4 ms·

The major purpose of class actions is as a deterrent for the company. If I cause $10 in harm to a 10 million people, it's not financially viable for them each t

by dokein 9y ago

The major purpose of class actions is as a deterrent for the company. If I cause $10 in harm to a 10 million people, it's not financially viable for them each to sue me, but someone should still be motivated to go after me civilly for that. Why do lawyers get so much? In the above hypothetical scenario, - No plaintiff is going to be adequately motivated to sue, so the lawyer has to have incentive. - No plaintiff has an incentive to pay a lawyer, so he or she has to operate on a contingency basis. This is a significant risk. - Finding and organizing a large number of plaintiffs (some percent of 10 million), and suing a large corporation, is an expensive process. - The cost of the suit is incurred before the payoff, which may be years later given the appeal process. I agree that class actions are often inappropriately used, but that lawyers make much more than the individual plaintiffs is not a priori a bad thing.

tommoor 9y ago
great summary!
bradleyjg 9y ago
> but someone should still be motivated to go after me civilly for that. In most (all?) other developed nations it is the role of the executive branch of the elected government to regulate and punish businesses so as to prevent defuse harms. This business with the civil justice system being distorted to create self appointed, profit seeking, ad hoc regulators is not the only way to skin the cat.
- MarkPNeyer 9y ago
  Seconding this here. If the state isn't going to prosecute big businesses for misbehaving, say goodbye to _any_ public support for business at all, small or bit. There was a philosophy that said, 'markets are important, so when a big player misbehaves, make sure the state his them HARD, otherwise people will lose faith in the markets' Now the prevailing attitude is 'these people can't be allowed to fail or the whole system will fall down.' And then, to nobody's surprise, they misbehave.
  - dokein 9y ago
    There are lawyers that actively search for businesses misbehavior in order to bring forward class action suits. In this scenario, the bigger the misbehavior (financially) the greater the incentive, independent of the magnitude of harm on the individual scale, i.e. you’re not dependent on someone being harmed enough to want to report to authorities. That strikes me as a market behavior that’s fairly well-aligned with the optimal behavior. As to the question of criminal prosecution or harsher penalties (e.g. dissolving the corporation): to my knowledge, these suits actually draw AG attention to areas of civil misbehavior which often borders criminal misbehavior. They even surface which citizens were harmed and bring forth information gained by discovery, etc. Thus class action lawsuits actually make it easier for the government to act — that they should prosecute but do not is an independent problem.
    - jaggederest 9y ago
      > They even surface which citizens were harmed and bring forth information gained by discovery, etc. I'm not sure, but is civil disclosure readily accessible to prosecutors? I thought normally it was kept confidential, and thus would only be available in the case of an active criminal case. I would expect that prosecutors wouldn't be able to trawl through it searching for evidence of wrongdoing, and there's some procedure around that in parallel construction, but I'm not a lawyer and I can't find any specific discussion of that matter particularly.
  - JoshTriplett 9y ago
    > If the state isn't going to prosecute big businesses for misbehaving Under what law? If there's some specific law they violated, then by all means, prosecute them. But you can't post-facto say "that seems like it was wrong" and prosecute; you can only say "we should pass laws to make that wrong in the future" and prosecute further offenders. (For instance, they clearly violated insider trading laws. But what other laws, actually written and on the books, did they violate?)
    - BearGoesChirp 9y ago
      > But you can't post-facto say "that seems like it was wrong" and prosecute We can and we have. There are a few justification loopholes that have been used in the past, but we can say something is so wrong that laws can be passed after the fact to punish people engaging in it. This power is dangerous, but so is many other government powers currently used.
- rz2k 9y ago
  Regardless of whether it is the optimal system for encouraging liability minimizing practices, other developed countries have found a perfect mechanism either. American owners of diesel VWs might have their cars bought back from them and be offered up to $10k in additional compensation. Furthermore VW has portrayed this as an obvious decision they made because they love their customers and want to make things right again. The same customers in Germany might get a free "upgrade" at the dealership which reduces airflow so that the car is compliant with pollution regulations, but less powerful.
  - bradleyjg 9y ago
    You don't need American style, lawyer dominated, opt-out class actions in order to right a wrong that caused $10k in damages to each consumer. You could use regular old joinder.
    - pdabbadabba 9y ago
      How does joinder solve the problem? You still need to motivate all those individual plaintiffs to hire a lawyer and sue, then get a court to join each one (with, presumably, opposition from the defendant every time), and then you don't have the benefit of the streamlined class action procedural rules (streamlined relative to a case with several thousand individual plaintiffs, that is). And you still have to pay the lawyers! I'm not here to say that class actions are the best, or even a good way of regulating, but I really don't see how the joinder rules offer a useful solution.
      - bradleyjg 9y ago
        I don't think the situation described by rz2k is a problem of regulating. The problem he points out is not that Germany didn't sufficiently punish Volkswagen -- though it might not have -- but that the hurt German consumers were not made whole. In terms of being made whole for a substantial tort (on the order of $10k) I don't think standard american tort litigation with joinder is perfect, but I think it is a better base to build upon than rule 23 litigation. With injuries of that size I think it is practical and desirable for cases to be client driven rather than hoping a judge reviewing a settlement will adequately protect the interest of the class as against those of class counsel.
outoftacos 9y ago
Deterrence theory does not work against corporations, this has been proven so many times it's barely worth discussing.

