Twenty-two years ago, political scientist Robert D. Putnam published an article in the journal International Organization. Titled "Diplomacy and domestic politics: the logic of two-level games," it argued that international trade negotiators have a more complicated job than most believe. Not only must they convince the negotiators across the table of the mutual benefits of their particular requests, they must also persuade their constituents back home ("behind the table") to accept the deal they ultimately work out.
Since Putnam published his article, this insight–that negotiators on behalf of organizations must negotiate both "across the table" and "behind the table"–has been cited so often it feels like just common sense. But Putnam did not limit himself to just identifying this two-level game. He also explored just how it affected the conduct of the negotiations themselves. And some of his conclusions can certainly inform how class-action lawyers negotiate class-action settlements.
For example, Putnam found that
the lower the cost of "no-agreement" to constituents, the smaller the win-set. [Ed. note: "win-set" refers to the set of agreements that could be ratified.] Recall that ratification pits the proposed agreement, not against an array of other (possibly attractive) alternatives, but only against ‘no-agreement.’ No-agreement often represents the status quo, although in some cases no-agreement may in fact lead to a worsening situation; that might be a reasonable description of the failed ratification of the Versailles Treaty.
(Emphasis in original.) This insight reflects one that negotiation scholars have known for a while: the better one’s alternative to an agreement with the other side (sometimes referred to with the unwieldy phrase BATNA, or "Best Alternative to Negotiated Agreement"), the less likely a negotiation will succeed. Putnam also explained that
In this sense, some constituents may offer either generic opposition to, or generic support for, Level I agreements, more or less independently of the specific content of the agreement, although naturally other constituents’ decisions about ratification will be closely conditioned on the specifics. The size of the win-set (and thus the negotiating room of the Level I negotiator) depends on the relative size of the "isolationist" ,forces (who oppose international cooperation in general) and the "internationalists" (who offer "all-purpose" support). All-purpose support for international agreements is probably greater in smaller, more dependent countries with more open economies, as compared to more self-sufficient countries, like the United States, for most of whose citizens the costs of no- agreement are generally lower. Ceteris paribus, more self-sufficient states with smaller win-sets should make fewer international agreements and drive harder bargains in those that they do make.
There are, of course, some important differences between trade negotiators and class-action lawyers. Class-action defense lawyers are legal agents of their clients, which means they may have less room to deviate from instructions than trade negotiators. And class-action plaintiffs’ lawyers often have clients that lack the power to direct the litigation. In fact, in a class action, thethe class members often don’t have a preference between "no agreement" and any agreement, because most of them aren’t aware of the litigation at all. So the plaintiffs’ counsel can cut whatever deal they see fit.
This is an important justification for fairness hearings on settlement. And it helps to explain why objectors have played such an important role in the development of caselaw on class-action settlements is that they have the incentive to act like an interested constituent of the plaintiffs’ lawyers, rejecting deals that are no better than "no agreement" on behalf of the class.
So what can class-action defense lawyers take from this article? For those looking to ensure a lower-cost settlement process, it is worth considering not just what the plaintiffs’ counsel will agree to, but what objections may get raised at the fairness hearing.