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I was a class action lawyer for several years. There is a great deal of definitive evidence that arbitration clauses undermine the purposes of class proceeding

by bmh_ca 11y ago

I was a class action lawyer for several years. There is a great deal of definitive evidence that arbitration clauses undermine the purposes of class proceedings, those purposes being: 1. increased access to justice (i.e. one may be automatically included in a successful claim, as opposed to seeking prospective reward through a potentially lengthy and expensive adjudication); 2. lowering of overall cost of adjudication (i.e. many issues may be resolved at once, at lower expense to the plaintiffs, defendant, and the courts); and 3. behavioural correction (i.e. raise the likelihood of bad behaviour by corporations resulting in monetary consequence). Contracting-away class procedural rights can undermine point #1 and #3. Most people do not litigate even when they have an excellent chance of success, and behavioural correction requires a certain percentage of individuals to bring and succeed in their cases. The percentage who tend to litigate, and whom can be confidentially settled with out of court, are empirically a fraction the aggregate exposure from a class proceeding. Which is all to say, arbitration clauses are not a problem if you do not feel like corporations should have monetary consequence for bad behaviour. This is certainly good for the people who own the corporations. There is a problem, whether perceived or real, of "lottery ticket litigation" where plaintiff class action lawyers receive a large payout on success. Certainly one wants to incentivize capable lawyers to take on hard and speculative projects by dangling good returns, but in the case of class actions I have always thought of it more as a public interest litigation. There should be an incentive to succeed, but properly employed class proceedings can have a substantial public benefit. Lottery litigation can attract the wrong lawyers, though in my experience there is a fairly wide spectrum. On the other hand, public service class proceedings have their own set of distinct issues.

bradleyjg 11y ago
>> behavioural correction requires a certain percentage of individuals to bring and succeed in their cases No it doesn't. Both the extensive use of the class form and punitive damages (or close substitutes) are virtually unique to the United States. Ad hoc regulation by an entrepreneurial plaintiff's bar acting without meaningful client input is not the not the only effective means to regulate businesses. On the contrary, plenty of countries arguably do a better job without the use of them at all.
- guelo 11y ago
  How do those other countries do it?
  - bradleyjg 11y ago
    Public sector regulators drawing a salary and answerable (at least in theory) to democratically elected bosses and ultimately the people.
    - makomk 11y ago
      From what I've seen, the US already has pretty aggressive public sector regulation in most areas, more than we seem to have over here in the UK these days. It's still not a complete solution because regulators don't have the resources to be everywhere at once.
- wpietri 11y ago
  The US is also uniquely suited to business innovation. I think that's no coincidence. Depending upon after-the-fact class action instead of up-front regulation means more focus on actual harm than fear of harm. I also broadly wouldn't trust the US to be particularly good at government regulation until our elections are publicly funded. There's a lot of evidence that our legislation is distorted towards the interests of the moneyed. I don't think that's a recipe for energetic, effective business regulation.
- bmh_ca 11y ago
  > >> behavioural correction requires a certain percentage of individuals to bring and succeed in their cases > No it doesn't. It is necessary for class proceedings to induce behavioural modification, which is what we are talking about here. There are other means to bring about behavioural correction, but that was beyond the scope of my comments. > Both the extensive use of the class form and punitive damages (or close substitutes) are virtually unique to the United States. At least a dozen states have class procedures, but you may be right on punitive damages. Canada is quite close, but punitive measures are handed out sparingly. >> Ad hoc regulation by an entrepreneurial plaintiff's bar acting without meaningful client input is not the not the only effective means to regulate businesses. I partially agree; class proceedings are a poor substitute for regulation. However, a few points. First, in tandem with victim compensation and reduced litigation costs, some argue the behavioural modification aspect from financial consequence can act as a check-and-balance that requires no arbitrary intervention by the government to correct and prevent wrongdoing. Second, class action are procedural in nature and the substance of the case must be founded on existing laws – often common law torts, but sometimes regulatory or administrative. The cost of enforcement via a class proceeding is relieved from the public purse, and no additional rights are conferred on victims by way of a class proceeding – only the vehicle for exercising those rights is modified. Third, regulators are often not as aligned with victims as plaintiff lawyers in class proceedings. It is not unheard of, and in some places quite common, for regulators to be hired by the very institutions they are charged with regulating. Moreover, one can gauge the effectiveness of the class proceeding in behavioural modification by observing the broad resistance to it, namely the widespread introduction of arbitration clauses. Perhaps not the behaviour it was intended to modify, but that itself speaks to the point. > On the contrary, plenty of countries arguably do a better job without the use of them at all. I tend to agree, depending on the circumstances, but it is a hotly contested point.

by bmh_ca 11y ago

bradleyjg 11y ago

>> behavioural correction requires a certain percentage of individuals to bring and succeed in their cases No it doesn't. Both the extensive use of the class form and punitive damages (or close substitutes) are virtually unique to the United States. Ad hoc regulation by an entrepreneurial plaintiff's bar acting without meaningful client input is not the not the only effective means to regulate businesses. On the contrary, plenty of countries arguably do a better job without the use of them at all.

guelo 11y ago
How do those other countries do it?
- bradleyjg 11y ago
  Public sector regulators drawing a salary and answerable (at least in theory) to democratically elected bosses and ultimately the people.
  - makomk 11y ago
    From what I've seen, the US already has pretty aggressive public sector regulation in most areas, more than we seem to have over here in the UK these days. It's still not a complete solution because regulators don't have the resources to be everywhere at once.
wpietri 11y ago
The US is also uniquely suited to business innovation. I think that's no coincidence. Depending upon after-the-fact class action instead of up-front regulation means more focus on actual harm than fear of harm. I also broadly wouldn't trust the US to be particularly good at government regulation until our elections are publicly funded. There's a lot of evidence that our legislation is distorted towards the interests of the moneyed. I don't think that's a recipe for energetic, effective business regulation.
bmh_ca 11y ago
> >> behavioural correction requires a certain percentage of individuals to bring and succeed in their cases > No it doesn't. It is necessary for class proceedings to induce behavioural modification, which is what we are talking about here. There are other means to bring about behavioural correction, but that was beyond the scope of my comments. > Both the extensive use of the class form and punitive damages (or close substitutes) are virtually unique to the United States. At least a dozen states have class procedures, but you may be right on punitive damages. Canada is quite close, but punitive measures are handed out sparingly. >> Ad hoc regulation by an entrepreneurial plaintiff's bar acting without meaningful client input is not the not the only effective means to regulate businesses. I partially agree; class proceedings are a poor substitute for regulation. However, a few points. First, in tandem with victim compensation and reduced litigation costs, some argue the behavioural modification aspect from financial consequence can act as a check-and-balance that requires no arbitrary intervention by the government to correct and prevent wrongdoing. Second, class action are procedural in nature and the substance of the case must be founded on existing laws – often common law torts, but sometimes regulatory or administrative. The cost of enforcement via a class proceeding is relieved from the public purse, and no additional rights are conferred on victims by way of a class proceeding – only the vehicle for exercising those rights is modified. Third, regulators are often not as aligned with victims as plaintiff lawyers in class proceedings. It is not unheard of, and in some places quite common, for regulators to be hired by the very institutions they are charged with regulating. Moreover, one can gauge the effectiveness of the class proceeding in behavioural modification by observing the broad resistance to it, namely the widespread introduction of arbitration clauses. Perhaps not the behaviour it was intended to modify, but that itself speaks to the point. > On the contrary, plenty of countries arguably do a better job without the use of them at all. I tend to agree, depending on the circumstances, but it is a hotly contested point.