ABSTRACT
Class action law is modeled on the assumption that a large group of individuals have similar legal claims of such small value that no one of them has the incentive or ability to litigate alone. Rule 23 resolves that collective action problem by enabling one class member to represent the group, with a common fund fee award sharing the costs across the class. The Constitution guarantees class members the options of opting out (exit) or objecting (voice), but given the small stakes, most do nothing (loyalty). While elegant, this model does not capture the reality of all class suits. In many cases, some class members have significant enough legal claims that they are capable of litigating alone. The group dynamics accordingly change, with everything turning on the question of whether the large claimants will opt out and litigate separately. The risk that they might discourages the defendant from settling the class’s small claims, lest it then have to litigate the large claimants’ valuable claims. But the dynamics simultaneously create an opportunity: if the class members could unite, they might increase their leverage and extract a premium from a defendant eager to settle the whole package of claims, with that global settlement simultaneously benefiting the defendant (as evidenced by its willingness to pay a premium for it). The tragedy of this commons is that, built on a different template, class action law provides no model for intraclass coordination …
Francis E McGovern and William B Rubenstein, The Negotiation Class: A Cooperative Approach to Class Actions Involving Large Stakeholders, Texas Law Review volume 99 issue 1 (2020).
First posted 2020-12-22 15:58:53
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