Last March, dean of class action scholarship John Coffee Jr. published an article in the Columbia Law Review titled "Litigation Governance: Taking Accountability Seriously." Coffee’s argument is that, from a corporate governance perspective, there are two ways to keep an organization’s leaders accountable: "exit" and "voice." In other words, judges and legislators can make it easier for shareholders to leave an organization, or they can give them a greater voice in governing it. He then tries to apply those principles to class actions and other forms of collective redress. Specifically, he worries about how the current class-action regime may not really hold plaintiffs’ counsel accountable during the course of a lawsuit:

Perhaps more importantly, an intense, low visibility competition has arisen for the coveted position of class counsel because the winner of this competition stands to capture significant rents. This competition has been the underlying cause of recent scandals within the plaintiffs’ bar. Although the nature of this competition has recently changed, its latest manifestation – pay-to-play contributions by plaintiffs’ law firms to public pension funds – may enable some competitors to undercut the very reforms that Congress established to control class action abuses. The vulnerability of these reforms, it will be argued, flows directly from the class action’s special governance rules and reveals the dangers of relying primarily on "voice," rather than "exit."

(Internal footnote omitted.)  Coffee focuses on the "exit" method (which he identifies as opt-outs under Rule 23(b)(3)).  As a result, he spends much of his time analyzing the European model of certifying "opt-in" actions or–as they’re sometimes called across the Atlantic–"collective redress." He notes that allowing for opt-in litigation (much like the FLSA collective action) usually does a better job of aligning counsel’s interests with their clients’, and that technology has made opting in more feasible in large-scale class actions. Given that many class actions generally have very low participation rates, encouraging opt-in classes would, at the very least, reduce exorbitant fees and remove the need for using the increasingly controversial

However, in the process, he also provides a good policy argument for defendants who seek to oppose certification. It’s difficult to regulate exit, but courts already have a way to regulate voice that Coffee does not consider: enforcing the adequacy requirement. If courts were stricter about policing the adequacy of the named plaintiff–specifically, her ability to independently oversee her counsel–the plaintiff could potentially do a better job of policing counsel herself. How could courts do this?

  • Allow discovery into the nature of plaintiff’s relationship with her lawyer. Courts have already deemed family members and close friends to be inadequate class plaintiffs, but they have also allowed a number of close business and personal relationships to go unchallenged.
  • Consider whether the lawsuit originated with the lawyer or the plaintiff. Courts frown on lawyers who craft a complaint and then recruit the plaintiff in individual lawsuits. There is little reason to assume that a recruited plaintiff has the independence to oversee her counsel when their interests might conflict with the class’s.
  • Examine what the plaintiff has done her homework. Courts are clear that plaintiffs do not need to be experts in the subject matter of the lawsuit to be adequate, which makes some sense. A plaintiff in an ERISA suit, for example, need not know the ins and outs of the statute like her lawyers should. But if the plaintiff has not read the complaint, does not keep tabs on the case with counsel, or offers an understanding of the case that contradicts her counsel’s, the court has strong evidence that the plaintiff cannot independently oversee counsel.

I’m realistic. I don’t expect a revolution in enforcing adequacy. Courts have long known the "open secret" that lawyers make the decisions about class actions instead of their clients.  And the prevalence of pay-to-play practices with large institutional clients in securities actions suggests that some plaintiffs’ counsel are determined to co-opt their clients.  Nonetheless many courts gloss over adequacy when the defense raises it. Some of this may be inertia: why upset a system that may provide some rough justice. But some of this is also framing. When challenging adequacy, defense counsel should consider couching their arguments in terms of the ability to oversee counsel, rather than stressing more stringent, hard-to-meet standards like expertise.