, now that that Bankruptcy filing has not only protected them from all Collection efforts, but it has also locked up all of their Assets. And their needs to be a cap before anything leaves this room. Metaphorically, thank you very much. That’s a tough way to do business.

And things have to be exposed that never had to be exposed in business before. Talk about the ultimate open book. It’s not just open to your Creditors, it’s open to the world. Which means it’s open to your competitors, as well. To see lots and lots of information about this Company. Every decision that’s a decision as it’s phrased in the trade, “Not in the ordinary course, is a decision that a Bankruptcy Court has a right to review. Indeed, one cannot take it if the Bankruptcy Court is not at least first given the opportunity to consult on this, and all of your Creditors are given the opportunity to consult.

Wouldn’t it be fun to drive a car with 50,000 backseat drivers? Because that’s what we’re really talking about as a Chapter 11. It’s still very expensive. When we talk about cost, it’s just a question of “How high is up?” when we’re talking about attorneys fees and trying to settle Mass Tort Cases. It has some real structural defects. The first one is it is not clear, and it is probably the case that it will not bind future Claimants. I say probably the case that it will not. I’ve stood up in Court and argued that it should. I’ve written in my academic work that it should, but I’m not sure it’s a winning position.

So, in the examples I was giving you earlier, when we were talking about the Victims who may not know until some point in the future, that they have a Claim against Piper Aviation–that they’re the people who are going to be hit–The question is can you bind them? If you can’t bind them, you can’t solve the Fairchild or the Piper problem. So, Bankruptcy–here we talk about it as the “get everybody in the room,” there’s actually a back door in Bankruptcy. It’s a back door that comes to the fore in the Mass Tort Cases. It becomes really critical. So Bankruptcy itself is not structurally entirely coherent on this issue.

Bankruptcy also has one of the most peculiar second back doors. That is while Bankruptcy Law tries to get everyone in–Like, we will settle multi-multi million dollar Bond-Indenture Disputes without a blink. A Bankruptcy Judge could sit down and do this. Make all kinds of Operating Decisions. Talk about the feasibility of the Company –he can decide all sorts of complex matters.

Ultimately, a Tort Suit cannot be resolved in a Bankruptcy Court. So, if there’s a Tort Action against the Company, the Bankruptcy Court at best create a structure, but it can’t bear-hug someone who has a Tort Objection or a Tort Claim against the Company. Ultimately, the way the Bankruptcy Law’s written, is that Party always has the right to go somewhere else and get that issue resolved. Either to a State Court or to a Federal Court can get out of the Bankruptcy bear hug.

So that has all sorts of implications. It means Bankruptcy, as a mass-support settlement device is even more expensive. It’s even more uncertain. It’s even more complex, because you’ve got to watch out to create these additional roots. And you’ve got leaks in the concept of getting a real resolution to all of the problems for this Company. It’s got another problem, and it relates to this problem, and that is Claims Estimations.

In Bankruptcy, we’ve never had the notion that we’re going to litigate everything to figure out how much people are owed. There’s a wonderful device known as “Claims Estimation.” You think you’re owed so much on this Breach of Contract. Stand up, Counselor, and you’ve got an hour to tell me what you would prove if you had had a trial. There. Stand up and tell me what you would have done at trial.

And the judge says, “Sounds like about 12 million dollars to me. Sit down, let’s go. Next.”

I always like to say that, at least in Bankruptcy Court, that the notion of Due Process is not worshipped with the same vigor that it’s worshipped elsewhere in our Court System. And there’s a reason for that. There’s a real philosophy behind it. It’s that that costs money. And we can’t reach a resolution if we can’t get this kind of thing resolved. But again, in Claims Estimation where we’re talking about Claims Estimation, it’s a whole lot tougher. The techniques are not there; there’s a question about whether or not there is legal capacity to do this.

It is also possible, and this is the one that really is troubling, is that we’re putting the hardest Tort Claims as part of the Settlement mix, in front of judges who, by definition, have not had a lot of experience with Tort Lawyers. So, one says to a Bankruptcy Judge, “I’ve got a billion dollar Tort Claim.”

The Bankruptcy Judge, accustomed to dealing with Commercial Claims, says, “That sounds like a lot. This is a big and serious claim.” Because Commercial Claims usually have to be limited to how much money you’re already loaned out on this deal.

The Tort Case, I think that many State Judges would say, “Aw, a billion dollars–I’ve had four of those already this morning.”

Talk’s cheap. But, we are sometimes dealing with judges who are not as familiar with some of the techniques and some of the Claims that Tort Lawyers make. It’s just different. They’re not people who spend a lot of time in the same places.

