In bankruptcy, establishing a mass-tort trust is the final piece in structuring resolution of protracted aggregate litigation faced by a corporate debtor. As seen in cases like Purdue Pharma and Boy Scouts of America, the multibillion-dollar aggregate settlement figure captures all the headlines. But the trust distribution provisions\u2014which actually provide the details of how individual claimants will be treated and what they will receive\u2014are an afterthought. This odd dynamic has allowed antiquated trust provisions that create short-term<\/p>\n\n\n\n
benefits and often significant long-term costs to proliferate. The Faustian Bargain is especially pernicious in mass torts because many key trust features appear harmless or marginally threatening when initially identified. Unfortunately, the confluence of these provisions can wildly distort the assumptions underlying settlement. In fact, they alter the deal.<\/p>\n\n\n\n
This Article explores the details of modern mass-tort trusts resolved through federal bankruptcy with the objective of highlighting structural and procedural anomalies. We begin by assessing the foundational trusts created decades ago and use this data as the basis for comparative analysis of modern trusts. Eleven representative trusts originating in bankruptcy cases filed over the last four decades inform our assessment. Our research reveals various pathologies that heighten the risk of disparate recoveries for similarly situated claimants. Future claimants\u2014those who file claims many years after trust inception\u2014are the most affected.<\/p>\n\n\n\n
This Article proposes modified distribution protocols and a reconceptualization of how these trusts are negotiated, structured, and backstopped to improve the likelihood of comparable recoveries for similarly situated claimants across the life of the trust. Our ultimate goal is to inject additional integrity into the trust formulation process and improve outcomes for the next wave of mass-tort cases.<\/p>\n\n\n\n