November 02, 2005

Creeping Class Actions

by PG

The pending Netflix settlement of a class-action claim that the company throttled service to heavy users and failed to fulfill its onetime promise of one-day turnaround inspired a 3YoH discussion on the evils of class action suits. That many class actions are economically inefficient, resulting in a loss to the productive company and a windfall to the contingency-fee attorneys, is undeniable. A. Rickey begins by talking about how singular (pun unintended) the class action sounded to his British friends:

The most difficult explanation--made slightly more difficult by the fact that we mentioned it during the second round of drinks--was probably the strange American tradition of the class action.
We Americans tend to take the class action lawsuit (and class action lawyers) for granted, but they don't exist in much of the rest of the world. The idea of randomly being involved in a lawsuit that you don't know anything about, when you didn't really have a complaint against the company to begin with, seems a bit... well, odd.
The Europeans are considering becoming more American in this respect, according to two recent articles (1, 2) in a British trade magazine, and the Dutch already have "collective action."

Despite the vilification of the plaintiff's bar, particularly by conservatives, it doesn't appear to have become sufficiently unpopular to spur a democratic backlash and significant movement for a change in the rules of civil procedure. The anti-class action folks have yet to hit Hollywood, whereas based-on-a-true-story movies about the virtuous class action are churned out every few years. (Think Erin Brockovich, A Civil Action; this year's is North Country, about a class action against workplace sex discrimination.) Moreover, the problems inherent to class actions -- and there's a question of whether mass joinder would be better -- are somewhat muddled up with the drawbacks of contingency fees, which form of payment some nations are adopting to varying degrees. For example, the UK permits solicitors but not barristers to work on contingency.

UPDATE: Will Baude proposes that the same kind of compensation given to the injured Netflix users be extended to the attorneys in the case.

November 2, 2005 08:01 PM | TrackBack
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