Governance and legitimacy in the law of class actions

Supreme Court Review

Volumn 1999, Issue , 1999, Pages 337-391

  Issacharoff, Samuel ^a  

^a NONE

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EID: 0346339769     PISSN: 00819557     EISSN: None     Source Type: Book Series    
DOI: 10.1086/scr.1999.3109711     Document Type: Article

References (257)

1. 116 US 367 (1996) (upholding a Delaware state court settlement of all class claims, including federal claims over which the Delaware court had no subject matter jurisdiction).
2. 521 US 591 (1997) (striking down settlement class that included both present and future asbestos claimants).
3. 119 S Ct 2295 (1999) (striking down use of limited fund settlement class of present and future claimants).
4. See Thomas Hobbes, Leviathan 89 (Cambridge, 1996) (noting that in the hypothesized state of nature, "there is no place for industry; because the fruit thereof is uncertain: and consequently no culture of the Earth; no Navigation, nor use of the commodities that may be imported by Sea; no commodious building . . .").
5. See Matt Ridley, The Origins of Virtue: Human Instincts and the Evolution of Cooperation (Viking, 1998).
6. Deposit Guaranty Bank v Roper, 445 US 326, 339 (1980).
7. Amchem, 521 US at 617, quoting Mace v Van Ru Credit Corp., 109 F3d 338, 344 (7th Cir 1997). Amchem, as will be developed below, is distinct from this classic rendition of the class action. While all class actions seek economies of scale, the newer, more aggressive 23(b)(3) class actions, particularly in the tort context, are purely creatures of efficiency. In mass tort class actions, many if not most of the claimed injuries would warrant individual prosecution as conventional tort claims but for the overlap in trial presentation and the corresponding strain on limited judicial resources.
8. Amchem, 521 US at 617, quoting Mace v Van Ru Credit Corp., 109 F3d 338, 344 (7th Cir 1997). Amchem, as will be developed below, is distinct from this classic rendition of the class action. While all class actions seek economies of scale, the newer, more aggressive 23(b)(3) class actions, particularly in the tort context, are purely creatures of efficiency. In mass tort class actions, many if not most of the claimed injuries would warrant individual prosecution as conventional tort claims but for the overlap in trial presentation and the corresponding strain on limited judicial resources.
9. The antecedents of this approach can be found in the requirement that a judgment is entitled to full faith and credit only insofar as it satisfies die "minimum procedural requirements" of due process. Kremer v Chemical Construction Co., 456 US 461, 481 (1982). See also Hansberry v Lee, 311 US 32 (1940).
10. The antecedents of this approach can be found in the requirement that a judgment is entitled to full faith and credit only insofar as it satisfies die "minimum procedural requirements" of due process. Kremer v Chemical Construction Co., 456 US 461, 481 (1982). See also Hansberry v Lee, 311 US 32 (1940).
11. 311 US 32 (1940).
12. 490 US 755 (1989).
13. See Mark C. Weber, A Consent-Based Approach to Class Action Settlement: Improving Amchem Products, Inc. v. Weber, 59 Ohio St L J 1155, 1193, 1201 (1998). See also John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 95 Colum L Rev 1343, 1465 (1995) (noting the importance of the right to opt out in mass tort cases); Samuel Issacharoff, Class Action Conflicts, 30 UC Davis L Rev 805, 833 (1997) (endorsing the importance of the right to opt out as signaling rival lawyers that a deal is in the works, as well as avoiding illegitimate Star Chamber secrecy in judicial processes).
14. See Mark C. Weber, A Consent-Based Approach to Class Action Settlement: Improving Amchem Products, Inc. v. Weber, 59 Ohio St L J 1155, 1193, 1201 (1998). See also John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 95 Colum L Rev 1343, 1465 (1995) (noting the importance of the right to opt out in mass tort cases); Samuel Issacharoff, Class Action Conflicts, 30 UC Davis L Rev 805, 833 (1997) (endorsing the importance of the right to opt out as signaling rival lawyers that a deal is in the works, as well as avoiding illegitimate Star Chamber secrecy in judicial processes).
15. See Mark C. Weber, A Consent-Based Approach to Class Action Settlement: Improving Amchem Products, Inc. v. Weber, 59 Ohio St L J 1155, 1193, 1201 (1998). See also John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 95 Colum L Rev 1343, 1465 (1995) (noting the importance of the right to opt out in mass tort cases); Samuel Issacharoff, Class Action Conflicts, 30 UC Davis L Rev 805, 833 (1997) (endorsing the importance of the right to opt out as signaling rival lawyers that a deal is in the works, as well as avoiding illegitimate Star Chamber secrecy in judicial processes).
16. See Patrick Woolley, Rethinking the Adequacy of Adequate Representation, 75 Tex L Rev 571, 602-03 (1997).
17. See David L. Shapiro, Class Actions: The Class as Party and Client, 73 Notre Dame L Rev 913, 958-59 (1998).
18. See Charles Silver and Lynn Baker, I Cut, You Choose: The Role of Plaintiffs' Counsel in Allocating Settlement Proceeds, 84 Va L Rev 1465, 1466 (1998).
19. See Jonathan R. Macey and Geoffrey P. Miller, The Plaintiffs' Attorney's Role in Class Action and Derivative Litigation: Economic Analysis and Recommendations for Reform, 58 U Chi L Rev 1, 105-16 (1991).
20. See Susan P. Koniak, Feasting While the Widows Weep: Georgine v. Amchem Products, Inc., 80 Cornell L Rev 1045, 1092 (1995) (proposing use of a guardian ad litem to protect interests of absent class members against potential collusive behavior by class counsel); Eric D. Green, What Will We Do When Adjudication Ends? We'll Settle in Bunches: Bringing Rule 23 into the Twenty-First Century, 44 UCLA L Rev 1773, 1796-97 (1997) (advocating early appointment of ad litem, by a professor who served as the guardian ad litem for the class in Ortiz).
21. See Susan P. Koniak, Feasting While the Widows Weep: Georgine v. Amchem Products, Inc., 80 Cornell L Rev 1045, 1092 (1995) (proposing use of a guardian ad litem to protect interests of absent class members against potential collusive behavior by class counsel); Eric D. Green, What Will We Do When Adjudication Ends? We'll Settle in Bunches: Bringing Rule 23 into the Twenty-First Century, 44 UCLA L Rev 1773, 1796-97 (1997) (advocating early appointment of ad litem, by a professor who served as the guardian ad litem for the class in Ortiz).
22. 119 S Ct at 2302. Estimates of the number of workers occupationally exposed to asbestos range from 13 to 21 million. Report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation 6-7 (1991). In dissent in Ortiz, Justice Breyer adds that 80,000 new federal cases have been filed in the past decade, 10,000 in the last year alone. 119 S Ct at 2324 (Breyer, J, dissenting). The spiral of new asbestos claims is not expected to peak for another decade.
23. 119 S Ct at 2302. Estimates of the number of workers occupationally exposed to asbestos range from 13 to 21 million. Report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation 6-7 (1991). In dissent in Ortiz, Justice Breyer adds that 80,000 new federal cases have been filed in the past decade, 10,000 in the last year alone. 119 S Ct at 2324 (Breyer, J, dissenting). The spiral of new asbestos claims is not expected to peak for another decade.
24. 119 S Ct at 2302. Estimates of the number of workers occupationally exposed to asbestos range from 13 to 21 million. Report of the Judicial Conference Ad Hoc Committee on Asbestos Litigation 6-7 (1991). In dissent in Ortiz, Justice Breyer adds that 80,000 new federal cases have been filed in the past decade, 10,000 in the last year alone. 119 S Ct at 2324 (Breyer, J, dissenting). The spiral of new asbestos claims is not expected to peak for another decade.
25. See Castano v American Tobacco Co, 84 F3d 734 (5th Cir 1996) (defining the concept of a mass tort and rejecting a cigarette smokers' class action, inter alia, on the basis that the claims and defenses had not matured through sufficient individual trials).
26. Thus, by the time of Ortiz, Justice Souter could describe the valuation of asbestos claims in the Eastern District of Texas as being of "almost mechanical regularity." 119 S Ct at 2303.
27. Judge Parker now sits on the Fifth Circuit.
28. Jenkins v Raymark Industries, Inc., 785 F2d 1034 (5th Cir 1986).
29. See Cimino v Raymark, Industries, Inc., 751 F Supp 649, 651 (ED Tex 1990). Judge Parker estimated that even under the unrealistic assumption that the trial court could resolve thirty cases a month, it would take over six years to try the then pending docket, leaving untouched the 5,000 additional cases that would have been filed in the interim. Id at 652. Moreover, Judge Parker graphically noted that during the pendency of asbestos claims in his court, 448 of the original plaintiffs had died awaiting a trial setting. Id at 651.
30. Id at 651.
31. This is a thumbnail sketch of a detailed trial plan. I must disclose that I served as part of the special master task force assembled by Judge Parker (with my colleagues at the University of Texas, Jack Ratliff, the lead master, and Charles Silver) to implement this class action approach. For my defense of the trial plan proposed in Cimino, see Samuel Issacharoff, Administering Damage Awards in Mass-Tort Litigation, 10 Rev Litig 463 (1991)
32. See In re Fibreboard Corp., 893 F2d 706, 712 (5th Cir 1986) (holding that the district court's trial management plan would inappropriately change Texas's substantive tort law).
33. See Cimino v Raymark Industries, Inc., 151 F3d 297 (1998). Because Cimino involved all cases on file in the Eastern District of Texas, consolidation and class actions serve essentially the same ends. They both aggregate a limited domain of already filed cases in which all individuals are represented by counsel. The major representation issues present in the creation of class actions with either unknown class members or class members with no contractual relation to counsel are not present.
34. Cimino, 751 F Supp at 651.
35. John C. Coffee, Jr., The Corruption of the Class Action: The New Technology of Collusion, 80 Cornell L Rev 851, 851-52 (1995).
36. Tice v American Airlines, 162 F3d 966, 968 (7th Cir 1998).
37. See Ortiz 119 S Ct at 2304; Amchem, 117 S Ct at 2239. The Amchem negotiations followed the consolidation of all asbestos cases pending in federal court (except those against firms in bankruptcy) through the Judicial Panel of Multidistrict Litigation. 117 S Ct at 2238.
38. See Ortiz 119 S Ct at 2304; Amchem, 117 S Ct at 2239. The Amchem negotiations followed the consolidation of all asbestos cases pending in federal court (except those against firms in bankruptcy) through the Judicial Panel of Multidistrict Litigation. 117 S Ct at 2238.
39. See Ortiz 119 S Ct at 2304; Amchem, 117 S Ct at 2239. The Amchem negotiations followed the consolidation of all asbestos cases pending in federal court (except those against firms in bankruptcy) through the Judicial Panel of Multidistrict Litigation. 117 S Ct at 2238.
40. Of course, the right to opt out for future claimants is largely a fiction. The Manual for Complex Litigation, Third, states categorically that future claimants "cannot be given meaningful notice . . . and their opt-out rights (in a Rule 23(b)(3) action) may be illusory." Federal Judicial Center, Manual for Complex Litigation, Third § 30.45 (West, 3d ed 1995). This point is well captured by Professor Coffee: "when a mass torts class action is defined primarily to encompass future claimants, defendants can expect 'rational apathy' on the part of most class members, who have little incentive to protect themselves (and no reason to opt out with regard to injuries they have not yet experienced). This, in turn, sets the stage for a collusive settlement." Coffee, The Corruption of the Class Action at 855 (cited in note 28). See also Todd W. Latz, Note, Who Can Tell The Futures? Protecting Settlement Class Members Without Notice, 85 Va L Rev 531, 568 (1999) (rejecting idea of meaningful notice to future class members and instead focusing on the adequacy of representation as critical due process protection).
41. Of course, the right to opt out for future claimants is largely a fiction. The Manual for Complex Litigation, Third, states categorically that future claimants "cannot be given meaningful notice . . . and their opt-out rights (in a Rule 23(b)(3) action) may be illusory." Federal Judicial Center, Manual for Complex Litigation, Third § 30.45 (West, 3d ed 1995). This point is well captured by Professor Coffee: "when a mass torts class action is defined primarily to encompass future claimants, defendants can expect 'rational apathy' on the part of most class members, who have little incentive to protect themselves (and no reason to opt out with regard to injuries they have not yet experienced). This, in turn, sets the stage for a collusive settlement." Coffee, The Corruption of the Class Action at 855 (cited in note 28). See also Todd W. Latz, Note, Who Can Tell The Futures? Protecting Settlement Class Members Without Notice, 85 Va L Rev 531, 568 (1999) (rejecting idea of meaningful notice to future class members and instead focusing on the adequacy of representation as critical due process protection).
42. Professor Marcus describes the three categories of future claimants as those who have already suffered injury but have not yet filed suit, those who have been exposed to a potentially toxic product but have not yet developed any pathology that would occasion filing suit, and those who have not yet been exposed but who, if exposed, may be predicted to develop injuries into the future. Richard L. Marcus, They Can't Do That, Can They? Tort Reform Via Rule 23, 80 Cornell L Rev 858, 882 (1995).
43. The presence of future claimants raised further Article III case of controversy problems since in many jurisdictions exposure without the onset of disease was nonjusticiable. In each case, the Court circumvented this troubling subject matter jurisdiction issue by allowing the case to address class certification even in the absence of a confirmed Article III case or controversy. According to the Court, the class issues could be addressed because "their resolution here is logically antecedent to the existence of any Article III issues . . . ." Amchem, 521 US at 612; see also Ortiz, 119 S Ct at 2307. The Court, however, did note that it was "mindful that Rule 23's requirements must be interpreted in keeping with Article III constraints . . . ." Id. The Court also showed itself willing this past Term to allow federal courts to dispose of cases on other bases, such as personal jurisdiction, even where the existence of federal subject matter jurisdiction was in question. See Ruhrgas v Marathon Oil Co., 119 S Ct 1563 (1999).
