Academic journal article Defense Counsel Journal

Federal Class Action Reform in the United States: Past and Future and Where Next?

Academic journal article Defense Counsel Journal

Federal Class Action Reform in the United States: Past and Future and Where Next?

Article excerpt

If the past is prologue, then there will be many proposals, some tinkering, some substantive, some legislative, to change class action practice

PREDICTING the likely future developments in class action practice in the federal courts of the United States must begin in the past.

THE PAST: OR WHERE WE'RE NOT GOING NEXT

A. The 1966 Class Action

The beginning point is the complete revision of Rule 23 of the Federal Rules of Civil Procedure that took effect in 1966. This revision instituted the familiar Rule 23(b)(1) and (b)(2) "mandatory" classes and the much more pervasive (b)(3) "optout" class. There has been little excitement about the (b)(1) class, apart from the currently unsuccessful attempts to adapt it to "limited fund" mass tort litigation. The (b)(2) class was a central focus of the 1966 revisions, which were designed to entrench the then-growing use of class actions to enforce civil rights through injunctions. Although there is some concern today about efforts to expand (b)(2) class actions to embrace individual damages claims as "incidental" to class-based injunctive relief, there is no general dissatisfaction with it. Broad class-based injunctions, often involving "institutional reform," are widely accepted.

The opt-out Rule(b)(3) class is a different story. It was invented in a moment of inspiration. Several participants in the process that developed (b)(3) tell us today that they had not the slightest idea what it would become. That may be in part because it has become many things.

One common description of the variety of (b)(3) class actions focuses on the apparent monetary value of individual class member claims. The "consumer" class action is often described as one needed to ensure enforcement of rights that involve sums too small to support effective enforcement through individual actions. The "mass tort" class action is described as one that brings together large claims that could and often would support individual actions. In between lie "mixed" actions that include in one class both members whose claims would and others whose claims would not support individual litigation.

Another description of the variety of (b)(3) class actions focuses on the subject matter involved. Antitrust and securities litigation are most frequently mentioned as examples of well-developed class action practice, where this procedural device is working well. Much greater problems are seen in attempts to bring class action procedure to bear on mass torts.

It did not take long for Rule 23(b)(3) class actions to make an impression. Lawyers and courts worked together to make "class action" a household word. The potentially neutral observation that they had multiplied "like the leaves of the green bay tree" was followed by more darkling observations about "legalized blackmail" and "Frankenstein monsters."

Some areas of the law were transformed, if not in substantive meaning, then in realworld meaning. Much of the reaction to class actions flowed from this impact. Enthusiasts lauded the opportunity for more effective enforcement of "public interest" legislation. Detractors, perhaps unwilling to voice directly their displeasure with the substantive law, talked instead of the compulsion to settle unfounded class claims. Settlements are coerced, they complain, by at least two major factors. One is the staggering cost of defending class litigation. The second is the risk that even a completely unfounded claim will be sustained in litigation-a risk, they say, that arises not only from the prospect of an occasional aberrant result but also from a subtle pressure exerted by the class action itself. On this view, it is more difficult to say "no" when a claim is advanced on behalf of many people. Together, the cost of defending and even a small risk of a very large loss exert powerful pressure to settle.

Substantive law objections also were voiced. The most direct expression is that much modern regulatory legislation is drafted in deliberately broad and ambiguous terms. …

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