Class Action Dilemmas

Class Action Dilemmas: Pursuing Public Goals for Private Gain

Deborah R. Hensler
Nicholas M. Pace
Bonita Dombey-Moore
Beth Giddens
Jennifer Gross
Erik K. Moller
Copyright Date: 2000
Edition: 1
Published by: RAND Corporation
Pages: 636
https://www.jstor.org/stable/10.7249/mr969icj
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  • Book Info
    Class Action Dilemmas
    Book Description:

    Class action lawsuits--allowing one or a few plaintiffs to represent many who seek redress--have long been controversial. The current controversy, centered on lawsuits for money damages, is characterized by sharp disagreement among stakeholders about the kinds of suits being filed, whether plaintiffs' claims are meritorious, and whether resolutions to class actions are fair or socially desirable. Ultimately, these concerns lead many to wonder, Are class actions worth their costs to society and to business? Do they do more harm than good? To describe the landscape of current damage class action litigation, elucidate problems, and identify solutions, the RAND Institute for Civil Justice conducted a study using qualitative and quantitative research methods. The researchers concluded that the controversy over damage class actions has proven intractable because it implicates deeply held but sharply contested ideological views among stakeholders. Nevertheless, many of the political antagonists agree that class action practices merit improvement. The authors argue that both practices and outcomes could be substantially improved if more judges would supervise class action litigation more actively and scrutinize proposed settlements and fee awards more carefully. Educating and empowering judges to take more responsibility for case outcomes--and ensuring that they have the resources to do so--can help the civil justice system achieve a better balance between the public goals of class actions and the private interests that drive them.

    eISBN: 978-0-8330-4394-8
    Subjects: Law

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. FOREWORD
    (pp. vii-viii)
    Lawrence Zicklin

    When the RAND Institute for Civil Justice approached Neuberger Berman with a proposal to fund a study of class action litigation, we were intrigued. Billions of dollars were being spent on these suits, and nobody really understood the implications: What types of lawsuits should be handled in a class action format? Were class participants receiving their fair share of settlements? On what basis should plaintiff lawyers be paid? There were many opinions on what was right and wrong with the class action system, but little objective research on which to base policy recommendations.

    We knew that for this type of...

  3. Table of Contents
    (pp. ix-xvi)
  4. FIGURES
    (pp. xvii-xviii)
  5. TABLES
    (pp. xix-xxii)
  6. ACKNOWLEDGMENTS
    (pp. xxiii-xxiv)
  7. Section I
    • Chapter One “ATTENTION: ALL PERSONS OR ENTITIES”
      (pp. 3-8)

      In the past several years, notices like these, published in local and national newspapers or sent through the mail, have stirred interest and controversy. Class actions—lawsuits filed on behalf of a number of individuals who together seek a legal remedy for some perceived wrong—seem to be growing in number and variety.¹ Many Americans have seen notices about class actions in their daily newspapers. Many more have learned about high-profile class actions, such as the litigation against tobacco companies, through television and radio. An unknown number of Americans have obtained payments offered as a result of the resolution of...

    • Chapter Two A MATTER OF SOME INTEREST
      (pp. 9-48)

      Whether and when to enable large numbers of individuals to bring claims collectively against a single or a few defendants has long been a subject of debate in the civil law. The language of the debate is the language of civil procedure: the formal rules that govern when and how plaintiffs may bring suits against defendants; how those defendants may contest the plaintiffs’ claims; and how the adversaries may bring to bear the facts and law that are relevant to their dispute, so as to ultimately reach a resolution of the case.¹ But underlying disagreements about procedural rules rests the...

    • Chapter Three VIRTUES AND VICES
      (pp. 49-134)

      After more than 30 years of controversy, the U.S. legal system seems to have reached an uneasy accommodation with class actions seeking affirmation of rights—of children, taxpayers, prisoners, and other groups in society. There is political disagreement about which and whose rights we should honor, and Congress has enacted legislation forbidding the federally funded Legal Services Corporation to assist in bringing rights-based (or any other) class actions.¹ But these actions reflect fundamental arguments about individual and group rights more than disagreement about the appropriateness of providing a vehicle, such as the class action, for collective litigation of these issues....

  8. Section II
    • Chapter Four INTO THE FISHBOWL
      (pp. 137-144)

      In litigation, as in other life events, protagonists often have very different stories to tell about what happened and what was achieved. One person’s trivial damages, pursued out of greed or plain orneriness, is another person’s noble cause, requiring rectification and compensation. One person’s satisfactory compromise is another person’s excessive—or inadequate—remedy, given the facts and the law. One person’s reasonable reward for a job well done is another person’s outrageous extortion. Because most civil lawsuits are negotiated in private and settled between the parties without needing judicial consent, our ability to determine for ourselves the merits of these...

