THE GOALS OF CLASS ACTIONS

Introduction

Debates over class actions have often been compared to a war. 1 1 Four decades ago, Professor Arthur R. Miller described these debates as a “holy war.” Arthur R. Miller, Of Frankenstein Monsters and Shining Knights: Myth, Reality, and the “Class Action Problem,” 92 Harv. L. Rev. 664, 664 (1979) [hereinafter Miller, Of Frankenstein Monsters and Shining Knights]. Professor David Marcus has spoken of the “class action wars.” David Marcus, The History of the Modern Class Action, Part I: Sturm Und Drang, 1953–1980, 90 Wash. U. L. Rev. 587, 610–14 (2013) [hereinafter Marcus, History of the Modern Class Action]. ... Close This war centers on class actions for monetary relief, which aggregate many damages claims into a single lawsuit. 2 2 This Note focuses on class actions for monetary relief. Other categories of class actions do not raise most of the issues this Note discusses and should be treated as distinct. See Maureen Carroll, Class Action Myopia, 65 Duke L.J. 843, 850 (2016) (“Not only does the current debate largely fail to reflect the function and importance of subtypes other than the aggregated-damages class action, but more important, it also has produced across-the-board changes in class-action law that have made the purposes of the other subtypes more difficult to achieve.”). ... Close One side defends such class actions as a tool for providing access to justice and keeping the powerful in check. 3 3 E.g., Elizabeth J. Cabraser, The Class Abides: Class Actions and the “Roberts Court”, 48 Akron L. Rev. 757, 800–01 (2015) (“May [class actions] abide . . . to serve the good of the many in our uniquely challenging time; and to preserve for adjudication those trespasses to our economic and personal rights and interests that our individual resources, or those of the courts themselves, do not permit us to effectively pursue alone.”); Arthur R. Miller, The Preservation and Rejuvenation of Aggregate Litigation: A Systemic Imperative, 64 Emory L.J. 293, 312 (2014) (“[S]ooner or later, thoughtful people will be distressed by the realization that restricting class actions and other forms of group litigation inevitably leads to the under-enforcement of important public policies.”). ... Close The other side accuses them of enabling meritless litigation and bleeding money from corporations. 4 4 E.g., Linda S. Mullenix, Ending Class Actions as We Know Them: Rethinking the American Class Action, 64 Emory L.J. 399, 405 (2014) (arguing that class actions for dam­ages are dysfunctional and that class actions should be limited to injunctive relief). Some­times, con­cerns along these lines are targeted at specific types of damages class actions rather than being generalized to all damages class actions. E.g., Janet Cooper Alexander, Do the Merits Matter? A Study of Settlements in Securities Class Actions, 43 Stan. L. Rev. 497, 516–19 (1991) (arguing that the meritoriousness of legal claims is a relatively weak determi­nant of whether securities class actions are filed and the size of the resulting settlements, and that the degree of decline in stock prices and the amount of insurance coverage are stronger determinants). ... Close This war is fought on many fronts. Some ques­tion whether it is desirable, or even constitutional, for class actions to be binding upon class members without their express consent. 5 5 E.g., Martin H. Redish, Wholesale Justice: Constitutional Democracy and the Problem of the Class Action Lawsuit 2–3 (2009) [hereinafter Redish, Wholesale Justice] (ar­guing that class actions raise constitutional and political concerns because they “often re­vok[e]—either legally or practically—the individual right holder’s ability to control the protection or vindication of his rights” and “often effect dramatic alterations in the DNA of the underlying substantive law”). For a rebuttal to these arguments, see Alexandra D. Lahav, Are Class Actions Unconstitutional?, 109 Mich. L. Rev. 993, 999–1009 (2011) (book review). ... Close Others argue that class ac­tion plaintiff’s attorneys are subject to distorted incentives that cause them to litigate too aggressively, 6 6 E.g., Susan P. Koniak & George M. Cohen, Under Cloak of Settlement, 82 Va. L. Rev. 1051, 1056–57 (1996) (claiming that “lawyer abuse in class actions is rampant” and proposing that there should be a threat of legal liability for lawyers in order to deter such abuse). ... Close or perhaps to settle too cheaply. 7 7 E.g., John C. Coffee, Jr., Understanding the Plaintiff’s Attorney: The Implications of Economic Theory for Private Enforcement of Law Through Class and Derivative Actions, 86 Colum. L. Rev. 669, 689–90 (1986) [hereinafter Coffee, Understanding the Plaintiff’s Attorney] (“[P]laintiff’s attorneys have an incentive to settle prematurely and cheaply when they are compensated on the traditional percentage of the recovery basis.”). ... Close The much-contested certification requirements of Federal Rule of Civil Procedure 23 (Rule 23) have been subject to renewed scrutiny under the Roberts Court. 8 8 See generally Robert H. Klonoff, The Decline of Class Actions, 90 Wash. U. L. Rev. 729, 745–823 (2013) (surveying federal case law that has made class actions more difficult for plaintiffs to bring); Robert H. Klonoff, Class Actions Part II: A Respite From the Decline, 92 N.Y.U. L. Rev. 971 (2017) (reviewing further developments in federal case law that repre­sent a slowdown, though not a reversal, in the trend that class actions are becoming more difficult for plaintiffs to bring). ... Close The class action war is now fifty years old. 9 9 See infra notes 52–55 and accompanying text. ... Close Class actions have been debated endlessly, and many of the same themes have reverber­ated through the decades. Disagreements between the two sides are as heated as ever. Class actions have often proven resilient, and they have of­ten been slow to change. Yet they have changed, and recently they have been changing fast. It now appears that the class action war has reached an important new juncture.

