Class action myopia.
Over the past two decades, courts and commentators have often treated the class action as though it were a monolith, limiting their analysis to the particular class form that joins together a large number of claims for monetary relief. This Article argues that the myopic focus on the aggregated-damages class action has led to under-theorization of the other class-action subtypes, which serve far different purposes and have far different effects, and has allowed the ongoing backlash against the aggregated-damages class action to affect the other subtypes in an undifferentiated manner. The failure to confine this backlash to its intended target has had a negative impact on the availability of the other class forms, harming the interests of both litigants and the judiciary. In particular, in civil-rights cases involving injunctive or declaratory relief, obstacles to class treatment pose a threat to remedial efficacy and the rule of law. Courts, lawmakers, and scholars should therefore engage in a broader analysis that takes into account all of the subtypes set forth in the modern class-action rule.
TABLE OF CONTENTS Introduction I. The Neglected Structure of The Class-Action Rule A. Three Categories Rooted in Judicial Experience 1. Inconsistent Judgments and Rule 23(b)(1)(A) 2. Depleted Resources and Rule 23(b)(1)(B) 3. Civil Rights and Rule 23(b)(2) B. A Fourth Category "Deliberately Created" II. The Limited Terms of the Class-Action Debate A. Settlement Pressure B. Attorney Overcompensation C. Delay and Expense D. Other Topics of Debate III. The Undifferentiated Products of the Class-Action Debate A. Interlocutory Appeals B. Evidentiary Burdens. C. Enumerated Ascertainability D. Class Waivers E. Heightened Commonality IV. Case Studies of The Harm to Courts and Litigants A. Jamie S. v. Milwaukee Public Schools B. M.D. ex rel. Stukenberg v. Perry C. Fisher v. University of Texas at Austin V. Beyond Myopia: Broadening the Discussion A. Disaggregating the Concerns, Differentiating the Responses B. Converting to Subtype-Differentiated Standards C. Highlighting History Conclusion
It has become a commonplace to say that the class action is dying, or at least, that courts and lawmakers are trying to kill it. (1) This Article argues that something different is going on: courts and lawmakers are trying to rein in a specific type of class action, and in the process, they are imposing unwarranted constraints on all of the others.
The problem is one of square pegs and round holes, and it arises from a myopic focus on the aggregated-damages class action, (2) the particular class form that aggregates a large number of monetary claims into a single class-wide recovery. Myopia is not blindness, and this problem has not arisen from a lack of knowledge on the part of courts, lawmakers, or scholars. Those who deal with class actions in their professional lives are aware that subtypes other than the aggregated-damages class action exist, and when they explicitly discuss those other class forms, they also recognize significant differences among them. However, when they turn their attention to perceived problems with the class-action device--and the appropriate responses to those problems--their knowledge and recognition of the other class forms tends to fall by the wayside. At that point, they tend to focus almost entirely on the aggregated-damages class action.
In an aggregated-damages class action, the amount of the recovery increases in connection with the number of people in the class, a feature that is both a blessing and a curse. On the one hand, the scaling-up from individual to class-wide recoveries can create economic viability where none existed before, by increasing the potential contingency fee enough that the litigation becomes worth an attorney's time. (3) On the other hand, the incentive to create ever-larger classes can lead to unwieldy litigation, eyebrow-raising fees, and confiscatory recoveries. (4)
Over the past two decades, courts and commentators have been arguing about the settlement pressure arising from class certification, the massive fee awards received by class counsel, and the time and expense required for class-action litigation, among other issues. (5) Disagreements tend to center on the extent to which the benefits of class treatment justify these deviations from the asserted norms of traditional bilateral litigation, (6) rather than the question whether class treatment in fact entails those deviations. (7) This debate has led to a series of restrictions on class treatment, as courts and lawmakers have aimed for a better balance between the costs and benefits of allowing the class action to achieve its litigation-facilitating purpose. (8)
The class action, however, does not have a purpose; it has purposes. (9) The current debate largely fails to reflect the versatility of the class action's design. Consider the following examples:
Logically indivisible relief: Residents of New York City allege that the city's emergency-preparedness program fails to accommodate the needs of persons with disabilities by, for example, failing to adequately provide for the evacuation of persons with disabilities from multistory buildings. (10) The residents sue for an injunction to change the program.
Limited funds: Hurricanes cause the levees in New Orleans to break, leading to extensive flooding. Residents suffer hundreds of millions of dollars in damages, but only about $21 million in insurance funds is available to satisfy their claims. (11) The residents sue to recover their fair share of the funds.