    • Chapter Five CONTACT LENS PRICING LITIGATION: ROBERTS v. BAUSCH & LOMB, INC.
      (pp. 145-174)

      In early 1993,Business Weekreporter Mark Maremont was in Rochester, New York, to research a story on Kodak.³ As an afterthought—to make the trip to western New York more worthwhile—he stopped by Bausch & Lomb, Incorporated, to see if he might learn about any recent developments. Bausch & Lomb is a Rochester-based manufacturer of optical, eye care, and other products, with $2 billion in global annual revenues.⁴ During his visit, Maremont was taken on a tour of the company’s soft contact lens manufacturing plant and noticed something curious at the end of the assembly line:

      A white-clad...

    • Chapter Six BANK BROKERAGE PRODUCT LITIGATION: PINNEY v. GREAT WESTERN
      (pp. 175-190)

      Banking deregulation in the early 1980s opened the way for banks, savings and loans institutions, and their affiliates to offer investment products and services previously offered only by broker-dealers and other nonbank securities firms. Many banks jumped at the opportunity to compete for the billions of dollars that customers had diverted to stocks, bonds, and mutual funds in search of higher yields than those offered by traditional bank savings accounts and certificates of deposit (CDs).

      However, by the mid-1990s, regulators, politicians, and courts were hearing mounting numbers of allegations that banks and their affiliates were using misleading sales practices to...

    • Chapter Seven COLLATERAL PROTECTION INSURANCE LITIGATION: GRAHAM v. SECURITY PACIFIC HOUSING SERVICES, INC.
      (pp. 191-210)

      The banking industry suffered a series of devastating failures in the 1980s. One result of these failures was closer regulatory examination of the solvency of banks and the financial arrangements into which banks entered.³ Banking regulators suggested that one practice of the banking business that contributed to the crises of the 1980s was that some banks undersecured their loans.

      To head off the potential problems caused by undersecured loans, banking regulators recommended that all borrowers who secured their loans with collateral such as a car or a home carry insurance so that the loan would be safe if the collateral...

    • Chapter Eight CABLE TV LATE FEE LITIGATION: SELNICK v. SACRAMENTO CABLE
      (pp. 211-224)

      Sacramento Cable Television is the sole cable television operator for Sacramento, California, a metropolitan area of about 1.5 million residents. It services the cities of Sacramento, Folsom, and Galt as well as the County of Sacramento. Through 1996, Sacramento Cable Television operated as a partnership of Scripps-Howard Cable Company of Sacramento, which was owned by the large Scripps-Howard Broadcasting Corporation, and River City Cable vision, Inc.³ Although the subscriber base has varied as households add and drop cable services, the company serviced, on average, approximately 209,000 subscribers per month between 1992 and 1994 for charges ranging from $10 to $23.⁴...

    • Chapter Nine CREDIT LIFE INSURANCE PREMIUM OVERCHARGING LITIGATION: INMAN v. HEILIG-MEYERS
      (pp. 225-254)

      When a consumer buys relatively costly items such as automobiles, furniture, or appliances, the purchase price is often wholly or partly financed by the dealership or retail store. When the contracts of sale and financing are signed, buyers are frequently asked if they would also like to obtain a special kind of insurance—for an additional fee—that would protect their purchase from repossession if they were unable to make the required monthly payments as a result of various calamities. One such coverage, dubbed “credit life insurance,” is designed so that in the event of the purchaser’s death, no further...

    • Chapter Ten INSURANCE PREMIUM DOUBLE ROUNDING LITIGATION: MARTINEZ v. ALLSTATE AND SENDEJO v. FARMERS
      (pp. 255-292)

      In May 1995, former Texas Department of Insurance (TDI) General Counsel D.J. Powers, then working as a solo practitioner in Austin, received a call from Dallas attorney John Cracken seeking Powers’ help in exploring a new area of litigation. Cracken, a personal injury attorney described by theSan Antonio Express-Newsas having “a reputation for aggressive if not audacious litigation,”⁴ reportedly had seen his caseload and earnings threatened by recently enacted Texas tort reform.⁵ He had watched the progress of a class action suit handled by an attorney he admired and wound up liking both the action and the outcomes...

