Class Action Countermeasures : Class Action Lawyers & Attorneys : McGuireWoods Law Firm : Complex Litigation, Mass Torts

 Professor Myriam Gilles holds the distinction of having called the arbitration issue earlier than almost any other academic.  So when she writes a follow-up, it's well worth paying attention. That follow up is here, in her latest working paper, Killing Them with Kindness: Examining "Consumer-Friendly" Arbitration Clauses after AT&T Mobility vs. Concepcion. And her findings indicate that corporate defendants are issuing "consumer-friendly" arbitration clauses. (Though, as she points out, few are as generous as the AT&T clause that "won" in Concepcion.)

Professor Gilles is primarily concerned with the popular plaintiff argument that arbitration clauses should not be enforced when they might prevent a "vindication" of consumers' rights. She argues that there are four basic judicial responses to arbitration clauses: "liberal pragmatism" (any arbitration agreement that prevents a vindication of rights should fail), "practical formalism" (Concepcion has promoted a "race to the top" on arbitration clauses, and that's a good thing), "FAA absolutism" (there is no vindication of rights exception), and "conservative instrumentalism" (the vindication of rights exception should not swallow Concepcion).

[T]he view that I perceive as becoming dominant in the post-Concepcion world is “practical formalism,” under which most claimants seeking to make the vindication of rights showing are likely to fail, as consumer-friendly arbitration clauses proliferate across the corporate landscape. Justice Scalia in Concepcion offered up the observation that the claimants in that case could have vindicated their rights under the bilateral arbitration clause at issue, principally because “the arbitration agreement provides that AT&T will pay claimants a minimum of $7,500 and twice their attorney’s fees if they obtain an arbitration award greater than AT&T’s last settlement offer.” Since that time, numerous lower courts have rejected challenges to arbitration clauses and class action waivers based upon the observation that the clause at issue would in fact allow the vindication of rights – at least, when measured against the yardstick of Concepcion

(Unitalicized emphasis added, internal footnote omitted.)

What makes this working paper especially useful is that Professor Gilles doesn't just provide a taxonomy of different court's approaches, she actually looks at a number of clauses offered for popular customer services like Chase Bank, Groupon, and Xbox Live.  Her findings:

A few conclusions are worth noting at the forefront. First, all the clauses I examined contained class action waivers. While this is not surprising, it represents a clear increase in the popularity of these provisions over the past decade. Second, nearly all the clauses had been amended in the aftermath of Concepcion. Indeed, I could find few arbitration clauses that hadn’t been amended in 2011-2012, and presumably, many of these changes reflect the addition of pro- consumer provisions. Third, fewer companies than I had expected have copied the more generous aspects of AT&T’s clause – i.e., provisions offering automatic cost-shifting, bounties, premiums and doubling of attorneys’ fees. Of the 37 arbitration clauses examined, only 6 companies offered anything close to AT&T’s set of incentives, and none were quite as generous."

(Emphasis added, internal footnote omitted.)  In general, Professor Gilles's findings indicate that what companies have done in the wake of Concepcion is to amend their arbitration clauses, make an educated guess as to what level of "pro-consumer" terms would survive any court challenge, and then further amend upwards after losing court battles. And that's certainly useful information for any in-house counsel looking to minimize their class-action risk.

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For the last six or seven years, a growing academic literature has put forward the argument that the primary justification for class actions is not to compensate absent class members, but to deter corporate wrongdoing. That justification has formed the basis of a number of arguments, from Professor Fitzpatrick's proposal that class action attorneys earn a 100% commission on their cases to Professor Lahav's that the law should go a little easier on the class-action lawyer. It also underlies many of the fears that tightening the class-action rules may lead to rampant corporate misconduct.

Few practitioners or scholars have really confronted the deterrence justification for class actions in depth. However, today's piece of Classic Scholarship, Class Action “Cops”: Public Servants or Private Entrepreneurs?, by John Beisner, Jessica Miller, and Matt Shors (57 STAN. L. REV. 1441), was an early and muscular entry into the debate. Beisner and company argue that, because of the incentives they face, class-action lawyers neither can nor should act as "private attorney generals," and that, in doing so, they distort the careful choices about how best to enforce the law that government must make.

First, they point out, there is no justification in the law for a "pure deterrence" class action. In fact, allowing class actions to operate as purely "private attorney general" vehicles would likely violate the Rules Enabling Act.