Civil rights: A mental health provider alleges that a California law banning "sexual orientation change efforts" for minors (that is, therapy designed to convert minors from homosexual to heterosexual) violates his First Amendment rights. The provider sues for an injunction prohibiting the statute's enforcement, not only as to him, but as to all others who provide such therapy. (12)
Aggregated damages: Consumers in Ohio allege that a company has sold them defective washing machines, which damage their clothing and create unpleasant odors in their homes. (13) The consumers sue to recover the damages allegedly caused by the machines.
Plaintiffs may bring a class action in each of the foregoing scenarios, but each situation entails a different justification for class treatment and a different set of procedural needs. The class-action rule thus contains a different provision, with different procedural requirements, applicable to each: (14) Federal Rule of Civil Procedure 23(b)(1)(A) for logically indivisible relief, (15) Rule 23(b)(1)(B) for the distribution of a limited fund, (16) Rule 23(b)(2) for civil rights and common conduct, (17) and Rule 23(b)(3) for aggregated damages. (18) For simplicity, I will refer to these subtypes as the logical-indivisibility, limited-fund, injunctive civil-rights, and aggregated-damages class actions, respectively. (19) In contrast to the efficiency and litigation-facilitating purposes of the aggregated-damages class action, (20) the logical-indivisibility subtype protects against inconsistent judgments, the limited-fund subtype promotes the fair distribution of insufficient resources, and the injunctive civil-rights subtype facilitates class-wide relief for class-wide harms. (21)
These subtypes came into being nearly a half century ago, through revisions to Rule 23 that took effect in 1966. (22) By then, centuries of Anglo American case law had demonstrated a need for devices like the logical-indivisibility and limited-fund subtypes as a means of protecting judicial legitimacy and preventing unfairness to litigants. (23) Similarly, relatively recent experiences with desegregation claims had demonstrated a need for a device like the injunctive civil-rights subtype as a means of promoting the rule of law and securing effective relief for large-scale harms. (24) In contrast, the aggregated-damages class action reached beyond previous judicial experience to encompass situations in which class treatment was "not as clearly called for," as the authors of the revisions put it. (25) Although the other subtypes were designed to capture the lessons of existing case law, the aggregated-damages class action was an innovation, designed for procedural flexibility and adaptation. (26)
And adaptation did indeed occur. Incentivized by the promise of sizable contingency fees, which were largely unavailable under the other subtypes, plaintiffs' lawyers turned their creative energies to the aggregated-damages class action. They achieved great success, and by the mid-1990s, courts certified more class actions under the aggregated-damages subtype than any other. (27) Yet even as the use of the aggregated-damages class action has expanded, the need for the other subtypes has remained--research suggests that about one third of class actions involve subtypes other than the aggregated-damages class action, with the injunctive civil-rights class action accounting for a large majority of that subset. (28) Moreover, due to the substantive claims involved, those subtypes have an importance beyond their raw numbers. The injunctive civil-rights class action, in particular, plays an important role in the articulation and enforcement of constitutional rights. (29) The mandate of Brown v. Board of Education, (30) for example, would have been more difficult to carry out if African American students had to sue one by one to obtain admission to previously segregated schools. (31)
Not only does the current debate largely fail to reflect the function and importance of subtypes other than the aggregated-damages class action, (32) but more important, it also has produced across-the-board changes in class-action law that have made the purposes of the other subtypes more difficult to achieve. (33) Limitations ranging from broadened appellate review of class-certification decisions (34) to heightened commonality under Wal-Mart Stores, Inc. v. Dukes (35) have rendered the device inefficient or unavailable for some of its least controversial uses, as a result of perceived problems that may have little or nothing to do with those uses. (36) Indeed, it is unclear whether the paradigmatic post-Brown desegregation cases could be certified as class actions under today's restrictive standards. (37)
As the foregoing discussion suggests, the impact of these undifferentiated restrictions on civil-rights litigation deserves particular concern. (38) Effective enforcement of civil-rights laws depends on private litigation, as Congress recognized long ago. (39) But when only declaratory or injunctive relief is at issue, the private sector generally lacks an economic incentive to bring such litigation, (40) let alone to do so on a class basis. (41) Market forces thus suppress the litigation of class actions seeking declaratory or injunctive relief for civil-rights violations. Increases in the transaction costs associated with injunctive civil-rights class actions can only further suppress this type of class litigation. (42)
Recent cases brought under the injunctive civil-rights subtype illustrate the harms that undifferentiated restrictions on class treatment can cause. (43) In some such cases, the denial of class certification can prevent the courts from reaching the merits of important issues. (44) In others, it can increase the time and expense involved in litigating those issues on a class basis, without a corresponding benefit to the fairness or accuracy of the results. (46) Increases in the time and expense required for class litigation, in turn, will lead some litigants to forego seeking class treatment in the first instance; that choice can have negative consequences for judicial economy, rights articulation, and other values that the judicial system should promote. (46) In order to prevent these harms and improve the conceptual coherence of class-action law, courts, lawmakers, and scholars should move beyond the prevailing myopia to undertake a broader analysis, one that takes into account all of the subtypes set forth in the modern class-action rule. (47)
This Article proceeds as follows. Part I analyzes the origin and structure of the modern class-action rule to demonstrate its multifunctional design. Part II demonstrates the ways in which the current class-action debate neglects the existence and function of subtypes other than the aggregated-damages class action. Part III examines the mismatch between this conceptually limited debate and the across-the-board changes that it has produced. Part IV presents case studies of the harms that the undifferentiated changes can cause, and Part V identifies a set of approaches to mitigating and reversing those harms.
