‘The Conservative Case for Class Actions’ Doesn’t Pass the Smell Test

By STEVEN P. LEHOTSKY & JONATHAN URICK

November 26, 2019   |   Published on National Review

Professor Brian Fitzpatrick’s argument for class-action suits is neither conservative nor convincing.

 

When a fellow former law clerk to Justice Antonin Scalia claims that our client, the U.S. Chamber of Commerce, betrays conservative legal ideals through its unyielding opposition to abuse of class-action suits by the plaintiffs’ bar, we take it seriously. But the argument that Professor Brian Fitzpatrick raised in his November 13 National Review piece does not stand up to scrutiny.

Professor Fitzpatrick, relying principally upon the U.S. Chamber’s brief in the landmark 2011 Supreme Court case AT&T Mobility LLC v. Concepcion, attempts to ascribe to the Chamber a position he invented: Opposed to class actions in all cases, and instead pining for more federal enforcement against business. No self-respecting legal conservative, he argues, would favor law enforcement by the executive branch in lieu of private-sector lawyers, motivated by profit in the form of contingency fees (lots and lots of contingency fees).

Well, our former boss Justice Scalia did, for good conservative reasons: history, tradition, and political accountability.

As Justice Scalia wrote in Wal-Mart Inc. v. Dukes, class actions are an exception to the long-standing rule, dating to English common law and the Founding era, that litigation is conducted on behalf of the individual named parties. Today’s class-action colossus is a creation largely of the mid-1960s — hardly the heyday of conservative legal reform.

A staple activity of the modern class-action bar is filing lawsuits alleging minor technical violations of laws that provide statutory penalties that can mount into billions of dollars when multiplied across millions of consumers. One egregious example is the flood of lawsuits over the Telephone Consumer Protection Act, which was intended to prevent abusive robocalls but has been transformed into a tool for shaking down companies over honest mistakes such as dialing the out-of-date cellphone numbers of customers.

When statutory-damage awards vastly exceed the trivial harm from technical violations, class actions become tools of over-deterrence. As Justice Scalia warned, outsourcing the enforcement of civil penalties to the class-action bar “turns over to private citizens the function of enforcing the law” and deprives government officials of the discretion to decide whether and when to pursue a case.

Plaintiffs’ lawyers have no incentive to exercise discretion or restraint. They can make money even on marginal cases, by coercing companies into settling for less than the cost of continued litigation. That undermines democratic accountability, Justice Scalia wrote, and frustrates the “uniform application of the law.”

In response, Professor Fitzpatrick contends that the class-action industry is “less compromised by special interests” and thus provides greater accountability than regulation by executive agencies.

It’s an absurd argument: Plaintiffs’ lawyers are one of the richest, most powerful special interests in Washington and throughout the country, as well as being the storm troopers of the anti-free-enterprise agenda. It is troubling that conservatives might buy into the notion that expanding class actions and giving unelected lawyers greater involvement in dictating businesses’ behavior would somehow enhance democratic accountability.

Professor Fitzpatrick concedes that “improvements can be made” to the class-action system and recommends “tightening [it] up in various ways” to discourage meritless litigation. Of course, the U.S. Chamber, through its Institute for Legal Reform (ILR) and Litigation Center, has been trying to do precisely this for years.

But even important successes such as the Securities Litigation Uniform Standards Act and the Private Securities Litigation Reform Act have failed to reduce the number of class actions, as plaintiffs’ lawyers constantly find clever ways around them. To take one example, federal securities class actions are particularly prone to abuse and have skyrocketed in recent years despite efforts to rein them in.

Professor Fitzpatrick dismisses as an “extreme outlier” the infamous Subway “foot-long” case, in which lawyers tried to gobble up most of the $525,000 settlement for their fees. But it is no such thing. A 2018 ILR study found that the U.S. tort system takes an enormous bite out of the economy, consuming an estimated $429 billion in 2016, or about $3,000 per household. It also found that only 57 percent of that total went to plaintiffs even before accounting for their lawyers’ fees. But don’t just take our word for it: A 2015 Consumer Financial Protection Bureau study found that in 87 percent of resolved class actions, class members other than the named plaintiff received no award. No wonder even Professor Fitzpatrick noted in a 2009 academic article that “in the run-of-the-mill case, only a small percentage of the victims are made whole.”

A legal system that routinely enriches the trial bar but delivers something to consumers less than 20 percent of the time has a lot to answer for. And blithely describing it as a way to improve the functioning of the free market would not have fooled Justice Scalia, our former boss and Fitzpatrick’s. He would have recognized that this wolf comes as a wolf.

Steven P. Lehotsky is the executive vice president and chief litigation counsel for the U.S. Chamber Litigation Center (USCLC). Jonathan Urick is the USCLC’s senior counsel.

11/26/2019