by dokein 9y ago

tommoor 9y ago

great summary!

bradleyjg 9y ago

> but someone should still be motivated to go after me civilly for that. In most (all?) other developed nations it is the role of the executive branch of the elected government to regulate and punish businesses so as to prevent defuse harms. This business with the civil justice system being distorted to create self appointed, profit seeking, ad hoc regulators is not the only way to skin the cat.

MarkPNeyer 9y ago
Seconding this here. If the state isn't going to prosecute big businesses for misbehaving, say goodbye to _any_ public support for business at all, small or bit. There was a philosophy that said, 'markets are important, so when a big player misbehaves, make sure the state his them HARD, otherwise people will lose faith in the markets' Now the prevailing attitude is 'these people can't be allowed to fail or the whole system will fall down.' And then, to nobody's surprise, they misbehave.
- dokein 9y ago
  There are lawyers that actively search for businesses misbehavior in order to bring forward class action suits. In this scenario, the bigger the misbehavior (financially) the greater the incentive, independent of the magnitude of harm on the individual scale, i.e. you’re not dependent on someone being harmed enough to want to report to authorities. That strikes me as a market behavior that’s fairly well-aligned with the optimal behavior. As to the question of criminal prosecution or harsher penalties (e.g. dissolving the corporation): to my knowledge, these suits actually draw AG attention to areas of civil misbehavior which often borders criminal misbehavior. They even surface which citizens were harmed and bring forth information gained by discovery, etc. Thus class action lawsuits actually make it easier for the government to act — that they should prosecute but do not is an independent problem.
  - jaggederest 9y ago
    > They even surface which citizens were harmed and bring forth information gained by discovery, etc. I'm not sure, but is civil disclosure readily accessible to prosecutors? I thought normally it was kept confidential, and thus would only be available in the case of an active criminal case. I would expect that prosecutors wouldn't be able to trawl through it searching for evidence of wrongdoing, and there's some procedure around that in parallel construction, but I'm not a lawyer and I can't find any specific discussion of that matter particularly.
- JoshTriplett 9y ago
  > If the state isn't going to prosecute big businesses for misbehaving Under what law? If there's some specific law they violated, then by all means, prosecute them. But you can't post-facto say "that seems like it was wrong" and prosecute; you can only say "we should pass laws to make that wrong in the future" and prosecute further offenders. (For instance, they clearly violated insider trading laws. But what other laws, actually written and on the books, did they violate?)
  - BearGoesChirp 9y ago
    > But you can't post-facto say "that seems like it was wrong" and prosecute We can and we have. There are a few justification loopholes that have been used in the past, but we can say something is so wrong that laws can be passed after the fact to punish people engaging in it. This power is dangerous, but so is many other government powers currently used.
rz2k 9y ago
Regardless of whether it is the optimal system for encouraging liability minimizing practices, other developed countries have found a perfect mechanism either. American owners of diesel VWs might have their cars bought back from them and be offered up to $10k in additional compensation. Furthermore VW has portrayed this as an obvious decision they made because they love their customers and want to make things right again. The same customers in Germany might get a free "upgrade" at the dealership which reduces airflow so that the car is compliant with pollution regulations, but less powerful.
- bradleyjg 9y ago
  You don't need American style, lawyer dominated, opt-out class actions in order to right a wrong that caused $10k in damages to each consumer. You could use regular old joinder.
  - pdabbadabba 9y ago
    How does joinder solve the problem? You still need to motivate all those individual plaintiffs to hire a lawyer and sue, then get a court to join each one (with, presumably, opposition from the defendant every time), and then you don't have the benefit of the streamlined class action procedural rules (streamlined relative to a case with several thousand individual plaintiffs, that is). And you still have to pay the lawyers! I'm not here to say that class actions are the best, or even a good way of regulating, but I really don't see how the joinder rules offer a useful solution.
    - bradleyjg 9y ago
      I don't think the situation described by rz2k is a problem of regulating. The problem he points out is not that Germany didn't sufficiently punish Volkswagen -- though it might not have -- but that the hurt German consumers were not made whole. In terms of being made whole for a substantial tort (on the order of $10k) I don't think standard american tort litigation with joinder is perfect, but I think it is a better base to build upon than rule 23 litigation. With injuries of that size I think it is practical and desirable for cases to be client driven rather than hoping a judge reviewing a settlement will adequately protect the interest of the class as against those of class counsel.

outoftacos 9y ago

Deterrence theory does not work against corporations, this has been proven so many times it's barely worth discussing.