I. THE NEGLECTED STRUCTURE OF THE CLASS-ACTION RULE
The class-action rule took on its current structure through amendments that went into effect in 1966. (48) By that time, American courts had decades of experience with the prior version of Rule 23 of the Federal Rules of Civil Procedure, in addition to a much larger body of Anglo American case law on aggregate litigation generally. (49) The authors of the 1966 amendments took the lessons of history into account, (50) but they did not allow that history to constrain them. They created a new framework requiring that all class actions must satisfy the prerequisites of numerosity, commonality, typicality, and adequacy of representation, (51) and must also fit within one of four class-action subtypes. (52) As described below, three of the subtypes represented an effort to codify a set of best practices that courts had already developed, whereas the fourth marked an ambitious and uncertain change in American civil procedure. It is that final category that, over the past two decades, has driven the path of the class-action rule as a whole.
A. Three Categories Rooted in Judicial Experience
Advisory Committee reporter Benjamin Kaplan, writing in the year following the adoption of revised Rule 23, described the drafters' approach to prior judicial experience with class actions as follows:
The Advisory Committee ... perceived, as lawyers had for a long time, that some litigious situations affecting numerous persons "naturally" or "necessarily" called for unitary adjudication.... Approaching rule 23, then ... the Committee strove to sort out the factual situations or patterns that had recurred in class actions and appeared with varying degrees of convincingness to justify treatment of the class in solido. The revised rule was written upon the framework thus revealed.... (53)
This analysis of recurring fact patterns resulted in the first three categories described in the class-action rule: the logical-indivisibility subtype set forth in Rule 23(b)(1)(A), the limited-fund subtype set forth in Rule 23(b)(1)(B), and the injunctive civil-rights subtype set forth in Rule 23(b)(2). (54) These three subtypes are collectively known as the "mandatory" class actions, because if a court certifies a class action under one of these subtypes, class members do not have an absolute right to decline membership in the class--that is, to "opt out." (55) (In contrast, the aggregated-damages class action set forth in Rule 23(b)(3) does provide an absolute right to opt out. (56) Due to their historical pedigrees, and because of the confusion that the term "mandatory" can cause, (57) I will refer to these three subtypes as the "traditional" class actions.
1. Inconsistent Judgments and Rule 23(b)(1)(A). The Advisory Committee began its search for the traditional class-action categories by asking what would happen, in different factual scenarios, if more than one potential claimant brought an individual lawsuit. (58) In one scenario that courts had repeatedly faced, individual actions by multiple claimants created a risk of inconsistent judgments. The problem arose when a defendant had to choose whether to take a single, impersonal action with the potential to affect numerous other people--for example, taking water from a stream, (59) constructing a building, (60) or issuing a bond. (61) The defendant's conduct in such cases is logically indivisible in the sense that it cannot possibly be modified as to one plaintiff but not another. (62) For example, a defendant cannot take water from a particular stream so as to reduce the amount of water available to one downstream landowner, yet leave the amount of water available to another downstream landowner unchanged. Similarly, a defendant cannot both construct and not construct a particular building, or issue and not issue a particular bond.
Although the defendant in a case involving logical indivisibility has no ability to take different actions toward different plaintiffs, multiple claimants might individually possess the right to sue the defendant over its conduct. In the absence of class treatment, this potential for multiple lawsuits would present an adjudicatory problem for both courts and litigants. A court might issue a decree requiring the defendant to take an action different from that required by another court's decree. Defendants might thereby find themselves subject to conflicting orders, or orders that simultaneously permitted and prohibited the challenged conduct. It was this risk of inconsistent judgments, and its negative consequences for judicial legitimacy, that the authors of the 1966 revisions sought to avoid.
