Tuesday, June 26, 2012
I am following up on Alexandra's post on the Supreme Court's recent grants of certiorari in class action cases. As Alexandra points out, the Court is going to review two cases that address whether the plaintiffs have to prove the merits to obtain class certification. I just wrote an article, Proof of Classwide Injury, that addresses this very issue, and the article is about to be published very shortly. Here is the a link to a previous draft on SSRN and the abstract:
Federal courts have recently required proof of classwide injury to certify a class action for monetary remedies. Proof of classwide injury is defined as proof, which is common to the class, that the defendant's unlawful conduct injured every member of the class. This article argues that the requirement of proof of classwide injury arises from three fallacies about the class action. The first fallacy, the "all at once" fallacy, presumes that all issues in a class action must be determined in one fell swoop. I argue that the class action is not an "all at once" trial device but a trust device that entrusts the claims to class attorney so that he or she can make optimal investments on common issues. Thus, a class action can incorporate multiple trials, or even individualized trials. The second fallacy, the "extraordinary remedy" fallacy, analogizes the class action to extraordinary remedies like the preliminary injunction. Thus, proof of classwide injury is required because it allows a court to determine the plaintiffs' likelihood of success of the merits. However, in litigation involving numerous plaintiffs, the defendant can exploit economies of scale to invest in common issues that the plaintiffs cannot utilize in the absence of the class action. Thus, class certification is required before a merits determination, not after. The third fallacy, the "individualist" fallacy, presumes that individual trials as to each plaintiff's injury are required in the absence of proof of classwide injury to avoid compensating uninjured plaintiffs. I argue that individual trials will not necessarily result in more accuracy, and, more importantly, such accuracy is of secondary importance given the deterrence function of the litigation, which only requires an accurate determination of the defendant's aggregate liability. The article concludes that class certification only requires common questions concerning liability, not common answers as to individual injury. It also suggests factors other jurisdictions should consider in adopting, designing, and implementing similar collective procedures.