Wholesale Justice: Constitutional Democracy and the Problem of the Class Action Lawsuit.

Author:Lahav, Alexandra D.
Position:Book review
 
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WHOLESALE JUSTICE: CONSTITUTIONAL DEMOCRACY AND THE CLASS ACTION LAWSUIT. By Martin H. Redish. Stanford: Stanford University Press. 2009. Pp. x, 317. $27.95.

INTRODUCTION

Are class actions unconstitutional? Many people--defendants and conservative legislators, not to mention scholars at the American Enterprise Institute--would like them to be. For opponents of the class action, Martin Redish's book Wholesale Justice (1) provides some of the most theoretically sophisticated arguments available. The book is a major contribution both to the scholarly literature on class actions and to the larger political debate about this powerful procedural device. The arguments it presents will surely be debated in courtrooms as well as classrooms.

Redish, a leading scholar in constitutional law, federal courts, and civil procedure, argues that studies of class actions have missed an important point: class actions, as they currently exist, violate the Rules Enabling Act and separation-of-powers principles. Congress delegated to the Supreme Court the power to create rules of procedure for the federal courts. (2) Redish argues that this delegation of power does not permit the Court to create rules that transform individual causes of action into monster litigation. Worse yet, the class action brings about this transformation in the absence of democratic accountability, resulting in a type of "stealth" legislation. There is a lot more in Redish's book--he addresses the due process implications of the class action for small claimants who might get nothing while their lawyers walk away with millions, and he makes concrete proposals for reform--but the book's greatest contribution to the ongoing debate over class actions is this structural constitutional point. Redish tests the class action against a coherent vision of American democracy and demonstrates the ways in which it fails to fit into that vision. The book is original, radical, and important. It operates on both theoretical and pragmatic levels and will no doubt play a significant role in the ongoing debate about class actions. It is especially timely as the Supreme Court revisited the relationship between class actions and the substantive law last term in Shady Grove Orthopedic Associates v. Allstate Insurance Co. (3) and will decide four more important class action cases in the October 2010 term. (4)

Because Redish's critique could be devastating to the class action rule, scholars of class actions, legislators, and consumer advocates need to address his arguments. Redish is largely right that, with a few exceptions, those of us who write about class actions have paid too little attention to the big constitutional and political theory issues raised by the class action rule. (5) Under his definition of democratic accountability and separation of powers, he is also right about class actions. But his theory is less persuasive when we consider complementary constitutional ideals. In particular, the concept of checks and balances requires the opposite conclusion: class actions are constitutional.

This Review of Wholesale Justice proceeds in two Parts. I begin by describing Redish's arguments against the class action rule and his proposals for reform; I then respond to them. There is not enough room to delve deeply into his arguments in this Review, but I hope that my summary in Part I will whet the reader's appetite for more. In the second Part, I critique Redish's two central arguments and demonstrate that class actions do not violate principles of separation of powers and that they do not constitute a betrayal of the fundamental requirement of legislative accountability in a democracy. I focus on these points because they are the most original and far-reaching arguments Redish makes.

First, checks and balances, not separation of powers, is the proper metaphor for our constitutional democracy. The powers of the federal government can no more be separated from one another than can the concepts of "substance" and "procedure." This is as true today as it was when Madison pointed it out in several of the Federalist Papers attributed to him. (6) In those essays, Madison argued that the maxim that separation of powers is a requirement of free government is not absolute and that overlap between the branches of government is inevitable and necessary for government to function properly. This system of checks and balances has been a foundational principle of American democracy. It supports the power of the Supreme Court, under the Rules Enabling Act, to set forth the class action rule for congressional ratification. Should the class action come to be considered unwise as a policy matter, it will be reformed by political forces. In fact, it already has.

