4 ms·

I'm going to take a contrary point of view: Class action lawsuits (where a group of customers sue a company that they purchased a product from) are almost alway

by powera 11y ago

I'm going to take a contrary point of view: Class action lawsuits (where a group of customers sue a company that they purchased a product from) are almost always pointless and expensive wastes of money, and we should encourage contracts to forbid them. * Many class-action suits end up with a result of lawyers get $50 million, and everyone who bought a product gets a coupon for more of that product. * The threshold for what can be the basis of a class-action is extremely low. * A good portion of "legitimate" class-action suits could also be construed as federal fraud / false advertising suits. (the example of a bank selling insurance that couldn't possibly be used would be an example) All of these are different from, say, a town suing a company for environmental damage. In that case, there's no contract between the individual citizens of the town and the company, so this trend won't impact those lawsuits at all.

philsnow 11y ago
> Many class-action suits end up with a result of lawyers get $50 million, and everyone who bought a product gets a coupon for more of that product. Who pays that $50M to the lawyers? It's a zero-sum game, where should the plaintiffs win, the defendant loses big with very little effort on individual plaintiffs' parts. What other remedy do consumers have against abusive corporations who act in bad faith, knowing full well that individuals won't take 40 or 400 hours out of their life to fight over $300? I can absolutely see it going the other way as well, where an activist (or sock puppet for a competitor) can rally together a mob of people against whatever company they don't like this week. My response to that is that, in general, companies are in a position to defend themselves and should regard defending these cases as a cost of doing business. The alternative is to ask consumers (especially those in poverty) to enjoy death by a thousand cuts as dozens of companies each take their pound of flesh from each and every one of them. In this case, the "cost of doing business" takes food off the table.
wpietri 11y ago
You're missing the social value of class action lawsuits. There are basically three ways to have reasonably well run open markets: individual action, state action, and collective action. Individual action often makes no sense. If a company shafts me for $10, I'm not going to spent the thousands or millions necessary to prove the error. I'll just write it off and be less trusting next time. But if a company can screw each American out of $10, they've made $3.2 billion, which is a great incentive, and also provides for fantastic legal defense. Net result: a lot of people have bad experiences, reducing consumer trust and making innovation harder. State action is also often problematic. It's not bad at some things. But especially at HN, we don't want to encourage this as the primary means of market regulation. Governments are slow to move and risk averse. It's easier and safer for them to over-regulate, favoring incumbents and limiting innovation to what they can be persuaded to permit. (See, e.g., the car market.) Class action, on the other hand, fills an important gap. Companies know that they can't just screw everybody without risking a big lawsuit and a big payout. But plenty of problems get solved without government having to intervene. Class action basically allows for a "forgiveness, not permission" model for regulation. As long as your customers are happy and you treat them fairly, your risk is low. If class action stops working as a way of redressing grievances, we'll see a lot of people agitating for increased government regulation. As an entrepreneur, I'd hate to see that happen.
- dd36 11y ago
  This is a great response. Maybe there is another way to prevent class action abuse but it's not through forced arbitration. My small claim was removed to arbitration against my objections, and they actually mention me in the NYTimes article: https://medium.com/p/faq-citibank-the-aaa-and-arbitration-my-experience-fighting-for-quick-dispute-resolution-427281c3b134 https://medium.com/p/faq-citibank-the-aaa-and-arbitration-my...
jcfrei 11y ago
But class-action suits are ideal when a large number of people suffered a minor monetary loss. How are you going to deal with these cases if only arbitration is left? If these cases are handled on an individual basis nobody will seek redemption. Whether and how much the lawyers or the plaintiffs receive in compensation is not so important in my eyes, what matters is the exemplary effect on businesses.

by powera 11y ago

philsnow 11y ago

> Many class-action suits end up with a result of lawyers get $50 million, and everyone who bought a product gets a coupon for more of that product. Who pays that $50M to the lawyers? It's a zero-sum game, where should the plaintiffs win, the defendant loses big with very little effort on individual plaintiffs' parts. What other remedy do consumers have against abusive corporations who act in bad faith, knowing full well that individuals won't take 40 or 400 hours out of their life to fight over $300? I can absolutely see it going the other way as well, where an activist (or sock puppet for a competitor) can rally together a mob of people against whatever company they don't like this week. My response to that is that, in general, companies are in a position to defend themselves and should regard defending these cases as a cost of doing business. The alternative is to ask consumers (especially those in poverty) to enjoy death by a thousand cuts as dozens of companies each take their pound of flesh from each and every one of them. In this case, the "cost of doing business" takes food off the table.

wpietri 11y ago

You're missing the social value of class action lawsuits. There are basically three ways to have reasonably well run open markets: individual action, state action, and collective action. Individual action often makes no sense. If a company shafts me for $10, I'm not going to spent the thousands or millions necessary to prove the error. I'll just write it off and be less trusting next time. But if a company can screw each American out of $10, they've made $3.2 billion, which is a great incentive, and also provides for fantastic legal defense. Net result: a lot of people have bad experiences, reducing consumer trust and making innovation harder. State action is also often problematic. It's not bad at some things. But especially at HN, we don't want to encourage this as the primary means of market regulation. Governments are slow to move and risk averse. It's easier and safer for them to over-regulate, favoring incumbents and limiting innovation to what they can be persuaded to permit. (See, e.g., the car market.) Class action, on the other hand, fills an important gap. Companies know that they can't just screw everybody without risking a big lawsuit and a big payout. But plenty of problems get solved without government having to intervene. Class action basically allows for a "forgiveness, not permission" model for regulation. As long as your customers are happy and you treat them fairly, your risk is low. If class action stops working as a way of redressing grievances, we'll see a lot of people agitating for increased government regulation. As an entrepreneur, I'd hate to see that happen.

dd36 11y ago
This is a great response. Maybe there is another way to prevent class action abuse but it's not through forced arbitration. My small claim was removed to arbitration against my objections, and they actually mention me in the NYTimes article: https://medium.com/p/faq-citibank-the-aaa-and-arbitration-my-experience-fighting-for-quick-dispute-resolution-427281c3b134 https://medium.com/p/faq-citibank-the-aaa-and-arbitration-my...

jcfrei 11y ago

But class-action suits are ideal when a large number of people suffered a minor monetary loss. How are you going to deal with these cases if only arbitration is left? If these cases are handled on an individual basis nobody will seek redemption. Whether and how much the lawyers or the plaintiffs receive in compensation is not so important in my eyes, what matters is the exemplary effect on businesses.