March 22, 2013
Moore on Confronting the Myth of "State Court Class Action Abuses"
In the shameless self-promotion category . . .
I have posted on SSRN a draft of my article "Confronting the Myth of 'State Court Class Action Abuses' Through an Understanding of Heuristics and a Plea for More Statistics." The paper has been accepted for publication in the UMKC Law Review, Volume 82, No. 1 (2013).
The Supreme Court heard five cases involving class actions this term. One of these cases, Standard Fire Insurance Company v. Knowles, brought the Class Action Fairness Act to the Court for the first time. Petitioner insurance company and its numerous business-interest amici repeatedly claimed before the Court that "state court class action abuses" should justify removal of the case (which was based on state law and filed in state court) to federal court.
The charge of "state court class action abuses" echoes the same rhetoric that CAFA's supporters used in their ultimately successful efforts to pass the legislation. Hyperbolic assertions of a "flood of state court class actions" in which plaintiffs' lawyers were "abusing" the limits of diversity jurisdiction to keep cases in state court, and state courts were "abusing" the class action device by granting "drive-by" class certifications, fill the pages of CAFA's legislative history.
Unfortunately for the quality of the debate, then and now, no current data and very little past data about class actions are readily and publicly available, for federal or state courts. In other words, courts in the United States offer no data on such basic questions as the number of cases filed as class actions, the percentage of cases designated as class actions that are eventually certified as such, or the ultimate disposition of such cases.
To be sure, the herculean efforts of the Federal Judicial Center, the California Office of Court Research, and private academic researchers have resulted in the compilation of databases that provided partial answers to some of these questions. But these limited efforts are well beyond the resources and skill available to the public, the press, and even to most policy-makers and the Court.
What does the lack of baseline data on class actions mean? A wealth of psychological research has shown that human cognition and judgment are subject to a variety of heuristics and biases. For example, the mantra of "state court class action abuses" has a "priming effect" making it easier to see or imagine such "abuses." Further, the mind automatically attempts to create a coherent story out of the information it has, even if that information is incomplete or invalid. This manifests itself in many ways, including the "anchoring effect," the "availability heuristic," and the "representativeness heuristic," which are exploited by those spreading the myth of "state court class action abuses." Even if a person knew the base rate of class action filings or dispositions, for example, the "representativeness heuristic" would make it difficult to avoid making judgments about class actions based on negative stereotypical anecdotes. Without such base rates available at all, it will be almost impossible. One can only hope that the Court will resist the lure of class action mythology as it considers the five class action cases pending this term.