44. The presence of future claimants raised further Article III case of controversy problems since in many jurisdictions exposure without the onset of disease was nonjusticiable. In each case, the Court circumvented this troubling subject matter jurisdiction issue by allowing the case to address class certification even in the absence of a confirmed Article III case or controversy. According to the Court, the class issues could be addressed because "their resolution here is logically antecedent to the existence of any Article III issues . . . ." Amchem, 521 US at 612; see also Ortiz, 119 S Ct at 2307. The Court, however, did note that it was "mindful that Rule 23's requirements must be interpreted in keeping with Article III constraints . . . ." Id. The Court also showed itself willing this past Term to allow federal courts to dispose of cases on other bases, such as personal jurisdiction, even where the existence of federal subject matter jurisdiction was in question. See Ruhrgas v Marathon Oil Co., 119 S Ct 1563 (1999).
45. The presence of future claimants raised further Article III case of controversy problems since in many jurisdictions exposure without the onset of disease was nonjusticiable. In each case, the Court circumvented this troubling subject matter jurisdiction issue by allowing the case to address class certification even in the absence of a confirmed Article III case or controversy. According to the Court, the class issues could be addressed because "their resolution here is logically antecedent to the existence of any Article III issues . . . ." Amchem, 521 US at 612; see also Ortiz, 119 S Ct at 2307. The Court, however, did note that it was "mindful that Rule 23's requirements must be interpreted in keeping with Article III constraints . . . ." Id. The Court also showed itself willing this past Term to allow federal courts to dispose of cases on other bases, such as personal jurisdiction, even where the existence of federal subject matter jurisdiction was in question. See Ruhrgas v Marathon Oil Co., 119 S Ct 1563 (1999).
46. 119 S Ct at 2295, 2304-05.
47. Judge Higginbotham of course recused himself when the Fibreboard litigation reached the Fifth Circuit. There is more than a touch of irony in the fact that Judge Higginbottham had been a member of the Fifth Circuit panel that issued the per curium mandamus reversing Judge Parker in the first round of Cimino class litigation. See In re Fibreboard, 893 F2d 706 (5th Cir 1986).
48. 521 US at 620.
49. Id at 620-22.
50. Id at 621.
51. These are required under Rule 23(b)(3) for class actions organized for efficiency reasons.
52. 119 S Ct at 2295, 2304-05. In what must surely be one of the most ornate, if not baroque, legal maneuvers ever attempted, the insurers in turn hoped to use their obligation to the Fibreboard class to claim limited funds of their own and in turn force a compelled class action of all present and future claimants against them. In effect, the Ortiz litigation was the opening salvo in an attempt to create a mounting edifice of limited funds that would close out all asbestos litigation.
53. See In re Asbestos Litigation, 90 F3d 963, 993 (5th Cir 1998) (Smith, J, dissenting).
54. Ortiz, 119 S Ct at 2308-11.
55. Id at 2313.
56. Id. Presumably this issue had been laid to rest in Amchem. Nonetheless, the Fifth Circuit reaffirmed its holding after a remand from the Supreme Court following Amchem. The Fifth Circuit nonetheless reaffirmed its ruling in a five paragraph per curium opinion, In re Asbestos Litigation, 134 F 3d 668 (5th Cir 1998), which prompted Professor Tribe's memorable opening in his petition for certiorari, "Some people just can't take a hint." Ortiz v Fibreboard, Petition for Writ of Certiorari 1 (1998).
57. Id. Presumably this issue had been laid to rest in Amchem. Nonetheless, the Fifth Circuit reaffirmed its holding after a remand from the Supreme Court following Amchem. The Fifth Circuit nonetheless reaffirmed its ruling in a five paragraph per curium opinion, In re Asbestos Litigation, 134 F 3d 668 (5th Cir 1998), which prompted Professor Tribe's memorable opening in his petition for certiorari, "Some people just can't take a hint." Ortiz v Fibreboard, Petition for Writ of Certiorari 1 (1998).
58. 119 S Ct at 2301.
59. Id at 2323.
60. Id at 2324.
61. This is clearest in the concurring opinion of Chief Justice Rehnquist in Ortiz, in which he states, on behalf of Justices Scalia and Kennedy, that he would join the dissent of Justice Breyer, but for the failure of the rules to have been amended to allow for the proposed settlement class. 119 S Ct at 2324.
62. See Charles Alan Wright and Arthur R. Miller, 4 Federal Practice and Procedure § 1001 (2d ed 1986) (noting that "[t]he existing situation . . . may be described as judicial rulemaking pursuant to a legislative delegation and subject to a congressional veto") and § 1008 (noting that "The federal courts now are largely self-governing in procedural matters, with rulemaking powers limited only by their own sense of justice, sensible considerations of public policy, and the possibility of congressional veto.").
63. I leave aside for the moment the inconsistent result in Matsushita.
64. There is a consistent though muted strain in class action law focusing on the attorneys as the guarantors of adequacy of representation. See, e.g., In re General Motors Corp. Engine Inter-change Litigation, 594 F2d 1106 (1979) (trial court has continuing duty to undertake stringent examination of adequate representation by named class representatives and their counsel at all stages of litigation); General Telephone Co. v Falcon, 457 US 147, 158 (1982) ("The adequacy of representation requirement . . . also raises concerns about the competency of class counsel and conflicts of interest."); Nilsson v Couglin, 670 F Supp 1186 (SDNY 1987) (discussing necessity for adequate/qualified class counsel for class action). On several occasions, class action status has been denied because of inadequacy of counsel. See, e.g., Shields v Valley Nat'l Bank, 56 FRD 448 (D Ariz 1971); Anderson v Moorer, 372 F2d 747 (5th Cir 1967). See generally Newberg on Class Actions, ch 3 (". . . in the usual case when the plaintiff has no conflict with the class, courts focus primarily on class counsel, not on the plaintiff, to determine if there will be vigorous prosecution of the class action . . . . Apart from special circumstances involving the class representative, the primary focus of the vigorous prosecution aspect of the adequacy test is on counsel for the class."); Note, The Class Representative: The Problem of Absent Plaintiffs, 68 Nw U L Rev 1133, 1136 (1974) ("the single most important factor considered by the courts in determining the quality of the representatives' ability and willingness to advocate the cause of the class has been the caliber of the plaintiff's attorney. It is well settled that the lawyer must be 'qualified, experienced, and generally able to conduct the proposed litigation'.").
65. There is a consistent though muted strain in class action law focusing on the attorneys as the guarantors of adequacy of representation. See, e.g., In re General Motors Corp. Engine Inter-change Litigation, 594 F2d 1106 (1979) (trial court has continuing duty to undertake stringent examination of adequate representation by named class representatives and their counsel at all stages of litigation); General Telephone Co. v Falcon, 457 US 147, 158 (1982) ("The adequacy of representation requirement . . . also raises concerns about the competency of class counsel and conflicts of interest."); Nilsson v Couglin, 670 F Supp 1186 (SDNY 1987) (discussing necessity for adequate/qualified class counsel for class action). On several occasions, class action status has been denied because of inadequacy of counsel. See, e.g., Shields v Valley Nat'l Bank, 56 FRD 448 (D Ariz 1971); Anderson v Moorer, 372 F2d 747 (5th Cir 1967). See generally Newberg on Class Actions, ch 3 (". . . in the usual case when the plaintiff has no conflict with the class, courts focus primarily on class counsel, not on the plaintiff, to determine if there will be vigorous prosecution of the class action . . . . Apart from special circumstances involving the class representative, the primary focus of the vigorous prosecution aspect of the adequacy test is on counsel for the class."); Note, The Class Representative: The Problem of Absent Plaintiffs, 68 Nw U L Rev 1133, 1136 (1974) ("the single most important factor considered by the courts in determining the quality of the representatives' ability and willingness to advocate the cause of the class has been the caliber of the plaintiff's attorney. It is well settled that the lawyer must be 'qualified, experienced, and generally able to conduct the proposed litigation'.").
66. There is a consistent though muted strain in class action law focusing on the attorneys as the guarantors of adequacy of representation. See, e.g., In re General Motors Corp. Engine Inter-change Litigation, 594 F2d 1106 (1979) (trial court has continuing duty to undertake stringent examination of adequate representation by named class representatives and their counsel at all stages of litigation); General Telephone Co. v Falcon, 457 US 147, 158 (1982) ("The adequacy of representation requirement . . . also raises concerns about the competency of class counsel and conflicts of interest."); Nilsson v Couglin, 670 F Supp 1186 (SDNY 1987) (discussing necessity for adequate/qualified class counsel for class action). On several occasions, class action status has been denied because of inadequacy of counsel. See, e.g., Shields v Valley Nat'l Bank, 56 FRD 448 (D Ariz 1971); Anderson v Moorer, 372 F2d 747 (5th Cir 1967). See generally Newberg on Class Actions, ch 3 (". . . in the usual case when the plaintiff has no conflict with the class, courts focus primarily on class counsel, not on the plaintiff, to determine if there will be vigorous prosecution of the class action . . . . Apart from special circumstances involving the class representative, the primary focus of the vigorous prosecution aspect of the adequacy test is on counsel for the class."); Note, The Class Representative: The Problem of Absent Plaintiffs, 68 Nw U L Rev 1133, 1136 (1974) ("the single most important factor considered by the courts in determining the quality of the representatives' ability and willingness to advocate the cause of the class has been the caliber of the plaintiff's attorney. It is well settled that the lawyer must be 'qualified, experienced, and generally able to conduct the proposed litigation'.").
67. There is a consistent though muted strain in class action law focusing on the attorneys as the guarantors of adequacy of representation. See, e.g., In re General Motors Corp. Engine Inter-change Litigation, 594 F2d 1106 (1979) (trial court has continuing duty to undertake stringent examination of adequate representation by named class representatives and their counsel at all stages of litigation); General Telephone Co. v Falcon, 457 US 147, 158 (1982) ("The adequacy of representation requirement . . . also raises concerns about the competency of class counsel and conflicts of interest."); Nilsson v Couglin, 670 F Supp 1186 (SDNY 1987) (discussing necessity for adequate/qualified class counsel for class action). On several occasions, class action status has been denied because of inadequacy of counsel. See, e.g., Shields v Valley Nat'l Bank, 56 FRD 448 (D Ariz 1971); Anderson v Moorer, 372 F2d 747 (5th Cir 1967). See generally Newberg on Class Actions, ch 3 (". . . in the usual case when the plaintiff has no conflict with the class, courts focus primarily on class counsel, not on the plaintiff, to determine if there will be vigorous prosecution of the class action . . . . Apart from special circumstances involving the class representative, the primary focus of the vigorous prosecution aspect of the adequacy test is on counsel for the class."); Note, The Class Representative: The Problem of Absent Plaintiffs, 68 Nw U L Rev 1133, 1136 (1974) ("the single most important factor considered by the courts in determining the quality of the representatives' ability and willingness to advocate the cause of the class has been the caliber of the plaintiff's attorney. It is well settled that the lawyer must be 'qualified, experienced, and generally able to conduct the proposed litigation'.").
68. There is a consistent though muted strain in class action law focusing on the attorneys as the guarantors of adequacy of representation. See, e.g., In re General Motors Corp. Engine Inter-change Litigation, 594 F2d 1106 (1979) (trial court has continuing duty to undertake stringent examination of adequate representation by named class representatives and their counsel at all stages of litigation); General Telephone Co. v Falcon, 457 US 147, 158 (1982) ("The adequacy of representation requirement . . . also raises concerns about the competency of class counsel and conflicts of interest."); Nilsson v Couglin, 670 F Supp 1186 (SDNY 1987) (discussing necessity for adequate/qualified class counsel for class action). On several occasions, class action status has been denied because of inadequacy of counsel. See, e.g., Shields v Valley Nat'l Bank, 56 FRD 448 (D Ariz 1971); Anderson v Moorer, 372 F2d 747 (5th Cir 1967). See generally Newberg on Class Actions, ch 3 (". . . in the usual case when the plaintiff has no conflict with the class, courts focus primarily on class counsel, not on the plaintiff, to determine if there will be vigorous prosecution of the class action . . . . Apart from special circumstances involving the class representative, the primary focus of the vigorous prosecution aspect of the adequacy test is on counsel for the class."); Note, The Class Representative: The Problem of Absent Plaintiffs, 68 Nw U L Rev 1133, 1136 (1974) ("the single most important factor considered by the courts in determining the quality of the representatives' ability and willingness to advocate the cause of the class has been the caliber of the plaintiff's attorney. It is well settled that the lawyer must be 'qualified, experienced, and generally able to conduct the proposed litigation'.").
