CLASS ACTION DILEMMAS: PURSUING PUBLIC GOALS FOR PRIVATE GAIN by Deborah R. Hensler, Nicholas M. Page, Bonita Dombey-Moore, Beth Giddens, Jennifer Gross, and Erik K. Moller. Santa Monica, CA: RAND Institute for Civil Justice, 2000. 609pp. Cloth $55.00. Paper $34.50.

Reviewed by Roy B. Flemming, Department of Political Science, Texas A&M University.

When war breaks out, the first casualty is unbiased news from the front. In a similar way, an early loss in America's ongoing "torts war" that began in the 1970s is disinterested, systematic information from the courtroom trenches where civil justice is under siege. America's tort regime is one of the most divided and politicized legal communities in the country. Consumers, environmentalists, and workers line up against big business and corporations. Trial lawyers with ties to the Democratic Party routinely face off against Wall Street or LaSalle Street law firms closely allied with the Republican Party. Corporate-funded tort reform groups exist throughout the country to push their agendas in state legislatures and in Congress, often with great success. They are opposed, of course, by citizens' lobbies and other groups. The warring parties in turn are members of dense networks of alliances and coalitions. As the torts war wax and wane, however, one constant has been the rhetorical potency in legislative and legal confrontations of anecdotes and horror stories about skyrocketing punitive damages awarded by feckless juries, the proliferation of frivolous lawsuits, corporations blackmailed into bankruptcy, bloated fees for plaintiff attorneys (but negligible awards for their clients), the corruption of civil proceedings by "junk science" and a parade of other horribles. (For the curious, the American Tort Reform Association's website, www.atra.org,includes a page entitled "Litigation Horror Stories: Stories That Show a Legal System That's Out of Control.")

A keen and generally neutral observer of the torts war has been the Institute of Civil Justice (ICJ), a research program within the RAND Corporation. For nearly two decades, the ICJ has released a steady stream of studies dealing with asbestos litigation, automobile accident injury compensation, medical malpractice, product liability, punitive damages, workers' compensation, court administration, alternative dispute resolution, jury verdicts, and so on. (An annotated bibliography of ICJ publications can be downloaded from RAND's website, www.rand.org/centers/icj/pubs.) The ICJ is funded in part by grants from corporations, insurance companies, trade groups, and professional associations. Its board of overseers includes law professors and judges but mostly corporate and general counsel, seniorpartners of major law firms, and insurance executives. The Institute's stated purpose is to provide "objective, empirically based, analytic research" to the policy community. "Class Action Dilemmas" is an ambitious attempt in this tradition to assess the costs and benefits of class action lawsuits permitted under Rule 23 of the

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Federal Rules of Civil Procedure. Rule 23 was promulgated in the sixties with an eye toward recent civil rights legislation. History took a different turn, however, after Congress extended the Rule to include various kinds of unfair trade practices, and soon after businesses started a "holy war" against the rule. As the subtitle of this book indicates, the fundamental concern is whether private interests can be harnessed to achieve a public good. The worry is that the substantial financial rewards plaintiff attorneys often gain from bundling individual clients into large classes promote unmerited lawsuits or predatory class actions, collusive settlement practices between the attorneys at the expense of the plaintiffs, and ineffectual policy outcomes.

Ten cases studies of lawsuits create the foundation for these assessments. It is not clear they are sufficient to meet the challenge ICJ posed for itself. Instead of "thick descriptions" of the litigation process analyzing how the participants settled the lawsuits, ICJ presents only the facts of the stories - the essentials of who, what, and when. The cases provide few details about the how and whys of the settlement process. The primary purpose of the ten cases was to gather the information needed for cost-benefit comparisons. Moreover, as ICJ acknowledges, the cases are not a representative sample. The absence of a national recording system of class action lawsuits throws up a major roadblock to sampling these lawsuits. Partial lists exist. For example, Stanford's Securities Class Action Clearinghouse (http://securities.stanford.edu) maintains an inventory of federal securities lawsuits (now numbering more 925) but similar tracking efforts of other kinds of litigation, especially in the state courts, are virtually non-existent. (A recently developed website, www.notice.com, can also be used to search for current class actions and product recalls.)

To develop a list of lawsuits for its two-year study period, RAND used LEXIS, NEXIS, a business periodical database, and the WALL STREET JOURNAL. The cases in LEXIS, of course, are drawn from national and state reporters but the publication practices of courts vary considerably. The database withroughly 2,150 cases included lawsuits that were often controversial, generally filed in federal court, and usually appealed. For these reasons, the ten cases are not representative of class actions. Moreover, ten cases hardly capture the rich diversity of class actions. To make the best of this limited sample, the RAND authors picked cases from two categories of lawsuits: consumer class actions involving small individual losses and mass tort class actions where individual stakes were higher. Within each category, an effort was made to find cases with differing kinds of complaints. Each case study had to meet four prerequisites. It had to be certified, substantially closed or resolved, central to the litigation (when more than one lawsuit was involved), and filed relatively recently so that the case reflected current practices and conditions.

