A series of mostly hostile Supreme Court and court of appeals decisions, combined with the Court’s unwillingness to rein in boilerplate arbitration clauses in consumer agreements, has led a number of scholars to proclaim that class actions are dead, or at least dying. While appreciating that this framing puts the unquestioned decline of class actions into stark relief, I have been skeptical of the narrative. The recent amendments to Rule 23, for instance, show that policymakers still believe that class actions have salience, and the myriad state-court class actions that fly beneath the jurisdictional radar of the Class Action Fairness Act belie the class action’s demise.
In some retellings of the “class actions are dying” narrative, the ironic suplot is the rise of class-action practice in the rest of the world. Until recent years, only countries with a common-law heritage employed class actions, and even among those countries, only the United States used them with regularity. Over the past ten to fifteen years, however, many countries (I recently counted almost forty, and I was not attempting a comprehensive survey) have established some form of class or collective action. The terms of these processes vary across numerous measures: who can bring suit, for what types of claims, whether members must opt in or may opt out, and so on. But the moral of the subplot is that, just as American courts are moving away from one of the signal features of American procedural exceptionalism, the rest of the world is embracing the device.
The new volume from Hodges and Voet throws some shade on this subplot, and at the same time adumbrates a future in which class actions might indeed wither away.
Although the European Commission recommended in 2013 that Member States develop collective-redress procedures, the recommendation went out of its way to take swipes at the “toxic cocktail” of incentives that fueled the American class action. The European view of the American class action is a nasty caricature of its worst features: greedy lawyers, abusive discovery, and cowering corporations pitchforking millions of dollars at meritless settlements to prevent juries from plunging companies into bankruptcy. The Commission’s message was: “Collective redress, yes; American class actions, most decidedly no.”
But consensus on this point dissipated when the rubber met the road. The authors document the post-2013 failure of Member States to agree on basic matters of class-action or collective-redress design. As a result, the results of collective-redress litigation have been unimpressive so far and the future effectiveness of such litigation is likely to be limited.
More important, those captivated by the rise of class actions in other countries may be neglecting a phenomenon that is bubbling up at the same time: a wide range of new mechanisms to resolve mass disputes, of which class actions or class-action-like devices are only one. Focusing on the responses of EU Member States to the problem of collective redress, the authors describe this welter of responses. The devil is often in the details, and this book is chock-full of case studies from European countries. Aided in their effort by rapporteurs from Member States who presented their findings at a series of conferences, the authors group these responses into four broad categories: collective actions (class actions and their ilk); criminal prosecutions that, among their sanctions, generate compensation orders for victims; regulatory mechanisms that seek to modify putative injurers’ future behavior (whether through influence or coercion) and that may include compensation as part of the regulatory response; and ombudsmen, who work in conjunction with regulatory agencies to process claims, provide information feedback designed to modify injurers’ behavior, and advocate for necessary changes in legislation or other regulatory rules.
In evaluating these options as they have played out in the EU over the past decade, the authors are enthusiastically disposed to the latter two options, particularly when the ombudsman has a full toolbox of remedial options that includes compensatory mechanisms for consumers and techniques to influence or coerce industry. The latter options are not an either-or choice. As the authors describe, the regulatory and ombudsmen models have been married in a number of high-profile cases to provide redress and prevent recurrence of improper behavior.
Ombudsmen, which act as alternative dispute resolvers en masse, earn the lion’s share of the authors’ praise. Ombudsmen enjoy “a number of strengths and few weaknesses.” Strengths include an automatic opt-in procedure for consumers who contact the ombudsman, the capacity to treat like cases alike, the ability to notify companies and affected consumers of common issues, and the power to resolve those issues on a classwide basis without binding consumers to the resolution. The process is also free to consumers (with companies or government agencies footing the bill) and faster than judicial resolution.
In contrast, the authors are cool to litigation options, like class actions, for corrective redress.
They seek to convince the reader of their conclusions along two paths. The first is descriptive: they lay out the successes and limits of each approach in the countries and cases in which they have been tried, often with accompanying data. The second is theoretical (a term the authors may not like, so perhaps functional is a better word): the principal goals of collective redress to consumers are compensation and influencing behavior to prevent similar conduct in the future. On these measures, the authors argue, the regulatory and ombudsman approaches outperform alternatives.
Both sets of arguments are contestable. On the descriptive side, the number of countries using ombudsmen is small, and experience is limited outside the United Kingdom. On the functional side, the authors, who throw in their lot with behavioral sociology and economics rather that rational-choice economics, swim against a strong tide to argue that affecting future behavior, not deterrence, is a principal function of system of mass dispute resolution. Following prior work by Hodges, the authors argue that compensation does little to deter bad conduct and that mechanisms other than ordering the payment of money are necessary to change behavior.
Those steeped in class-action literature will fault the authors for cherry-picking arguments that put the class action in its worst light as a compensatory and deterrence mechanism.
In addition, the authors would have done well to defend their ombudsman-favoring recommendations against evident critiques. One critique is the problem of regulatory capture. While it appears that this problem has not infected the professionalized British ombudsmen system, the closest American analogy to a broad consumer ombudsman — the Consumer Financial Protection Bureau (CFPB) — has been a political football that offers a cautionary tale of what can go wrong when an administration disagrees fundamentally with the ombudsman’s regulatory objectives. Another critique, which was beyond the remit of the authors to address, is whether it is possible to mold a regulatory-ombudsman approach to a legal culture, such as in the United States, that prefers to regulate action lightly at the front end and sort out harmful effects at the back end. Finally, it is unclear how much of the success of ombudsmen is due to the backstop of litigation: would ombudsmen have the same leverage without realistic litigation options?
Some of the approaches that the authors describe have American analogs. As Adam Zimmerman and his co-authors have demonstrated, the American system increasingly relies on criminal or regulatory-enforcement proceedings to provide redress to victims in mass disputes. The CFPB and a few other ombudsman-like systems, such as FINRA, already exist. Thus far, however, Americans have not invested these mechanisms with the broad regulatory and compensatory powers of some of their European counterparts.
For me, the scenario likeliest to kill the American class action is a better alternative — a device that accomplishes most of the aims of class actions with fewer side effects. So far, such devices have been thin on the ground, at least in the United States. Despite its limits, the book offers a tantalizing look at an alternative universe of mass dispute resolution and is sure to stimulate the imagination of scholars who think about the future of aggregation in the United States. If regulatory and ombusdman approaches can be adapted to the American context, collective redress need not rely solely on class actions, multidistrict litigation, or less desirable options such as individualized consumer ADR. Debates about the strengths, weaknesses, and incentive structures of the present options will take on a different mien. The authors’ effort to sketch a possible future for aggregate dispute resolution creates an intriguing picture indeed.