The Tort tactics may be unfamiliar. The time value of money is what Bankruptcy Judges focus on. It’s in a different place. And then, keep in mind that when we bring everybody into the same room, the leverage is different for the Commercial Debt. Commercial Debt had the opportunity before this ever came along, to negotiate for a better deal in the event that this Company ever collapses–that Bankruptcy comes along.

So, with their often-powerful leverage in dealing with the Company, as Jack Weinstein says, “The Commercial Debt always does fine in Mass Tort Cases.” They get out, and they get out unscathed. Keep in mind that Bankruptcy is their form, and that they understand the enormous pressure to get consent to get this plan together. And they know how to work the leverage on the need for Consent. Probably better than any other set of lawyers, anywhere.

Then, the last point about Bankruptcy that probably makes it the scariest. Not only is one not the master of one’s fate when one files for Bankruptcy, in the sense that you’ve got all those backseat drivers about the Operation of the Company, and you’re trying to bring this together for Settlement. Bankruptcy runs the substantial risk that there will be a Transfer of Ownership of this Business. That the people who were the Shareholders of this Business, when we get ready to come out on the other side, may not own this Business any more.

This Business may be owned by a Trust. This Business may be sold up, broken of into different pieces; in effect, Bankruptcy is the ultimate of “in return” for all that protection, all the chips have been placed on the table. It’s just possible someone else is going to take them and run. That may happen in a Bankruptcy Case.

Now, I want to say one last thing about it, and then I’m going to quit and I’m going to let you all say whatever you’d like to say about this. I’m willing to play Traffic Cop on this, and you can make whatever comments you want. As I said earlier, the presence of Bankruptcy affects the likelihood of Settlement and the shape of Settlements. It also, in my view, should effect Law Reform.

When the ALI undertook its project on Complex Litigation a few years back, and it has been a few years back, I guess it’s been about ten years since they did the Complex Lit.

(MALE VOICE INAUDIBLE)

Yes. When they first did Complex Litigation, I looked at the Proposal for the project. I was then just in the ALI, but not in the Council of the ALI, yet. I called Jeff Hazard, who is the Director of the ALI. I said, “There’s nothing in here about Bankruptcy.”

I don’t know if you know Jeff Hazard was then Sterling Professor of Civil Procedure at Yale Law School. Jeff said, “O, Elizabeth, you don’t need to think about Bankruptcy. We’re just doing Complex Litigation.”

Bankruptcy is about, in his words, “something else.” And so, he wanted to do this whole project by putting a caveat at the top that said, Complex Litigation. (BLOT) Not about Bankruptcy.

I think that what we’ve learned since then is that we’re not going to talk about Tort Reform, and we’re not going to talk about Mass Tort if we’re not also talking about Bankruptcy. Because it doesn’t matter whether or not the scholars put it on the table. The people who are involved have put it on the table, because this is what they’ve used to try to solve the problem of Mass Tort.

Mass Torts is a problem for people who get injured. It is a problem for Businesses for whom the zillion Claims are brought. And it is a problem for the Court System that sees itself sucked into a black hole, in terms of time and resources, that it will never emerge from. It effects everybody.

Is Bankruptcy the answer? Well, here’s my answer. Bankruptcy is an answer. It is a bad answer to the Mass Tort Case. But, it is the best answer. We need reforms in Bankruptcy. We need Procedural Reforms. We need reforms about Claims Estimation, we need reforms about voting. We need reforms about deciding Tort Claims jurisdiction, in my view, and I believe we need reforms on Future Claimants.

The National Bankruptcy Review Commission has a whole section on Mass Torts. We need to make sure that Bankruptcy and Chapter 11 is an intact safety net for a Company that has Mass Torts brought against us. But, what we need more powerfully, in my view, is the non-Bankruptcy Reform that means you don’t need to fall into the safety net. We need to find more ways that Companies can stay on the high wire. I think they can learn from the Bankruptcy experience. I think that as we try to craft legislative solutions, looking at what makes Bankruptcy work, and whether that can be adapted to use in a non-Bankruptcy content, is quite sensible.

But, I leave you then with this thought. If Bankruptcy is the answer, it is the answer only because there is no other good answer available to us. Those are my thoughts.

(applause)

Want to ask some questions?

MALE VOICE: [inaudible]

ELIZABETH WARREN:Want to stand up so everybody will hear?

MALE VOICE 1: It seems to me that there’s a two-step problem. [inaudible] the reaction that I have. Bankruptcy really does seem like a bad solution. And the first is, you have to have mechanism to force a single jurisdiction on the Class Action. Similar to the way it works in Bankruptcy.

