14 January 2004

The Number of a Class…
is the class of all classes similar to the given class. Good old Frege; he's almost as confusing as is managing a class action. Or justifying one. (As Hans Grüber might say, "The benefits of a classical education.")

In any event, I was right and the business community was wrong. Or, at least, when somebody even tried to consider class actions and their impacts from other than an anecdotal perspective with a predetermined outcome—that is, actually did an "experiment" to test a theory—it refuted, or at least seriously questioned, the common business assertion that class actions are ruining American business. See Jonathan D. Glater, "Study Disputes View of Costly Surge in Class-Action Suits," New York Times (14 Jan 2004).

At least, this is what passes for experimental data in economics. More than anything else, the obvious and serious problems with the data even available to the researchers—and particularly data available to researchers who are not hindered by hidden (or not-so-hidden) agendas of the people and organizations funding the research—make drawing any policy conclusions from the theorizing of the so-called "trial bar" or the business/insurance complex less reliable than is drawing policy conclusions from a single interview with someone grabbed off the street. One major problem is that all of the available data is anecdotal. This means that it is analyzed if, and only if, it even comes to the attention of the researchers. Notice that in the article in question, not once is there a reference to any finance-based class action, such as a securities suit or a TILA action. (I have only anecdotal evidence; but that includes consideration of confidential settlements, of which I kept a confidential and encrypted record for every matter in which I was ever involved, so at least it's more inclusive that way.) Everything is based upon discrete events (civil rights and traditional torts), not upon patterns and general practices. To say the least, this greatly skews any policy-based analysis of a general rule.

Further, the confidentiality problem is ultimately fatal to any analysis of any publicly available data, and anybody who relies upon statistical analysis of selective-reporting data that is not disclosed didn't live through the 1960s and 1970s. Two words: "body count."

The real problem is that we're crossing the Erie line with the whole argument. Class actions are a procedural device used by courts to manage their dockets (as difficult to manage as a class action is, it's a helluva lot less difficult to manage than the aggregate of, say, 125 individual actions). However, the real argument is over the compensation awarded after trial or as a result of settlement based upon the substance of the underlying action. This substantive flaw—if it is, in the aggregate, an objectively verifiable flaw, and not merely a reflection of self-interest in minimizing costs to an individual economic actor overwhelming proper systemic internalization of costs—is then used to justify changing the procedure in a manner that very well may be outcome determinative. In the abstract, that looks something like this:

  1. Procedural Rule X applies to and defines all lawsuits of class A.
  3. Rule X results only in collective adjudication of the lawsuits in class A. Rule X does not alter the substantive Rules N1…Nn used to determine the actual results in the lawsuits, whether aggregated as L(A) or individually litigated as L(A1)…L(An).    
  4. Prelawsuit wealth and resources available for litigation or other determination of the substantive outcome are equal for both sides in all lawsuits of class A, and therefore can be removed from the process as a consideration.
  6. The results of the lawsuits in subclass A', which is substantially less than all of class A, are unsatisfactory to the subclass of defending parties in subclass A', subsubclass A".
  8. Therefore, Rule X is unsatisfactory for all of class A and must be replaced.
  10. New Rule X' must result in a different substantive aggregate result for lawsuits in subclass A' that is more favorable to subsubclass A".

To say the least, this does not pass the laugh test.