Private Law Theory

ABSTRACT
Bankruptcies now dominate mass-tort litigation. Defendants file for bankruptcy because the class action and multi-district litigation devices have failed to deliver parties meaningful finality, and new legal tools — non-debtor releases, complex claims-processing schemes, and the Texas Two-Step — have made bankruptcy a more attractive forum for resolving mass-tort liabilities. Troublingly, litigants, courts, and scholars struggle to consistently evaluate a reorganization plan’s legitimacy. This Note takes a novel approach, arguing federal preclusion law and due process principles of exit, voice, and loyalty provide the best framework for evaluating a mass-tort bankruptcy. Bankruptcy resolutions are generally ‘otherwise consistent’ with due process because they substitute claimants’ exit rights for voice rights. Whether a reorganization plan violates due process depends not on the formal legal tools mass-tort debtors deploy but on whether those tools infringe upon claimants’ voice rights or undermine aggregate litigation’s core goals of finality and equitable redress. This Note concludes bankruptcy remains a valuable forum for resolving complex mass-tort crises and identifies several cases that guide future stakeholders.

Goldberg, Jonathan, ‘Otherwise Consistent’: A Due Process Framework for Mass-Tort Bankruptcies (January 10, 2023), New York University Law Review, Forthcoming.