You're completely misunderstanding the purpose of class actions, and are using an oft-repeated error. The article itself explains the value of class actions.
Class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them.
This is the source of the fallacy you commit: the idea that this involves large compensation for consumers. Consumers ARE compensated in class actions, it's just that their individual harm is small so their individual payout is small.
So if, say, Comcast has been secretly overcharging customers $10/month, it's not a big enough problem for any one of them to sue. But as a class of millions of Comcast consumers, it may be worth it, and can have a real punch at that level.
This is the other part of your error: of course class actions are "lawyer-driven" because, again, the harm to any individual is small. It's the lawyers and firms pursuing the class action that are doing the work and organizing the action, often on contingency. Related to your first mistake, you and many others see the lawyers getting a big payment as "stealing" from the class when they are being compensated for the work they did and winning restitution for harms that no individual consumer would pursue, and the class members STILL get fairly compensated for the small harm done to them.
Finally, and perhaps the largest part of your error, this does and, in the US, is really the only way to, deter illegal conduct because, again, this illegal conduct is premised on the idea that it's too small for any person to care or find it worthwhile to fight. By organizing a class action you enable consumers to hit back and stop this kind of behavior, and put companies on notice that they can't try these underhanded tactics without risk.
I agree that a regulation model would be preferable to this kind of litigation, but until we have regulation we must use the litigation tools we have available.
Be very wary of screeds against class actions, they're almost certainly corporate propaganda.
A just resolution would be for each customer to get $120/year they were with Comcast PLUS Comcast should have some penalty for their fraud.
Instead what happens is Comcast agrees to a "huge" $30 million fine that works out to $12/customer per year if everyone opts in to the lawsuit and the lawyers take 50% for their efforts, so the lawyers get $15 million, the customers who sign up get $12 back and the ones who miss the memo get $0.
The customers don't have any recourse to say "no, that's a shitty settlement, we want 100% of what we're owed not 10% of it" or "hey, 50% is too much for the lawyers, I'd rather take $0 than the shitty deal we were offered".
A just system would make the corporation pay the lawyer fees (as part of their punishment for doing illegal things) and the customers/victims would be made 100% whole.
They definitely do, they can decide to opt-out, and retain the right to sue the company on that issue. But those who opt-out would have to go start their own lawsuit. For small matters where you were wronged by $120, and you only get $30 back, this is definitely not worth it to start your own lawsuit, the best action here is to take the money and boycott that company if possible. For bigger amounts, like lemon-law cars, it might be worth it, especially if the payouts look too small. For instance, $300 refund if you had to do multiple transmissions repair on your car doesn't seem that great, given that a transmission repair can cost from $500 to thousands of $ each. In that case it can make sense to opt-out.
> or "hey, 50% is too much for the lawyers, I'd rather take $0 than the shitty deal we were offered".
The article says they usually get $2 for $10, which can still look high I agree, but definitely not 50%.
Actually, you are misunderstanding the purpose of class actions. You may see it as s some ideal, but it's not why they were created. They were created to simplify similar cases into one case for the purpose of not having two trials when you could have one.. That's it. It was literally for the efficient administration of justice. Not to do what you suggest the purpose is. Take a gander at the history of the federal rules of civil procedure, this is very widely documented and known.
This is one reason the supreme court was able to say "no more". They are just a collection of court rules.
I'd also argue they are not the ideal instrument, as they rarely actually achieve any real gains for the individuals.
I can't say whether or not the process is ideal, but I can say that the benefit to individuals is irrelevant. The COLLECTIVE - the whole society - benefits in a big way when the behavior of a large corporation doing very small harm to thousands or millions of individuals is punished and deterred. The bar for success can't always be directed at individuals; there are very positive societal level benefits that are small to individuals but huge to the whole ecosystem.
Again, never the original purpose, and while a good goal, class actions are surely ineffective at this.
