The rule of law problem: unconstitutional class actions and options for reform.

Author:Moller, Mark
  1. INTRODUCTION II. THE RULE OF LAW PROBLEM A. Defining Rights B. Due Process and the Rule of Law 1. Introduction to Due Process in the Class Action Context: Federalism and State Autonomy Interests 2. The Rule of Law and Class Actions 3. Class Actions and Rent-Seeking III. CONSTITUTIONAL CLAIM AGGREGATION: PROPOSALS FOR REFORM A. Principles for Reform 1. Decentralization 2. Cooperative Federalism 3. Judicial Review B. The Class Action Fairness Act Considered 1. Summary of Provisions a. Expanding Federal Diversity Jurisdiction b. Expanding Federal Removal Jurisdiction 2. Will the Class Action Fairness Act Succeed? a. Article III Problems with the Class Action Fairness Act b. The Act's Myopic Focus on Federal Competency C. Designing a Better Class Litigation System 1. Enhance Transparency 2. Create Textual Choice of Law Requirements 3. Eliminate the Power of Named Plaintiffs to Monopolize the Market for Class Members 4. Create Structural Incentives for Litigants and Courts to Raise Constitutional Challenges to Class Certification 5. Encourage Decentralization and Cooperative Federalism IV. CONCLUSION I. INTRODUCTION

    Imagine that relief depends on the will of a man, called the Judge, who possesses the power to force "wrongdoers" to compensate "victims." Busy and indecisive, the Judge hasn't formulated a coherent set of laws. Instead, when a citizen asserts a grievance, the Judge changes the rules based on principles he does not announce in advance. As a result, no one can predict when he will be hauled into court because there is, quite simply, no commonly accepted language for what is "wrong," who is a victim, and when coercive legal process is proper.

    This article suggests that contemporary class action litigation mirrors this imaginary legal world. Utilizing an often neglected strain of due process analysis, the article explains how class actions frequently unsettle defendants' expectations about their rights and defends the proposition that class actions thereby violate due process. The article then applies this due process analysis to launch a new framework for class action reform, one that flows naturally from conceptualizing class action abuse as a constitutional problem.

    It is well known that rights are often ignored or changed when litigants assert claims on behalf of a class. To see this problem concretely, consider the following hypothetical: Congress passes a law that outlaws the use of "profane" words, but excuses a defendant who utters profanity when physically injured. An onlooker sues you for damages under the statute after you stub your toe and assault him with choice words. At trial, you produce a witness--a tourist who videotaped the incident--but the judge disregards the evidence, deciding he will not enforce the "physical injury" defense on this occasion. Clearly, your rights have been altered. A potent defense (stubbing your toe) is not available to you, and your liability is assessed by a standard different than the law had allowed.

    When courts aggregate many individual lawsuits through the class device, they are inevitably tempted to change defendants' rights in this fashion. Imagine, now, that one citizen files a class action against you under this anti-profanity statute, alleging you violated the rights of 10,000 persons in as many different individual encounters. It would be impossible for the court to ascertain whether the physical injury defense applied to each claim, since no single court could examine each of your interactions with 10,000 class members. So, inevitably, the plaintiff, to secure aggregation, will argue that your liability can be proven in a more lenient fashion. If the court accepts the plaintiff's invitation, the rules that govern your conduct are changed.

    The hypothetical illustrates a pervasive problem plaguing class litigation: When claims are aggregated, courts are often tempted to change parties' burdens of proof to ease management of the case, altering the rights of the parties in the process. Because courts alter rights in this fashion without reference to any intelligible principle, defendants, plaintiffs, and courts lack a common benchmark for identifying wrongdoing that deserves compensation. This is the rule of law problem at the heart of the class action debate.

    The rule of law problem is of constitutional dimension. The Due Process Clause (1) protects individual autonomy (specifically, "liberty"). (2) Yet parties cannot meaningfully exercise their autonomy unless they can apprehend what the law requires of them. Their apprehension, in turn, depends on the existence of predictable rules of conduct, including stable burdens of proof and advance warning of the conditions under which the burdens may be changed. For these reasons, I argue that the Due Process Clause limits courts' authority to unsettle the rules governing proof of claims in the class context.