69. There is a consistent though muted strain in class action law focusing on the attorneys as the guarantors of adequacy of representation. See, e.g., In re General Motors Corp. Engine Inter-change Litigation, 594 F2d 1106 (1979) (trial court has continuing duty to undertake stringent examination of adequate representation by named class representatives and their counsel at all stages of litigation); General Telephone Co. v Falcon, 457 US 147, 158 (1982) ("The adequacy of representation requirement . . . also raises concerns about the competency of class counsel and conflicts of interest."); Nilsson v Couglin, 670 F Supp 1186 (SDNY 1987) (discussing necessity for adequate/qualified class counsel for class action). On several occasions, class action status has been denied because of inadequacy of counsel. See, e.g., Shields v Valley Nat'l Bank, 56 FRD 448 (D Ariz 1971); Anderson v Moorer, 372 F2d 747 (5th Cir 1967). See generally Newberg on Class Actions, ch 3 (". . . in the usual case when the plaintiff has no conflict with the class, courts focus primarily on class counsel, not on the plaintiff, to determine if there will be vigorous prosecution of the class action . . . . Apart from special circumstances involving the class representative, the primary focus of the vigorous prosecution aspect of the adequacy test is on counsel for the class."); Note, The Class Representative: The Problem of Absent Plaintiffs, 68 Nw U L Rev 1133, 1136 (1974) ("the single most important factor considered by the courts in determining the quality of the representatives' ability and willingness to advocate the cause of the class has been the caliber of the plaintiff's attorney. It is well settled that the lawyer must be 'qualified, experienced, and generally able to conduct the proposed litigation'.").
70. This is made express in Hansberry, 311 US at 42-43.
71. Owen M. Fiss, The Allure of Individualism, 78 Iowa L Rev 965, 970-71 (1993). To formulate the inquiry in this fashion does not resolve what the level of adequacy must be. For instance, Professor Fiss and I disagree on the application of subsequent preclusion to non-class members whose claims were affected by a class consent decree in Martin v Wilks.
72. Compare Fiss, supra, with Samuel Issacharoff, When Substance Mandates Procedure: Martin v. Wilks and the Rights of Vested Incumbents in Civil Rights Consent Decrees, 77 Cornell L Rev 189 (1992).
73. The better formulation is that the claims or defenses of the named plaintiff be representative of the class. See General Telephone Co. v Falcon, 457 US at 147 (1982) (rejecting across-the-board class certification and requiring that named plaintiff have claim common to absent class members).
74. For a discussion of the limited case law success with defining 23(a)(3), see Issacharoff, Administering Damage Awards at 463 (cited in note 24).
75. Edward H. Cooper, The (Cloudy) Future of Class Actions, 40 Ariz L Rev 923, 927 (1998). This theme was developed in the academic literature by Professor Coffee. See John C. Coffee, Jr., The Regulation of Entrepreneurial Litigation: Balancing Fairness and Efficiency in the Large Class Action, 54 U Chi L Rev 877, 899 ("From a policy perspective, the choice is between truth and illusion. We could continue to pretend that the class representative is the true party in interest, or we could recognize the reality of the attorney as entrepreneur."). See also Silver and Baker at 1489 (cited in note 14) ("Attorneys, not named plaintiffs, control what happens in class actions"); Issacharoff, Class Action Conflicts at 828-29 (cited in note 11).
76. Edward H. Cooper, The (Cloudy) Future of Class Actions, 40 Ariz L Rev 923, 927 (1998). This theme was developed in the academic literature by Professor Coffee. See John C. Coffee, Jr., The Regulation of Entrepreneurial Litigation: Balancing Fairness and Efficiency in the Large Class Action, 54 U Chi L Rev 877, 899 ("From a policy perspective, the choice is between truth and illusion. We could continue to pretend that the class representative is the true party in interest, or we could recognize the reality of the attorney as entrepreneur."). See also Silver and Baker at 1489 (cited in note 14) ("Attorneys, not named plaintiffs, control what happens in class actions"); Issacharoff, Class Action Conflicts at 828-29 (cited in note 11).
77. Edward H. Cooper, The (Cloudy) Future of Class Actions, 40 Ariz L Rev 923, 927 (1998). This theme was developed in the academic literature by Professor Coffee. See John C. Coffee, Jr., The Regulation of Entrepreneurial Litigation: Balancing Fairness and Efficiency in the Large Class Action, 54 U Chi L Rev 877, 899 ("From a policy perspective, the choice is between truth and illusion. We could continue to pretend that the class representative is the true party in interest, or we could recognize the reality of the attorney as entrepreneur."). See also Silver and Baker at 1489 (cited in note 14) ("Attorneys, not named plaintiffs, control what happens in class actions"); Issacharoff, Class Action Conflicts at 828-29 (cited in note 11).
78. Edward H. Cooper, The (Cloudy) Future of Class Actions, 40 Ariz L Rev 923, 927 (1998). This theme was developed in the academic literature by Professor Coffee. See John C. Coffee, Jr., The Regulation of Entrepreneurial Litigation: Balancing Fairness and Efficiency in the Large Class Action, 54 U Chi L Rev 877, 899 ("From a policy perspective, the choice is between truth and illusion. We could continue to pretend that the class representative is the true party in interest, or we could recognize the reality of the attorney as entrepreneur."). See also Silver and Baker at 1489 (cited in note 14) ("Attorneys, not named plaintiffs, control what happens in class actions"); Issacharoff, Class Action Conflicts at 828-29 (cited in note 11).
79. Cooper at 927 (cited in note 56).
80. This is a theme that is emerging in some of the commentary on the recent class action cases. See, e.g., Shapiro at 958-59 (cited in note 13) ("the constitutional propriety of class action treatment . . . turns on the issue of adequate representation" which in turn must focus "on the adequacy of counsel (rather than worrying about the named representative))"; Coffee, Class Wars, at 1348-52 (cited in note 11) (analyzing reasons for class member passivity in class actions).
81. For a leading early discussion of this point, see Diane Wood Hutchinson, Class Actions: Joinder or Representational Device? 1983 Supreme Court Review 459.
82. Phillips Petroleum Co. v Shutts, 472 US 797 (1985).
83. Shutts, 472 US at 808.
84. See Charles Alan Wright, et al, 7B Federal Practice and Procedure § 1796.1 (2d ed 1986); Manual for Complex Litigation, Third, § 21.1-21.4 (cited in note 31) (summarizing judicial experience as requiring no automatic entitlement by a defendant to take discovery of absent class members).
85. Shutts, 472 US at 810.
86. 490 US at 762.
87. See Sosna v Iowa, 419 US 393 (1975).
88. In Martin, a civil rights challenge to discriminatory hiring practices in the Birmingham, Alabama, fire department ended in a consent decree between black firefighters and the city. The decree provided for a restructuring of promotional rules that were in force through a collective bargaining agreement between the city and the overwhelmingly white firefighters union. The issue in the case was whether the consent decree would foreclose any union legal challenge to the continued enforceability of the union contract. The Court held that nonparties to the class action consent decree could not be bound to its outcome even if they were offered the possibility of expressing objection at the approval hearing. Martin v Wilks, 490 US 755 (1989). For an extended defense of the Court's holding in Martin, see Issacharoff, When Substance Mandates Procedure (cited in note 53).
89. In Martin, a civil rights challenge to discriminatory hiring practices in the Birmingham, Alabama, fire department ended in a consent decree between black firefighters and the city. The decree provided for a restructuring of promotional rules that were in force through a collective bargaining agreement between the city and the overwhelmingly white firefighters union. The issue in the case was whether the consent decree would foreclose any union legal challenge to the continued enforceability of the union contract. The Court held that nonparties to the class action consent decree could not be bound to its outcome even if they were offered the possibility of expressing objection at the approval hearing. Martin v Wilks, 490 US 755 (1989). For an extended defense of the Court's holding in Martin, see Issacharoff, When Substance Mandates Procedure (cited in note 53).
90. I have previously argued at length that viewed in this fashion, the decision in Martin was compelled by fundamental due process concerns. See Issacharoff, When Substance Mandates Procedure (cited in note 53).
91. Geoffrey C. Hazard, Jr., et al, An Historical Analysis of the Binding Effect of Class Suits, 146 U Pa L Rev 1849, 1850 (1998). Professor Hazard and his collaborators continue: The key legal question for the class suit therefore has been whether, where the judgment in such a suit is adverse to members who were actual parties, the judgment would be not merely discouraging to absentees, but preclusive against them as a matter of law - whether the rule of bar applies to absent class members. Id at 1850-51.
92. Id at 1852.
93. Shapiro at 917 (cited in note 13).
94. Id at 919.
95. I will primarily address this due process concern using the language of principal-agent relations. It is also possible to speak of the "moral hazard" confronting an agent whose actions (a) cannot be monitored by the principal, and (b) can realize returns under conditions at variance with the interests of the principal. See Paul Milgrom and John Roberts, Economics, Organizations, and Management 169 (Prentice-Hall, 1992) (analyzing principal-agent relationship in terms of moral hazard problem).
96. See Stephen C. Yeazell, From Medieval Group Litigation to the Modern Class Action 182 (Yale, 1987).
97. See Robert G. Bone, Personal and Impersonal Litigative Forms: Reconceiving the History of Adjudicative Representation, 70 BU L Rev 213 (1990) (reviewing Yeazell (cited in note 73)). Professor Bone characterizes the three types of suits in equity as general right, voluntary association, and privateer. Id at 236-38.
98. Bone at 267 (cited in note 74).
99. Under Justice Story's summary of equity jurisprudence, this was known as the Necessary Parties Rule. Joseph Story, Commentaries on Equity Pleadings, § 72-238 at 74 (2d ed 1840). For a discussion of the relaxation of the Necessary Parties Rule in equity jurisprudence, see Hazard, et al at 1878-80 (cited in note 68).
100. Under the federal rules, the right of notice and the ability to opt out are covered by Rule 23(c)(2), which is in turn triggered only by class actions certified under Rule 23(b)(3).
101. I have previously argued that the limited fund class action should be seen as the plaintiff's equivalent of an interpleader action. See Issacharoff Class Action Conflicts at 820-21 (cited in note 11). The class is created not by the interrelation among the class members but by the confines of the limited stake that would leave a corpus devoid of fundsfacing ongoing sirmlar claims. In like fashion, the injunctive action is defined by the conduct of the defendant's obligation, rather than the similarly situated posture of the plaintiff class; indeed Rule 23(b)(2) takes as its core the idea that the class is defined by the tact that "the party opposing the class has acted or refused to act on grounds generally applicable to the class, thereby making appropriate final inactive relief or corresponding declaratory relief with respect to the class as a whole. . . ."
102. Thus, for example, in a voting rights class action challenging at-large municipal elections, a defendant municipality is either compelled to alter its system of elections or it is not. It would make no sense to order the defendant to hold districted elections for the victorious class members but continue its prior electoral system for those that opted out.
103. At best, objecting class members may intervene through independent counsel. But that does not obviate the fact that their rights will be adjudicated as part of the class proceeding.
104. This is well captured in Ortiz, in which the Court holds the "greater the leniency in departing from the historical limited fund model, the greater the likelihood of abuse in ways that will be apparent when we apply the limited fund criteria to the case before us. The prudent course, therefore, is to presume that when subdivision (b)(1)(B) was devised to cover limited fund actions, the object was to stay close to the historical model." 119 S Ct at 2313.
105. The clearest example of this comes in Allison v Citgo Petroleum, 151 F3d 402 (5th Cir 1998). As a result of the Civil Rights Act of 1991, plaintiffs in employment discrimination claims were entitled to legal damages for harms that included emotional distress and other characteristically individual issues. The Fifth Circuit held that the introduction of these prototypically individual claims took a Title VII claim out of the mold of the civil right injunctive case that had routinely been certified under 23(b)(2) and required more fine-grained evaluation under Rule 23(b)(3). Id at 425.
106. Aerojet-General Corp. v Askew, 511 F2d 710, 719 (5th Cir 1975).
107. See Martin 490 US at 762 ("our 'deep-rooted historic tradition that everyone should have his own day in court'"), quoting Charles Alan Wright, et al, 18 Federal Practice & Procedure § 4449, at 417 (1981); Hansberry, 311 US at 40 (tracing the principle in "Anglo- American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process").
108. See Martin 490 US at 762 ("our 'deep-rooted historic tradition that everyone should have his own day in court'"), quoting Charles Alan Wright, et al, 18 Federal Practice & Procedure § 4449, at 417 (1981); Hansberry, 311 US at 40 (tracing the principle in "Anglo-American jurisprudence that one is not bound by a judgment in personam in a litigation in which he is not designated as a party or to which he has not been made a party by service of process").
109. Wright, et al, 18 Federal Practice and Procedure § 4457 at 494.
110. This is elaborated by Patrick Woolley into a defense of the right of participation for all individuals holding a legal claim, even in the class action context. See Woolley at 602-03 (cited in note 12).
111. "All of the cases that in fact preclude relitigation by a nonparty have involved several factors in addition to apparently adequate litigation by a party holding paralle interests." Wright et al, § 4457 (1998 Supp) at 420. As noted by the Seventh Circuit, "[e]xamples of these additional factors include control or participation in the earlier litigation, acquiescence deliberate maneuvering to avoid the effects of the first case, or the close relationship between the parties to the various cases." Tice v American Airlines, 162 F3d 966, 971 (7th Cir 1998) See, e.g., Tyus v Schoemehl, 93 F3d 449, 454-56 (8th Cir 1996) (adding that the doctrine is more appropriate in public law cases); NAACP v Metropolitan Council, 125 F3d 1171, 1175 (8th Cir 1997), vacated, 118 S Ct 1162 reinstated, 144 F3d 1168 (8th Cir 1998); Bittinger v Tecumseh Products Co., 123 F3d 877, 881 (6th Cir 1997); Collins v E.I. DuPont de Nrmours & Co., 34 F3d 172, 175-78 (3d Cir 1994); see also Wright, et al, 18 Federal Practice and Procedure: Jurisdiction § 4457, at 502.
