Let’s Make Sure Class Actions Can Still Do Their Job

September 15, 2015 In Blog

Let’s Make Sure Class Actions Can Still Do Their Job

Here at Public Justice, we see class actions as an important tool for righting wrongs and holding the powerful accountable. As part of our efforts to promote and protect class actions, we’re working to make sure that the federal rule that governs them—Rule 23 of the Federal Rules of Civil Procedure—continues to get the job done.

First, why do we care about class actions? Among other things, class actions allow consumers to hold corporations liable for widespread wrongdoing that could not successfully be challenged in individual litigation. Companies often engage in unfair and deceitful conduct that hurts a lot of people—imagine, for example, the sale of expensive “nutritional supplements” that are nothing but snake oil. As bad as such products may be, individual damages are too small to make it economically feasible for a single consumer to file suit. That’s where class actions come in: they allow groups of victims to band together and seek collective justice.

Class actions also serve as an important deterrent for illegal behavior. Class actions seeking damages for many people create a powerful incentive for companies to do the right thing. Without class actions, corporations could rip off a lot more consumers with total impunity. In other words, without class actions we would have a lot less justice—and a lot more snake oil.

That’s why we’re working hard to ensure that Rule 23 is as powerful and fair as possible. The Rule is currently under review by a federal advisory committee that is responsible for updating the rules governing civil procedure. A subcommittee of practitioners, academics, and judges has been tasked with deciding whether to change Rule 23 in various ways. Back in March, we submitted a set of proposals to the Subcommittee about how we think the Rule should be changed.

Since then, the Subcommittee has issued its own set of “rule sketches” that could have a big impact on class actions if they go forward. (To see the sketches, click on the “Mini-Conference materials” in this link.) We like some of the Subcommittee’s proposals, but others – not so much. Luckily, the Subcommittee is welcoming the public’s input on its proposals, and we just submitted written comments setting forth our views.

Here’s what we had to say, in a nutshell:

First, we strongly supported a proposal to incorporate cy pres guidelines into Rule 23. Cy pres awards are a hugely important mechanism for distributing any funds that are left over from class actions settlements. Courts routinely permit cy pres awards as the best way to indirectly compensate class members who cannot be compensated directly. But cy pres awards have come under attack in recent years, principally by those who want to stamp out class actions altogether. A lot of companies, in particular, would like leftover settlement funds to “revert” back to them, rather than to go to charities whose work indirectly benefits the class. Our comments urged adoption of a formal rule that would protect cy pres awards from such attacks and ensure that they remain a viable mechanism in the future.
Second, we supported a proposal to clarify that courts have the power to certify certain issues for class certification, even though the entire case may not be appropriate for class-wide treatment. In our view, issue class certification can be an important tool in cases where class treatment of defenses or individual damages is inappropriate, but the main liability issue would be too difficult or expensive for an individual plaintiff to pursue on her own. Although issue classes are already permitted under current law, they’ve recently come under attack by opponents of class actions. The Subcommittee is trying to fix that, and our comments applauded the Subcommittee’s efforts.
Third, we supported the Subcommittee’s proposal to stop class-action defendants from using Rule 68, which permits a defendant to make an offer of complete judgement, as a way to “pick off” class representatives, thereby insulating themselves from the entire class of plaintiffs. (For more on this topic, check out our recent blog post.) Public Justice had previously encouraged the Subcommittee to eliminate Rule 68 altogether. Although the Subcommittee isn’t willing to go that far, it is considering a proposal that would basically get rid of Rule 68 in the context of class actions, which would go a long way toward solving the problem.
Finally, we opposed a proposal to impose an “identifiability” requirement at the class certification stage. In many class actions, particularly class cases involving the purchasers of a relatively inexpensive consumer items, it may not be possible to identify class members until they come forward with a claim. We argued that imposing a strict “identifiability” requirement at the class certification stage is both unnecessary and could possibly wipe those class actions off the map.

It’s too early to say where the Subcommittee will go from here. It has not yet formally proposed any amendment to Rule 23, and is still considering various options. There are a lot of steps between now and any final rule approval.

Whatever happens, we deeply appreciate the Subcommittee’s efforts to make sure that Rule 23 continues to serve the interests of justice, and to ensure that all stakeholders have an opportunity to voice their opinions. We will continue to weigh in—and, of course, to keep you posted. Class actions are too important to sit on the sidelines.