In the first place, the concept raises fundamental questions about the validity of the class action device under the Rules Enabling Act. After all, if the true purpose of the class concept were to facilitate private law enforcement, it would be a substantive right. The Rules Enabling Act, however, authorizes the federal judicial branch to create nothing more than purely procedural mechanisms.

Then, they show just why it is that we (rightly) don't trust the idea of private enforcement in other areas of the law.

In this regard, the private law enforcement characterization promoted by some class action attorneys is no different from permitting self-appointed “police officers” to roam the streets, set up speed traps, pull over drivers (whether or not they were speeding), and give them the option of either (1) spending a few nights in jail, or (2) resolving the problem by paying the police officer (for personal benefit) whatever he demands. No doubt, the self-appointed “cops” would argue that this would be an efficient system. After all, it would discourage speeding.
But justifiably, the public would have no trust in--or respect for--such a system of law enforcement, since prosecutorial decisions would be driven (or at least would have the appearance of being driven) by the overwhelming financial self-interest of the police officers themselves.

(In layman's terms, nobody rooted for Jackie Gleason in Smokey and the Bandit.)

Nonetheless, many continue to argue, if Smokey isn't doing his job properly, don't we need someone to backstop him? Isn't that a strong argument to bring in Dog the Bounty Hunter, to what the cops don't have the time or resources to do? [Warning: Link has autoplaying audio.]

As Beisner and company point out, the answer there is probably "no." First, Dog doesn't have the same incentives as real police. He's going to chase after the most telegenic fugitives, rather than the most dangerous. (Witness his current "Most Wanted," celebrity fugitive Randy Quaid.) And that will lead to over-deterrence in high-profile cases where the government is already working, and under-deterrence where the work is harder and the rewards less certain. The same thing happens in class actions, where many lawyers choose to just piggyback on government investigations or voluntary corporate action.

The reason class action lawyers prefer to follow--rather than to lead-- government investigations is simple: those lawyers prefer “no research” lawsuits that appear likely (from the investigation itself) to yield lucrative settlements with only a minimal investment of time and money. In contrast, government lawyers, who by definition are not driven by profits, tend to be willing to spend more time doing the factual and legal research needed to decide what kinds of cases should be brought, not simply to increase revenue, but to further the public good.

Moreover, there may be good reason the government might choose not to chase after Randy Quaid.

"The “gap-filler” argument also ignores that state officials often choose not to initiate legal action for reasons other than inadequate resources. For example, state attorneys general, as elected officials tasked with pursuing the public interest, have discretion to determine that, although a particular lawsuit might produce a recovery, the lawsuit should not be brought."

When might it choose not to bring a lawsuit? Say, when doing so might harm another vulnerable population within the state.  (And here, despite mightily trying to bring this analogy around to reality TV and celebrity fugitives, I admit defeat.)

Their solution: if you want private cops, then you have to treat them more like cops than private businessmen. Cops don't make 30% commissions on their drug busts, and with good reason. That kind of incentive would warp their instinct to protect the public rather than line their pockets. (Similarly, SEC lawyers don't get to keep 30% of their fines, and yet they can still draw heavy criticism for under- or over-enforcement.)  Everything about the class action rules as they stand and are enforced--the emphasis on procedure, the allowance of contingency fees, the use of common funds--rests on the assumption that the attorneys are securing compensation for civil wrongs, rather than supplementing actual law enforcement.

But the most interesting aspect of this debate to me, after having reread this article, is that it makes one thing very clear. The real issue here is not whether corporations should be allowed to effectively self-regulate. That argument is difficult at the best of times, and these are not the best of times. But if we don't trust corporations to effectively self-regulate, why would we trust plaintiff's lawyers--whose incentives match the corporations' rather than the government's--to do the exact same thing? The best answer I can come up with isn't very flattering to the plaintiffs' lawyers.

[Disclosure: At the time the article was written, John, Jessica, and Matt were all colleagues of mine. To my knowledge, none of them have ever made Burt Reynolds or Dog the Bounty Hunter references.]

