In her new article Symmetry & Class Action Litigation, 60 UCLA L. Rev. 1494 (2013), Connecticut law professor Alexandra Lahav has spotted what appears to be an interesting inconsistency in the way modern courts treat class action: despite case law to the contrary, courts often treat certification of a litigation class more rigorously than certification of a settlement class. One can think of any number of reasons for this: courts favor settlements of large disputes; they like clean dockets; there are fewer possible parties to appeal. Professor Lahav believes that it reveals a pro-defendant bias in the courts:
The courts’ leniency toward class settlements leads to a paradox. While judges are concerned that a litigated class will exert undue pressure on the defendant to settle, they readily approve of settlements of claims they believe lack merit. One might respond that defendant has consented to the settlement, but arguably courts should also be concerned that the defendant’s purported consent is in fact a response to the duress imposed by the threat of a class action. I suggest that the reason for courts’ exclusive concern over defendant’s duress in litigated classes is that litigated class actions upend the status quo ante whereas settlement classes reinforce it. Ultimately, if judges continue to treat settlement and litigation classes differently, the courts will reflect the asymmetry between plaintiffs and defendants in the real world.
(Emphasis added.) This broad-brush critique of defendants and courts, however, is based on a blinkered view of class action practice. In particular, Professor Lahav’s argument suffers from three flaws:
- She cherry picks the case law. Like Professor Erichson before her, Professor Lahav focuses on only two cases in arguing for a new trend favoring settlement classes: In re AIG and Sullivan v. DB Investments. It’s not fair to criticize Professor Lahav for leaving out Rodriguez v. National City Bank, which had not come out yet. But one can’t say the same about Dewey v. Volkswagen Atkiengesellschaft, which found the named plaintiffs in a settlement inadequate. Nor did she mention the various district court opinions like Tijero v. Aaron Bros., Inc. which have restrained settlements that could not meet the requirements of Rule 23(a) and 23(b). Focusing on a few exemplars is fine. Using them to declare a trend while ignoring contrary evidence is less so. And the fact that the Third Circuit (of DB Investments fame) issued the Rodriguez opinion–which rejected a settlement where the plaintiffs made no commonality showing–at roughly the same time this article was published highlights that cherry-picking cases will often undermine your predictive abilities.
- She never mentions plaintiff’s lawyers. Professor Lahav spends much of her time arguing that plaintiffs need class actions to give them equality against corporate defendants. And she spends much of the rest of her time trying to debunk the "blackmail" model of class action settlement. But defendants’ (and courts’) concerns about blackmail are not what she thinks they are. Defendants are not usually worried that a named plaintiff with a legitimate grievance is trying to "extort" $100 from them. They worry that entrepreneurial counsel recruit plaintiffs to represent theories they believe may result in settlements that contain lucrative fee agreements.
- She doesn’t address the asymmetry in discovery costs. Professor Lahav argues that class actions don’t cost defendants much more than $300,000 to litigate. Her source for this assertion is a 2009 study by the the excellent Federal Judicial Center. But things have changed since 2009. E-discovery (rules for which went into effect in 2006) has only increased the costs of litigation, particularly for defendants. In fact, several courts have noted that class actions offer a peculiar asymmetry of discovery costs (favoring the plaintiffs), and that plaintiffs’ counsel often try to leverage that asymmetry to extract settlement agreements favorable to them (if not always the class). In the 1990s, courts were concerned about the in terrorem effect of class liability; now they are usually more concerned with the overall cost of the litigation.
There is certainly something to the critique that courts often favor class action settlements, even when they will not benefit absent class members. I’ve said as much myself. But taking on an issue without looking at all sides of it will lead to a shallow (and incorrect) analysis, one that lacks predictive power and leads to poor policy.