    Sadly, the rule of law problem has been ignored, utterly, by class action reformers. Now in his second term, President Bush has placed class action reform on the front burner, (3) but the recently enacted Class Action Fairness Act--the showcase class action reform of President Bush's second term--merely expands federal "diversity jurisdiction" over "interstate" class actions (i.e., class suits that aggregate the claims of persons residing in more than one state). (4) This reform does nothing to address the rule of law problem spawned by claim aggregation. Alas, this problem simply isn't on the reform radar.

    This article suggests, for the first time, that court procedures can be harnessed to create concrete incentives for constitutional scrutiny of class action litigation. In Part I of this article, I begin by examining the due process implications of the rule of law problem. I describe the relationship between burdens of proof and substantive rights and defend the proposition that ad hoc alteration of rights in the class context is a violation of due process. I then turn to the structural features of class litigation--that is, criteria for aggregating and centralizing complex litigation--that dampen due process scrutiny of class actions.

    Turning to reform, Part II of the article begins by critiquing the Class Action Fairness Act--a statute likely to exacerbate the rule of law problem without providing any countervailing benefits. Then, I examine a series of alternative procedural solutions. First, I argue that certain commonly proposed changes to the class action procedure--including requirements that courts, prior to certification, consider the merits of the case and that absent class members opt in to the class--will promote due process and the rule of law in ways that commentators have ignored. Second, I argue that Congress can create new incentives for securing federal due process scrutiny of certification orders while prodding states to undertake procedural reforms that protect defendants' due process rights. (5) To do so, I argue that Congress can and must conditionally preempt state judicial procedure.


    If a claim may be proven only by investigating unique aspects of a class member's transaction with the defendant, a court that aggregates tens of thousands of these claims faces an impossible task: conducting tens of thousands of mini-trials. Many courts therefore change the governing substantive law in order to pave the way for aggregation--violating, in the process, defendants' due process rights. Below, I briefly describe how class actions alter rights and then analyze that alteration as a due process violation.

    1. Defining Rights

      Consider two kinds of rights, which I will term "individual rights" and "group rights." Individual rights are, put simply, rights whose content is determined by reference to individualized proof and whose violation is refuted by individualized defenses. An ordinary tort, for example, is proven with reference to a specific, individual transaction: if A hits B, the law of tort directs us to assess A's intent, A's care, B's contributory negligence, and the extent of harm. Those elements of liability, in turn, force us to consider the circumstances surrounding the event (whether A was pushed into B, or B had threatened A, etc.). Such questions, in the ordinary course of things, cannot be answered without scrutinizing the individual case.

      Group rights, by contrast, are those vested in a group of strangers who share no common injury but whom the law treats as a litigating unit for some reason of policy. Imagine, for example, a statute that permits a purchaser to sue a corporation for publishing false advertisements--even though the advertisements didn't inflate the price of the good the plaintiff bought or induce her to buy it. Under this hypothetical statute, the defendant is liable if it acted in an unjust way toward consumers as a group. The inquiry, which asks whether the defendant engaged in a proscribed act, eliminates questions of causation. (6) I call the resulting form of proof, in which individualizing elements like causation are abandoned, "collective proof" to distinguish it from "individualized" proof.

      The common law typically has preferred individualized proof of liability, (7) but has authorized departures from individuated proof when practicality demands. For example, contracts are interpreted according to the intent of the parties, but in some cases the intent is impossible to discern. In these cases, intent may be construed by reference to what most people would prefer (so-called majoritarian default rules). (8) Here, interpretation aims to establish individual intent; but proof turns on what most people would have intended and so is not a specific, individualized analysis of the unique transaction. The common law mediates the choice between individual rights and group rights in this way, by prescribing the conditions for, and the degree of departure from, individualized proof.

      Class actions can alter rights by...

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