To address cases involving logically indivisible relief, the authors of the 1966 revisions created Rule 23(b)(1)(A). The text of this subtype explicitly sets forth its purpose of preventing inconsistent judgments, providing for class treatment when "prosecuting separate actions by or against individual class members would create a risk of ... inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class." (63) The Advisory Committee envisioned that the logical-indivisibility subtype would enable a single, class-wide adjudication of the claimants' rights and the defendant's duties, preserving judicial legitimacy and assuring the possibility of compliance. (64)
2. Depleted Resources and Rule 23(b)(1)(B). In creating the logical-indivisibility subtype, the authors of the 1966 revisions generally took a defendant's perspective on the risks of individual adjudications. In contrast, when they turned to the limited-fund subtype, they took up the perspective of potential claimants. (65) Here, the risk to be avoided was that the adjudication of one claimant's rights would prejudice the interests of the others--for example, by depleting the resources available to satisfy future judgments. (66) Rule 19, which governs joinder of required parties, (67) addresses the same risk on a smaller scale; (68) not coincidentally, amendments to that rule took effect simultaneously with the revisions to Rule 23. (69)
At the time of the 1966 revisions, principles similar to those captured in Rule (19) had already existed for centuries. (70) Courts had developed those principles to address recurring fact patterns, including the limited-fund scenario, in which the externalities of an individual case had the potential to harm similarly situated plaintiffs. (71) Just as the logical-indivisibility scenario involved the impossibility of a defendant complying with incompatible standards of conduct, the limited-fund scenario involved another problem of impossibility, one that arose when a defendant would not be able to pay out all of the judgments that could be entered against it. (72)
Early limited-fund cases involved situations such as foreclosure on a property subject to multiple mortgages and the distribution of a decedent's assets to his creditors. (73) Those types of cases continued into the modern era even as new forms, such as lawsuits seeking to divide insurance proceeds among those injured in an accident or natural disaster, came into being. (74) The thread tying the cases together was the risk that the latest-in-time claimants might be left with no recourse, despite having valid claims against the defendant, because of the practical effects of judgments already entered in favor of others.
In order to address that risk in cases involving large numbers of claimants, (75) the authors of the 1966 revisions created the limited-fund subtype under Rule 23(b)(1)(B). By its terms, this subtype authorizes class treatment when "prosecuting separate actions by or against individual class members would create a risk of ... adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests." (76) The provision allows for the equitable distribution of a limited fund through a single class proceeding, eliminating the need for claimants to race to the courthouse in order to secure relief.
3. Civil Rights and Rule 23(b)(2). The injunctive civil-rights class action responded to a more recent set of cases, and a more immediate set of concerns, than the other two traditional class forms discussed above. Throughout the 1950s and 1960s, civil-rights plaintiffs attempted to bring a number of cases on a class basis. (77) In many cases--most famously, Brown v. Board of Education--they succeeded in obtaining class treatment and correspondingly broad orders for relief. (78) Often this breadth occurred in spite of the formalistic requirements imposed by the pre-1966 version of the class-action rule, which appeared to prevent class-wide remedies in desegregation cases. (79) Some judges, "[i]gnoring doctrinal constraints altogether ... signaled that plaintiffs' judgments in desegregation class actions would benefit all black schoolchildren included in the class definition," even though the rule required a different result. (80)
Other courts, however, refused to allow class treatment for desegregation and other civil-rights claims. (81) Especially during the post-Brown period of Southern intransigence, many courts and legislatures engaged in legal strategies designed to limit the reach of the decision. (82) These judicial and legislative strategies were mutually reinforcing: judges interpreted Brown as a prohibition on de jure discrimination rather than a requirement of integration, and legislatures "replaced de jure policies of segregation with mechanisms that purported to treat blacks as individuals but invariably produced the same segregated results." (83) For example, some states enacted pupil-assignment laws that allowed school boards to conduct an individualized, multiple-factor assessment of each student's appropriate school placement. (84) These replacement policies made dissimilarities within a potential class of African American students theoretically relevant to the class-certification analysis, and thus defeated requests for class treatment. (85)
The unavailability of class treatment created serious problems for civil-rights plaintiffs. It could prevent them from obtaining any decision on the merits of their claims; for example, a school desegregation case might drag on until the individual plaintiffs had graduated, rendering the action moot. (86) It could create additional obstacles to compliance; for example, even if an individual case did result in a broad remedial order, the intended beneficiaries might find themselves unable to enforce it because of their status as nonparties. (87) Most important, it could result in an order so narrow as to be meaningless--many judges at that time refused to grant system-wide relief to individual litigants in civil-rights cases. (88) Some courts, upon holding that a desegregation plaintiff had proved his claim, would refuse to order any remedy beyond the admission of that one African American student to an otherwise all-white school. (89) That remedial approach could result in integration only after multiple lawsuits and great expense.
