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>Where the class members are individual consumers, litigation ends up being lawyer-driven. Cases settle for pennies on the dollar of potential damages, and end

>Where the class members are individual consumers, litigation ends up being lawyer-driven. Cases settle for pennies on the dollar of potential damages, and end up serving neither to compensate consumers nor really to deter illegal conduct. You're completely misunderstanding the purpose of class actions, and are using an oft-repeated error. The article itself explains the value of class actions. Class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them. This is the source of the fallacy you commit: the idea that this involves large compensation for consumers. Consumers ARE compensated in class actions, it's just that their individual harm is small so their individual payout is small. So if, say, Comcast has been secretly overcharging customers $10/month, it's not a big enough problem for any one of them to sue. But as a class of millions of Comcast consumers, it may be worth it, and can have a real punch at that level. This is the other part of your error: of course class actions are "lawyer-driven" because, again, the harm to any individual is small. It's the lawyers and firms pursuing the class action that are doing the work and organizing the action, often on contingency. Related to your first mistake, you and many others see the lawyers getting a big payment as "stealing" from the class when they are being compensated for the work they did and winning restitution for harms that no individual consumer would pursue, and the class members STILL get fairly compensated for the small harm done to them. Finally, and perhaps the largest part of your error, this does and, in the US, is really the only way to, deter illegal conduct because, again, this illegal conduct is premised on the idea that it's too small for any person to care or find it worthwhile to fight. By organizing a class action you enable consumers to hit back and stop this kind of behavior, and put companies on notice that they can't try these underhanded tactics without risk. I agree that a regulation model would be preferable to this kind of litigation, but until we have regulation we must use the litigation tools we have available. Be very wary of screeds against class actions, they're almost certainly corporate propaganda.

