Sturm und Drang, 1953-1980.

• Author: Marcus, David
• Position: The History of the Modern Class Action, part 1 - Continuation of III. The Politics of Rule 23, 1967-1980 B. Efforts at Class Action Reform through Conclusion: The Art of the Possible, with footnotes, p. 615-652 - F. Hodge O'Neal Corporate and Securities Law Symposium: The Future of Class Actions

1. Efforts in the Advisory Committee

   In September 1971, Warren Burger, no class action fan, (156) asked the Advisory Committee to consider alterations to Rule 23. (157) Soon thereafter, the American College of Trial Lawyers (ACTL), a prominent defense-oriented group, issued a notable report that found a receptive judicial audience. (158) The ACTL catalogued every major critique of Rule 23: the rule generated blackmail settlements, it produced distortions in the substantive law, it clogged the federal judiciary with remedial minutiae, and it illegitimately generated claims. (159) Among the significant changes the group included the reactionary suggestion that class members should have to opt in to benefit from a judgment. (160) Also, foreshadowing a change the Advisory Committee proposed two decades later, (161) the ACTL proposed a "just ain't worth it" provision, to discourage certification whenever "the likelihood that damages to be recovered by individual class members ... are so minimal as not to warrant the intervention of the court." (162) Plaintiffs' lawyers excoriated the ACTL's report as a "most intemperate and inaccurate" (163) "'cry baby' complaint about Rule 23." (164) But the ACTL report resonated with some Advisory Committee members, who took its proposed amendments, including the opt-in idea, seriously. (165)

   Proposals like these and reactions to them reflected Rule 23's normative divide. To the ACTL, Rule 23 promised judicial economy, not regulatory aggrandizement or large-scale redistribution through litigation. (166) If not deployed narrowly for joinder purposes alone, the rule wasted "judicial time, effort, and expense," and caused the "sacrific[e of] procedural and substantive fairness to the party opposing the class." (167) When a high-profile committee of the Association of the Bar of the City of New York issued a rejoinder to the ACTL's report, (168) dissenting members complained that the majority had "overlooked the essentially procedural nature of Rule 23" with its "laudatory but uncomfortably vague" enthusiasm for the class action's regulatory potential. (169)

   The Advisory Committee struggled throughout the decade to respond to these pressures. It debated a few medium-bore suggestions, including a proposed amendment to lessen notice obligations in Rule 23(b)(3) cases, (170) and one that would explicitly prohibit any merits inquiry at the certification stage. (171) But mostly the committee foundered. Hoping that empirical study would pave the road to reform,172 members in 1977 surveyed nearly 2000 judges, lawyers, and professors for their attitudes toward Rule 23 and for their reactions to several proposed revisions. (173) But the results, some of which Tables I and II summarize, revealed nothing more than partisan conflict and confusion.

   Plaintiffs' and defense lawyers split along predictable lines. The judges' responses corroborated the widespread perception that Rule 23 had worn out its welcome with the courts by the late 1970s. (174) But strong judicial support of certain measures, such as the ACTL's proposed opt-in amendment, made some committee members wonder if judges really understood Rule 23 and its history. (175)

   The Advisory Committee managed to act on a couple of suggestions. In late 1977 it went so far as to approve a "just ain't worth it" amendment, albeit one that would have permitted courts to weigh the case's regulatory contribution along with the value of individual compensation it could achieve against the costs of aggregate processing. (176) As a "sad" Arthur Miller lamented, however, by this point the rulemaking process had "run into something approximating a brick wall." (177) The challenge of class action reform exceeded the committee's institutional capacities, harmstrung as it was by the Enabling Act's substantive rights proviso. (178) Walter Mansfield, a committee member, summarized the problem as he saw it:

   The Advisory Committee has wrestled with rule 23 and possible amendment to it at great length in an effort to simplify and improve the processing of class damage actions, but it has found that the problem is not simply one of procedure. The problem is also one of substance. As I personally see it, the question is: Should mass economic wrongdoers be forced to disgorge their illegal or ill-gotten gains in order to deter them from preying on others who are not in a position to protect themselves? That, to me, is a question of substance and not of procedure. (179) The Advisory Committee could not resolve the normative divide between the adjectival and regulatory conceptions of Rule 23. Accepting its limitations, it surrendered its supervisory responsibilities for Rule 23 to the Carter Administration and left class actions totally alone until 1990. (180)