The creation of the injunctive civil-rights subtype can best be understood against this societal backdrop. (90) Although the modern version of Rule 23 took effect in 1966, the authors began work on the revisions several years earlier. (91) As Advisory Committee member John Frank explained, those revision efforts proceeded "in direct parallel to the Civil Rights Act of 1964 and the race relations echo of that decade was always in the committee room." (92) The drafters were well aware of the hurdles facing civil-rights plaintiffs in unsympathetic and hostile courts, (93) as well as the inadequate relief that many of those litigants obtained from individual-by-individual injunctions. (94) This mismatch between remedy and harm had negative consequences not only for the other affected individuals, but also for judicial legitimacy and the rule of law. (95)
With the need for system-wide responses to civil-rights claims specifically in mind, (96) the authors of the 1966 revisions created Rule 23(b)(2), which applies when "the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate respecting the class as a whole." (97) As the authors noted, this subtype allows a court to "settl[e] the legality of the [defendant's] behavior with respect to the class as a whole," (98) rather than through piecemeal litigation. If the court decides in favor of the class, all class members can rely on the resulting injunction or declaration. If the court decides in favor of the defendant, all class members are bound to that result.
B. A Fourth Category "Deliberately Created"
The final subtype created by the 1966 revisions, unlike the other three, did not result from the lessons of judicial experience with aggregate litigation. Nor did it result from the Advisory Committee's search for the categories of "natural" class actions. (99) Rather, it represented "a new category deliberately created," and an "innovation," as its principal author described it. (100) This subtype, the aggregated-damages class action, applies when "the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy." (101)
Rule 23(b)(3) enables a representative plaintiff to bring a class action based on an aggregation of multiple damages claims. The Advisory Committee stated that classes certified under the aggregated-damages subtype could "achieve economies of time, effort, and expense," as well as "promote)] uniformity of decision as to persons similarly situated, without sacrificing procedural fairness or bringing about other undesirable results." (102) Alternatively, by offering the potential for a larger overall recovery and thus a larger contingency fee, (103) this subtype can create an economic incentive to litigation where none existed before. As Jack Weinstein wrote several years after the new rule's adoption, "[m]atters which would not have been litigated can now be brought to court." (104) These efficiency and litigation-generating purposes contrast sharply with the other subtypes' focus on avoiding the unfair or unworkable outcomes of individual litigation. (105)
The authors of the 1966 revisions had doubts as to whether they should include the aggregated-damages class action in their changes to Rule 23. (106) The Advisory Committee's Note described the subtype in remarkably tentative terms, noting that "[i]n the situations to which this subdivision relates, class-action treatment is not as clearly called for as in those described above, but it may nevertheless be convenient and desirable depending upon the particular facts." (107) In an article published in the year after the rule's adoption, Benjamin Kaplan assured readers that "(b)(3) is well confined," (108) and that it "invites a close look at the case before it is accepted as a class action and even then requires that it be specially treated." (109) That special treatment includes express judicial findings of predominance and superiority, as well as notice and opt-out rights for members of the class--procedural protections not required under the other subtypes. (110)
Notwithstanding these additional protections, the aggregated-damages class action became the focus of criticism and controversy from the start. (111) Moreover, although the authors of the 1966 revisions had envisioned a more limited use for the new subtype, (112) the plaintiffs' bar increasingly recognized the possibilities it presented for economic rewards, and they attempted to bring class actions in areas ranging from mass torts to consumer claims. (113) Unsurprisingly, defendants resisted these efforts, (114) and before long, "segments of the bench and bar [were] waging a holy war" over the class-action rule. (115) Stories of class counsel engaging in "undesirable or unprofessional conduct" became commonplace, notwithstanding objections that such "abuse does not appear to have been widespread," (116) and that "to the extent there are difficulties they center around ... class actions under rule 23(b)(3), rather than actions under subdivision (b)(1) or (b)(2)." (117)
Due in large part to the creativity of the plaintiffs' bar with regard to the aggregated-damages subtype, the other subtypes now represent a minority of class actions. But they are a significant minority, not only in number, but also in importance. (118) The conditions that created a need for the traditional subtypes, having existed for decades or even centuries, have not suddenly disappeared. As the next Part explains, however, those subtypes have played a nearly invisible role in the development of class-action law over the past two decades.