112. "All of the cases that in fact preclude relitigation by a nonparty have involved several factors in addition to apparently adequate litigation by a party holding paralle interests." Wright et al, § 4457 (1998 Supp) at 420. As noted by the Seventh Circuit, "[e]xamples of these additional factors include control or participation in the earlier litigation, acquiescence deliberate maneuvering to avoid the effects of the first case, or the close relationship between the parties to the various cases." Tice v American Airlines, 162 F3d 966, 971 (7th Cir 1998) See, e.g., Tyus v Schoemehl, 93 F3d 449, 454-56 (8th Cir 1996) (adding that the doctrine is more appropriate in public law cases); NAACP v Metropolitan Council, 125 F3d 1171, 1175 (8th Cir 1997), vacated, 118 S Ct 1162 reinstated, 144 F3d 1168 (8th Cir 1998); Bittinger v Tecumseh Products Co., 123 F3d 877, 881 (6th Cir 1997); Collins v E.I. DuPont de Nrmours & Co., 34 F3d 172, 175-78 (3d Cir 1994); see also Wright, et al, 18 Federal Practice and Procedure: Jurisdiction § 4457, at 502.
113. "All of the cases that in fact preclude relitigation by a nonparty have involved several factors in addition to apparently adequate litigation by a party holding paralle interests." Wright et al, § 4457 (1998 Supp) at 420. As noted by the Seventh Circuit, "[e]xamples of these additional factors include control or participation in the earlier litigation, acquiescence deliberate maneuvering to avoid the effects of the first case, or the close relationship between the parties to the various cases." Tice v American Airlines, 162 F3d 966, 971 (7th Cir 1998) See, e.g., Tyus v Schoemehl, 93 F3d 449, 454-56 (8th Cir 1996) (adding that the doctrine is more appropriate in public law cases); NAACP v Metropolitan Council, 125 F3d 1171, 1175 (8th Cir 1997), vacated, 118 S Ct 1162 reinstated, 144 F3d 1168 (8th Cir 1998); Bittinger v Tecumseh Products Co., 123 F3d 877, 881 (6th Cir 1997); Collins v E.I. DuPont de Nrmours & Co., 34 F3d 172, 175-78 (3d Cir 1994); see also Wright, et al, 18 Federal Practice and Procedure: Jurisdiction § 4457, at 502.
114. "All of the cases that in fact preclude relitigation by a nonparty have involved several factors in addition to apparently adequate litigation by a party holding paralle interests." Wright et al, § 4457 (1998 Supp) at 420. As noted by the Seventh Circuit, "[e]xamples of these additional factors include control or participation in the earlier litigation, acquiescence deliberate maneuvering to avoid the effects of the first case, or the close relationship between the parties to the various cases." Tice v American Airlines, 162 F3d 966, 971 (7th Cir 1998) See, e.g., Tyus v Schoemehl, 93 F3d 449, 454-56 (8th Cir 1996) (adding that the doctrine is more appropriate in public law cases); NAACP v Metropolitan Council, 125 F3d 1171, 1175 (8th Cir 1997), vacated, 118 S Ct 1162 reinstated, 144 F3d 1168 (8th Cir 1998); Bittinger v Tecumseh Products Co., 123 F3d 877, 881 (6th Cir 1997); Collins v E.I. DuPont de Nrmours & Co., 34 F3d 172, 175-78 (3d Cir 1994); see also Wright, et al, 18 Federal Practice and Procedure: Jurisdiction § 4457, at 502.
115. "All of the cases that in fact preclude relitigation by a nonparty have involved several factors in addition to apparently adequate litigation by a party holding paralle interests." Wright et al, § 4457 (1998 Supp) at 420. As noted by the Seventh Circuit, "[e]xamples of these additional factors include control or participation in the earlier litigation, acquiescence deliberate maneuvering to avoid the effects of the first case, or the close relationship between the parties to the various cases." Tice v American Airlines, 162 F3d 966, 971 (7th Cir 1998) See, e.g., Tyus v Schoemehl, 93 F3d 449, 454-56 (8th Cir 1996) (adding that the doctrine is more appropriate in public law cases); NAACP v Metropolitan Council, 125 F3d 1171, 1175 (8th Cir 1997), vacated, 118 S Ct 1162 reinstated, 144 F3d 1168 (8th Cir 1998); Bittinger v Tecumseh Products Co., 123 F3d 877, 881 (6th Cir 1997); Collins v E.I. DuPont de Nrmours & Co., 34 F3d 172, 175-78 (3d Cir 1994); see also Wright, et al, 18 Federal Practice and Procedure: Jurisdiction § 4457, at 502.
116. "All of the cases that in fact preclude relitigation by a nonparty have involved several factors in addition to apparently adequate litigation by a party holding paralle interests." Wright et al, § 4457 (1998 Supp) at 420. As noted by the Seventh Circuit, "[e]xamples of these additional factors include control or participation in the earlier litigation, acquiescence deliberate maneuvering to avoid the effects of the first case, or the close relationship between the parties to the various cases." Tice v American Airlines, 162 F3d 966, 971 (7th Cir 1998) See, e.g., Tyus v Schoemehl, 93 F3d 449, 454-56 (8th Cir 1996) (adding that the doctrine is more appropriate in public law cases); NAACP v Metropolitan Council, 125 F3d 1171, 1175 (8th Cir 1997), vacated, 118 S Ct 1162 reinstated, 144 F3d 1168 (8th Cir 1998); Bittinger v Tecumseh Products Co., 123 F3d 877, 881 (6th Cir 1997); Collins v E.I. DuPont de Nrmours & Co., 34 F3d 172, 175-78 (3d Cir 1994); see also Wright, et al, 18 Federal Practice and Procedure: Jurisdiction § 4457, at 502.
117. "All of the cases that in fact preclude relitigation by a nonparty have involved several factors in addition to apparently adequate litigation by a party holding paralle interests." Wright et al, § 4457 (1998 Supp) at 420. As noted by the Seventh Circuit, "[e]xamples of these additional factors include control or participation in the earlier litigation, acquiescence deliberate maneuvering to avoid the effects of the first case, or the close relationship between the parties to the various cases." Tice v American Airlines, 162 F3d 966, 971 (7th Cir 1998) See, e.g., Tyus v Schoemehl, 93 F3d 449, 454-56 (8th Cir 1996) (adding that the doctrine is more appropriate in public law cases); NAACP v Metropolitan Council, 125 F3d 1171, 1175 (8th Cir 1997), vacated, 118 S Ct 1162 reinstated, 144 F3d 1168 (8th Cir 1998); Bittinger v Tecumseh Products Co., 123 F3d 877, 881 (6th Cir 1997); Collins v E.I. DuPont de Nrmours & Co., 34 F3d 172, 175-78 (3d Cir 1994); see also Wright, et al, 18 Federal Practice and Procedure: Jurisdiction § 4457, at 502.
118. "All of the cases that in fact preclude relitigation by a nonparty have involved several factors in addition to apparently adequate litigation by a party holding paralle interests." Wright et al, § 4457 (1998 Supp) at 420. As noted by the Seventh Circuit, "[e]xamples of these additional factors include control or participation in the earlier litigation, acquiescence deliberate maneuvering to avoid the effects of the first case, or the close relationship between the parties to the various cases." Tice v American Airlines, 162 F3d 966, 971 (7th Cir 1998) See, e.g., Tyus v Schoemehl, 93 F3d 449, 454-56 (8th Cir 1996) (adding that the doctrine is more appropriate in public law cases); NAACP v Metropolitan Council, 125 F3d 1171, 1175 (8th Cir 1997), vacated, 118 S Ct 1162 reinstated, 144 F3d 1168 (8th Cir 1998); Bittinger v Tecumseh Products Co., 123 F3d 877, 881 (6th Cir 1997); Collins v E.I. DuPont de Nrmours & Co., 34 F3d 172, 175-78 (3d Cir 1994); see also Wright, et al, 18 Federal Practice and Procedure: Jurisdiction § 4457, at 502.
119. 311 US 32 (1940).
120. At other levels, Hansberry continues to be a problematic case. The issue before the Court was whether a racially restricting covenant would be enforced. The suit was brought on behalf of a prospective black purchaser of a home in an all-white section of Chicago. A previous attempt to rent to a black family had resulted in a class action by the homeowners' association purporting to represent all homeowners seeking to enforce the covenant. That suit was successful, although there were apparently significant factual errors relevant to both the basis for class treatment and the enforceability of the covenant. Despite the Court s assumption that the covenant, if properly implemented, was enforceable, the Court treated the Hansberrys' interest in the purchase as an individual right rather than as an interest running with the land. In the former case, clearly the interests of the would-be black purchasers could not have been adequately represented by the all-white homeowners' association. But if the issue was the enforceability of the covenant as written, then both the seller and buyer in proposed later transactions would be bound by their predecessors in interest in the property. It is entirely possible that the Court finessed this point to avoid upholding an offensive racial covenant during World War II. But two parts of Hansberry survive nonetheless. First, the opinion makes clear that a proper class action may bind the absent class members to its outcome. 311 US 32, 41 (1940). Second, the potential misuse of the class action device requires greater procedural regularity in its application than that provided by equity practice of old. Id at 42.
121. As expressed by Judge Diane Wood of the Seventh Circuit: [T]he fact that virtual representation looks like a class action but avoids compliance with Rule 23 is a weakness, not a strength, of the doctrine. . . . In properly certified class actions, parties who have adequate notice and (at a minimum) an opportunity to opt out of an earlier case may, if their interests are sufficiently aligned with one of the earlier parties, be bound by the results of that litigation. See, eg, Hansberry v Lee, 311 US 32 (1940); and Phillips Petroleum Co v Shutts, 472 US 797 (1985). This is the theory on which Rule 23 is based. The class action cases allowing preclusion after adequate notice and the opportunity to opt out recognize a form of consent that is enough to justify binding the later parties to the earlier result (again, when the other criteria such as identity of issue and interest are also satisfied). Tice, 162 F3d at 972.
122. As expressed by Judge Diane Wood of the Seventh Circuit: [T]he fact that virtual representation looks like a class action but avoids compliance with Rule 23 is a weakness, not a strength, of the doctrine. . . . In properly certified class actions, parties who have adequate notice and (at a minimum) an opportunity to opt out of an earlier case may, if their interests are sufficiently aligned with one of the earlier parties, be bound by the results of that litigation. See, eg, Hansberry v Lee, 311 US 32 (1940); and Phillips Petroleum Co v Shutts, 472 US 797 (1985). This is the theory on which Rule 23 is based. The class action cases allowing preclusion after adequate notice and the opportunity to opt out recognize a form of consent that is enough to justify binding the later parties to the earlier result (again, when the other criteria such as identity of issue and interest are also satisfied). Tice, 162 F3d at 972.
123. As expressed by Judge Diane Wood of the Seventh Circuit: [T]he fact that virtual representation looks like a class action but avoids compliance with Rule 23 is a weakness, not a strength, of the doctrine. . . . In properly certified class actions, parties who have adequate notice and (at a minimum) an opportunity to opt out of an earlier case may, if their interests are sufficiently aligned with one of the earlier parties, be bound by the results of that litigation. See, eg, Hansberry v Lee, 311 US 32 (1940); and Phillips Petroleum Co v Shutts, 472 US 797 (1985). This is the theory on which Rule 23 is based. The class action cases allowing preclusion after adequate notice and the opportunity to opt out recognize a form of consent that is enough to justify binding the later parties to the earlier result (again, when the other criteria such as identity of issue and interest are also satisfied). Tice, 162 F3d at 972.
124. This distinction is well developed in Hazard, et al, at 1919-22 (cited in note 68) (relying on Thomas Atkins Street, Federal Equity Practice (1909), as the best contemporary exposition of this approach). The distinction between true and spurious class actions was formally adopted in the Federal Equity Rules in 1912. Id at 1923-24. In 1938 the first Federal Rules of Civil Procedure were adopted. The original federal rules carried forth the distinction between what were termed "true," "hybrid," and "spurious" class actions. In 1966, the modern form of Rule 23 was introduced which abolished these distinctions in favor of the Rule 23 (a) common characteristics of class actions and the Rule 23(b) division along the lines of relief sought in the case.
125. Yeazell at 40 (cited in note 73) ("most medieval group litigation involved groups whose organization antedated the lawsuit itself. . . . unlike some modern collective litigation, medieval group litigation did not overcome the difficulties of organizing a group for collective action. That task had already been done").
126. Mayor of York v Pilkington, 25 Eng Rep 946 (Ch 1737).
127. Lloyd v Loaring, 31 Eng Rep 1302 (Ch 1802); see generally Hazard, et al, at 1874-76 (cited in note 68).
128. Lloyd v Loaring, 31 Eng Rep 1302 (Ch 1802); see generally Hazard, et al, at 1874-76 (cited in note 68).
129. See Yeazell at 52-68 (cited in note 73); Bone at 220 (cited in note 74).
130. I will return to the attempts to use some preexisting authority to monitor the class action, as with the proposed requirement of notice of statewide class actions to the attorneys general contained in the Class Action Fairness Act of 1999, S 353, 106th Cong, or the attempt to give large institutional investors the option of assuming the lead plaintiff role in the Securities Litigation Reform Act of 1995, Pub L No 104-67, 109 Stat 737 (codified in scattered sections of 15 USC and 18 USC).
131. See 7A Wright, et al, § 1752 (cited in note 49) (citing cases in which courts "suggested that if the class were successful, the absentees should be notified and asked if they wanted to take advantage of the result").