Second, Redish's argument that class actions constitute a kind of stealth legislation points to a real problem with modern legislation: remedies do not reach the same level of salience as causes of action. This is true when laws are passed with great fanfare but little effect because the remedy provided is inadequate as well as when a minor cause of action becomes a major litigation by operation of the class action rule. At the same time, Redish fails to appreciate the fact that although some laws are more salient to voters than others, this does not mean that lawmakers who make these laws are unaccountable. Legislative measures that today garner no interest can tomorrow be the object of reform. So it has been with the class action. The appropriate solution to this accountability problem is a more robust public discussion of procedures and remedies, including but not limited to the class action rule.

  1. WHOLESALE JUSTICE

    Redish makes three arguments against the class action in Wholesale Justice. First, Redish argues that class actions transform substantive rights by collecting individual claims in a single suit. This transformation violates separation-of-powers principles and the Rules Enabling Act because it is achieved through the Supreme Court's rulemaking power rather than by congressional action. Second, he argues that class actions also violate individual rights, including a right of litigants to freedom from association. Third, he argues that settlement class actions in particular are unconstitutional because they violate Article III's case-or-controversy requirement. As Redish himself explains, these arguments are the meat of the book (p. 61), but he also presents some pragmatic suggestions for reformation of the class action rule to render it constitutional.

    First, Redish argues that by aggregating claims where the class members are truly absent--"comatose" in Redish's colorful language--the class action fundamentally transforms the underlying right into something else (p. 14). That something else is not what the legislature specifically intended. Often it is a lawsuit run by lawyers offering no meaningful compensation to individual litigants. Redish calls this a "faux class action" (p. 14, passim). Such a suit may have the salutary effects of deterrence, but it is not what the legislature meant to achieve. In this way the procedural rule impermissibly circumvents legislative intent.

    A concrete example, drawn from the Supreme Court's recent decision in Shady Grove Orthopedic Associates v. Allstate Insurance Co., will help clarify the issue. (7) Shady Grove Orthopedic Associates provided medical care to a patient who assigned to it her rights to insurance benefits under a health insurance policy issued by Allstate Insurance. Allstate paid eventually, but not on time, and refused to pay the statutory interest that had accrued as a result of the late payment. Shady Grove was owed approximately $500 in interest. It filed a class action lawsuit against Allstate on behalf of all the providers that had claims for statutory interest based on overdue payments from Allstate. (8) Now, instead of being a single suit for $500, Allstate faced an interest penalty in excess of $5,000,000 in a collective litigation. Furthermore, nearly all the members of this hypothetical lawsuit--the absent class members--have little individual interest in filing a suit and probably would not have filed one absent the class action. If the lawsuit yields results, the class members may not even file claim forms because it is too complicated or they do not care enough to do so.

    Such small claims lawsuits are brought because the lawyer stands to gain some percentage of the winnings for her trouble. As Redish explains, "[N]o one ... understands the purpose of this form of class action to be the compensation of class members in the first place." (9) Except, according to Redish, the legislators who created the underlying cause of action. This state of affairs, Redish argues, is not only wrong as a policy matter (which has been argued before); it is also wrong as a constitutional matter because it permits a court-promulgated rule to disfigure a substantive cause of action (assuming that, in creating the substantive law of the state, the legislature intended to create numerous $500 cases, not one litigation worth $5,000,000) (pp. 73-78, 83-85).

    Underlying this analysis is the principle that it is the job of the legislature to determine the scope of substantive rights. The class action is a court-promulgated procedural rule. Proposals for amending the Federal Rules of Civil Procedure are first drafted by the Advisory Committee on Civil Rules. The Advisory Committee proposes rules to the Judicial Conference of the United States, which then decides which rules to present to Congress. If Congress does not act by the statutory deadline, the rules go into effect. (10) Redish argues that this system violates the Presentment Clause because Congress cannot legislate by inaction and also exceeds the federal courts'

    Article III power, which limits them to deciding cases and controversies. (11) What is supposed to save the rulemaking process is that the power of the...

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