II. THE LIMITED TERMS OF THE CLASS-ACTION DEBATE
Courts and commentators have long weighed the costs and benefits of the class-action device when debating its appropriate level of availability. (119) In its current form, that debate involves vigorous disputes over issues relating to settlement pressure, attorney overcompensation, and the expense and delay associated with class treatment, among other topics. Over the past two decades, the class action's proponents and opponents alike (120) have tended to frame these disputes in a manner that neglects the existence of the logical-indivisibility, limited-fund, and injunctive civil-rights class-action subtypes.
It bears noting that the following analysis does not depend on whether the concerns described below are well taken in the context of the aggregated-damages class action. (121) I will note my view, however, that these concerns have varying degrees of validity and import within that context. Arguments that plaintiffs' counsel in aggregated-damages class actions are overcompensated, for example, are often overstated (especially when unaccompanied by any inquiry into the compensation received by defense counsel), whereas concerns about the settlement pressure arising from certification of an aggregated-damages class sometimes carry more weight (especially as a justification for interlocutory appeals from class-certification decisions). My purpose in this Part is not to take a position with respect to these disputes in the context of the aggregated-damages class action. Rather, my argument is that even if one agrees that each of these concerns justifies restricting the availability of the aggregated-damages class action, the justification (as currently articulated and examined) does not extend to restrictions on the other subtypes. (122)
A. Settlement Pressure
Those who favor greater restrictions on class actions often raise the specter of "blackmail" (123) or "in terrorem" (124) settlements, in which a defendant pays to settle a case not because of its merits, but because class certification has increased the stakes of the litigation beyond what the defendant can bear. (125) Scholars raised concerns about settlement pressure as early as 1971, (126) but the issue did not gain widespread traction until 1995, when the Seventh Circuit decided In re Rhone-Poulenc Rorer, Inc. (127) In that influential opinion, Judge Posner expressed his concern that class certification could "forc[e] ... defendants to stake their companies on the outcome of a single jury trial, or be forced by fear of the risk of bankruptcy to settle even if they have no legal liability." (128) In the intervening years, the notion that judges should guard against uses of the class action that result in irresistible settlement pressure has gained credence among courts and scholars. (129)
Of course, the blackmail thesis also has its critics: courts and scholars have questioned it on both empirical and normative grounds. (130) Some have pointed to the lack of evidence that defendants actually experience bet-the-company levels of settlement pressure because of class certification, or that settlements in fact result from certification-induced pressure, as opposed to pressure arising from the merits of the plaintiffs' claims. (131) Others have argued that courts have no authority to consider settlement pressure as a factor in certification decisions, as no such provision appears in the class-action rule. (132) Finally, some have disputed that there is anything unfair about the increased settlement pressure associated with class certification, as it results only from the scope of the defendant's own activity. (133)
Notwithstanding the disagreements between them, both sides of this debate start from the assumption that class certification does in fact increase the stakes involved in the litigation, in the sense of increasing the total amount that the defendant would have to pay if it lost the case. To be sure, this assumption will always hold true for the aggregated-damages class action, because the joining together of multiple monetary claims necessarily increases the defendant's potential liability. Whatever the size of the claims, summing up two monetary values produces a total greater than either one taken alone.
What has gone largely unnoticed, however, is that the assumption of increased liability often does not hold true for subtypes other than the aggregated-damages class action. (134) For example, the very nature of logically indivisible relief is that the remedy available to a single claimant is the same as the remedy available to a group of claimants. (135) No matter whether one or many residents seek a particular change in a city's emergency-preparedness plan, the cost of making that change will remain the same; no matter whether one or many customers request that a restaurant build a wheelchair ramp, the cost of building that ramp will not change; no matter whether one or many neighbors complain about the fumes emanating from a hot sauce plant, the cost of containing the fumes will not be affected. In these types of cases, although many factors may affect the defendant's potential liability, the mere fact of class treatment does not. The same is true of limited-fund class actions, (136) which are available only when factors unrelated to the litigation limit the amount of money the defendant might be required to pay. (137)
Prior to 2011, the link between certification and settlement pressure was more complicated in cases brought pursuant to the injunctive civil-rights subtype. At that time, courts routinely included claims for individualized monetary relief in classes certified under Rule 23(b)(2), creating a scaling-up effect similar to that involved in aggregated-damages class actions. In its 2011 decision in Wal-Mart Stores, Inc. v. Dukes, however, the Supreme Court held that the members of a class certified under the injunctive civil-rights subtype could not seek individualized monetary relief. (138) Accordingly, although litigants may seek certification of an aggregated-damages class contemporaneously with certification of an injunctive civil-rights class, the latter should not itself entail the aggregation of individualized monetary claims.