2. The Carter Administration's Rule 23 Replacement

   Nearly every year during the 1970s, Congress debated legislation that involved Rule 23 in one way or another. Usually the bills addressed a particular substantive area, with Congress considering how class litigation factored into a regulatory scheme's overall implementation. (181) In the late 1970s, however, the Carter Administration lost patience with the pace of reform in the Advisory Committee and decided to take on wholesale class action reform itself. (182) Class action reform got the attention of Griffin Bell, Jimmy Carter's first attorney general. (183) He tapped Virginia law professor Daniel Meador for the job, (184) and by the end of Carter's first year, Meador had drafted legislation to replace Rule 23(b)(3). (185) Its length--a bloated twenty-four pages--reflected the class action's new significance.

   The administration tried to straddle the normative divide that had stymied the Advisory Committee and polarized class action politics. A memorandum introduced the bill's premise: "there are basically two kinds of [class actions,] and ... to a large degree the problems encountered have resulted from the failure of current procedures to differentiate between them." (186) The bill solved this problem by dividing damages class actions into two categories. The first, initially described as a "public penalty procedure," made more explicit the class action's regulatory role by transforming the device into a qui tam mechanism. Whenever forty or more people suffered $500 or less in harm, a right of action would vest in the United States. (187) Five hundred dollars represented the threshold below which the administration estimated an ordinary person would not seek compensation; insofar as these suits were thought to have value, it was for their deterrent function. (188) The process essentially replicated agency enforcement actions, with the right to sue belonging to the government. Individualized causation and damage assessments, problems for class certification, would disappear. (189) The administration would give victims restitution after the imposition of an aggregate penalty on the defendant, with damages scheduling and other statistical techniques determining the amount. (190)

   The second type, the "class compensatory procedure," cast the class action more as a joinder mechanism. It encompassed claims that had value even without aggregation, ones for which "private compensation, rather than deterrence, [is] the paramount concern." (191) The operative part of the proposal would overturn Snyder. Forty or more persons alleging claims under any law that exceeded $500 in per capita value could pursue a federal class action. (192) The bill suggested several other tweaks to class action practice, including a lowered predominance threshold to enable certification and a preliminary merits determination before class certification, but otherwise left the class action status quo in place. (193)

   A collective yawn greeted the Advisory Committee's proposed revision when published in 1964, but in 1978, with the class action wars fully underway, the Carter Administration's bill drew a slew of comments. (194) Its ambition reflected the overheated temperature of the class action wars. Something major had to give, and give in dramatic fashion. Starting over from scratch, as the Carter Administration proposed to do for Rule 23(b)(3), seemed a reasonable response. But few constituencies demonstrated any enthusiasm for the bill, (195) even as the administration pushed repeatedly for its enactment. (196) Ultimately the effort failed. Never again has Congress seriously considered a wholesale legislative takeover of class actions, and reform efforts with an ambition even approximating the Carter Administration's did not begin again until the 1990s.

   IV. THE EMERGENCE OF STABILITY IN CLASS ACTION LAW, 1967-1980

   If reality had matched the heated rhetoric of the 1970s, then the fallow period for class action reform that began with the demise of the Carter Administration's bill in 1980 is puzzling. But the situation on the ground was different. Arthur Miller got it right when he observed in 1979 that "class action practice under the existing rule appears to be stabilizing." (197) Core doctrinal questions remained unanswered, sometimes shockingly so. (198) Even more fundamental was the fight over Rule 23's proper understanding, which continued unabated. (199) Nonetheless, the federal judiciary and Congress successfully deployed a pragmatic balancing strategy for class action governance in each of the major substantive areas of class litigation, and kept the two conceptions in equipoise. These decision-makers managed to craft a body of doctrine that served the otherwise-inconsistent values confronting each other across the regulatory/adjectival divide.

   1. An Elaboration on the Dilemma of Class Action Governance

      As discussed in Part I, the regulatory and adjectival conceptions have normative implications for Rule 23's deployment. In sum, the former permits courts to adjust substantive law and ordinary processes in the name of regulatory efficacy, while the latter requires that...