Over the past decade, proponents of class actions have decidedly been put on the defensive. In a line of cases beginning with AT&T Mobility LLC v. Concepcion, the Supreme Court has held that contractual agreements re­quiring individual arbitration are protected under the Federal Arbitration Act of 1925. 10 10 563 U.S. 333, 352 (2011) (overturning a California common law rule that prohib­ited contracts from disallowing class-wide arbitration, finding that such a rule is preempted by the Federal Arbitration Act); see also Epic Sys. Corp. v. Lewis, 138 S. Ct. 1612, 1616 (2018) (upholding employment agreements requiring individual arbitration and dismissing a chal­lenge based on the Federal Arbitration Act’s saving clause and the National Labor Relations Act); Am. Express Co. v. Italian Colors Rest., 570 U.S. 228, 228 (2013) (holding that con­tractual agreements requiring individual arbitration cannot be invalidated on the ground that costs of individual arbitration exceed the potential recovery). ... Close Arbitration, an alternative to traditional litigation, is an in­formal and nonjudicial means of resolving disputes. In individual arbitra­tion, a single claimant seeks redress for themselves, without anyone else being represented in the proceeding or bound by the outcome. Arbitra­tion is relatively uncontroversial when the parties agree to it after the dis­pute arises, mutually availing themselves of a forum that may be cheaper, faster, or more tailored to the dispute than litigation in court. 11 11 See Concepcion, 563 U.S. at 344–45 (“The point of affording parties discretion in designing arbitration processes is to allow for efficient, streamlined procedures tailored to the type of dispute. It can be specified, for example, that the decisionmaker be a specialist in the relevant field, or that proceedings be kept confidential to protect trade secrets.”). ... Close But it is increas­ingly common for corporations to include provisions requiring in­dividual arbitration in employment and consumer contracts,  and  for  peo­ple  to  sign  away  the  right  to  litigate  in  court  before  disputes arise. 12 12 See Alexander J.S. Colvin, The Growing Use of Mandatory Arbitration, Econ. Pol’y Inst. (Apr. 6, 2018), https://www.epi.org/publication/the-growing-use-of-mandatory-arbitration
-access-to-the-courts-is-now-barred-for-more-than-60-million-american-workers/ [https://perma.
cc/ZWA8-DMDY] (reviewing empirical evidence of the growing trend of mandatory em­ployee arbitration). ... Close Most people do not, and probably could not, bargain out of mandatory arbitra­tion agree­ments, so there are few checks on their proliferation. 13 13 See Epic, 138 S. Ct. at 1637, 1643 (Ginsburg, J., dissenting) (discussing inequality of bargaining power between workers and employers).
One of the few downsides that corporations must consider when including mandatory arbitration provisions in contracts is the possibility that many people who would not other­wise litigate against the corporation will pursue arbitration. In such a scenario, mandatory arbitration agreements can backfire on the corporation, forcing it to pay arbitration fees for many disputes at once. While this has traditionally been viewed as unlikely, plaintiff-side law firms have recently introduced a tactic of mass arbitration, which involves coordinating large numbers of claimants to bring arbitration actions. This tactic has sometimes been remarka­bly effective. For example, it recently forced Amazon to remove a mandatory arbitration provision from its contract with customers. Michael Corkery, Amazon Ends Use of Arbitration for Customer Disputes, N.Y. Times (July 22, 2021), https://www.nytimes.com/2021
/07/22/business/amazon-arbitration-customer-disputes.html (on file with the Columbia Law Review) (last updated Sept. 28, 2021). Still, it appears unlikely that the mass arbitration tactic will be broadly replicated against small and midsize corporations or in the context of complicated disputes. ... Close Given that most people bound by mandatory arbitration agreements cannot take part in class actions, there are likely to be fewer class actions wherever such agree­ments proliferate. 14 14 See John C. Coffee, Jr., Entrepreneurial Litigation: Its Rise, Fall, and Future 129 (2015) (“Over time, the use of arbitration clauses will only spread, predictably covering most persons in contractual relationships with a company and also applying to at least some tort claimants, disabling both groups from suing in court.”); Brian T. Fitzpatrick, The Conservative Case for Class Actions 128 (2019) [hereinafter Fitzpatrick, The Conservative Case] (“The status quo is no longer lots and lots of class actions like it was before 2011. The status quo is now few and maybe no class actions.”).
Not all mandatory arbitration agreements contain explicit waivers that prohibit partic­ipation in class actions and class arbitration, but courts are likely to interpret mandatory arbitration agreements as prohibiting participation in class proceedings even in the absence of such explicit waivers. See, e.g., Lamps Plus, Inc. v. Varela, 139 S. Ct. 1407, 1411 (2019) (holding that mandatory arbitration agreements that are silent or ambiguous as to the avail­ability of class arbitration do not permit class arbitration). ... Close Proponents of class actions have called on Congress to intervene, recognizing that class actions are in peril if Congress does noth­ing. 15 15 See, e.g., Epic, 138 S. Ct. at 1633 (Ginsburg, J., dissenting) (“Congressional correc­tion of the Court’s elevation of the [Federal Arbitration Act] over workers’ rights to act in concert is urgently in order.”); Fitzpatrick, The Conservative Case, supra note 14, at 125–27 (calling on Congress to amend the Federal Arbitration Act so as to reverse the outcome of Concepcion). ... Close Congress must decide whether class actions are worth saving.

