INTRODUCTION

This chapter reviews the financing of mass litigation in the US. It defines the problem as a subset of the problem of the financing of legal claims in the American private law system. After describing the history and economic logic of the contingent fee in the US, it examines how the adoption of the contingent fee affects the financing of class actions and multidistrict litigation in the US.

THE FUNDAMENTALS OF FINANCING LITIGATION IN THE US

Private law in the US is, in theory, grounded in an architecture of rights and remedies which reflect certain democratic and liberal values. There is a guarantee that the courts be open to all parties with standing in both state and federal constitutional law. Any person who genuinely believes that they have suffered a wrong at the hands of another may demand compensation from the responsible party without even filing a lawsuit. Of course, the putative wrongdoer is under no legal obligation to pay compensation until and unless there is an authoritative judgment from a court imposing that legal obligation. It is therefore well understood among those who study private law in the US that, in reality, legal claims sit on a ‘dispute pyramid’ in which volume stands in an inverse relationship with formality.

At the very base of the pyramid are claims made informally between potential plaintiffs and potential defendants before any formal lawsuit is filed (or even researched). Next up the pyramid are claims formally made by the filing of a lawsuit. There are far fewer of these than in the previous group, but they are accompanied by formal pleadings and, as a matter of law, if filed by a lawyer (as opposed to the party acting on their own behalf), reflect the lawyer’s genuine belief that the claim is well grounded in law and fact. Next up the pyramid are those claims which are abandoned or dismissed by a judicial ruling for procedural reasons. There are far fewer of these claims than in the previous group, obviously, and reflect judgment based on yet even more legal analysis than at the point of filing the lawsuit.

DOES LEGAL FORMALISM EXIST?

The first step in my argument is to show that, as a historical matter, legal positivism was represented in the United States by the theory of law we now call formalism. I have defined positivism (partially through its historical origins in Bentham and Austin), and I have proven that it operated as a placeholder for formalism in jurisprudential argument at the turn of the century, but I have not yet defined formalism. In this chapter I shall define formalism, but I shall do so in a particularly indirect way. It is naturally crucial to my argument that I construct, as I did with positivism, a relatively precise set of conditions that distinguish formalism as a theory of law, and it is even more crucial for my argument that this list overlaps – more or less – the three conditions I attributed to positivism in Chapter 2. I cannot simply list the elements of legal formalism as I did with positivism because unlike positivism, formalism was not codified by a set of theorists as focused or confident as Bentham and Austin. As we shall see later, although there is little doubt as to the identity of formalism's chief architects (namely Langdell and Beale), they were not nearly as self-conscious about their roles as the founders of a movement as were Bentham and Austin. Hence, no formalist left behind a document as foundational as either Bentham's Of the Laws in General or Austin's Province.

WECHSLER AND NEUTRAL PRINCIPLES

Thus far, the theory of reasoned elaboration seems both workable and attractive. Yet it is apparent that despite the presence of The Legal Process in the Harvard curriculum, its reputation as a theoretical text and even a teaching material has declined. Not only has Hart and Sacks's theory lost its audience, but it has developed a distinct and unsavory reputation as a theory steeped in “conservatism and procedural fetishism”. One might wonder how The Legal Process came to merit this reputation; the answer is found in the fact that in the eyes of many observers, Hart and Sacks's theory met “a formidable opponent” – and not an ally – “in the Warren Court.” Thus, we must turn toward an episode in the history of legal process that, although central to the argument of this book, has not yet been mentioned: Herbert Wechsler and the theory of neutral principles.

Wechsler's 1959 Holmes Lecture, entitled Towards Neutral Principles of Constitutional Law, was published at the same time as Hart's Foreword. It is probably the most important of the legal process writings, not because it is the best (clearly The Legal Process itself best expresses its own theory) but because it applied reasoned elaboration to the most pressing problem in constitutional law at the time – racial equality under the federal constitution – and, by assuming that challenge, drew the attention of a wide audience of lawyers and nonlawyers.

CLASSICAL LEGAL POSITIVISM AND CLASSICAL COMMON LAW THEORY

The best place to begin any discussion of legal positivism and American jurisprudence is 1940, which is when Lon Fuller accused legal realism of being merely a subspecies of positivism. Fuller thought that legal realism and legal positivism were part of the same jurisprudential family tree. He thought that legal realism was a modern American modification to the legal positivism of Jeremy Bentham and John Austin:

It is clear that the association of realism with positivism was supposed to weaken realism, and this suggests that positivism was perceived as quite unpopular among Fuller's intended audience. Fuller represented a tendency among American natural law theorists to conflate legal realism and legal positivism. It seemed quite natural to Fuller to attribute the rise of fascism to the European embrace of positivism: “[Legal positivism] played an important part … in bringing Germany and Spain to the disasters which engulfed those countries.” Fuller's comments gave support to others who were mounting a campaign to connect legal realism and fascism.