ameister14 9y ago
I don't think you should assume Rayiner doesn't understand what a class action is. He's an appellate lawyer, I'm pretty sure he gets what a class action is. He's basically saying class actions don't work the best if your goal is greater consumer protection. There are other ways to do it that are more effective.
- Sangermaine 9y ago
  I'm not assuming anything. I'm saying that he's misunderstanding the purpose and value of class actions based on the content of his comment, and am not impressed by attempts at arguments from authority. Appellate lawyer or not, his points were not good ones. I mean, the very article he's commenting on directly refutes his points about class actions resulting in less compensation for consumers and only or largely benefiting lawyers.
  - ameister14 9y ago
    It's not an argument from authority. It's an attempt to sidestep the breaking things down into basic parts for non-technical discussion, by pointing out that the person you responded to is capable of having a technical discussion on the subject. You make some statements here that are arguable - for example, that 'class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them.' That's not always true. Legislation or regulatory oversight are often better solutions as they occur faster and have broader implications. You even acknowledge that later in your comment as you agree that regulation is better. I don't think anybody in the thread is arguing that individual arbitration is a better method. The question is whether class-action suits is the final method or if we should be considering different regulatory controls.
    - Sangermaine 9y ago
      Yes, I noted that regulation or legislation is better, but we don't have them now. Under the current system, class actions are valuable instruments for consumers. No one, myself included, is saying class actions should be "the final method", just that it's wrong to argue against them when they are currently generally the only method available to consumers for certain kinds of harm. I'd be the first to support robust regulatory protections that protect consumers to the point that they render class actions redundant, but sadly we don't live in that world.
JamesBarney 9y ago
Everyone in my family growing up was a lawyer, and the saying I always heard was "in class action lawsuits only the lawyers are getting rich". I've also heard this from many other lawyers outside my family. So it's at least a widely held belief.
- Sangermaine 9y ago
  But that's the point: what does that comment mean? Class actions, like any court action, isn't meant to make the plaintiffs rich. It's to obtain restitution for their harm. If they were ripped off $10, then they should get something around that. The lawyers who got them that compensation should of course be paid for their work.
  - ryanbrunner 9y ago
    Right, but if we take his statement at face value, and a significant portion of the money changing hands in a class action is going towards lawyers, it's at the very least a massively inefficient system.
    - tlogan 9y ago
      Good question. Lets take lawyers a side. How much would you pay to somebody to ensure that a big evil corporation is not cheating their ~10M customers by $10/year (100M/year in total)? $10M? $50M?
      - astrocat 9y ago
        This is the perspective that makes sense to me. Regular Joe individuals may not be getting rich, or even getting decent compensation for the harm they experienced, but is society getting a benefit by having a process that disincentives large companies from harming millions of people in small ways for big profits? I'd say that yes, that is VERY valuable for society, and if a handful of lawyers are getting millions for it... so what? This doesn't mean it's the ideal solution to widespread consumer harm, but it's a tool we have at our disposal NOW instead of hypothetical legislation or regulation we might have at some point in the future...
rayiner 9y ago
> Class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them. If you think of litigation in economic-theoretic terms, yes, that's the purpose of class actions. But while you're in that head space, you also need to consider the principal-agent problem: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble.... Where the claims are small and the class members are unsophisticated, the principals (the consumers) don't have sufficient incentive to control their agents (the lawyers). That manifests in class action litigation in two ways. Class action lawyers are incentivized to bring cases that are marginal on the merits: http://www.abajournal.com/news/article/posner_opinion_blasts_class_actions_that_are_no_better_than_a_racket http://www.abajournal.com/news/article/posner_opinion_blasts.... They also are incentivized to settle good cases for for a fraction of potential damages. The end result is a system that doesn't do a great job of really anything. Consumers get only a tiny fraction of what they've lost. Companies aren't deterred--they just treat the occasional payout as the cost of doing business.
- tptacek 9y ago
  Is this related to the transactional principal-agent problem in things like real estate, where the incentives of the agents are to close transactions as quickly as possible, since optimizing for the quantity of transactions handled is wildly more lucrative than optimizing for the outcome of any one transaction?
  - rayiner 9y ago
    Yes, I think so. There is at least a significant subset of the industry where the most lucrative strategy is settling a large volume of mediocre cases quickly.
  - dragonwriter 9y ago
    It's more a manifestation of thst problem than merely related. Class action lawsuits are a crappy solution, but often better than the alternative, which is often nothing. (In some cases, mass direct-action lawsuits are superior, but coordinating those also has substantially increased overhead, and they gave some of the same settlement incentives; OTOH, because they are positive approval rather than opt out, it's less likely that a small-fraction settlement gets approved.
DannyBee 9y ago
"Class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them." Actually, you are misunderstanding the purpose of class actions. You may see it as s some ideal, but it's not why they were created. They were created to simplify similar cases into one case for the purpose of not having two trials when you could have one.. That's it. It was literally for the efficient administration of justice. Not to do what you suggest the purpose is. Take a gander at the history of the federal rules of civil procedure, this is very widely documented and known. This is one reason the supreme court was able to say "no more". They are just a collection of court rules. I'd also argue they are not the ideal instrument, as they rarely actually achieve any real gains for the individuals.
- astrocat 9y ago
  >I'd also argue they are not the ideal instrument, as they rarely actually achieve any real gains for the individuals. I can't say whether or not the process is ideal, but I can say that the benefit to individuals is irrelevant. The COLLECTIVE - the whole society - benefits in a big way when the behavior of a large corporation doing very small harm to thousands or millions of individuals is punished and deterred. The bar for success can't always be directed at individuals; there are very positive societal level benefits that are small to individuals but huge to the whole ecosystem.
  - DannyBee 9y ago
    "but I can say that the benefit to individuals is irrelevant. " Again, never the original purpose, and while a good goal, class actions are surely ineffective at this. " The COLLECTIVE - the whole society - benefits in a big way when the behavior of a large corporation doing very small harm to thousands or millions of individuals is punished and deterred." Also as mentioned, I think this is very true, but class actions have pretty much not had that effect at all. There are very few areas where class actions have been effective at accomplishing this.
- afpx 9y ago
a_c_s 9y ago
You missed the most critical points of the parent though. To use your example, Comcast has been overcharging by $10/month for years. A just resolution would be for each customer to get $120/year they were with Comcast PLUS Comcast should have some penalty for their fraud. Instead what happens is Comcast agrees to a "huge" $30 million fine that works out to $12/customer per year if everyone opts in to the lawsuit and the lawyers take 50% for their efforts, so the lawyers get $15 million, the customers who sign up get $12 back and the ones who miss the memo get $0. The customers don't have any recourse to say "no, that's a shitty settlement, we want 100% of what we're owed not 10% of it" or "hey, 50% is too much for the lawyers, I'd rather take $0 than the shitty deal we were offered". A just system would make the corporation pay the lawyer fees (as part of their punishment for doing illegal things) and the customers/victims would be made 100% whole.
- sliverstorm 9y ago
  You actually can remove yourself from a class action and retain the right to sue independently, if you think you will do better and win your 100%. (Or for any other reason)
- jbg331 9y ago
  For purposes of clarity, lawyers don't get 50%, and whatever they do get needs to be approved by the judge. It's often 20-30% depending on work.
- vmarsy 9y ago
  > The customers don't have any recourse to say "no, that's a shitty settlement, we want 100% of what we're owed not 10% of it" They definitely do, they can decide to opt-out, and retain the right to sue the company on that issue. But those who opt-out would have to go start their own lawsuit. For small matters where you were wronged by $120, and you only get $30 back, this is definitely not worth it to start your own lawsuit, the best action here is to take the money and boycott that company if possible. For bigger amounts, like lemon-law cars, it might be worth it, especially if the payouts look too small. For instance, $300 refund if you had to do multiple transmissions repair on your car doesn't seem that great, given that a transmission repair can cost from $500 to thousands of $ each. In that case it can make sense to opt-out. > or "hey, 50% is too much for the lawyers, I'd rather take $0 than the shitty deal we were offered". The article says they usually get $2 for $10, which can still look high I agree, but definitely not 50%.
jayess 9y ago
Written like a true class action plaintiffs' attorney.
sseveran 9y ago
Personally I don't like that regulatory oversight is being outsourced to lawsuits both class action and from regulators. One might say that if Comcast were overcharging their customers they were defrauding them. And while I am generally in favor of weaker regulations I am in favor of much stronger penalties for those that break the law. In your example not only should Comcast be disgorging any fraudulently obtained gains with interest, people should be going to jail. We have as a country for too long accepted this system where when a company does something illegal we let those that committed the fraud off the hook and send the bill to the companies shareholders. The idea that HSBC should have been allowed to continue to operate in the US after its conduct is absurd, (and yes I understand what would have happened if their banking license was pulled). That there have not been large numbers of arrests of Wells Fargo employees given the amount of fraud committed and laws broken is also absurd. If you or I fraudulently opened millions of accounts we would rightly be going to prison for a very long time. I do find it gratifying to see VW employees being indicted. But the arrest of executives who commit wrongdoing is far too rare these days.

