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In principle, the economic case for class actions looks unassailable. Class actions provide a way for our legal system to contend with the many small, but complex, claims dominated by common issues. Individuals often can’t afford to bring the suits that class aggregations make feasible. With a single blow, a class action both deters the defendant and compensates the plaintiff. While individual claimants lose control over their cases, they gain a larger net return. Class actions work best with injunctive relief or common funds by barring people from opting out (because they share in the benefits). And for personal injury claims, Federal Rule of Civil Procedure 23 preserves individual opt-out rights, which are often exercised if weak counsel is selected as class representative. Rule 23 bundles efficiency, equity and deterrence in one tidy package. Why then the rising discontent with an institution with such secure theoretical foundations? A good idea in theory can become a bad idea in practice. First, the system is expensive to administer. Ongoing procedural battles over class certification, class representatives and class notice are easy to underestimate in the abstract. Second, even large defendants blink in the thankless game of “you bet your company” where the superhigh stakes (cases of asking for $100 billion are not unknown) make settlement a moral imperative, regardless of the merits of the case. Third, and more subtle, class actions magnify any errors-and there can be lots-that creep into the substantive law. Rule 23 was adopted in 1966 just before the huge expansion of statutory and common law liability. The humble class action dealing with multiple personal injuries arising out of a single bus crash morphed into exotic suits with thousands of complex claims involving drugs, medical devices, securities, discrimination and the like. The judicial desire to provide a mass vehicle for these new claims has in turn covertly expanded the substantive law. Consider the tasks of proving the element of reliance in misrepresentation cases or allowing setoffs in overcharge cases. They present powerful obstacles to aggregating individual suits. The patterns of interaction that lead individuals to buy a security, a cigarette or a drug are manifestly separate issues that undercut the predominance requirement of Rule 23(b)(3). Ditto with setoffs in refund cases brought under various consumer fraud statutes for the benefits conferred by a recalled product. Some judges hew to the old line that if the law in one single case raises a certain set of issues, then that fragmentation of issues militates against the certifying of a nationwide class, or perhaps any class at all. But other judges take exactly the opposite tack and knock out either reliance or setoffs to make sure that common issues predominate. The aggregation of individual claims thus distorts underlying substantive law, as procedure dominates substance-rather than the reverse. Judicial forks in the road The differences in attitude cut deep. For example, Judge Frank Easterbrook’s decision in In re Bridgestone/Firestone Inc. Tire Products Liab. Litig. (7th Cir. 2002), mercilessly dissecting the plaintiff class, was widely divergent from Judge John M. Walker’s approach allowing certification in Robinson v. Metro-North Commuter Line (2d Cir. 2001), for a motley collection of disparate-impact cases. These differences matter; class lawyers often have broad latitude as to forum, and sympathetic courts become magnets for suits. The trend won’t be abated by sporadic U.S. Supreme Court decisions. Our federalist system magnifies the problem. Federal cases are subject to multidistrict consolidation. But federal panels have no control over state class actions. Defendants often fight a multiple-front war, trapped in state proceedings until a final judgment in their favor has been entered in the federal case. The want of coordination often leads to the pursuit of inconsistent theories, as when two distinct plaintiffs claim the exclusive right to a single refund. Litigation thus may turn on whether a diligent federal judge moves quickly enough to stop the shenanigans that take place in such bellwether jurisdictions as Madison County, Ill. The overall class action system is in an acute state of distress even assuming the highest level of professionalism of 99% of our judges. The arsenal of forum selection plus prevention of removal to federal court can prove a deadly combination. While the excesses of class actions are abundant, there are also concerns about injustices and inefficiencies that cut against the plaintiffs. The absence of clear “ownership” of class actions gives an astute defendant the opportunity to shop a meritorious case until it finds a compliant partner with whom to make a settlement that precludes other viable class actions in the midst of litigation. The second law firm may be amenable to a smaller take of a smaller pie because it has done less work. The upshot is that class members (and other class counsel) are done in by these strategic settlements, reached after defendants conduct a so-called “reverse auction.” The diagnosis of multiple pathologies seems easy, but reform is hard because the overall malaise has multiple causes, both substantive and procedural. Prying cases loose from problem jurisdictions is a promising path; opening up the doors of the federal courts is, on balance, another good idea; and thinking hard about eliminating class actions where fines or other administrative actions would suffice is a third. All of these are partial fixes that will meet fierce political opposition. But hard as reform may be, even one $10 billion judgment for some trivial violation of consumer protection laws should give us breathless pause. Richard A. Epstein, an NLJ columnist, is the James Parker Hall Distinguished Service Professor of Law at the University of Chicago Law School and a senior fellow at the Hoover Institution of Stanford, Calif.

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