132. See 7B Wright, et al, § 1787 (cited in note 49) (noting that
133. See 7B Wright, et al, § 1787 (cited in note 49) (noting that "[b]y requiring the absentee to take affirmative action to avoid being bound, the rule attempts to eliminated the common practice in 'spurious' class suits prior to 1966 of waiting to see if the adjudication was favorable to the class before deciding whether to enter the action"), and Charles Alan Wright, Law of Federal Courts 483 (West, 2d ed 1983) (arguing that if an absentee does " 'opt out', and the judgement ultimately is favorable to the class, he should not be entitled to rely on it as collateral estoppel," because to permit it would "make a mockery of the (b)(3) procedure, and would restore in a different form the 'one way' intervention that the amended rule was expressly intended to preclude"). Similar discussion can also be found in the Manual for Complex Litigation, Third at 224 (cited in note 31).
134. See Jack Ratliff, Offensive Collateral Estoppel and the Option Effect, 67 Tex L Rev 63, 77, 79 ("The basic unfairness lies in the disparate risks taken by plaintiffs as a class and the defendant in the first case . . . . [t]he option effect forces the first-case defendant to play for low stakes if he wins, but for high stakes if he loses").
135. 255 US 356 (1921).
136. For an extended discussion of asymmetries of the stakes in litigation, see Samuel Issacharoff, Group Litigation of Consumer Claims: Lessons of the American Experience, 34 Tex Intl L J 135, 142-45 (1999).
137. Restatement (Second) of Judgments § 42(1)(d) (1982).
138. While it is possible to address this problem in the language of agency costs in game theoretic terms, see, e.g., Michael A. Perino, Class Action Chaos? The Theory of the Core and an Analysis of Opt-Out Rights in Mass Tort Class Actions, 46 Emory L J 85, 125, 141-42 n 235 (1997) (applying this analysis to the conflicts presented in Georgine, the lower court version of Amchem), this is simply a recasting of the classic discussion over due process.
139. This is of course taken from Albert Hirschman's seminal work, Exit, Voice and Loyalty: Response to Decline in Firms, Organizations and States (Harvard, 1970). In the course of many discussions, Jack Coffee and I both fastened on Hirschman's typology to characterize the debates over class actions. The exact origin of the inspiration is as forgotten as it is unimportant. See John C. Coffee, Jr., Class Action Accountability: Reconciling Exit, Voice, and Loyalty in Representative Litigation, 100 Colum L Rev (forthcoming, 2000).
140. This is of course taken from Albert Hirschman's seminal work, Exit, Voice and Loyalty: Response to Decline in Firms, Organizations and States (Harvard, 1970). In the course of many discussions, Jack Coffee and I both fastened on Hirschman's typology to characterize the debates over class actions. The exact origin of the inspiration is as forgotten as it is unimportant. See John C. Coffee, Jr., Class Action Accountability: Reconciling Exit, Voice, and Loyalty in Representative Litigation, 100 Colum L Rev (forthcoming, 2000).
141. Coffee, Class Wars at 1408 (cited in note 11).
142. This is the Supreme Court's characterization in Amchem, 521 US at 617.
143. I make it a practice to ask my procedure students how many had opted out of the Amchem litigation. Given the scope of the class definition, virtually any twenty-something-year-old American with a working parent was likely to have been a class member. The class is defined as "exposed individuals who currently suffer no physical ailments, but who may in the future develop possibly fatal asbestos-related diseases." Georgine, 83 F3d at 617. "Exposure" is in turn defined to include anyone exposed by contact to the work clothes of a parent or other family member.
144. This may also be expressed in game theoretic terms as a product of the cost of defection exceeding the potential alternative payoff. See Perino at 127-29 (cited in note 103). In simple terms, there is no gain to be had from preserving the right to bring an action whose expected payoff is zero.
145. See Arthur R. Miller, Problems of Giving Notice in Class Actions, 58 FRD 313, 322 (1973) ; Deborah Rhode, Class Conflicts in Class Actions, 34 Stan L Rev 1183, 1215 (1982).
146. See Arthur R. Miller, Problems of Giving Notice in Class Actions, 58 FRD 313, 322 (1973) ; Deborah Rhode, Class Conflicts in Class Actions, 34 Stan L Rev 1183, 1215 (1982).
147. See Weber at 1193-1201 (cited in note 11) ("the class member must receive adequate notice of the settlement and have adequate time to reflect on the decision to accept or reject the settlement. Notice of the decision entails an adequate description of the settlement and its effects so that the person can make a choice that will maximize individual well-being.").
148. I have previously argued for this functional approach to the right to notice. See Issacharoff, Class Action Conflicts at 833 (cited in note 11).
149. For example, Professor Weber proposes a muscular notion of notice so as to place the emphasis in settlement approval "on the idea of individual consent." Accordingly, his approach "would stress . . . whether the individual class member has the opportunity to accept or reject the settlement. Consent should matter; the consent that matters should be meaningful consent; implied consent is no substitute for real choice; and the practical effects of requiring choice will be beneficial." Weber at 1193 (cited in note 11).
150. Shapiro at 937 (cited in note 13) (focusing on the seminal cases Ben Hur and Hansberry). Moreover, these cases did not even mention notice to the absent class members. Id.
151. See Shutts 472 US 797 (1985); Henry Paul Monaghan, Antisuit Injunctions and Preclusion Against Absent Nonresident Class Members, 98 Colum L Rev 1148, 1170 (1998) (addressing the jurisdictional "fiction" of the Shutts implied consent approach).
152. See Shutts 472 US 797 (1985); Henry Paul Monaghan, Antisuit Injunctions and Preclusion Against Absent Nonresident Class Members, 98 Colum L Rev 1148, 1170 (1998) (addressing the jurisdictional "fiction" of the Shutts implied consent approach).
153. This is a topic of increasing concern in the commentary on class actions. See Marcel Kahan and Linda Silberman, The Inadequate Search for "Adequacy" in Class Actions: A Critique of Epstein v. MCA, Inc., 73 NYU L Rev 765 (1998); Geoffrey P. Miller, Overlapping Class Actions, 71 NYU L Rev 514 (1996); Geoffrey P. Miller, Full Faith and Credit to Settlements in Overlapping Class Actions: A Reply to Professors Kahan and Silberman, 73 NYU L Rev 1167 (1998); Coffee, Class Action Accountability (cited in note 104); Issacharoff, Class Action Conflicts (cited in note 11).
154. This is a topic of increasing concern in the commentary on class actions. See Marcel Kahan and Linda Silberman, The Inadequate Search for "Adequacy" in Class Actions: A Critique of Epstein v. MCA, Inc., 73 NYU L Rev 765 (1998); Geoffrey P. Miller, Overlapping Class Actions, 71 NYU L Rev 514 (1996); Geoffrey P. Miller, Full Faith and Credit to Settlements in Overlapping Class Actions: A Reply to Professors Kahan and Silberman, 73 NYU L Rev 1167 (1998); Coffee, Class Action Accountability (cited in note 104); Issacharoff, Class Action Conflicts (cited in note 11).
155. This is a topic of increasing concern in the commentary on class actions. See Marcel Kahan and Linda Silberman, The Inadequate Search for "Adequacy" in Class Actions: A Critique of Epstein v. MCA, Inc., 73 NYU L Rev 765 (1998); Geoffrey P. Miller, Overlapping Class Actions, 71 NYU L Rev 514 (1996); Geoffrey P. Miller, Full Faith and Credit to Settlements in Overlapping Class Actions: A Reply to Professors Kahan and Silberman, 73 NYU L Rev 1167 (1998); Coffee, Class Action Accountability (cited in note 104); Issacharoff, Class Action Conflicts (cited in note 11).
156. This is a topic of increasing concern in the commentary on class actions. See Marcel Kahan and Linda Silberman, The Inadequate Search for "Adequacy" in Class Actions: A Critique of Epstein v. MCA, Inc., 73 NYU L Rev 765 (1998); Geoffrey P. Miller, Overlapping Class Actions, 71 NYU L Rev 514 (1996); Geoffrey P. Miller, Full Faith and Credit to Settlements in Overlapping Class Actions: A Reply to Professors Kahan and Silberman, 73 NYU L Rev 1167 (1998); Coffee, Class Action Accountability (cited in note 104); Issacharoff, Class Action Conflicts (cited in note 11).
157. This is a topic of increasing concern in the commentary on class actions. See Marcel Kahan and Linda Silberman, The Inadequate Search for "Adequacy" in Class Actions: A Critique of Epstein v. MCA, Inc., 73 NYU L Rev 765 (1998); Geoffrey P. Miller, Overlapping Class Actions, 71 NYU L Rev 514 (1996); Geoffrey P. Miller, Full Faith and Credit to Settlements in Overlapping Class Actions: A Reply to Professors Kahan and Silberman, 73 NYU L Rev 1167 (1998); Coffee, Class Action Accountability (cited in note 104); Issacharoff, Class Action Conflicts (cited in note 11).
158. Miller, Full Faith and Credit at 1167 (cited in note 115).
159. Consistent with the notion that in litigation anything can and does happen is the fact pattern in the recent Lazy Oil Co. v Witco, 166 F3d 581 (3rd Cir 1999). In that case, litigation was truly client-initiated by an informed major shareholder of a company who then opposed a proposed class settlement of antitrust litigation. Only one of the class representatives supported the settlement, and a surprising 384 class members objected to the terms of the settlement. Id at 583-84. The objecting class members then demanded that the class counsel be disqualified from the case for holding a conflicting position to individual class members who objected to counsel's continued representation. The Third Circuit affirmed the district court in finding that complete class approval was not a prerequisite either to settlement or to the continued role of class counsel, and approved the settlement. One may question whether the intensity of opposition by unusually informed class members should have been more heavily weighted in the decision to approve of the settlement, but the conclusion that individual class members, even named class members, do not have a veto on class counsel seems inescapable. Nonetheless, there are plenty of reported opinions of class settlements being approved over the objections of substantial numbers of class members, including the class representatives. See, e.g., Maywalt v Parker & Parsley Petroleum Co., 864 F Supp 1422, 1426-33 (SDNY 1994), affirmed, 67 F3d 1072 (2d Cir 1995) (settlement approved despite objections by nearly 2,700 class members, including the class representatives); County of Suffolk v Long Island Lighting Co., 907 F2d 1295, 1325 (2d Cir 1990) (opposition by a majority of the class representatives insufficient to prevent settlement approval).
160. Consistent with the notion that in litigation anything can and does happen is the fact pattern in the recent Lazy Oil Co. v Witco, 166 F3d 581 (3rd Cir 1999). In that case, litigation was truly client-initiated by an informed major shareholder of a company who then opposed a proposed class settlement of antitrust litigation. Only one of the class representatives supported the settlement, and a surprising 384 class members objected to the terms of the settlement. Id at 583-84. The objecting class members then demanded that the class counsel be disqualified from the case for holding a conflicting position to individual class members who objected to counsel's continued representation. The Third Circuit affirmed the district court in finding that complete class approval was not a prerequisite either to settlement or to the continued role of class counsel, and approved the settlement. One may question whether the intensity of opposition by unusually informed class members should have been more heavily weighted in the decision to approve of the settlement, but the conclusion that individual class members, even named class members, do not have a veto on class counsel seems inescapable. Nonetheless, there are plenty of reported opinions of class settlements being approved over the objections of substantial numbers of class members, including the class representatives. See, e.g., Maywalt v Parker & Parsley Petroleum Co., 864 F Supp 1422, 1426-33 (SDNY 1994), affirmed, 67 F3d 1072 (2d Cir 1995) (settlement approved despite objections by nearly 2,700 class members, including the class representatives); County of Suffolk v Long Island Lighting Co., 907 F2d 1295, 1325 (2d Cir 1990) (opposition by a majority of the class representatives insufficient to prevent settlement approval).
161. Consistent with the notion that in litigation anything can and does happen is the fact pattern in the recent Lazy Oil Co. v Witco, 166 F3d 581 (3rd Cir 1999). In that case, litigation was truly client-initiated by an informed major shareholder of a company who then opposed a proposed class settlement of antitrust litigation. Only one of the class representatives supported the settlement, and a surprising 384 class members objected to the terms of the settlement. Id at 583-84. The objecting class members then demanded that the class counsel be disqualified from the case for holding a conflicting position to individual class members who objected to counsel's continued representation. The Third Circuit affirmed the district court in finding that complete class approval was not a prerequisite either to settlement or to the continued role of class counsel, and approved the settlement. One may question whether the intensity of opposition by unusually informed class members should have been more heavily weighted in the decision to approve of the settlement, but the conclusion that individual class members, even named class members, do not have a veto on class counsel seems inescapable. Nonetheless, there are plenty of reported opinions of class settlements being approved over the objections of substantial numbers of class members, including the class representatives. See, e.g., Maywalt v Parker & Parsley Petroleum Co., 864 F Supp 1422, 1426-33 (SDNY 1994), affirmed, 67 F3d 1072 (2d Cir 1995) (settlement approved despite objections by nearly 2,700 class members, including the class representatives); County of Suffolk v Long Island Lighting Co., 907 F2d 1295, 1325 (2d Cir 1990) (opposition by a majority of the class representatives insufficient to prevent settlement approval).
162. For an early attempt to use voting rules and intervention to control conflicts in representations of multiple principals by one agent, as in class actions, see Lewis A. Kornhauser, Control of Conflicts of Interest in Class-Action Suits, 41 Public Choice 145 (1983). Kornhauser subsequently dubbed such representation "hydraheaded." Lewis A. Kornhauser, Fair Division of Settlements, A Comment on Silver and Baker, 84 Va L Rev 1561, 1562 (1998).