ameister14 9y ago

I don't think you should assume Rayiner doesn't understand what a class action is. He's an appellate lawyer, I'm pretty sure he gets what a class action is. He's basically saying class actions don't work the best if your goal is greater consumer protection. There are other ways to do it that are more effective.

Sangermaine 9y ago
I'm not assuming anything. I'm saying that he's misunderstanding the purpose and value of class actions based on the content of his comment, and am not impressed by attempts at arguments from authority. Appellate lawyer or not, his points were not good ones. I mean, the very article he's commenting on directly refutes his points about class actions resulting in less compensation for consumers and only or largely benefiting lawyers.
- ameister14 9y ago
  It's not an argument from authority. It's an attempt to sidestep the breaking things down into basic parts for non-technical discussion, by pointing out that the person you responded to is capable of having a technical discussion on the subject. You make some statements here that are arguable - for example, that 'class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them.' That's not always true. Legislation or regulatory oversight are often better solutions as they occur faster and have broader implications. You even acknowledge that later in your comment as you agree that regulation is better. I don't think anybody in the thread is arguing that individual arbitration is a better method. The question is whether class-action suits is the final method or if we should be considering different regulatory controls.
  - Sangermaine 9y ago
    Yes, I noted that regulation or legislation is better, but we don't have them now. Under the current system, class actions are valuable instruments for consumers. No one, myself included, is saying class actions should be "the final method", just that it's wrong to argue against them when they are currently generally the only method available to consumers for certain kinds of harm. I'd be the first to support robust regulatory protections that protect consumers to the point that they render class actions redundant, but sadly we don't live in that world.

