Beyond “it Just Ain’t worth It”: Alternative Strategies for Damage Class Action Reform

We begin with the premise that private class actions for money damages can yield significant social benefits. Class actions for damages can provide compensation for modest but non-trivial losses suffered by widely dispersed but similarly positioned persons as a result of the negligence or illegal behavior of others, allowing recovery for losses that cannot practically be achieved through individual litigation. In this way, damage class actions can deter such injurious behavior and thereby supplement regulatory enforcement by administrative agencies that are under-funded, susceptible to capture by the subjects of their regulation, or politically constrained. Damage class actions also may provide efficient management and resolution of large numbers of similar claims when individual litigation is feasible, but its costs would be extraordinarily high. Despite these benefits, however, the financial incentives that fuel private class action litigation have the potential to undermine these goals. Private litigation that duplicates effective regulatory enforcement may impose additional costs without commensurate benefits. Non-meritorious class actions filed by lawyers who expect defendants to be willing to pay something simply to ensure that the class counsel will “go away,” as well as class action settlements that bear little relation to the merits of the claims, dilute the deterrent effect of class action litigation. Settlements designed in ways that make it unlikely that the defendants will deliver all of the benefits they have pledged to pay class members