You file something, and then from that point on, a mechanism goes into place with a sign. Who falls into the class? How [inaudible] works, and what the final [inaudible] really big. And then, down the road, whatever the verdict is, [inaudible] verdict is a wreck to the financial security of the Company. Then at that point, that verdict along with any debts and obligations, [inaudible] goes into Bankruptcy. I think the real problem here is [inaudible]

ELIZABETH WARREN: …is the channeling part. Yes.

MALE VOICE: You’ve got to channel the way Bankruptcy would, but it seems to me that’s the primary mechanism to solve most of the problems.

ELIZABETH WARREN: I think it’s a very interesting comment. Yes. Other people want to…yes sir?

MALE VOICE 2: Two part question.

ELIZABETH WARREN: Sure.

MALE VOICE 2: First part, you’d said that Bankruptcy probably won’t bind Future Claimants. I want to know is there a split in the Circuits, or something? Are there some Courts that would allow it? Or, is that just your personal opinion that it should, or what?

Number two–if it could bind Future Claimants–[inaudible]

ELIZABETH WARREN: Yes. Okay. The answer on why I say it probably won’t is the “sting” of having argued the Case that lost. And that was Fairchild Aviation. Fairchild Aviation–the question was–You had a Company that literally was to be liquidated. That was the recommendation. It was in a Chapter 11. It was not in a Chapter 7, but there was a Trustee appointed, old Equity is gone, old Management’s gone. That’s not the issue.

There’s a plant in San Antonio that has 700 jobs and it’s actually one of the finest plants in the world for manufacturing small aircraft. A man came along who had nothing to do with the Business before it came. He got some investors together and said, “I want to buy Fairchild out of Bankruptcy, but I’ll only buy it on one condition. That is, I’ll be liable for everything I build with this Company from this point on into the future, but the Bankruptcy Court has got to tell me that what I’m buying will not carry the Liability of a plane built 25 years ago, that falls out of the sky. Cos I can make the deal work if I can do it on my own planes. But I can’t make the deal work, otherwise.”

Keep in mind, the alternative is, as they pointed out to the Bankruptcy Judge, “we’re shutting this Company down. We’re plowing it under. The land is going to be sold to somebody else. There will be no factory, here.

The Judge agreed to it, a plane fell out of the sky. They brought a Claim against the new, the emerged, Fairchild Aviation. I went in and argued the Case, and I lost. The judge said, “You can’t bind future Claimants.”

I said, “Your Honor, you bound them.” He said, “I didn’t have the power to do it.”

(laughter)

I mis-spoke.

MALE VOICE 3: [inaudible]

ELIZABETH WARREN:Yes. O, yes. Fortunately, yes. All you have to do is punch in Elizabeth Warren on the Lexus, and it comes out this bad opinion. (exasperated sigh) It’s Fairchild Aviation. It’s out of the Western District of Texas. It’s about–golly, how time flies when you’re having fun–about four years old. Three years old.

Now interestingly enough, it went up on Appeal to the District Court, and sat in the District Court for-ever. In the meantime, they kept finagling the Business and they found a way to settle the one Claim against it, and a way to deal in the interim with their Insureds. So they’ve stayed in business, literally, a while longer. But the next plane crash and the next law suit–there’s a question about whether or not the Company will be gone. Whether or not they’re trying to get out.

So what happens was part of the deal was they had to go back and vacate the opinion–the original Liability opinions. So technically, the opinion is not the law, anymore. But only because there was Settlement.

Yes. Oh, I’ll answer it. Wait. You asked me one other question. Let me just answer it real quick. I want to make sure we get on to the other. You said is there due process for binding Future Claimants. Reasonable people can differ on this. I do not think there is. I think the Supreme Court has spoken to this in a Case called Silver -vs.- Silver, 1893, I want to say, but I could be wrong on the date. That is, prior to the–and we can play this game–either the injury or the filing of the law suit, there’s no Property Right that’s attached. Therefore, the Law can change whatever it wants to change. This is one where they changed the standards on Tort Liability. They said, “for all those who haven’t been injured, no problem.” Now, that’s one, obviously to go to the Supreme Court. But, I think I think there’s a good argument that there’s not. And there have actually been some good Law Review articles written on this one, as well. I realize other people will see that differently.

Yes sir.

MALE VOICE 3: I’d like to ask you to briefly comment on the Dow-Corning Bankruptcy, and limit your comment because we’ve got so little time.

ELIZABETH WARREN: Sure.