THE REEVALUATION OF REALISM

It seems commonly assumed by those who study constitutional law or jurisprudence that the legal process school did not possess a legal theory of great sophistication. It is rare, for example, to see the writings of the important scholars of the 1950s and early 1960s in collections that contain realists like Karl Llewellyn and Jerome Frank, or fundamental rights scholars like Ronald Dworkin and Laurence Tribe. Writers working within the legal process tradition did, however, operate with a background theory of law that was a version of legal positivism, although this background theory was not, at the time, called as such.

The point at which I want to begin is, ironically enough, with Henry Hart's 1951 attack on Justice Holmes's alleged legal positivism. Hart attacked Holmes's error of separating law and morality: “The first part [of Holmes's The Path of the Law] explains what law really is – something entirely separate from morals.” Hart equated Holmes's positivism with the central tenets of Llewellynlike realism of the 1930s. Hart (not entirely consistently) argued that the logical extension of Holmes's theory of law was the scientific behavioralism of the most extreme realists, in which “[i]t is not what the judges say which is important, but what they do⃜ [W]e seem to arrive, if we take this path, at the monstrous conclusion that reason and argument, the conscious search for justice, are in vain.”

A WORKING DEFINITION OF FUNDAMENTAL RIGHTS

Judge Skelly Wright's critique of legal process revealed two basic theoretical commitments of the fundamental rights approach: (1) that legal principles cannot fully or adequately identify moral values; and (2) that judges must choose (at some level and only sometimes) upon which moral values to rely when adjudicating a legal claim. We should be clear about what we are attributing to Wright. When Wright suggested that a judge must make a moral choice when interpreting a legal principle that expressly refers to a moral concept, he was saying that the judge must do something different from interpreting the moral concept to which the law refers. When a law refers to a nonlegal concept (such as “subsequent” or “adjacent”), we accept the inevitable difficulties of interpretation, but we do not readily assume that the interpretation of a temporal concept (for example) requires the judge to supplement the temporal concept with another concept instantiating another value of equal weight (such as morality or aesthetics). Nowhere did Wright (or any other fundamental rights theorist) suggest that the problem of interpreting moral concepts in law is a subset of the more general problem of interpreting concepts in law. Nor did it seem that it is a problem that could be solved by better draftsmanship:

LEGAL POSITIVISM'S CHECKERED

PAST The past forty years have not been kind to legal positivism. Ever since H.L.A. Hart's famous debate with Lon Fuller over the charge that German legal positivists were partly responsible for the rise of Adolf Hitler, positivism has often been the target of frequent attacks by American lawyers. Its critics have tried, at various times, to connect positivism with a diverse and jointly inconsistent group of theories, such as legal formalism, legal realism, and originalism. Furthermore, since the 1960s, legal positivism has been associated almost entirely with politically conservative forces in the United States, especially with an approach to constitutional interpretation known during the 1970s as “judicial restraint.” Given the various contexts in which the term positivist has been used, it is clear that in recent years it has become a pejorative in modern American legal circles.

The first task of this book is to set out a historical account of the transformation of legal positivism in American jurisprudence. The method is somewhat inductive: The argument begins with the observation that, although scholars today treat legal positivism as a major – if not the major – jurisprudence in the United States, no such theory was discussed by name in legal literature before the late 1920s.

THE EMERGENCE OF NEW LEGAL POSITIVISM

Weak Epistemic Natural Law collapses into strong epistemic natural law because once the ground of law is morality, no nonmoral reason can cabin it. For some conservative legal process scholars, such as Bickel, Bork, and Wechsler, the insatiability of justice was not a problem, because, as we saw in Chapter 5, they did not believe that morality could be objective, and therefore did not think that moral reasoning was anything other than the expression of subjective preference. For these theorists, all law could do was capture the personal preferences of its framers. Hence, adjudication was the application of the original intentions of a law's framers to a set of facts.

If the only positivist reaction to the fundamental rights approach were the originalism of Bickel, Bork, and Wechsler, then the final chapter of legal positivism in the United States would have been a story of a decline into irrelevancy, with the final scene being, perhaps, the defeat of Robert Bork's nomination to the Supreme Court in 1987. Since the late 1980s, originalism has lost much of its influence both in the academy and among the public.

Legal positivism has generated another, much more powerful response to the fundamental rights approach that is rooted in neither moral skepticism nor originalism.