To be sure, a defendant may well face pressure to settle a case that does not involve the aggregation of monetary claims. The cost of implementing an injunction, for example, may reach into the millions of dollars. (139) In contrast to the aggregated-damages class action, however, for which the cost of the remedy necessarily increases with the number of people in the class, (140) the cost of a system-wide injunction will often be independent of the size or existence of the class. (141) The cost of such an injunction depends on the expense associated with changing the defendant's generally applicable conduct, rather than the expense associated with delivering an individualized remedy to each class member. Moreover, even when logically indivisible relief is not at issue, a court might award systemwide relief to an individual plaintiff, further attenuating the relationship between class treatment and remedial cost. (142) Accordingly, although subtypes other than the aggregated-damages class action can involve significant settlement pressure, class treatment is not usually the source of that pressure.
As the foregoing discussion suggests, the connection between class certification and settlement pressure requires separate analysis under each class-action subtype. But courts and scholars have generally failed to recognize the need for this differentiated analysis--class-action myopia has instead led the debate to proceed on the basis of mere assumptions, which remain unexamined precisely because they hold true in the context of the aggregated-damages subtype. Indeed, scholarship discussing certification-induced settlement pressure has routinely neglected even to mention that the other subtypes exist. (141) Thus, although the debate over settlement pressure purports to be a debate about the class action writ large, on its current terms it amounts to a debate only about the aggregated-damages class action.
B. Attorney Overcompensation
The myopic focus on the aggregated-damages class action is not limited to disputes over settlement pressure, as disagreements over compensation for class counsel demonstrate. On one side of this disagreement, those who would limit the availability of the class action argue that plaintiffs' counsel receive excessive attorney's fees in class litigation. (144) Members of the public tend to agree: "[P]ublic attitudes about plaintiffs' class action lawyers have often been strongly negative," (145) fueled in large part by stories of attorneys who receive huge contingency fees while class members receive little to no monetary relief. (146)
As with settlement pressure, scholars have responded to the charges of overcompensation both empirically and normatively. Some have noted that, contrary to political rhetoric and popular belief, attorney's fees for class counsel have not in fact increased over time, and that "[f]ees and costs decline as a percent of the recovery as the recovery amount increases, suggesting the efficiency of this form of aggregate litigation." (147) Others have pointed to the deterrent function of class litigation, arguing that attorney compensation needs to be high enough to encourage class actions that deter harmful conduct. (148)
At times, this discussion looks like an argument over who is the fatter cat, with the class action's opponents pointing to class counsel who reap huge fee awards (despite doing little to earn them), and its proponents pointing to companies that reap huge profits (despite engaging in harmful activity). (149) Nonprofit public-interest lawyers seldom appear as characters in this drama. Just as the phrase "class action" is unlikely to make most people think of Brown v. Board of Education (150) the phrase "class-action lawyer" is unlikely to make them think of Thurgood Marshall. Yet Brown was no less a class action than the consumer or securities cases that might come to mind, and Marshall was no less a class-action lawyer than the attorneys who bring those cases.
More generally, what the compensation debate neglects to recognize is that some class actions cannot generate huge contingency fees, or indeed any contingency fees, because they do not seek monetary relief. For example, consider class actions seeking only injunctive or declaratory relief pursuant to the civil-rights subtype. (151) Such actions can yield a court-ordered attorney's fee only if a fee-shifting statute applies. (152) Even then, absent exceptional circumstances, class counsel will at most receive a reasonable hourly rate for the hours reasonably spent on the litigation; (153) the typical award will fall below counsel's market rate for hours actually worked. (154) Indeed, many successful cases covered by a fee-shifting statute will yield no fee at all. (155) As with settlement pressure, compensation issues play out differently in the context of each class-action subtype, but the current class-action debate fails to recognize or account for those differences.
C. Delay and Expense
The same unrecognized limitation affects discussions of the delay and expense associated with the class-action device. Critics complain that class proceedings cost too much and take too long, with the effect of clogging court dockets, delaying relief to class members, and miring defendants in protracted litigation. (156) The class action's proponents largely concede that class proceedings consume more time and money than nonclass litigation, but argue that those additional costs are necessary to ensure that absent class members will be protected and that the necessary deterrence will be achieved. (157) The underlying assumption, on both sides, is that class actions are more expensive and time-consuming because they are class actions.
The assumption of increased time and effort holds true for the negative-value aggregated-damages class action, because in the absence of class treatment, little to no litigation would in fact occur. (158) Beyond that context, however, the issue becomes much murkier. To be sure, class certification proceedings take up courts' and litigants' time, and are not required in a nonclass case. (159) Yet the effect of those proceedings, when certification is granted, is to collapse multiple lawsuits (whether actual or potential) into one. More important, to the extent that the question is whether to increase the obstacles to class treatment, it must focus on postcertification delay and expense. Certification-related delay and expense would otherwise lead to obstacles that further increase certification-related delay and expense in an endless, one-way ratchet.