JamesBarney 9y ago

Everyone in my family growing up was a lawyer, and the saying I always heard was "in class action lawsuits only the lawyers are getting rich". I've also heard this from many other lawyers outside my family. So it's at least a widely held belief.

Sangermaine 9y ago
But that's the point: what does that comment mean? Class actions, like any court action, isn't meant to make the plaintiffs rich. It's to obtain restitution for their harm. If they were ripped off $10, then they should get something around that. The lawyers who got them that compensation should of course be paid for their work.
- ryanbrunner 9y ago
  Right, but if we take his statement at face value, and a significant portion of the money changing hands in a class action is going towards lawyers, it's at the very least a massively inefficient system.
  - tlogan 9y ago
    Good question. Lets take lawyers a side. How much would you pay to somebody to ensure that a big evil corporation is not cheating their ~10M customers by $10/year (100M/year in total)? $10M? $50M?
    - astrocat 9y ago
      This is the perspective that makes sense to me. Regular Joe individuals may not be getting rich, or even getting decent compensation for the harm they experienced, but is society getting a benefit by having a process that disincentives large companies from harming millions of people in small ways for big profits? I'd say that yes, that is VERY valuable for society, and if a handful of lawyers are getting millions for it... so what? This doesn't mean it's the ideal solution to widespread consumer harm, but it's a tool we have at our disposal NOW instead of hypothetical legislation or regulation we might have at some point in the future...

rayiner 9y ago

> Class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them. If you think of litigation in economic-theoretic terms, yes, that's the purpose of class actions. But while you're in that head space, you also need to consider the principal-agent problem: https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem https://en.wikipedia.org/wiki/Principal%E2%80%93agent_proble.... Where the claims are small and the class members are unsophisticated, the principals (the consumers) don't have sufficient incentive to control their agents (the lawyers). That manifests in class action litigation in two ways. Class action lawyers are incentivized to bring cases that are marginal on the merits: http://www.abajournal.com/news/article/posner_opinion_blasts_class_actions_that_are_no_better_than_a_racket http://www.abajournal.com/news/article/posner_opinion_blasts.... They also are incentivized to settle good cases for for a fraction of potential damages. The end result is a system that doesn't do a great job of really anything. Consumers get only a tiny fraction of what they've lost. Companies aren't deterred--they just treat the occasional payout as the cost of doing business.

tptacek 9y ago
Is this related to the transactional principal-agent problem in things like real estate, where the incentives of the agents are to close transactions as quickly as possible, since optimizing for the quantity of transactions handled is wildly more lucrative than optimizing for the outcome of any one transaction?
- rayiner 9y ago
  Yes, I think so. There is at least a significant subset of the industry where the most lucrative strategy is settling a large volume of mediocre cases quickly.
- dragonwriter 9y ago
  It's more a manifestation of thst problem than merely related. Class action lawsuits are a crappy solution, but often better than the alternative, which is often nothing. (In some cases, mass direct-action lawsuits are superior, but coordinating those also has substantially increased overhead, and they gave some of the same settlement incentives; OTOH, because they are positive approval rather than opt out, it's less likely that a small-fraction settlement gets approved.

DannyBee 9y ago

"Class actions are an ideal instrument for redress of harm where the harm to any individual is small, but the harm is widespread, meaning that a company is cheating or hurting many people but it's not worth any one individual's effort or expense to sue them." Actually, you are misunderstanding the purpose of class actions. You may see it as s some ideal, but it's not why they were created. They were created to simplify similar cases into one case for the purpose of not having two trials when you could have one.. That's it. It was literally for the efficient administration of justice. Not to do what you suggest the purpose is. Take a gander at the history of the federal rules of civil procedure, this is very widely documented and known. This is one reason the supreme court was able to say "no more". They are just a collection of court rules. I'd also argue they are not the ideal instrument, as they rarely actually achieve any real gains for the individuals.