" The COLLECTIVE - the whole society - benefits in a big way when the behavior of a large corporation doing very small harm to thousands or millions of individuals is punished and deterred."
Also as mentioned, I think this is very true, but class actions have pretty much not had that effect at all. There are very few areas where class actions have been effective at accomplishing this.
The Advisory Committee that drafted the new Rule 23 in the mid-1960s was influenced by two major developments. First was the suggestion of Harry Kalven, Jr. and Maurice Rosenfield in 1941 that class action litigation by individual shareholders on behalf of all shareholders of a company could effectively supplement direct government regulation of securities markets and other similar markets. The second development was the rise of the civil rights movement, environmentalism and consumerism. The groups behind these movements, as well as many others in the 1960s, 1970s and 1980s, all turned to class actions as a means for achieving their goals.
https://en.wikipedia.org/wiki/Class_action
Also, it's somewhat misleading to cite to the history of the class action and ignore current justifications. This is like arguing that U.S. democracy is bad because it was originally a method for a small group of wealthy landowners to control the country, while ignoring the fact that currently anyone can vote. The history of class actions in England, although interesting, does not make the GP comment incorrect. If the modern purpose is only to simplify similar cases, we already have coordination and consolidation.
Yes.
Second, just in in what sense? If the questions affecting everyone are the same, there's no point in having 5 trials about it.
"(b) Types of Class Actions. A class action may be maintained if Rule 23(a) is satisfied and if: .. (3) 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. "
If you think of litigation in economic-theoretic terms, yes, that's the purpose of class actions. But while you're in that head space, you also need to consider the principal-agent problem: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble.... Where the claims are small and the class members are unsophisticated, the principals (the consumers) don't have sufficient incentive to control their agents (the lawyers).
That manifests in class action litigation in two ways. Class action lawyers are incentivized to bring cases that are marginal on the merits: http://www.abajournal.com/news/article/posner_opinion_blasts.... They also are incentivized to settle good cases for for a fraction of potential damages.
The end result is a system that doesn't do a great job of really anything. Consumers get only a tiny fraction of what they've lost. Companies aren't deterred--they just treat the occasional payout as the cost of doing business.
Class action lawsuits are a crappy solution, but often better than the alternative, which is often nothing.
(In some cases, mass direct-action lawsuits are superior, but coordinating those also has substantially increased overhead, and they gave some of the same settlement incentives; OTOH, because they are positive approval rather than opt out, it's less likely that a small-fraction settlement gets approved.
I was referring to the alternatives available in the status quo legal system in the US, but I disagree that more powerful regulatory agencies are a complete replacement for class actions, though they are perhaps independently desirable.
> 'Doing nothing' is a false dichotomy unless you subscribe to libertarian/corporatist philosophy. (Which would, if it could, abolish the position of the attorney general.)
No, it wouldn't (at least, most libertarians and even more so pro-corporate types recognize a role for government and a role for AGs within that government, though a narrower role than the status quo for each.) It might eliminate state causes of action on behalf of consumers, but those aren't the whole (or even main) thing that AGs, who are the state or federal government's chief legal counsel and law enforcement officer, do.
(Also, you seem to be missing “corporatist” to mean “pro-corporation minarchist capitalist”; corporatism is a disinct politico-economic philosophy that is about as far from libertarianism/minarchism as possible.)
And looking at the American political landscape, there are far more dyed-in-the-wool anti-human corporatists holding power then there are libertarians.
Not to mention that the article offers data to refute this idea that only the lawyers benfit (from a study the author commissioned in 2010 while at the Consumer Financial Protection Bureau):
>Opponents also claim that the rule benefits lawyers rather than consumers. In reality, lawyers collect a small portion compared with consumers, and only if they succeed. For every $10 that a company pays out for wrongdoing, we found about $8 goes to consumers and $2 goes to pay legal costs. In any event, banks choose to hire lawyers to file class-action lawsuits, and ordinary people deserve to make the same choice.