In terms of post-certification delay and expense, the class-action device can enable some lengthy and expensive litigation, involving extensive briefing and discovery. However, it also can enable the efficient, class-wide resolution of a purely legal question, involving no discovery at all. For example, in Doe v. Marion County, (160) the plaintiff brought an injunctive civil-rights class action challenging, on First Amendment grounds, an Indiana statute that prohibited registered sex offenders from using social-networking websites. He filed his complaint on June 27, 2012, and the Seventh Circuit resolved the "single legal question" presented by the case only nineteen months later, on January 23, 2013. (161)
Moreover, some of the "big" injunctive civil-rights class actions would be resource-intensive even if they proceeded on a nonclass basis. Consider California prison litigation. Before there was Coleman!Plata (162) a massive and ongoing pair of class actions addressing prison overcrowding, there was Johnson v. California, (163) a nonclass case addressing inmate segregation. Although the latter proceeded in the absence of class treatment, it nonetheless consumed over a decade of courts' and litigants' time, and it resulted in a statewide, structural consent decree. (164)
In some types of cases, class treatment can actually save both time and money, accelerating the provision of relief to the claimants. For example, in Ortiz v. Fibreboard Corp., (165) the litigants attempted to settle asbestos litigation under the limited-fund subtype. (166) When the case reached the U.S. Supreme Court, (167) the entire Court agreed that "the elephantine mass of asbestos cases ... defies customary judicial administration." (168) The defendant had faced thousands of asbestos claims over a period of decades, and new claimants continued to come forward on a regular basis. The proposed class settlement would have stopped this flood, providing compensation for the claimants, closure for the company, and docket relief for the courts. Because the Court determined that the litigation was not amenable to class treatment, however, the company and claimants were instead "consigned to the endless waiting that characterizes asbestos bankruptcies." (169) This is not to say that the class settlement in Ortiz should have been approved. My point is only that class treatment would have saved time and money, a possibility that the current class-action debate largely neglects.
The aggregation of monetary claims large enough to proceed individually, like those in Ortiz, can create efficiencies by reducing the duplication of effort by judges and litigants in factually and legally similar cases. These potential efficiency gains exist regardless of whether the aggregation occurs pursuant to the limited-fund class action or the aggregated-damages class action--under either subtype, discovery between the plaintiffs and the defendant will be bilateral rather than multilateral, and common questions will be decided in one proceeding rather than several. (170) An analysis of the other subtypes thus reveals that this aspect of the current debate has been limited in its focus, not only to the aggregated-damages class action, but to the negative-value aggregated-damages class action.
D. Other Topics of Debate
What is true of the foregoing topics is true of many others. Discussions of litigant autonomy, (171) agency costs, (172) distortion of substantive law, (173) and institutional competence (174) all have focused almost exclusively on the aggregated-damages class action, resulting in a conceptually incomplete debate over the costs and benefits of the class-action device. (175) The class action's opponents and proponents have found common ground, but that common ground represents only a portion of the territory covered by the class-action rule. Even the most respected and accomplished attorneys and scholars have at times limited their analysis in this manner. For example, consider John Frank, a highly regarded scholar and advocate who served on the rulemaking committee that drafted the modern class-action rule in the early 1960s. (176) Writing in the mid-1990s, Frank described the rule's origins and subtypes, then went on to discuss what he viewed as the problems with the rule. (177) The concerns that he identified in that discussion related only to the aggregated-damages subtype. He concluded that "the modern class action ... ha[d] become a legal mechanism out of control," (178) yet the analysis supported only the conclusion that the aggregated-damages class action was a mechanism out of control. If the luminaries who designed the modern rule can fall prey to class-action myopia, it should come as no surprise that others do as well.
III. The Undifferentiated Products of the Class-Action Debate
The current concerns about the class-action device have been debated within the limited context of the aggregated-damages class action, (179) largely neglecting considerations related to the other subtypes set forth in the rule. (180) Even as the class-action debate has narrowed in focus, however, its products have multiplied in scope and effect. As this Part explains, over a period beginning roughly in the mid-1990s, (181) courts and lawmakers have imposed a series of significant, across-the-board restrictions on class actions.
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|Title Annotation:||Abstract into III. The Undifferentiated Products of the Class-Action Debate, p. 843-876|
|Publication:||Duke Law Journal|
|Date:||Feb 1, 2016|
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