Managing Structural Costs of Class Actions
| Author | Craig Jones |
| Pages | 80-95 |
CHAPTER
FIVE
Managing
Structural
Costs
of
Class
Actions
A.
INTRODUCTION
As
I
have attempted
to
emphasize throughout
the
previous chapters
of
this book,
the
economic market
in
class actions,
if it is to be of
more than theoretical inter-
est, must take some account
of the
distorting
effects
of the
real
world.
I
have
already discussed some ways
in
which individual preferences
and
biases
can
dis-
tort litigation markets,
and how
optimal litigation investment
can
have
an
impact
on
outcomes
not
generally acknowledged.
In
this chapter
I
turn
to
some areas
in
which
much greater market forces
can
distort
the
outcomes
in
aggregate claims.
The
real world
is
divided into geographic
and
political entities
that
were not, gen-
erally speaking, designed
for the
efficient
resolution
of
litigation. Human behav-
iour,
particularly
the
self-interested behaviour
of the
main antagonists
-
defendants
and
plaintiffs' counsel
-
also
can
have
a
grossly distorting
effect
on
outcomes. Moreover,
the
reality
of
imperfect information, particularly
in
claims
involving indeterminate causation
and
unknown epidemiology, means that
the
timing
of
litigation
can
have
a
considerable impact
on the
global resolution
of
claims.
B.
CONSERVATION
OF
JUDICIAL RESOURCES
One
frequently
discussed
benefit
of
class actions
is
that they
can
permit
the
effi-
cient
use of
judicial resources
in
resolution
of
mass claims. However, some
80
—
Managing Structural Costs
of
Class
Actions
—
objections raised
to
aggregation, based
on
anecdotal accounts
of
rare
and
chaotic
episodes such
as
asbestos suits
in the
U.S., suggest that class litigation does
not
in
fact
lead
to
less litigation,
but
more,
and
that this
is a
reason
to
"rein
in"
such
actions.
When
considering
this
claim,
we
must focus clearly
on
just
what
we
mean
when
we say
that
we
should
"conserve"
judicial resources through class lit-
igation.
An
obvious consequence
of
aggregation
is
that
per-claim
litigation costs
are
reduced. This represents
a
saving
not
only
to the
class members,
but
also
to the
court,
which
can
hear thousands
of
claims
simultaneously.1
There
is
also persua-
sive
evidence that class actions settle more frequently than individual suits,
an
effect
that
is
purported
to
increase
as
aggregation becomes more complete across
the
class.2
Nevertheless, individual class actions
can be
very expensive indeed,
as
Chief
Justice Esson warned
in
Tiemstra
v.
Insurance Corporation
of
British Columbia
when
he
declared that
"class
actions have
the
potential
for
becoming monsters
of
complexity
and
cost."3
However
to
make this argument
in
opposition
to the
idea
of
aggregation
is to
miss
the
point.
As
Professor Coffee
put it:
Easy
as it is to
point
out
that mass tort litigation involves high transaction costs,
one
must
move
on to the
inevitable next question: "compared
to
what?"4
Courts have historically exploited basic aggregative techniques such
as
join-
der of
actions
to
take advantage
of
judicial
scale economies
and
avoid
wasteful
duplication
of
effort
(not
to
mention
the
embarrassing possibility
of
inconsistent
results
on
identical questions).
Yet to
suggest that
the
public purse will
be
spared
expense with
the
blossoming
of
class action regimes misses
a
central point
of
these
laws.
I
have advocated
at
some length
the
view that
the
principal
goal
of
class action suits
is to
modify
behaviour through optimal aggregation
and
recov-
Even
the
notoriously expensive asbestos litigation
was
made considerably less
so
through
aggregative techniques, even absent class actions.
A
federal study calcu-
lated that each asbestos case cost only
19% of the
average litigation, where
the
average products liability claim
was
well above average
(174%):
Thomas
E.
Willging,
"Mass Tort Problems
and
Proposals:
A
Report
to the
Mass Torts
Working
Group" (Federal
Judicial Center
1999, available
at
http://www.fjc.gov/public/pdf.nsf/lookup/MassTApC.pdf)
at 14.
One
economist
who has
developed settlement-rate models
has
found
that manda-
tory
aggregation leads
to
virtual certainty
of
settlement because, inter alia,
it
elim-
inates
the
"signalling"
and
information uncertainty produced through
the
opt-out
process: Yeon-Koo
Che
"Equilibrium Formation
of
Class Suits" (1996)
62 J.
Pub.
Econ.
339.
Tiemstra
v.
Insurance
Corporation
of
British Columbia (1996),
22
B.C.L.R.
(3d)
49at61(S.C.).
John
C.
Coffee,
Jr., "Class
Wars:
The
Dilemma
of the
Mass Tort Class
Action"
(1995)
95
Colum.
L.
Rev. 1343
[Coffee,
"Class
Wars"]
at
1347.
81
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