ICJ's report has three sections and several appendices. The first section with three chapters reviews the history of Rule 23, the evolution of class actions litigation since the 1960s, and the public policy debates it sparked. These chapters offer a particularly helpful account of recent battles over the attempt by the Advisory Committee on the Civil Rules to reform Rule 23 and how the traditional "have" versus "have-not" alignment of interests in America's tort regime has become more complicated as consumer advocates and attorneys have become increasingly more critical of

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"coupon settlements." The middle section includes a chapter for each of the ten lawsuits. The stories follow roughly a similar format that describes the origins of the lawsuits, the parties and interests, the issues, and settlement of the case. In the third section, the report draws comparisons between the case studies and then iscusses the problem of achieving the objectives of class actions under Rule 23. The appendices explain the methodology of the study. The appendix describing how ICJ calculated the monetary value of the settlements, distributions, and transaction costs of the lawsuits for which it had information is of special importance to theproject.

The major conclusions based on comparisons of the ten case studies are in the penultimate chapter, "The Great Big Question About Class Actions." The concluding chapter comments on the impracticality or needlessness of most proposed reforms of Rule 23 (b) (3) and ultimately hands the problem over to the judges, urging them to be more concerned with the substance of class actions and less anxious about speeding up the resolution of the lawsuits simply to move their dockets. The "Great Big Question" chapter picks up each of the major questions or criticisms of class actions litigation, looks at the information in the case studies, and then assesses the validity of the concerns. Ten cases, it turns out, are enough to reveal the complicated, contingent character of class actions but are not enough to establish firm conclusions. Many times, ICJ is forced to say, in effect, "It varies." and "It all depends.". As ICJ finally confesses, "Determining whether the benefits of Rule 23 damage class actions outweigh their costs - even in ten lawsuits - turns out to be enormously difficult."

This book, nearly 600 pages long, is crammed with facts and chockablock with details but lacks a theoretical perspective that might draw the whole thing together. The costs of simplifying complex realities in this way apparently were considered too high for a report intended for the policy community. Summarizing this book's findings thus becomes a major challenge. A couple of brief comments must suffice to illustrate the major points that are probably of greatest interest to potential readers. Who benefits is one of the bottom-line questions of class actions. It is commonly alleged the class action attorneys are the only beneficiaries while their clients get little. The "wide range of outcomes" ICJ found in the ten cases puts the lie to this claim, while there was "considerable variation" in actual disbursement rates. Actual payments to class members depend on how many of the members claim compensation, which complicates comparisons across cases. The proportions of class members who claimed compensation ranged from around 30 percent (four cases) to over 90 percent (five lawsuits). The average disbursement per claimant in the consumer class actions ranged from $5.75 (the total amount was $8.9 million) to $1,478 (the total was $11.2 million). For mass torts, the average amounts went from $1,433 to over $100,000. These figures, however, must be put in a broader context where attorneys were "sometimes" chiefly interested in a settlement price that would win the approval of the defendants, which raises questions about the adequacy of the compensation as well as its deterrent value. The regulatory goal of class actions is far from being a settled policy question. ICJ once again found a "mixed" picture. In some cases, defendants changed the product or practice that eventually came under legal attack before the lawsuits were filed because of other regulatory activity or litigation. The

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policy outcomes of the class actions could not easily or simply be attributed to the class actions themselves, which if generally true weakens the public policyposition of class action proponents.

Regardless of whether American-style class actions are efficient and equitable policy instruments (or even if we know with confidence how they work), opportunities for class action are growing in other countries with different regulatory and social welfare environments. In Canada, Quebec adopted class action legislation in 1978 with Ontario following in 1993 and British Columbia in 1995. Roughly 15-20 class actions are filed each year in these provinces. The Federal Court of Canada in July 2000 released a discussion paper recommending that its rules provide for class actions. Although the Federal Court does not have exclusive jurisdiction over claims against the federal government since plaintiffs can sue Ottawa in provincial courts, the constitutional question of whether provincial courts can bind non-resident class members has not yet been answered; a federal rule could be used to certify a nationwide class. In September 2000, the Supreme Court of Canada, which has rarely ruled on class action questions, agreed to review certification decisions in environmental claim from Ontario and a sexual abuse claim from British Columbia.

Australia established federal grounds for class actions in 1992 with the state of Victoria following suit in 1999. In Europe, class actions or "multi-party actions" and group litigation are less common. Nonetheless, in May 2000 a new group litigation rule was introduced in England and Wales where several major lawsuits during the 1980s were financed through legal aid. Scotland's Law Commission considered but rejected a multi-party rule in 2000. The Netherlands passed a group actions act in 1994, while Portugal provided for limited kinds of class actions a year later. New legislation went into effect in Spain this past January for certain groups or entities. On the other side of the ledger, group litigation proposals have stalled in Sweden and Finland, although the prospects that Sweden will adopt class action legislation like that in the United States and Canada are apparently favorable.

It appears, therefore, that despite different national contexts and legal traditions, some form of legislation or court rule allowing class action litigation has considerable attractiveness as a policy option. The emotive impact on the public of widely publicized litigation and sizable recoveries involving exploding automobiles, breast implants, defective heart pacemakers, contaminated water supplies, severe illnesses or death caused by contaminated blood transfusions, and myriad other calamities, combined perhaps with contemporary public skepticism and cynicism about governments, means that class actions will become increasingly common outside the United States, raising the "great big question" again and again in other countries.

Copyright 2001 by the author, Roy B. Flemming.