Tuesday, May 3, 2011

Zimmerman on Distributing Justice and The Criminal Class Action

Adam Zimmerman (St. John's) has posted two new articles on SSRN.  The first, "Distributing Justice," explores procedural concerns that arise when government agencies seek restitution on behalf of a large class of victims, and the second, "The Criminal Class Action," explores similar concerns when prosecutors distribute funds to a large group of victims (a compensatory goal), while also pursuing retribution and deterrence.  Here's the SSRN abstract for Distributing Justice:

This Article explores the procedural concerns that arise when regulatory agencies mimic class actions by collecting big monetary settlements on behalf of victims. Over the past decade, agencies have collected over $10 billion to compensate people hurt by massive frauds, false advertising, and defective drugs, using proceeds from penalties levied against regulatory violators. Today, the Securities and Exchange Commission regularly seeks awards against large public companies and distributes the money to injured investors through “Fair Funds.” The Federal Trade Commission similarly seeks restitution against parties profiting from unfair trade practices and distributes awards to consumers. Even the U.S. Postal Service distributes the ill-gotten profits of scam artists to victims of mail fraud.

However, unlike private lawsuits, agencies afford few safeguards for the victims they compensate. Agencies lack adequate procedures to hear victims’ claims, identify conflicts between different parties, or coordinate with other kinds of lawsuits. I argue that agencies should continue to play a role - albeit a limited one - in compensating victims for widespread harm. However, when agencies compensate victims, they should adopt rules similar to those that exist in private litigation to resolve differences between victims, improve judicial review, and coordinate with private lawsuits.

I propose three solutions to give victims more voice in their own redress, while preserving an agency’s flexibility to enforce the law: (1) that agencies involve representative stakeholders in settlement discussions through negotiated rulemaking; (2) that courts subject agency decisions to hard look review; and (3) that courts and agencies coordinate overlapping settlements before a single federal judge.

And here's the SSRN abstract for The Criminal Class Action (co-authored with David Jaros):

Over the past ten years, in a variety of high-profile corporate scandals, prosecutors have sought billions of dollars in restitution for crimes ranging from environmental dumping and consumer scams to financial fraud. In what we call “criminal class action” settlements, prosecutors distribute that money to groups of victims as in a civil class action while continuing to pursue the traditional criminal justice goals of retribution and deterrence. 

Unlike civil class actions, however, the emerging criminal class action lacks critical safeguards for victims entitled to compensation. While prosecutors are encouraged, and even required by statute, to seek victim restitution, they lack adequate rules requiring them to (1) coordinate with other civil lawsuits that seek the same relief for victims, (2) hear victims’ claims, (3) identify conflicts between different parties, and (4) divide the award among victims. 

We argue that prosecutors may continue to play a limited role in compensating victims for widespread harm. However, when prosecutors compensate multiple victims in a criminal class action, prosecutors should adopt rules similar to those that exist in private litigation to ensure that the victims receive fair and efficient compensation. We propose four solutions to give victims more voice in their own redress while preserving prosecutorial discretion: (1) that prosecutors and courts coordinate overlapping settlements before a single federal judge, (2) that prosecutors involve representative stakeholders in settlement discussions through a mediation-like process, (3) that courts subject prosecutors’ distribution plans to independent review to police potential conflicts of interest, and (4) that prosecutors adopt the distribution guidelines the American Law Institute developed for large-scale civil litigation to balance victims’ competing interests.

ECB

http://lawprofessors.typepad.com/mass_tort_litigation/2011/05/zimmerman-on-distributing-justice-and-the-criminal-class-action.html

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