But class action legislation is mired in partisan division. Democrats wish to preserve class actions, as demonstrated by the Forced Arbitration Injustice Repeal Act (FAIR Act), a bill that would render unenforceable any contractual agreements that bar class litigation of employment, con­sumer, antitrust, and civil rights disputes. 16 16 H.R. 1423, 116th Cong. (2019). For analysis of the FAIR Act, see infra section II.B. ... Close The FAIR Act was passed by a Democratic-controlled House of Representatives in September 2019, but it never became law. 17 17 See infra notes 141–142 and accompanying text. ... Close By contrast, Republicans would weaken class actions further: In March 2017, a Republican-controlled House of Representatives passed the Fairness in Class Action Litigation Act (Fairness Act), a bill that would significantly restrict class actions. 18 18 H.R. 985, 115th Cong. (2017). Among other provisions, the Fairness Act would require courts to determine, as prerequisites to class certification, that “each proposed class member suffered the same type and scope of injury as the named class representative[s]” and that there is “a reliable and administratively feasible mechanism . . . for distributing directly to a substantial majority of class members any monetary relief secured for the class.” Id. §§ 1716(a), 1718(a). For analysis of the Fairness Act, see infra section II.A. ... Close Like the FAIR act, the Fairness Act never became law. 19 19 See infra notes 120–121 and accompanying text. ... Close Class actions remain a live and urgent issue, with Democrats and Republicans rallied around opposing visions of reform. Even while Democrats control both houses of Congress and the presi­dency, their proposals are unlikely to become law due to the prospect of a Senate filibuster and possible dissent from conservative Democratic sena­tors. 20 20 See infra note 143 and accompanying text. ... Close A path to compromise is needed if any reforms are to pass.