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Last week, my post on the Ten Most Interesting Articles in 2011 got linked by Professor Alexandra Lahav at the fine Mass Tort Litigation Blog. She recommended my list of ten interesting but unwritten articles to students looking for notes topics, although she cautioned that 

I don't agree with Mr. Trask's assessment of my own work, legal academia or what people ought to write about …

Which is a completely fair opinion, even though I'm not entirely sure what those assessments are myself. Leaving aside what I think of Professor Lahav's work (I've featured it three times on this blog, and included it in one "Ten Most Interesting" list--I think her work is thought-provoking and worthy of serious discussion), I recently bemoaned the fact that 2011 was not a great year for interesting class-action scholarship. (Specifically, I complained that too many articles either previewed the same Supreme Court cases, or predicted the death of the class action.) And, in doing so, I stepped into a old debate that has grown heated in the past few months: what is the point of law school (and law professors) anyway?

The sources of that heat make this a particularly important question right now. The cost of legal education keeps rising, and so does legal-sector unemployment. While it grows more expensive, it also appears that legal education is becoming less relevant to actual law practice. Most of us have to justify our existence sometime, and law professors are taking their turn in the hot seat. They're not all doing it gracefully. While some have been thoughtful, others have been defensive, or self-congratulatory.

So what are legal scholars good for? They have two primary roles: they teach students and they research. I'll leave the teaching alone because it's been (let's just say "too long") since I was in law school, and I don't currently interview new hires.

But legal scholarship? Here I have an opinion, one that's been informed by reading pretty much everything published on class actions in the last four years through LEXIS or SSRN. I frequently rely on legal scholarship about class actions, on this blog, in my other writing, and in my own legal work. I think scholarship is more useful than most lawyers realize, even if you do have to sift a lot of silt to get to the gold. Since this is a defense-oriented blog, I focus on scholarship that is useful for class-action defense lawyers, but those are hardly the only worthwhile articles.

But I also think that legal academia is suffering from an ethos problem, one that stems from too much legal scholarship making too little effort to be relevant or interesting to those actually in the law. And, since law review articles may cost as much as $100,000 of student tuition each, that's a shameful waste of resources.

I'm a firm believer in academic independence. It enables scholars to follow where the facts and law lead for a given problem. That's something professional advocates can't do in the same way. And I accept that academic independence means that legal academia will never be merely a free R&D department for private lawyers.

But there is no reason, given the money law students (and, by extension, taxpayers, law firms, and clients) spend to fund those articles should result in so many proposals that ignore current law, faux dissents to existing opinions, jeremiads, or rehashes of the same Supreme Court cases. It should be eminently possible for academics to write articles that are original, useful, and still interesting to read.

So, based on those assumptions (and because I have a book deadline at the end of the week), here are ten simple things legal academics could do to make their work more relevant, and more interesting:

1. More looking for the overlooked. Professor Miriam Gilles wrote an excellent article on class-action arbitration--in 2005. It was good because lawyers weren't paying much attention to arbitration at the time. In the past year, as the legal status of class-action arbitration got resolved, we saw a flurry of articles rehashing Professor Gilles, but nothing focusing on emerging trends in numerosity, motions to strike class allegations, or new uses for superiority. Why not? Why weren't there any professors watching these trends?
2. More focus on district court cases. Where do you find the overlooked? On the front lines. And those are the trial courts. Based on two years' work with LEXIS, I can confidently say that the federal court system produces between 50 and 100 opinions in class actions each week. That's a lot of raw data, and a lot of overlooked trends. Who's looking there? Hardly anyone. Instead, everyone focuses on the same few appellate cases.
3. More focus on how the common law actually works. Many law review articles focus on Congressional action, what the Supreme Court should do, or arguments that are just plain contrary to existing law. But it takes little effort to come up with our own wish lists and invoke the genies of a unified Congress or Supreme Court. In our common-law system, most of the real change occurs when lawyers convince a trial court to rule their way. (That then generates those cases for appeal that the Langdell method loves so much.) So why aren't more articles proposing new arguments for lawyers to make?
   
