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Sunday, October 14, 2012

Against Common Answers

Let's switch gears from HDTVs to light cigarettes.  Suppose you walk into a convenience store to buy a pack of  cigarettes (again, humor me). You notice an ad stating that light cigarettes are healthier.  You decide to buy a pack of lights.  Sometime later, you buy a pack of lights because the lights were on sale.  

Years go by, and you read a newspaper article about a class action alleging fraud claims against cigarette makers.  It turns out that light cigarettes are not, in fact, healthier, and that cigarette makers knew this.  However, you read that class certification was denied because the class representatives could not show that every class member relied on the fraud to buy the cigarettes.  This makes sense because you don't even remember whether you bought light cigarettes in the past, or even why you did.  It's not like you saved the receipts.   

This is a real case, and reflects a consensus that class certification requires common proof of injury for every class member.  The most famous example is Wal-Mart Stores, Inc. v. Dukes, where the Supreme Court required some "glue" tying together the thousands of gender discrimination claims of the class members, who were all individually discriminated against by lower level managers.  The Court in Wal-Mart relied upon the work of the late Richard Nagareda, who argued that class representatives had to show not only "common questions," but that those questions had "common answers."   This term the Court granted certiorari in two cases, Amgen, Inc. v. Connecticut Retirement Plans and Trust Funds and Comcast v. Behrends, where the Court will essentially address whether a class representative must prove injury (or some element of it) for every class member to obtain class certification.

I argue against the requirement of "common answers" in "Proof of Classwide Injury."  There, I argue that the requirement of common answers is misguided because it effectively requires the class representatives to prove the merits before class certification.  This undermines the whole point of the class action, which is to equalize the incentives of the parties to invest in the merits.   If a plaintiff won't file a small claim, let alone invest in it, absent a class action, then why predicate the availability of the class action on proving the claim for the entire class?

More importantly, proof of classwide injury is unnecessary to fulfill the enforcement function of the litigation.  As noted by others, the class action in small claims litigation is meant to deter defendants from injuring a large number of dispersed plaintiffs who otherwise wouldn't file separately.  Deterrence only works if the prospect of the litigation (and the resultant liability) induces the defendant to follow the law.  But at that ex ante moment, the defendant doesn't know how his conduct will specifically affect the population exposed to that conduct.  Thus, the decision is made on a projected, aggregate basis.  If, at the time of litigation, the liability and damages are assessed on an aggregate basis, you get the full deterrent effect of the litigation without having to determine whether each and every class member was injured.

Let's go back to the cigarette example.  You may think that denying class certification is either benign (the losses are small, after all) or that you are protecting the rights of other to sue separately.  But if cigarette makers know they can engage in fraudulent marketing claims with no consequences, then protecting that right to sue separately only causes more fraud.  Who wants to protect such a right?  It's like protecting a right to a fire extinguisher that causes fires.

Posted by Sergio Campos on October 14, 2012 at 01:33 PM | Permalink

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Common answers doesn't require proof of the merits: the answer can be yes or no, so long as it's going to be the same across the class. If the common answer is also the wrong answer to prevail on the merits, you can certify a class; it's just going to lose.

Posted by: anon | Oct 14, 2012 3:36:03 PM

@anon I wish!

Posted by: Sergio Campos | Oct 15, 2012 12:15:48 PM

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