This Note explains that class actions are so contentious in part be­cause of disagreements over what goals they are supposed to serve. 21 21 This fundamental disagreement over the purpose of class actions is often over­looked. It is sometimes recognized in academic commentary, but, even there, less often than one might expect. The following works identify approximately the same dichotomy in views as this Note discusses, with much variation in exactly how they distinguish the two sides of the disagreement and in what labels they use to describe them: John H. Beisner, Matthew Shors & Jessica Davidson Miller, Class Action “Cops”: Public Servants or Private Entrepreneurs?, 57 Stan. L. Rev. 1441, 1442 (2005) (distinguishing between the view that class actions are a “means of resolving numerous commonly grounded controversies through a single lawsuit” and the view that they are “private law enforcement efforts” by “private attorneys general”); Sergio J. Campos, The Uncertain Path of Class Action Law, 40 Cardozo L. Rev. 2223, 2228 (2019) (distinguish­ing between the “exceptional” view of class actions, which considers class actions to be a tool for efficiency and prioritizes the goal of allowing each individual their day in court, and the “alternative” view, which prioritizes sub­stantive rights and values class actions as a tool for enforcing those rights); Myriam Gilles & Gary B. Friedman, Exploding the Class Action Agency Costs Myth: The Social Utility of Entrepreneurial Lawyers, 155 U. Pa. L. Rev. 103, 105–07 (2006) (distinguishing between the “orthodox” approach of assum­ing that class ac­tions are intended to compensate absent class members and the proposed view that their purpose is to deter more types of wrongdoing); Diane Wood Hutchinson, Class Actions: Joinder or Representational Device?, 1983 Sup. Ct. Rev. 459, 459–60 (distin­guishing be­tween the “joinder model,” which views class actions as a device for efficient adjudication of claims that should be individually viable, and the “rep­resentational model,” which embraces the inclusion of class members who could not have sued independently); Alexandra D. Lahav, Two Views of the Class Action, 79 Fordham L. Rev. 1939, 1941 (2011) (distinguishing between the view that class actions are “an advanced joinder device, merely aggregating individual cases” and the view that they represent “a transformative procedural rule that creates an entity out of a dispersed population of claim­ants”); Marcus, History of the Modern Class Action, supra note 1, at 592–94 (distinguishing between the “adjectival con­ception,” which views class actions as serving the goal of proce­dural efficiency, and the “reg­ulatory conception,” which views class actions as a device for enforcing substantive law). ... Close To assist in understanding these disagreements, this Note proposes a taxon­omy of the goals of class actions. It first identifies two broad justifications for class ac­tions: One justification is that class actions make litigation more efficient; the other justification is that class actions expand representation in litiga­tion. In this Note’s taxonomy, each of these two broad justifications is asso­ciated with two goals. Under the efficiency justification, one goal of class actions is to benefit plaintiffs by allowing them to save on the transac­tional costs of litigation, thereby increasing their net compensation; 22 22 See infra notes 71–74 and accompanying text. ... Close the other goal is to benefit the public by increasing monetary deterrence against wrongdoing. 23 23 See infra note 76 and accompanying text. ... Close Under the representation justification, one goal of class ac­tions is to benefit plaintiffs by including more of them in litiga­tion; 24 24 See infra notes 78–82 and accompanying text. ... Close the other goal is to benefit the public by giving rise to new and qual­itatively dif­ferent lawsuits that have outsized influence over laws and norms. 25 25 See infra notes 83–85 and accompanying text. ... Close This Note observes that there is a tension between the two effi­ciency goals and the two representation goals. Efficiency goals are best fur­thered by the inclusion of more valuable claims in class actions while representation goals are best fur­thered by the inclusion of more claimants in class actions.

Using this taxonomy, this Note examines the current views of Republicans and Democrats through an analysis of the Fairness Act and the FAIR Act. This analysis shows that Republicans believe only in the goal of compensation while Democrats believe in the goals of providing access to justice and shaping laws and norms. This difference in views reveals two cleavages between Republicans and Democrats. One cleavage is that Republicans do not believe class actions serve any public purpose, whereas Democrats do. The other cleavage, which this Note identifies as being deeper and more fundamental, is that Republicans align with the effi­ciency justification while Democrats align with the representation justifica­tion. These two views of class actions shape the current political debate—and political impasse—over class actions and mandatory arbitration agreements.

Despite these divisions, this Note argues that the goals of class actions are not inherently in conflict with one another and that political compro­mise is possible. If the efficiency goals and the representation goals were diametrically opposed, it would be difficult to see how the class action war could ever end. One side might achieve a particular legislative victory, but, if the past fifty years are any indication, the concerns of the opposing side would always reestablish themselves. Indeed, one might expect the class action war to continue for another fifty years. This Note rejects that vision and offers a path toward reconciling these goals. The approach advanced by this Note considers efficiency and representation to be equally im­portant justifications for class actions, avoiding the typical notion that one predominates over the other. Instead, this Note presents a framework for distinguishing between those class actions that primarily serve efficiency goals and those class actions that primarily serve representation goals. This framework conceptually reconciles the goals of class actions and can guide courts toward a more expansive understanding of the policy interests be­hind class actions. Moreover, this Note argues that this reconciled under­standing of class actions offers a path toward crafting legislative compromises that may be reasonably palatable to both Republicans and Democrats.

This Note proceeds in three Parts. Part I explains the goals of class actions, reviewing their historical context and describing their theoretical underpinnings. Part II explains that different views of the goals of class actions are motivating opposing Republican and Democratic legislative proposals related to class actions, as exemplified by the Fairness Act of 2017 and the FAIR Act of 2019. Part III proposes a framework for recon­ciling the goals of class actions and offers examples of legislative compro­mises that can be built on this reconciled understanding.