Article

The Corporate Settlement Mill

From cases involving “robo-signed” mortgages to catastrophic oil spills, the United States legal system increasingly encourages corporate wrongdoers to design and implement their own high-volume settlement programs to compensate thousands of unrepresented victims. These private settlement systems rely on corporate economies of scale to resolve massive disputes as comprehensively as a class action, but entirely outside of the court system. We call these systems “corporate settlement mills.”

Like class action settlements and “no fault” insurance options, corporate settlement mills may ameliorate many of the most commonly criticized features of individualized litigation. They offer redress to people who often cannot afford counsel, handle large volumes of claims quickly and predictably, and reduce court congestion. For those reasons such programs are increasingly required by federal laws, regulatory bodies and as a matter of complex litigation practice. 

But corporate settlement mills also have costs of their own. When sophisticated corporate actors quietly settle large numbers of cases in assembly-line fashion, they threaten transparency, fair dealing, and the rule of law. We argue that this new category of dispute resolution is more dangerous than others because a single, self-interested party — the prospective defendant itself — designs and oversees the entire determination process. Corporate settlement mills thus raise fundamental questions about how far policymakers may go to privatize our public, and historically neutral, system of adjudication.

Drawing lessons from other movements to privatize government, we argue that corporate settlement mills can provide an appropriate alternative to public adjudication as long as they remain answerable to the regulators, courts, and claimants that rely on them. We therefore offer specific suggestions to make them more accountable — including targeted prospective regulation, judicial review, stakeholder participation, and ethical reform. In so doing, we broaden the debate over what constitutes mass litigation, in the hope that lawmakers realize the benefits of large private settlements, without frustrating administrative regulation or the judiciary’s authority to “say what the law is.”

Patent Experimentalism

Many scholars have wrestled with what I call the “first-order question” in patent law: What policies should we adopt to promote innovation? This Article grapples with the second-order question: What policies should we adopt to promote innovation about promoting innovation? I argue that empirical progress in patent law depends on greater policy diversity (rather than the current emphasis on uniformity), but unconstrained “laboratories of experimentation” are suboptimal due to the spillovers from local policies. Instead, patent policy makers should adopt a third way between uniformity and local control: centralized promotion of policy variation. The optimal approach to such policy experimentation depends on the context. Randomized policy experiments should be used more often, both in the field (for example, testing prizes in a random selection of pharmaceutical classes) and in the lab (for example, testing how varying disclosure affects performance in implementing software patents).

But many nuanced, dynamic issues—such as the patent-eligibility of new technologies in heterogeneous jurisdictions—are better approached not through fixed experiments, but rather through an adaptive “experimentalist” governance regime. Local actors—patent examiners, judges, or even individual countries—should be granted broad discretion to meet centrally-defined framework goals, with the requirement of defending their decisions through robust peer review. Even where controlled experiments are infeasible, experimentalist policies could elicit local knowledge, generate varied observational data, and encourage more robust theory development about the mechanisms by which innovation policies work. This pluralistic, evidence-based approach to patent policy can be guided by recent trends in personalized and evidence-based medicine, and the resulting framework for legal experimentation has implications for policy learning beyond patent law.

The Legitimacy Of (Some) Federal Common Law

On topics that come within the reach of the states’ lawmaking powers, modern federal judges have no doubts about the legal status of the common law. With respect to such topics, the unwritten law in force in any particular state has long been regarded as part of that state’s law. Ever since Erie Railroad Co. v. Tompkins, moreover, federal courts have followed the settled precedents of each state’s highest court about the content of the state’s unwritten law. On topics that lie beyond the reach of state law, however, federal courts are less confident about the role of unwritten law. To be sure, in an opinion issued on the same day as Erie, the U.S. Supreme Court applied what it called “federal common law” to such a topic, and that practice has continued; in various contexts, modern courts recognize legal principles that are said to have the status of federal law but that have not been codified in any written enactment. Still, even Justice Douglas—who wrote some of the most expansive opinions in this vein—observed that “[t]he instances where we have created federal common law are few and restricted.” Subsequent Courts have agreed that federal common law exists only in “limited areas,” but they have not specified exactly how to identify those areas.

One idea, which Professor Alfred Hill suggested nearly fifty years ago and to which I still subscribe, is that preemption is a pre-condition for recognizing federal common law; by definition, “federal” common law operates only where something has displaced or restricted the states’ lawmaking powers. Depending on one’s view of preemption, that threshold limitation is potentially significant. For instance, I agree with Professor Bradford Clark that preemption needs to be traced to one of the forms of federal law listed in the Constitution’s Supremacy Clause, which refers to “[t]his Constitution, and the Laws of the United States which shall be made in Pursuance thereof[,] and all Treaties made, or which shall be made, under the Authority of the United States.”

I also agree with Professor Clark that when the Supremacy Clause refers to “Laws of the United States” that are “made” in pursuance of the Constitution, it is referring to federal statutes enacted through the process of bicameralism and presentment. On this view, courts can recognize federal common law only on topics that something in written federal law implicitly or explicitly puts beyond the reach of the states’ lawmaking powers.

This conclusion, however, potentially leaves a lot of room for federal common law. On any question that the Constitution, a federal statute, or a federal treaty prevents state law from answering but does not itself resolve, courts might be able to articulate a rule of decision as a matter of unwritten law. Indeed, according to one commentator who takes a fairly broad view of federal common law, that is essentially what the Supreme Court did in the initial decades after Erie: Judges felt free to recognize federal common law “whenever either the Constitution or Congress has ‘federalized’ an area of the law but has failed to provide rules of decision for all issues that may arise.”

Many modern federal judges deny that unwritten law can operate so broadly at the federal level. Their concerns revolve around the idea that articulating rules of decision as a matter of unwritten law entails a robust type of “lawmaking,” analogous to the power that a legislature exercises when it enacts a written law. After Erie, federal judges are used to acting as if state courts enjoy this sort of power (on matters as to which the states have lawmaking authority), but the Supreme Court has said that federal courts are different (even in areas of federal preemption). In Justice Rehnquist’s words, “Federal courts, unlike state courts, are not general common-law courts and do not possess a general power to develop and apply their own rules of decision.”

For many federal judges and commentators, it follows that every rule of decision that has the status of federal law must be traced in some way to a written federal enactment—not simply in the sense that the written enactment preempts state law, but in the sense that the written enactment either establishes the rule itself or authorizes the judiciary to do so. To be sure, this idea leaves room for disagreement about when a particular statute or constitutional provision should be understood to authorize “federal common lawmaking.”

But some distinguished commentators have advocated restrictive approaches. Justice Scalia has drawn the logical conclusion: “[I]n the federal courts, . . . with a qualification so small it does not bear mentioning, there is no such thing as common law. Every issue of law resolved by a federal judge involves interpretation of text—the text of a regulation, or of a statute, or of the Constitution.”

Academic critics of this logic have tended to accept the premise that all common-law decision-making entails robust lawmaking power, while arguing that federal courts can assert more such power than skeptics of federal common law think. This Article suggests exactly the opposite criticism. Like Justices Rehnquist and Scalia, I am reluctant to interpret either the Constitution or the typical federal statute as giving federal courts sweeping authority to invent new rules of decision out of whole cloth, even in the service of policies established by Congress. Nonetheless, I see a substantial role for certain types of federal common law in areas of federal preemption, because I do not think that modern federal courts are inventing rules of decision out of whole cloth whenever they articulate and apply any legal doctrines that have not been codified.

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