163. For an early attempt to use voting rules and intervention to control conflicts in representations of multiple principals by one agent, as in class actions, see Lewis A. Kornhauser, Control of Conflicts of Interest in Class-Action Suits, 41 Public Choice 145 (1983). Kornhauser subsequently dubbed such representation "hydraheaded." Lewis A. Kornhauser, Fair Division of Settlements, A Comment on Silver and Baker, 84 Va L Rev 1561, 1562 (1998).
164. Woolley at 629 (cited in note 12).
165. 815 F2d 626 (11th Cir 1987).
166. See Walker v City of Mesquite, 858 F2d 1071 (5th Cir 1988); Shults v Champion International Corp., 35 F3d 1056 (6th Cir 1994); In re Brand Name Prescription Drugs Antitrust Litigation, 115 F3d 456 (7th Cir 1997); Croyden Associates v Alleco, 969 F2d 675 (8th Cir 1992); Gottlieb v Wiles, 11 F3d 1004 (10th Cir 1993).
167. See Walker v City of Mesquite, 858 F2d 1071 (5th Cir 1988); Shults v Champion International Corp., 35 F3d 1056 (6th Cir 1994); In re Brand Name Prescription Drugs Antitrust Litigation, 115 F3d 456 (7th Cir 1997); Croyden Associates v Alleco, 969 F2d 675 (8th Cir 1992); Gottlieb v Wiles, 11 F3d 1004 (10th Cir 1993).
168. See Walker v City of Mesquite, 858 F2d 1071 (5th Cir 1988); Shults v Champion International Corp., 35 F3d 1056 (6th Cir 1994); In re Brand Name Prescription Drugs Antitrust Litigation, 115 F3d 456 (7th Cir 1997); Croyden Associates v Alleco, 969 F2d 675 (8th Cir 1992); Gottlieb v Wiles, 11 F3d 1004 (10th Cir 1993).
169. See Walker v City of Mesquite, 858 F2d 1071 (5th Cir 1988); Shults v Champion International Corp., 35 F3d 1056 (6th Cir 1994); In re Brand Name Prescription Drugs Antitrust Litigation, 115 F3d 456 (7th Cir 1997); Croyden Associates v Alleco, 969 F2d 675 (8th Cir 1992); Gottlieb v Wiles, 11 F3d 1004 (10th Cir 1993).
170. See Walker v City of Mesquite, 858 F2d 1071 (5th Cir 1988); Shults v Champion International Corp., 35 F3d 1056 (6th Cir 1994); In re Brand Name Prescription Drugs Antitrust Litigation, 115 F3d 456 (7th Cir 1997); Croyden Associates v Alleco, 969 F2d 675 (8th Cir 1992); Gottlieb v Wiles, 11 F3d 1004 (10th Cir 1993).
171. California Public Employees' Retirement System v Felzen, 119 S Ct 720 (1999), affirming 134 F3d 873 (7th Cir 1998).
172. California Public Employees' Retirement System v Felzen, 119 S Ct 720 (1999), affirming 134 F3d 873 (7th Cir 1998).
173. See Marcel Kahan and Linda Silberman, Matsushita and Beyond: The Role of State Courts in Class Actions Involving Exclusive Federal Claims, 1996 Supreme Court Review 219, 232 (noting that this further "creates the danger that unscrupulous class counsel will settle a class claim for a generous attorney fee, but a paltry recovery.").
174. See Silver and Baker at 1468 (cited in note 14) (emphasis omitted).
175. See Monaghan, Antisuit Injunctions and Preclusion at 1148 (cited in note 114). This position has some support on the Court. See Matsushita Elec. Indus. Co. v Epstein, 516 US at 386-87 (Ginsburg, J, concurring in part and dissenting in part).
176. See Martin v Wilks, 490 US 755 (1989). In particular, the Court distinguished class members from third parties for purposes of collateral attack. 490 US at 762 n 2. 127 For an argument directly to the contrary, see Kahan and Silberman, Matsushita and Beyond at 264 (cited in note 123) ("[A]s long as the court entertaining a proposed class action affords class members fair opportunity to raise the issue, adequacy of representation should be raised directly, and not be permitted to be raised collaterally.").
177. I stress this point because, since all class action settlements must obtain judicial approval, it is insufficient to rely on the fact of judicial acceptance of the settlement as itself the guarantor of fair treatment of absent class members. This is the approach that Amchem derisively referred to as the "chancellor's foot" standard of review in which a "disarmed" court makes an estimation of how reasonable a settlement appears based on limited information and potentially tainted incentives of the proponents of the settlement - and the reviewing court itself. The issue must be what are the standards for judicial scrutiny of settlements. Also, because of the danger that collusive class actions may be brought before courts suspected of being friendly, the proper legal standard is all the more important as setting up the basis for exacting appellate scrutiny of the faithful representation by the class agents.
178. I leave aside the problem of overlapping class actions in which a race to the courthouse might lead to the inequities in forcing a certified class (or even one awaiting certification) having to present its claims as part of an objection, intervention, and appellate challenge in a rival forum. This leaves open the problem presented in cases such as Matsushita v Epstein, 516 US 367, in which the real controversy was over which forum would control the disposition of the litigation.
179. Last Term's latest installment in this trend is O'Sullivan v Boerckel, 119 S Ct 1728 (1999) (requiring complete exhaustion of state appellate procedures, including disfavored discretionary review in state's highest court, prior to commencement of collateral habeas challenge).
180. For a discussion of the disincentives toward individual monitoring of class action settlements, see Susan P. Koniak and George M. Cohen, Under Cloak of Settlement, 82 Va L Rev 1051, 1122-30 (1996).
181. See Bruce Hay and David Rosenberg, The Individual Justice of Averaging (Working Paper 1999) (arguing that class members with less than complete information would prefer a regime of damage averaging, rather than individual determinations of recovery).
182. See Macey and Miller (cited in note 15).
183. The problems are of four different sorts. First, in one variant of the proposal, and as some courts have tried to implement it, the winning bid is given to the lawyers willing to undertake the representation most cheaply. As with dentistry, there may be some pain associated with delivering yourself to professionals whose chief attribute is their willingness to work you over cheaply. See Macey and Miller at 113 (cited in note 15) (recognizing that "the competence or financial qualification of the low bidder might also be suspect"); see also Julie Rubin, Auctioning Class Actions: Turning the Tables on Plaintiffs' Lawyers Abuse, 52 Bus Law 1441, 1455 (1997) (criticizing proposal on these grounds). Second, there is likely to be a systematic bias toward undervaluing class claims because of the lack of information at the prediscovery auction stage. See Randall S. Thomas and Robert G. Hansen, Auctioning Class Action and Derivative Lawsuits: A Critical Analysis, 87 Nw U L Rev 423 (1993). Third, because of uncertainty over future control of the class, there will be a systematic bias toward underinvestment in discovery, compounding the problem of the systematic undervaluation of the class claim. See Thomas and Hansen; Jill E. Fisch, Class Action Reform, Qui Tam, and the Role of the Plaintiff, 60 Law & Contemp Probs 167, 182 (1997) ("the auction has the potential to undercut the incentive to commit resources investigating possible corporate wrongdoing . . . . Because the auction procedure allows an entrepreneurial lawyer to outbid the plaintiff or lawyer who files the initial suit, the financial reward of representative litigation do not go to those who search out wrongdoing."). Finally, in the mass tort context, the sheer size of the claims at stake would exceed the resources of even the most well- heeled plaintiffs' firms. The only realistic prospective bidders would be the defendants or their insurers. This would compound the problems of information asymmetries leading to undervaluation and would, in effect, recreate the problem in the settlement class context of the class being created through the contrivance of the defendant, rather than through the adversarial process.
184. The problems are of four different sorts. First, in one variant of the proposal, and as some courts have tried to implement it, the winning bid is given to the lawyers willing to undertake the representation most cheaply. As with dentistry, there may be some pain associated with delivering yourself to professionals whose chief attribute is their willingness to work you over cheaply. See Macey and Miller at 113 (cited in note 15) (recognizing that "the competence or financial qualification of the low bidder might also be suspect"); see also Julie Rubin, Auctioning Class Actions: Turning the Tables on Plaintiffs' Lawyers Abuse, 52 Bus Law 1441, 1455 (1997) (criticizing proposal on these grounds). Second, there is likely to be a systematic bias toward undervaluing class claims because of the lack of information at the prediscovery auction stage. See Randall S. Thomas and Robert G. Hansen, Auctioning Class Action and Derivative Lawsuits: A Critical Analysis, 87 Nw U L Rev 423 (1993). Third, because of uncertainty over future control of the class, there will be a systematic bias toward underinvestment in discovery, compounding the problem of the systematic undervaluation of the class claim. See Thomas and Hansen; Jill E. Fisch, Class Action Reform, Qui Tam, and the Role of the Plaintiff, 60 Law & Contemp Probs 167, 182 (1997) ("the auction has the potential to undercut the incentive to commit resources investigating possible corporate wrongdoing . . . . Because the auction procedure allows an entrepreneurial lawyer to outbid the plaintiff or lawyer who files the initial suit, the financial reward of representative litigation do not go to those who search out wrongdoing."). Finally, in the mass tort context, the sheer size of the claims at stake would exceed the resources of even the most well- heeled plaintiffs' firms. The only realistic prospective bidders would be the defendants or their insurers. This would compound the problems of information asymmetries leading to undervaluation and would, in effect, recreate the problem in the settlement class context of the class being created through the contrivance of the defendant, rather than through the adversarial process.
185. The problems are of four different sorts. First, in one variant of the proposal, and as some courts have tried to implement it, the winning bid is given to the lawyers willing to undertake the representation most cheaply. As with dentistry, there may be some pain associated with delivering yourself to professionals whose chief attribute is their willingness to work you over cheaply. See Macey and Miller at 113 (cited in note 15) (recognizing that "the competence or financial qualification of the low bidder might also be suspect"); see also Julie Rubin, Auctioning Class Actions: Turning the Tables on Plaintiffs' Lawyers Abuse, 52 Bus Law 1441, 1455 (1997) (criticizing proposal on these grounds). Second, there is likely to be a systematic bias toward undervaluing class claims because of the lack of information at the prediscovery auction stage. See Randall S. Thomas and Robert G. Hansen, Auctioning Class Action and Derivative Lawsuits: A Critical Analysis, 87 Nw U L Rev 423 (1993). Third, because of uncertainty over future control of the class, there will be a systematic bias toward underinvestment in discovery, compounding the problem of the systematic undervaluation of the class claim. See Thomas and Hansen; Jill E. Fisch, Class Action Reform, Qui Tam, and the Role of the Plaintiff, 60 Law & Contemp Probs 167, 182 (1997) ("the auction has the potential to undercut the incentive to commit resources investigating possible corporate wrongdoing . . . . Because the auction procedure allows an entrepreneurial lawyer to outbid the plaintiff or lawyer who files the initial suit, the financial reward of representative litigation do not go to those who search out wrongdoing."). Finally, in the mass tort context, the sheer size of the claims at stake would exceed the resources of even the most well-heeled plaintiffs' firms. The only realistic prospective bidders would be the defendants or their insurers. This would compound the problems of information asymmetries leading to undervaluation and would, in effect, recreate the problem in the settlement class context of the class being created through the contrivance of the defendant, rather than through the adversarial process.
186. The phrase comes from Bernard Black's discussion of the use of oversight entities in the corporate governance context. See Bernard S. Black, Agents Watching Agents: The Promise of Institutional Investor Voice, 39 UCLA L Rev 811 (1992). For an extended discussion of the use of intermediaries as a governance strategy and the potential disruptions presented, see Samuel Issacharoff and Daniel Ortiz, Governing Through Intermediaries, 85 Va L Rev 1627 (1999).
187. The phrase comes from Bernard Black's discussion of the use of oversight entities in the corporate governance context. See Bernard S. Black, Agents Watching Agents: The Promise of Institutional Investor Voice, 39 UCLA L Rev 811 (1992). For an extended discussion of the use of intermediaries as a governance strategy and the potential disruptions presented, see Samuel Issacharoff and Daniel Ortiz, Governing Through Intermediaries, 85 Va L Rev 1627 (1999).
188. See Kahan and Silberman, The Inadequate Search for "Adequacy" at 782 (cited in note 115) (arguing that more exacting review of the adequacy of representation in the first forum is the best guarantor of the protection of the absent class members).
189. See Koniak at 1092 n 216 (cited in note 16); Green at 1797 (cited in note 167). There is some judicial skepticism about the benefits of such an approach. As observed in In re Intelligent Electronics, Inc. Securities Litigation, 1997 WL 786984 (ED Pa 1997), "The appointment of a class guardian would only further increase costs, extend indefinitely the time before distribution to the class and further needlessly complicate the procedures." 1997 WL 786984 at * 10.
190. For a discussion of this point, see Weber at 1213-15 (cited in note 11); James A. Henderson, Jr., Comment: Settlement Class Actions and the Limits of Adjudication, 80 Cornell L Rev 1014, 1020 (1995) (describing docket-clearing incentives for judges to approve "done-deals"); Charles Wolfram, Mass Torts, Messy Ethics, 80 Cornell L Rev 1228, 1233 (1995) (describing judicial incentives toward settlement as one of the sources of problems in modern mass tort litigation).
191. For a discussion of this point, see Weber at 1213-15 (cited in note 11); James A. Henderson, Jr., Comment: Settlement Class Actions and the Limits of Adjudication, 80 Cornell L Rev 1014, 1020 (1995) (describing docket-clearing incentives for judges to approve "done-deals"); Charles Wolfram, Mass Torts, Messy Ethics, 80 Cornell L Rev 1228, 1233 (1995) (describing judicial incentives toward settlement as one of the sources of problems in modern mass tort litigation).