astrocat 9y ago
>I'd also argue they are not the ideal instrument, as they rarely actually achieve any real gains for the individuals. I can't say whether or not the process is ideal, but I can say that the benefit to individuals is irrelevant. The COLLECTIVE - the whole society - benefits in a big way when the behavior of a large corporation doing very small harm to thousands or millions of individuals is punished and deterred. The bar for success can't always be directed at individuals; there are very positive societal level benefits that are small to individuals but huge to the whole ecosystem.
- DannyBee 9y ago
  "but I can say that the benefit to individuals is irrelevant. " Again, never the original purpose, and while a good goal, class actions are surely ineffective at this. " The COLLECTIVE - the whole society - benefits in a big way when the behavior of a large corporation doing very small harm to thousands or millions of individuals is punished and deterred." Also as mentioned, I think this is very true, but class actions have pretty much not had that effect at all. There are very few areas where class actions have been effective at accomplishing this.
afpx 9y ago

a_c_s 9y ago

You missed the most critical points of the parent though. To use your example, Comcast has been overcharging by $10/month for years. A just resolution would be for each customer to get $120/year they were with Comcast PLUS Comcast should have some penalty for their fraud. Instead what happens is Comcast agrees to a "huge" $30 million fine that works out to $12/customer per year if everyone opts in to the lawsuit and the lawyers take 50% for their efforts, so the lawyers get $15 million, the customers who sign up get $12 back and the ones who miss the memo get $0. The customers don't have any recourse to say "no, that's a shitty settlement, we want 100% of what we're owed not 10% of it" or "hey, 50% is too much for the lawyers, I'd rather take $0 than the shitty deal we were offered". A just system would make the corporation pay the lawyer fees (as part of their punishment for doing illegal things) and the customers/victims would be made 100% whole.

sliverstorm 9y ago
You actually can remove yourself from a class action and retain the right to sue independently, if you think you will do better and win your 100%. (Or for any other reason)
jbg331 9y ago
For purposes of clarity, lawyers don't get 50%, and whatever they do get needs to be approved by the judge. It's often 20-30% depending on work.
vmarsy 9y ago
> The customers don't have any recourse to say "no, that's a shitty settlement, we want 100% of what we're owed not 10% of it" They definitely do, they can decide to opt-out, and retain the right to sue the company on that issue. But those who opt-out would have to go start their own lawsuit. For small matters where you were wronged by $120, and you only get $30 back, this is definitely not worth it to start your own lawsuit, the best action here is to take the money and boycott that company if possible. For bigger amounts, like lemon-law cars, it might be worth it, especially if the payouts look too small. For instance, $300 refund if you had to do multiple transmissions repair on your car doesn't seem that great, given that a transmission repair can cost from $500 to thousands of $ each. In that case it can make sense to opt-out. > or "hey, 50% is too much for the lawyers, I'd rather take $0 than the shitty deal we were offered". The article says they usually get $2 for $10, which can still look high I agree, but definitely not 50%.

jayess 9y ago

Written like a true class action plaintiffs' attorney.

sseveran 9y ago

Personally I don't like that regulatory oversight is being outsourced to lawsuits both class action and from regulators. One might say that if Comcast were overcharging their customers they were defrauding them. And while I am generally in favor of weaker regulations I am in favor of much stronger penalties for those that break the law. In your example not only should Comcast be disgorging any fraudulently obtained gains with interest, people should be going to jail. We have as a country for too long accepted this system where when a company does something illegal we let those that committed the fraud off the hook and send the bill to the companies shareholders. The idea that HSBC should have been allowed to continue to operate in the US after its conduct is absurd, (and yes I understand what would have happened if their banking license was pulled). That there have not been large numbers of arrests of Wells Fargo employees given the amount of fraud committed and laws broken is also absurd. If you or I fraudulently opened millions of accounts we would rightly be going to prison for a very long time. I do find it gratifying to see VW employees being indicted. But the arrest of executives who commit wrongdoing is far too rare these days.