MALE VOICE 3: To the Tort Claimant Resolution. 3.2 billion was set aside to take Tort Claims. Assuming for the sake of this question, approximately 60% will end up going to women claiming Auto-Immune Disease. As you alluded earlier, medical science is substantially indicative there is no Causative Relationship between breast implants and Auto-Immune Disease

The Plaintiff, Dow-Corning had sought to have an “All-Issues” Trial on Causation. So in one [inaudible] the entire issue of Causation, where all Claimants would be resolved…Claimant’s lawyer resisted that. They ultimately prevailed. At least as the [inaudible] of the Bankruptcy.

So as a consequence, the Bankruptcy outcome essentially does not allow a resolution of the Causation. It simply permits Claims paid which medical science concludes is not caused by the implants. Is this a defensible outcome?

ELIZABETH WARREN: Well…If you want to ask me did I think the Bankruptcy Judge ruled the right way in refusing to do a single Causation trial, it’s easy. I don’t think he did. I think he ducked what was his responsibility to decide, and on up through the District Court and through the Court of Appeals. I think that when Causation is on the table, without having resolved that, my own view is one can’t know what the Claims are against the Company.

But having decided it, Dow Corning and the Claimants took the position that it was better to negotiate a consensual resolution. That’s not that Bankruptcy endowed one side with the power, it’s the reality of what kind of power one gets from bringing a law suit. There’s substantial value to bringing even a law suit that has a substantial possibility of losing. Because (a) it has defense costs and (b) it has some possibility of winning.

So the Parties decided to work to a consensual resolution. But there’s no doubt in my mind that when the Bankruptcy Judge decided–and in my view, that was the turning point in that Case. I take it that’s your view, as well. When the Bankruptcy Judge determined that there was not going to be a single trial on the question of Causation, the Bankruptcy Judge, in effect, made a Distribution of Assets to one group of Claimants. It just worked that way. It’s not structural within Bankruptcy. It’s not required within Bankruptcy. But it…

FEMALE VOICE 1: One question.

ELIZABETH WARREN: Yes. Please.

FEMALE VOICE 1: [inaudible]

ELIZABETH WARREN: O. Anybody else? Yes. Please.

MALE VOICE 4: Last year in Texas Law Review, one of our heroines [inaudible] and article which was more skeptical of the competence of this area. Her argument had kind of two parts. I know we don’t have time to get into them in detail. But, on the competence side, pointed out that these are already [inaudible] the more well-equipped Courts that carry lots of witnesses and who behave like regular Courts. These one-hour specials [inaudible] obscure [inaudible] competently handled, there is less effective prospect of appeal in Bankruptcy in Courts. You have this natural [inaudible] awfully hard to appeal with their determinations. In general, you are kicking it to a less competent level or factual resolution on things like, “How big are the Future Claims”? Or even on Dalcon Shield, which is one of your…you won’t find a difference of 100%–how big the Future Claims were.

The second problem is one that we already have in Class Actions. Namely, disloyal if you will, representation of the non-present Class of immature Future Claimants. That’s already a national scandal on [inaudible]. It moves that to Bankruptcy Court. Not only do you not solve that, but it probably gets worse. Because of the [inaudible] Because of the fact of the lawyers are even more likely to get along with each other and the judge than in Tort Litigation. The Future Claimant [inaudible] Don’t ask me, ask Judge Jones. She thinks that the Future Tort Class is going to be even more effectively sold down the river in Bankruptcy Court.

ELIZABETH WARREN: You know, I think these are legitimate concerns. I think they’re worth talking about. I didn’t stand up here and say, “Bankruptcy is the four-star answer.” But I will point out that when the National Bankruptcy Review Commission put together a whole package of amendments to recommend to Congress–so that Congress would go forward–to keep Bankruptcy as an intact, and in fact strengthen Bankruptcy as a way to deal with Mass Torts. Judge Jones, on the Commission, said on the very first day, “We will do nothing on Mass Torts and Bankruptcy. Because I have this profound distrust of Bankruptcy Courts. I think it’s a complex problem. Nobody can solve it.”

By the last day, Judge Jones was one of the people who voted for the unanimous decision to go ahead and make these recommendations. What Judge Jones faced in that two years on the Commission was over and over and over with every hearing, every panel that we brought in to discuss this. It was the notion that this is not the perfect answer. This is simply a way to make this answer better. This answer is better than any other that we have available to us at this point.

I find it interesting. I’m not sure if she rues her support in favor, but I would ask Judge Jones the same thing that at least a hundred practicing lawyers asked her during the course of the Commission hearings. That was, “What’s your alternative?” She didn’t have an answer to that one. That’s where we are.

(applause)