192. See Amchem, 521 US at 594-95.
193. Under the Private Securities Litigation Reform Act of 1995, 15 USC § 78u-4 (1998), courts are directed to appoint the most adequate plaintiff as lead named plaintiff and to entertain a presumption that this most adequate plaintiff is either the plaintiff in whose name the case was filed or the plaintiff that has the largest financial interest in the relief sought by the class. Id § 78u-4(a)(3)(B)(iii)(I)(aa) and (bb). The bill was prompted by an article advocating the appointment of large institutional investors whose stake in the litigation would provide an incentive for effective monitoring of class counsel and who would faithfully represent the interests of all class members. See Elliot J. Weiss and John S. Beckerman, Let the Money Do the Monitoring: How Institutional Investors can Reduce Agency Costs in Securities Class Actions, 104 Yale L J 2053 (1995). But see Jill E. Fisch, Class Action Reform: Lessons from Securities Litigation, 39 Ariz L Rev 533 (1997) (challenging assumption that large institutional investors have interests identical to small stakeholders, and positing that there are significant dangers of collusive behavior between large investors and defendants).
194. Under the Private Securities Litigation Reform Act of 1995, 15 USC § 78u-4 (1998), courts are directed to appoint the most adequate plaintiff as lead named plaintiff and to entertain a presumption that this most adequate plaintiff is either the plaintiff in whose name the case was filed or the plaintiff that has the largest financial interest in the relief sought by the class. Id § 78u-4(a)(3)(B)(iii)(I)(aa) and (bb). The bill was prompted by an article advocating the appointment of large institutional investors whose stake in the litigation would provide an incentive for effective monitoring of class counsel and who would faithfully represent the interests of all class members. See Elliot J. Weiss and John S. Beckerman, Let the Money Do the Monitoring: How Institutional Investors can Reduce Agency Costs in Securities Class Actions, 104 Yale L J 2053 (1995). But see Jill E. Fisch, Class Action Reform: Lessons from Securities Litigation, 39 Ariz L Rev 533 (1997) (challenging assumption that large institutional investors have interests identical to small stakeholders, and positing that there are significant dangers of collusive behavior between large investors and defendants).
195. S 353, 106th Cong, 1st Sess (February 3, 1999).
196. For example, there were recently allegations in New York that the state comptroller was using the lead plaintiff position of state pension funds to secure campaign contributions from lawyers seeking appointment as class counsel in securities fraud litigation. See Donors to McCall Campaign Got Pension Fund Contracts, NY Times (Oct 3, 1998) at A1.
197. In one well publicized case in Texas involving the use of computational changes to allegedly overcharge purchasers of auto insurance, the Attorney General demanded that $1.5 million of the class's settlement fund be set aside for a public relations effort warning consumers of the risk of consumer fraud. There was widespread belief that this public education drive would take the form of showcasing incumbent state officials in the context of reelection campaigns. See Deborah R. Hensler, Class Action Dilemmas: Pursuing Public Goals for Private Gain (Rand, 1999) (describing factual background of Zendejo v Allstate). It must be disclosed that I served as a co-counsel for the plaintiffs in this litigation.
198. Silver and Baker at 1466 (cited in note 14).
199. See Lexecon, Inc. v Milberg, Weiss, Bershad Hynes & Lerach, 523 US 26 (1998) (holding that a district court conducting pretrial proceedings in a civil action transferred from the Judicial Panel on Multidistrict Litigation could not assign the case to itself for trial, but not defining the full range of power of the MDL court).
200. This is reflected in the suggestion in the Manual for Complex Litigation, Third that the form of compensation for class counsel (e.g., what percentage of any common fund generated will be set aside for attorneys' fees) should be determined at the outset under the full conditions of uncertainty when the decisions of how much to invest in the case have to be made, rather than ex post, when the outcome is already at hand. See id § 24.21 (cited in note 31). For an academic defense of this approach, see Charles Silver, Unloading the Lodestar: Toward a New Fee Award Procedure, 70 Tex L Rev 865, 902 (1992).
201. This reflects a long-standing argument made by Professor Coffee that the basic approach to class action governance should be to structure incentives for class counsel so as to make the process as self-policing as possible. As stated by Coffee, If one wishes to economize on the judicial time that is today invested in monitoring class and derivative litigation, the highest priority should be given to those reforms that restrict collusion and are essentially self- policing. The percentage of the recovery award formula is such a "deregulatory" reform because it relies on incentives rather than costly monitoring. Ultimately, this "deregulatory" approach is the only alternative to converting the courts into the equivalent of public utility commissions that oversee the plaintiff's attorney and elaborately fix the attorney's "fair" return. John C. Coffee, Jr., Understanding the Plaintiff's Attorney: The Implications of Economie Theory for Private Enforcement of the Law Through Class and Derivative Actions, 86 Colum L Rev 669, 724-25 (1986).
202. For a defense of Amchem as a check on improper delegation of power to private parties, see Monaghan at 1165 n 73 (cited in note 114).
203. John C. Coffee, Jr., Conflicts, Consent, and Allocation after Amchem Products - Or, Why Attorneys Still Need Consent to Give Away Their Clients' Money, 84 Va L Rev 1541, 1555-56 (1998).
204. Id at 1543.
205. Silver and Baker at 1509 (cited in note 14) (concluding that "attorneys who manage class actions are trustees or guardians as much as they are agents or delegates").
206. Professor Cramton points to the presence of side agreements as creating an impermissible conflict of interest between the representation of absent class members and the representation of those individuals with a direct contractual relation to plaintiffs, counsel. Roger Cramton, Individualized Justice, Mass Torts, and "Settlement Class Actions:" An Introduction, 80 Cornell L Rev 811, 832 (1995).
207. Here I would take issue with Professor Coffee, who argues that in intraclass divisions of proceeds, "plaintiffs' attorneys have little economic incentive to make a 'fair' allocation, whereas they have a strong economic incentive to maximize the size of the settlement fund." Coffee, Conflicts, Consent, and Allocation at 1542 (cited in note 149). So long as attorneys are equally beholden to all members of the class, and will receive no change in remuneration depending on the intraclass allocation, the attorneys have no incentive not to make a fair allocation Under these conditions, all sorts of administrative shortcuts that save money for the class as a whole are permitted under current law, as they must be if consumer and other low value class actions are to exist. In typical cases, "[d]istinctions are usually drawn among plaintiffs mainly on the basis of significant objective factors that are easy to apply, while smaller differences and subjective factors are ignored." Silver and Baker at 1481 (cited in note 14).
208. See, e.g., Committee on Corporate laws, Section of Business Law, American Bar Assoc., Corporate Director's Guidebook 12-13 (1994) (noting that "The duty of loyalty requires directors to exercise their powers in the interests of corporation and not in the directors' own interest or in the interest of another person"); Lewis D. Solomon and Alan R. Palmiter, Corporations: Examples and Explanations 315 (Little Brown, 2d ed 1994) (noting that "Directors, officers and controlling shareholders breach their duty of loyalty when they divert assets, opportunities or information of the corporation for personal gain").
209. See, e.g., Committee on Corporate laws, Section of Business Law, American Bar Assoc., Corporate Director's Guidebook 12-13 (1994) (noting that "The duty of loyalty requires directors to exercise their powers in the interests of corporation and not in the directors' own interest or in the interest of another person"); Lewis D. Solomon and Alan R. Palmiter, Corporations: Examples and Explanations 315 (Little Brown, 2d ed 1994) (noting that "Directors, officers and controlling shareholders breach their duty of loyalty when they divert assets, opportunities or information of the corporation for personal gain").
210. For a discussion of potential ethical difficulties for class counsel representing parties with divergent interests, see Carrie Menkel-Meadow, Ethics and the Settlement of Mass Torts: When the Rules Meet the Road, 80 Cornell L Rev 1159, 1214 (1995); Cramton at 833 (cited in note 152) ("The facts in a number of recent settlement class actions make it clear that the two sets of deals are interconnected. If the terms of the two deals are different, the court should presume that the representation of the class was inadequate"); Nancy Morawetz, Bargaining, Class Representation and Fairness, 54 Ohio St L J 1 (1993).
211. For a discussion of potential ethical difficulties for class counsel representing parties with divergent interests, see Carrie Menkel-Meadow, Ethics and the Settlement of Mass Torts: When the Rules Meet the Road, 80 Cornell L Rev 1159, 1214 (1995); Cramton at 833 (cited in note 152) ("The facts in a number of recent settlement class actions make it clear that the two sets of deals are interconnected. If the terms of the two deals are different, the court should presume that the representation of the class was inadequate"); Nancy Morawetz, Bargaining, Class Representation and Fairness, 54 Ohio St L J 1 (1993).
212. For a discussion of potential ethical difficulties for class counsel representing parties with divergent interests, see Carrie Menkel-Meadow, Ethics and the Settlement of Mass Torts: When the Rules Meet the Road, 80 Cornell L Rev 1159, 1214 (1995); Cramton at 833 (cited in note 152) ("The facts in a number of recent settlement class actions make it clear that the two sets of deals are interconnected. If the terms of the two deals are different, the court should presume that the representation of the class was inadequate"); Nancy Morawetz, Bargaining, Class Representation and Fairness, 54 Ohio St L J 1 (1993).
213. See, generally, Issacharoff and Ortiz, Governing Through Intermediaries (cited in note 135).
214. The strongest version of this argument is found in the initial remand to the Fifth Circuit of Ortiz in light of Amchem. In dissent, Judge Jerry Smith argued that Amchem required that "any real conflict, even if minor when compared to the interest held in common, will render the representation inadequate." In re Asbestos Litig., 134 F3d 668, 677 (5th Cir 1998) (Smith, J, dissenting), rev'd sub nom. Ortiz v Fibreboard, 119 S Ct 2295 (1999).
215. The strongest version of this argument is found in the initial remand to the Fifth Circuit of Ortiz in light of Amchem. In dissent, Judge Jerry Smith argued that Amchem required that "any real conflict, even if minor when compared to the interest held in common, will render the representation inadequate." In re Asbestos Litig., 134 F3d 668, 677 (5th Cir 1998) (Smith, J, dissenting), rev'd sub nom. Ortiz v Fibreboard, 119 S Ct 2295 (1999).
216. This is described at lenght in Koniak (cited in note 16). Among the sources of internal preferences for the present injured over the future claimants were the contigent arrangements that plaintiffs' counsel had with their inventory of clients and the prospect of continuing legal fees in presenting the currently injured before the dispute resolution mechanisms set up as part of the settlement process.
217. Amchem, 521 US at 623-25.
218. This would correspond to a requirement of "horizontal equity" among class members by which a class action must "treat similarly situated people similarly," particularly in the settlement context. Menkel-Meadow at 1211 (cited in note 155). See also Kornhauser at 1578 (cited in note 118) (applying symmetry principle from bankruptcy to class action settlements).
219. 119 S Ct at 2319 (emphasis added). The Court fairly directly acknowledges the shift from Amchem's focus on the named representatives. Id at n 31.
220. 119 S Ct at 2319.
221. Id at 2317-19.
222. Id at 2319.
223. Id.
224. See Coffee, The Regulation of Entrepreneurial Litigation at 919 (cited in note 56) (dubbing this feature of class actions as "damage averaging").
225. See Silver and Baker at 1479-81 (cited in note 14) (giving examples from consumer class actions of using damage estimates to provide some recovery to all class members).
226. Id at 1482.
227. For cases expressing great skepticism over coupon settlements, see In re GM Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F3d 768 (3d Cir 1995), cert denied 516 US 824 (1995); Bloyed v General Motors Corp., 881 SW2d 422 (Tx Ct App 1994), affirmed 916 SW2d 949 (Tex S Ct 1996) (also rejecting coupon settlement in GM truck litigation, but suggesting that the case had little value). But see Geoffrey P. Miller and Lori S. Singer, Nonpecuniary Class Action Settlements, 60 Law & Contemp Probs 97 (1997) (arguing that coupon settlements may be efficient in certain cases).
228. For cases expressing great skepticism over coupon settlements, see In re GM Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F3d 768 (3d Cir 1995), cert denied 516 US 824 (1995); Bloyed v General Motors Corp., 881 SW2d 422 (Tx Ct App 1994), affirmed 916 SW2d 949 (Tex S Ct 1996) (also rejecting coupon settlement in GM truck litigation, but suggesting that the case had little value). But see Geoffrey P. Miller and Lori S. Singer, Nonpecuniary Class Action Settlements, 60 Law & Contemp Probs 97 (1997) (arguing that coupon settlements may be efficient in certain cases).
229. For cases expressing great skepticism over coupon settlements, see In re GM Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F3d 768 (3d Cir 1995), cert denied 516 US 824 (1995); Bloyed v General Motors Corp., 881 SW2d 422 (Tx Ct App 1994), affirmed 916 SW2d 949 (Tex S Ct 1996) (also rejecting coupon settlement in GM truck litigation, but suggesting that the case had little value). But see Geoffrey P. Miller and Lori S. Singer, Nonpecuniary Class Action Settlements, 60 Law & Contemp Probs 97 (1997) (arguing that coupon settlements may be efficient in certain cases).