>Consumers get only a tiny fraction of what they've lost.
But the whole point is that consumers have, individually, lost very little. If you were overcharged $20 and got $10, or $5, the company in aggregate has still been forced to pay out a lot. Any individual consumer isn't going to receive significant compensation even in a 100% win.
The article again offers data to refute this idea that consumers don't get fair compensation through class actions:
>First, opponents claim that plaintiffs are better served by acting individually than by joining a group lawsuit. This claim is not supported by facts or common sense. Our study contained revealing data on the results of group lawsuits and individual actions. We found that group lawsuits get more money back to more people. In five years of group lawsuits, we tallied an average of $220 million paid to 6.8 million consumers per year. Yet in the arbitration cases we studied, on average, 16 people per year recovered less than $100,000 total.
>Companies aren't deterred--they just treat the occasional payout as the cost of doing business.
This is true of any litigation, yet we don't usually see arguments against the very concept. It still at least forces companies to consider one more bar to abuse.
Until we have better regulation, this imperfect tool is something consumers have available to them to fight abuses of a type that normally wouldn't be addressed because of their nature. Without this tool, consumers would have no recourse. As the article says:
>As one judge noted, “only a lunatic or a fanatic sues for $30.”
>When a bank charges illegal fees to millions of customers and then blocks them from suing together, a result is not millions of individual claims, but zero. So the bank gets to pocket millions in ill-gotten gains.
Arguing against class actions makes no sense until we do have legislative or regulatory alternatives.
>In reality, lawyers collect a small portion compared with consumers, and only if they succeed. For every $10 that a company pays out for wrongdoing, we found about $8 goes to consumers and $2 goes to pay legal costs.
Of course we could take issue with this study, but unless someone can present some evidence in its favor the notion that only the lawyers ever profit from class actions seems like received wisdom "everyone just knows".
How much would you pay to somebody to ensure that a big evil corporation is not cheating their ~10M customers by $10/year (100M/year in total)? $10M? $50M?
This doesn't mean it's the ideal solution to widespread consumer harm, but it's a tool we have at our disposal NOW instead of hypothetical legislation or regulation we might have at some point in the future...
He's basically saying class actions don't work the best if your goal is greater consumer protection. There are other ways to do it that are more effective.
I mean, the very article he's commenting on directly refutes his points about class actions resulting in less compensation for consumers and only or largely benefiting lawyers.
You make some statements here that are arguable - for example, that 'class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them.'
That's not always true. Legislation or regulatory oversight are often better solutions as they occur faster and have broader implications. You even acknowledge that later in your comment as you agree that regulation is better.
I don't think anybody in the thread is arguing that individual arbitration is a better method. The question is whether class-action suits is the final method or if we should be considering different regulatory controls.
No one, myself included, is saying class actions should be "the final method", just that it's wrong to argue against them when they are currently generally the only method available to consumers for certain kinds of harm. I'd be the first to support robust regulatory protections that protect consumers to the point that they render class actions redundant, but sadly we don't live in that world.
Class actions are a poor substitute for good regulation. They are the bare minimum, or somewhat less than the bare minimum.
I do find it gratifying to see VW employees being indicted. But the arrest of executives who commit wrongdoing is far too rare these days.
Withdraw limiting regulations and replace them with market based compeititve mechanisms.
Except somehow the second part inevitably seems to get forgotten about...
It mostly fixes the whole "read this and click continue" insanity because it makes any clause that isn't law anyway unviable.
And click-through contracts are usually also void, at least in Germany.
Notably, in the EU, the tendency is to have more "ask for permission before doing something" regulation, and less "ask for forgiveness after doing something wrong" litigation. E.g. unlike in the U.S., there are laws setting forth detailed safety requirements for consumer products, and agencies responsible for enforcing those requirements. I suspect that approach yields the desired level of product safety at lower cost than the American approach. Similar approaches could, of course, be applied to consumer financial products.