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Corporations in Court: Big Business Litigation in U. S. Federal Courts, 1971–1991

Published online by Cambridge University Press:  27 December 2018

Terence Dunworth  and
Joel Rogers
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Abstract

This article provides an overview of federal litigation involving the largest 2,000 U. S. corporations over the period 1971–91. Reporting from a unique data set of the authors' construction, it finds that althugh the aggregate volume of business litigation grew during the 1970s and early 1980s, it has actually been declining in recent years in all major categories of cases; business-related litigation is heavily concentrated, with an extremely limited number of business “mega-litigants” accounting for most of the activity; this concentration is particularly evident in tort, with the result that the tort trend line outside the concentration is actually flat or declining; a good deal of the growth in litigation outside the tort area can be attributed to business itself; and big business wins overwhelmingly, as plaintiff and defendant, in cases that involve it. The general applicability of these findings is limited by the data's restriction to federal court litigation and the structure of the Integrated Federal Court Data Base from which the authors' data set was constructed. This granted, the report is by far the most comprehensive treatment of U. S. big business litigation to date, and its findings are strikingly at odds with the premises of much current policy discussion.

Type
Symposium: Business Disputing
Information
Law & Social Inquiry , Volume 21 , Issue 3 , Summer 1996 , pp. 497 - 592
Copyright
Copyright © American Bar Foundation, 1996 

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References

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56 In this article, each case in which an F2000 company is either lead plaintiff or lead defendant is termed an appearance for that company. Because there are some cases in which F2000 companies are both plaintiff and defendant, the total number of appearances is greater than the total number of cases. Our rationale for using the number of appearances rather than the number of cases as the measure of the litigation volume that individual companies face is that we see no difference between a case in which an F2000 company faces another F2000 company and one in which it does not, at least not with respect to the issues we are considering in this section of the report. At other times in the report, the analysis will focus on cases, not appearances. We endeavor to make it contextually obvious to the reader which we are dealing with at any given time. However, in general, the word “appearances” pertains to firms and the word “cases” pertains to lawsuits.Google Scholar

57 As in most categorizations of continuous data, the break points we use are somewhat arbitrary, and litigants at the top and bottom of the Moderate group are more like litigants at the bottom and top of the Mega and Minor groups, respectively, than they are like each other, at least with respect to frequency of appearance. Nevertheless, a categorical approach of some kind is needed to facilitate illustration of distributions of this type, and the adoption of a different schema (e. g., more numerous categories) would not materially affect the interpretations that can be made. Therefore, from time to time in the balance of this report, we employ this three-category breakdown to display frequencies of various kinds. Where appropriate, we will use narrower classifications.Google Scholar

58 Figure 3 maps concentration along a continuum from low to high by computing a statistic known as the Gini coefficient. This is a measure of concentration that would yield a score of zero if all companies within the sector had the same number of suits, and a score of one if a single company had all the litigation. The figure indicates that, certainly for most sectors, the intrasectoral level of inequality in litigation activity is extremely high albeit again at a high, level of sectoral aggregation.Google Scholar

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61 Contention continues today. Plaintiffs' lawyers are reportedly feuding with each other and with the asbestos defense consortium known as the Center for Claims Resolution about a $1.3 billion class action settlement for 100,000 future potential claims by asbestos victims. See Andrew Blum, “Plaintiffs' Bar Airs Split on Asbestos Pact,”Nat'l L. J., 14 March 1994, at A10. We do not mean to imply here that the asbestos and Dalkon Shield litigation is unimpottant or doesn't matter; obviously it does. These and other products have produced devastating situations for those on both sides of the lawsuits that have been brought conceming them. They have imposed an unmeasurable amount of suffering on individuals and families, and billions of dollars in costs on companies. But the life and scope of such litigation is finite. It does not directly involve many firms. As shown above in sec. III, more than 90% of all F2000 asbestos litigation involves only 10 companies. Consequently, we do not believe it should not be taken as a measure of the litigation burden that business in general faces.Google Scholar

62 That these particular products will leave the litigation scene does not mean that there are no others to take their place. The most current example is breast implants. Litigation concerning the damage allegedly caused by faulty implants is taking place in federal courts now. Its magnitude and impact is by all accounts staggering. There was recently a report of a $27 million award to three plaintiffs by a Houston jury. See Barnaby Feder, “Millions Awarded in Implant Trial,” National Report Section, N. Y. Times, 14 March 1994, at A7. The proposed settlement for all present and future plaintiffs, involving Dow Corning, Bristol Squibb Myers, and Baxter International, is reported to be $3.75 billion. See Henry Weinstein, “When Law, Tragedy Intersect,”Los Angeles Times, 26 March 1994, at 1 et seq. Early breast implant cases were filed as long as a decade ago, but the product did not move to “mass tort” status until late 1991, when new filings courts surged to a volume estimated at 12,000 cases, split about evenly between federal and state courts. This makes the litigation volume for breast implant claims, at least in federal courts, about the same as the earlier volume for IUD Dalkon Shield cases.Google Scholar

63 Though inadequate as a basis for calculating total business litigation volume, or for comparing large and small business litigation patterns, the diversity jurisdiction data below do have some value for estimating litigation outcome patterns for business in general. We therefore return to them in sec. VI, where win rates are reported.Google Scholar

64 In subsequent work, we hope to remedy this, at least in some measure, at least in diversity jurisdiction.Google Scholar

65 While we do not pursue the matter here, there are two basic reasons why this might be the case: the greater stakes they have in cases in dispute, or the greater resources they can bring to bear to those disputes. Unfortunately, available theory and evidence do not permit easy separation and empirical testing of the strength of these competing explanations. The reason is that what is typically taken to signal high “stakes” in business disputing (e. g., firm size, scope, assets, even reputation) heavily overlaps with those things that also signal high resources (deep pockets, full-service law firms, lots of experience in their area, etc.). The cost of litigation may also reasonably be expected to increase at the margin of legal uncertainty on which Priest and Klein and others think all litigation centers (though the fact that costs increase there is a good reason why they might be wrong); if so, there is no reason particular reason to expect litigation to center on that margin, and where it does conventional resource constraints become more operative.Google Scholar

66 In future work, we intend to test the robustness of these and other explanations for changes in the level of litigation. The point here is not to endorse them but to suggest their obviousness as potential explanations of the modest third of the increase not accounted for by a simple increase in economic activity.Google Scholar

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69 Asbestos cases were excluded from the CJRA evaluation and were consequently unavailable in the case records provided by the 20 districts in response to the CJRA evaluation design. Earlier estimates of the multiparty character of asbestos cases were performed in Dunworth, “Product Liability” (cited in note 20).Google Scholar