4. More work with primary litigation documents. District court cases shouldn't even be a cutting edge. Lawyers breed documents like crazy, and in these days of ECF and PACER, it is entirely possible to get access to entire court dockets without leaving the comfort of your office. So why aren't law professors taking more advantage of these rich seams of raw data? Imagine a survey of the most common commonality arguments. Or the most common discovery requests, and whether they get actual responses.
5. More natural experiments. There are 13 federal judicial circuits, 89 federal district courts, and 50 state court systems. Each of these has different judges, and come up with subtly different lines of cases. Economists love stuff like this; it means they can test all kinds of crazy theories. Why haven't our law professors done that? Got two different rules on experts at class certification? You can test how that affects certification rates, or filings of class actions. Where are these articles?
6. More predictions and more followups. Scientists make predictions, and then follow up on them later. Legal scholars make predictions ("The class action will die soon!") but rarely follow up on them. And yet, the followup is the most informative part. It even adds some drama--everyone loved when Oprah would revisit her best stories.
7. More changing of minds. Unless a scholar knows everything when she starts out, she should encounter facts that will change her views at points. (It's certainly happened to me.) Yet we rarely see that in scholarship.  Depaul professor Mark Moller recently did so in an interesting article on due process arguments. Why isn't this more common in articles? From a rhetorical standpoint, it adds credibility to an argument. And from a human-interest standpoint, it adds some drama.
8. Less overt ideology. Academics are certainly free to root for whomever they want and vote for whomever they like. But the ideal of the academic is that she is free to go where the facts lead. The appearance of partiality can harm even disciplines that should be immune from political controversy. So why not leave the partisanship to the lawyers and think tanks and tackle questions without preconceptions? I guarantee scholarship that aims toward neutrality is more useful to judges, and there is no question articles would be more interesting if we couldn't predict the results just from the author's name.
9. More fact-checking. Plaintiffs make one claim. (Class actions as a whole deter corporate wrongdoing.) Defendants argue the opposite. (Class actions in practice overdeter by focusing on government investigations.) The factual debate has a real impact on which legal rule is a better idea. Who's right? Legal scholars are ideally placed to referee these debates, particularly if they're seen as open-minded and not overtly ideological. 
10. More identification of stakes. Legal debates happen for a reason, and it's rarely just that one side is good and the other is not. Instead, specific arguments often involve specific strategic and tactical choices in litigation. Identifying the practical stakes to various legal positions helps to put those debates in context--for students, for judges, and for practitioners new to an area.

These suggestions are simple, but not easy. Fact-checking takes work. Convincing student editors that district-court rulings have merit will be a slog. But they should lead to scholarship that's both interesting to read and actually relevant to how lawyers argue (and judges decide) cases.

I've had my fill of top ten lists, and I'm sure you have too. Next week, we're back to the usual "case and a thought" method. So come back then for the classic case In re General Motors Pick Up Truck Fuel Litigation, and a review of Judge Posner's How Judges Think.

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Cardozo Law School professor Myriam Gilles has a new article in the latest issue of the DePaul Law Review, "Class Dismissed: Contemporary Judicial Hostility to Small-Claims Consumer Class Actions."

Provocative title aside, Gilles's article is ostensibly about the ascertainability requirement. That said, it seems remarkably unconcerned with cases that actually discuss ascertainability. (For example, it tries to tie acertainability doctrinally to either predominance or the notice requirement, ignoring those cases where courts have developed ascertainability from numerosity. The article also doesn't concern itself with merits-based classes, even though these classes wind up vexing a number of courts at certification.)

What "Class Dismissed" does do effectively is look at the different rhetorical anchors for class actions. She labels pro-certification thinking as "liberal" and concerning itself with "public law," while anti-certification arguments are more "conservative" and stem from a conception of "private law."

So, shorn of the ideological labels, "Class Dismissed" identifies a pair of rhetorical strategies that plaintiffs and defendants use in the certification debate. Plaintiffs will often stress the "public law" function of a class--how it will deter misconduct and get relief to those who need it. Defendants will stress the fact that a class action is not an attorney-general's parens patriae case; it's a private lawsuit on a large scale, and that means that the court may not take shortcuts just because the plaintiffs' attorneys call themselves "private attorneys general." They will also point out that the Rules Enabling Act requires that a class action not enlarge any substantive rights.

What does this mean for defendants? That it's important to keep what she calls "private law" rhetoric front and center in briefing a class action, most importantly because that rhetoric tends to line up best with the legal doctrine surrounding class actions. There is no question that many people--including judges and juries--can find arguments about deterring or punishing alleged corporate misconduct to be persuasive. If they didn't, there would be few punitive damages awards. But courts are also wary of overstepping their role as arbiters of actual disputes. As a result, they treat class actions as carefully-circumscribed exceptions from the usual rule of one-on-one litigation, and a defendant can rarely go wrong reminding them of the need to do so.

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