Wednesday, January 26, 2011
A Small Claimant Lottery?
Shay Lavie (SJD Candidate, Harvard) has posted an article entitled Reverse Sampling: Holding Lotteries to Allocate the Proceeds of Small-Claims Class Actions on SSRN. Not exactly about mass torts but related to my long time interest in sampling and case management in class actions. On the face of it I can't imagine a court going with this, but it relates to the same set of considerations that have propelled cy pres funds and fluid recovery (or attempts at fluid recovery) and so the analysis is important.
Small-claims class actions pose a unique dilemma: individual awards are small, and it is often not feasible to distribute them to each and every plaintiff. Courts have devised several alternative allocation procedures to cope with this problem, but none is satisfactory.
This Article proposes a different method: paying more money to fewer, randomly sampled, claimants. As each individual award entails per-claim administrative costs, using lotteries to distribute the proceeds of small-claims class actions cuts these expenses. The Article demonstrates that this method is superior to all existing alternatives. It funnels the money back to the group of victims, achieves deterrence, and maintains administrative efficiency. Finally, the Article shows that randomization is a fair allocation mechanism as all class members are equally treated, and that the use of lotteries in this context raises no legitimacy concerns.