    • Chapter Eleven BLOOD CLOTTING PRODUCTS FOR HEMOPHILIACS: IN RE FACTOR VIII OR IX CONCENTRATE BLOOD PRODUCTS
      (pp. 293-318)

      In the early 1980s, at the advent of the AIDS epidemic, the supply of plasma used to manufacture factor concentrate, a blood product used by hemophiliacs to facilitate clotting, became infected with human immunodeficiency virus (HIV). Eventually, factor concentrate transmitted the virus to more than half of the 16,000 persons with hemophilia in the United States.³ Soon after, lawsuits against the manufacturers of factor concentrate arose across the country in state and federal courts, as both individual cases and class actions. The case presented here was intended to resolve all of the nationwide litigation in a single class action, and...

    • Chapter Twelve TOXIC CHEMICAL FACTORY LITIGATION: ATKINS v. HARCROS
      (pp. 319-338)

      In 1931, the Thompson-Hayward Chemical Company purchased one acre of property in Gert Town, a neighborhood in New Orleans, Louisiana, and began building a chemical factory.³ At that time, Thompson-Hayward was a Missouri-based company that manufactured pesticides, and the residents of Gert Town were predominantly white, working-class families.⁴ The factory opened for production in 1941.⁵ At first, it only produced dry pesticides and all manufacturing took place indoors. But by the end of the 1940s, Thompson-Hayward was mixing wet pesticides in large outdoor vats; by the late 1950s, the company was also mixing wet and dry herbicides outdoors.⁶ This level...

    • Chapter Thirteen ORIENTED STRAND BOARD HOME SIDING LITIGATION: IN RE LOUISIANA-PACIFIC INNER-SEAL SIDING
      (pp. 339-374)

      Louisiana-Pacific Corporation is a leading forest products firm headquartered in Portland, Oregon. In about 100 facilities throughout the United States, Canada, and Ireland, it manufactures lumber, pulp, structural and other panel products, hardwood veneers, and cellulose insulation. In the early 1980s, Louisiana-Pacific began developing alternatives to lumber for use as home siding. The idea was to develop materials that could be constructed cheaply from wood manufacturing by-products and lower-grade wood.³ These alternative products were intended to be competitive with the numerous nonwood construction products that were beginning to increase in market share, such as aluminum siding and plastic construction products...

    • Chapter Fourteen POLYBUTYLENE PLUMBING PIPES LITIGATION: COX v. SHELL OIL
      (pp. 375-398)

      Beginning in the late 1970s, polybutylene plastic plumbing systems—touted as being cheaper and more durable than copper pipe systems—were installed in new homes nationwide, particularly in the sunbelt states, which were experiencing a housing boom. Over the years, several million homes, many of them mobile homes, were built with polybutylene plumbing systems.³ Before long, the plumbing systems began to experience failures of the fittings and of the pipe itself. Consumers nationwide attributed the failures to various causes, including inadequate design, defective manufacturing, improper installation, and degradation of the materials from chemicals in the drinking water.⁴ More than ten...

  9. Section III
    • Chapter Fifteen THE GREAT BIG QUESTION ABOUT CLASS ACTIONS
      (pp. 401-470)

      When we peered into the class action fishbowl, we found a murky picture of Rule 23(b)(3) damage class actions. In the ten class actions we studied closely, plaintiff attorneys seemed sometimes to be driven by financial incentives, sometimes by the desire to right perceived wrongs, and sometimes by both. They sometimes devoted substantial resources to investigating case facts and law, but at other times moved quickly to negotiating settlements. Some of these settlements served class members’ interests better than others. Most produced substantial fees for the lawyers themselves. Judges sometimes used their authority to ensure that settlements provided more for...

    • Chapter Sixteen ACHIEVING THE OBJECTIVES OF RULE 23(b)(3) CLASS ACTIONS
      (pp. 471-506)

      At the heart of the long controversy over damage class actions is this dilemma: The litigation derives its capacity to do good from the same feature that yields its capacity to do mischief. That feature, of course, is the opportunity damage class actions offer lawyers to secure large fees by identifying, litigating, and resolving claims on behalf of large numbers of individuals, many of whom were not previously aware that they might have a legal claim and most of whom play little or no role in the litigation process. The central question for public policy-making is how to respond to...

  10. Appendix A RULE 23 OF THE FEDERAL RULES OF CIVIL PROCEDURE
    (pp. 507-510)
  11. Appendix B DATABASE CONSTRUCTION
    (pp. 511-522)
  12. Appendix C QUALITATIVE INTERVIEW METHODOLOGY
    (pp. 523-526)
  13. Appendix D CASE STUDY METHODOLOGY
    (pp. 527-532)
  14. Appendix E CALCULATIONS FOR CASE STUDY SETTLEMENTS, STRUCTURES, COSTS, AND DISTRIBUTIONS
    (pp. 533-592)
  15. INDEX
    (pp. 593-610)