230. For cases expressing great skepticism over coupon settlements, see In re GM Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F3d 768 (3d Cir 1995), cert denied 516 US 824 (1995); Bloyed v General Motors Corp., 881 SW2d 422 (Tx Ct App 1994), affirmed 916 SW2d 949 (Tex S Ct 1996) (also rejecting coupon settlement in GM truck litigation, but suggesting that the case had little value). But see Geoffrey P. Miller and Lori S. Singer, Nonpecuniary Class Action Settlements, 60 Law & Contemp Probs 97 (1997) (arguing that coupon settlements may be efficient in certain cases).
231. For cases expressing great skepticism over coupon settlements, see In re GM Corp. Pick-Up Truck Fuel Tank Products Liability Litigation, 55 F3d 768 (3d Cir 1995), cert denied 516 US 824 (1995); Bloyed v General Motors Corp., 881 SW2d 422 (Tx Ct App 1994), affirmed 916 SW2d 949 (Tex S Ct 1996) (also rejecting coupon settlement in GM truck litigation, but suggesting that the case had little value). But see Geoffrey P. Miller and Lori S. Singer, Nonpecuniary Class Action Settlements, 60 Law & Contemp Probs 97 (1997) (arguing that coupon settlements may be efficient in certain cases).
232. This point was persuasively made by Judge Posner in In re Continental Illinois Securities Litigation, 962 F2d 566, 568 (7th Cir 1992) in the context of setting an appropriate fee for class counsel: "it is not the function of judges in fee litigation to determine the equivalent of the medieval just price. It is to determine what the lawyer would receive if he were selling his services in the market rather than being paid by court order." He reiterated the point in In the Matter of Continental Illinois Securities Litigation, 985 F2d 867, 868 (7th Cir 1993), stating that "in accordance with the principle that a judge in setting a fee award should be trying to give the lawyers what they would have got in a voluntary transaction in the market for legal services."
233. This point was persuasively made by Judge Posner in In re Continental Illinois Securities Litigation, 962 F2d 566, 568 (7th Cir 1992) in the context of setting an appropriate fee for class counsel: "it is not the function of judges in fee litigation to determine the equivalent of the medieval just price. It is to determine what the lawyer would receive if he were selling his services in the market rather than being paid by court order." He reiterated the point in In the Matter of Continental Illinois Securities Litigation, 985 F2d 867, 868 (7th Cir 1993), stating that "in accordance with the principle that a judge in setting a fee award should be trying to give the lawyers what they would have got in a voluntary transaction in the market for legal services."
234. This is the traditional basis for compensating attorneys when settlements or judgments create common funds and there is no contract between the lawyer and the beneficiaries. See, e.g., Trustees v Greenough, 105 US 527 (1881), and Central Railroad & Baring Co. of Georgia v Pettus, 113 US 116, 124 (1885). The Supreme Court reaffirmed the percentage recovery method of compensating attorneys who generate a common fund in Blum v Stenson, 465 US 886, 900 n 16 (1984) (observing that "under the 'common fund doctrine' . . . a reasonable fee is based on a percentage of the fund bestowed on the class"). See also Camden I Condominium Ass'n v Dunkle, 946 F2d 768, 771 (11th Cir 1991) ("From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund . . . were computed as a percentage of the fund."). The percentage approach is also routinely employed in common fund cases in the vast majority of federal circuits. See, e.g., In re Thirteen Appeals Arising Out of the San Juan DuPont Plaza Hotel Fire Litigation, 56 F3d 295, e 513, 516 (6th Cir 1993); Florin v Nations Bank of Georgia, 34 F3d 560, 565-66 (7th Cir 1994); Johnston v Comenca Mort. Corp., 83 F3d 241, 246 (8th Cir 1996); In re Washington Public Power Supply Sytem Securities Litigation, 19 F3d 1291, 1296 (9th Cir 1994); Gootlieb v Barry, 43 F3d 474, 483 (10th Cir 1994); Camden I, 946 F2d at 771-74; Swedish Hospital Corp. v Shalala, 1 F3d 1261, 1267-71 (DC Cir 1993).
235. This is the traditional basis for compensating attorneys when settlements or judgments create common funds and there is no contract between the lawyer and the beneficiaries. See, e.g., Trustees v Greenough, 105 US 527 (1881), and Central Railroad & Baring Co. of Georgia v Pettus, 113 US 116, 124 (1885). The Supreme Court reaffirmed the percentage recovery method of compensating attorneys who generate a common fund in Blum v Stenson, 465 US 886, 900 n 16 (1984) (observing that "under the 'common fund doctrine' . . . a reasonable fee is based on a percentage of the fund bestowed on the class"). See also Camden I Condominium Ass'n v Dunkle, 946 F2d 768, 771 (11th Cir 1991) ("From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund . . . were computed as a percentage of the fund."). The percentage approach is also routinely employed in common fund cases in the vast majority of federal circuits. See, e.g., In re Thirteen Appeals Arising Out of the San Juan DuPont Plaza Hotel Fire Litigation, 56 F3d 295, e 513, 516 (6th Cir 1993); Florin v Nations Bank of Georgia, 34 F3d 560, 565-66 (7th Cir 1994); Johnston v Comenca Mort. Corp., 83 F3d 241, 246 (8th Cir 1996); In re Washington Public Power Supply Sytem Securities Litigation, 19 F3d 1291, 1296 (9th Cir 1994); Gootlieb v Barry, 43 F3d 474, 483 (10th Cir 1994); Camden I, 946 F2d at 771-74; Swedish Hospital Corp. v Shalala, 1 F3d 1261, 1267-71 (DC Cir 1993).
236. This is the traditional basis for compensating attorneys when settlements or judgments create common funds and there is no contract between the lawyer and the beneficiaries. See, e.g., Trustees v Greenough, 105 US 527 (1881), and Central Railroad & Baring Co. of Georgia v Pettus, 113 US 116, 124 (1885). The Supreme Court reaffirmed the percentage recovery method of compensating attorneys who generate a common fund in Blum v Stenson, 465 US 886, 900 n 16 (1984) (observing that "under the 'common fund doctrine' . . . a reasonable fee is based on a percentage of the fund bestowed on the class"). See also Camden I Condominium Ass'n v Dunkle, 946 F2d 768, 771 (11th Cir 1991) ("From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund . . . were computed as a percentage of the fund."). The percentage approach is also routinely employed in common fund cases in the vast majority of federal circuits. See, e.g., In re Thirteen Appeals Arising Out of the San Juan DuPont Plaza Hotel Fire Litigation, 56 F3d 295, e 513, 516 (6th Cir 1993); Florin v Nations Bank of Georgia, 34 F3d 560, 565-66 (7th Cir 1994); Johnston v Comenca Mort. Corp., 83 F3d 241, 246 (8th Cir 1996); In re Washington Public Power Supply Sytem Securities Litigation, 19 F3d 1291, 1296 (9th Cir 1994); Gootlieb v Barry, 43 F3d 474, 483 (10th Cir 1994); Camden I, 946 F2d at 771-74; Swedish Hospital Corp. v Shalala, 1 F3d 1261, 1267-71 (DC Cir 1993).
237. This is the traditional basis for compensating attorneys when settlements or judgments create common funds and there is no contract between the lawyer and the beneficiaries. See, e.g., Trustees v Greenough, 105 US 527 (1881), and Central Railroad & Baring Co. of Georgia v Pettus, 113 US 116, 124 (1885). The Supreme Court reaffirmed the percentage recovery method of compensating attorneys who generate a common fund in Blum v Stenson, 465 US 886, 900 n 16 (1984) (observing that "under the 'common fund doctrine' . . . a reasonable fee is based on a percentage of the fund bestowed on the class"). See also Camden I Condominium Ass'n v Dunkle, 946 F2d 768, 771 (11th Cir 1991) ("From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund . . . were computed as a percentage of the fund."). The percentage approach is also routinely employed in common fund cases in the vast majority of federal circuits. See, e.g., In re Thirteen Appeals Arising Out of the San Juan DuPont Plaza Hotel Fire Litigation, 56 F3d 295, e 513, 516 (6th Cir 1993); Florin v Nations Bank of Georgia, 34 F3d 560, 565-66 (7th Cir 1994); Johnston v Comenca Mort. Corp., 83 F3d 241, 246 (8th Cir 1996); In re Washington Public Power Supply Sytem Securities Litigation, 19 F3d 1291, 1296 (9th Cir 1994); Gootlieb v Barry, 43 F3d 474, 483 (10th Cir 1994); Camden I, 946 F2d at 771-74; Swedish Hospital Corp. v Shalala, 1 F3d 1261, 1267-71 (DC Cir 1993).
238. This is the traditional basis for compensating attorneys when settlements or judgments create common funds and there is no contract between the lawyer and the beneficiaries. See, e.g., Trustees v Greenough, 105 US 527 (1881), and Central Railroad & Baring Co. of Georgia v Pettus, 113 US 116, 124 (1885). The Supreme Court reaffirmed the percentage recovery method of compensating attorneys who generate a common fund in Blum v Stenson, 465 US 886, 900 n 16 (1984) (observing that "under the 'common fund doctrine' . . . a reasonable fee is based on a percentage of the fund bestowed on the class"). See also Camden I Condominium Ass'n v Dunkle, 946 F2d 768, 771 (11th Cir 1991) ("From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund . . . were computed as a percentage of the fund."). The percentage approach is also routinely employed in common fund cases in the vast majority of federal circuits. See, e.g., In re Thirteen Appeals Arising Out of the San Juan DuPont Plaza Hotel Fire Litigation, 56 F3d 295, e 513, 516 (6th Cir 1993); Florin v Nations Bank of Georgia, 34 F3d 560, 565-66 (7th Cir 1994); Johnston v Comenca Mort. Corp., 83 F3d 241, 246 (8th Cir 1996); In re Washington Public Power Supply Sytem Securities Litigation, 19 F3d 1291, 1296 (9th Cir 1994); Gootlieb v Barry, 43 F3d 474, 483 (10th Cir 1994); Camden I, 946 F2d at 771-74; Swedish Hospital Corp. v Shalala, 1 F3d 1261, 1267-71 (DC Cir 1993).
239. This is the traditional basis for compensating attorneys when settlements or judgments create common funds and there is no contract between the lawyer and the beneficiaries. See, e.g., Trustees v Greenough, 105 US 527 (1881), and Central Railroad & Baring Co. of Georgia v Pettus, 113 US 116, 124 (1885). The Supreme Court reaffirmed the percentage recovery method of compensating attorneys who generate a common fund in Blum v Stenson, 465 US 886, 900 n 16 (1984) (observing that "under the 'common fund doctrine' . . . a reasonable fee is based on a percentage of the fund bestowed on the class"). See also Camden I Condominium Ass'n v Dunkle, 946 F2d 768, 771 (11th Cir 1991) ("From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund . . . were computed as a percentage of the fund."). The percentage approach is also routinely employed in common fund cases in the vast majority of federal circuits. See, e.g., In re Thirteen Appeals Arising Out of the San Juan DuPont Plaza Hotel Fire Litigation, 56 F3d 295, e 513, 516 (6th Cir 1993); Florin v Nations Bank of Georgia, 34 F3d 560, 565-66 (7th Cir 1994); Johnston v Comenca Mort. Corp., 83 F3d 241, 246 (8th Cir 1996); In re Washington Public Power Supply Sytem Securities Litigation, 19 F3d 1291, 1296 (9th Cir 1994); Gootlieb v Barry, 43 F3d 474, 483 (10th Cir 1994); Camden I, 946 F2d at 771-74; Swedish Hospital Corp. v Shalala, 1 F3d 1261, 1267-71 (DC Cir 1993).
240. This is the traditional basis for compensating attorneys when settlements or judgments create common funds and there is no contract between the lawyer and the beneficiaries. See, e.g., Trustees v Greenough, 105 US 527 (1881), and Central Railroad & Baring Co. of Georgia v Pettus, 113 US 116, 124 (1885). The Supreme Court reaffirmed the percentage recovery method of compensating attorneys who generate a common fund in Blum v Stenson, 465 US 886, 900 n 16 (1984) (observing that "under the 'common fund doctrine' . . . a reasonable fee is based on a percentage of the fund bestowed on the class"). See also Camden I Condominium Ass'n v Dunkle, 946 F2d 768, 771 (11th Cir 1991) ("From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund . . . were computed as a percentage of the fund."). The percentage approach is also routinely employed in common fund cases in the vast majority of federal circuits. See, e.g., In re Thirteen Appeals Arising Out of the San Juan DuPont Plaza Hotel Fire Litigation, 56 F3d
241. This is the traditional basis for compensating attorneys when settlements or judgments create common funds and there is no contract between the lawyer and the beneficiaries. See, e.g., Trustees v Greenough, 105 US 527 (1881), and Central Railroad & Baring Co. of Georgia v Pettus, 113 US 116, 124 (1885). The Supreme Court reaffirmed the percentage recovery method of compensating attorneys who generate a common fund in Blum v Stenson, 465 US 886, 900 n 16 (1984) (observing that "under the 'common fund doctrine' . . . a reasonable fee is based on a percentage of the fund bestowed on the class"). See also Camden I Condominium Ass'n v Dunkle, 946 F2d 768, 771 (11th Cir 1991) ("From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund . . . were computed as a percentage of the fund."). The percentage approach is also routinely employed in common fund cases in the vast majority of federal circuits. See, e.g., In re Thirteen Appeals Arising Out of the San Juan DuPont Plaza Hotel Fire Litigation, 56 F3d 295, e 513, 516 (6th Cir 1993); Florin v Nations Bank of Georgia, 34 F3d 560, 565-66 (7th Cir 1994); Johnston v Comenca Mort. Corp., 83 F3d 241, 246 (8th Cir 1996); In re Washington Public Power Supply Sytem Securities Litigation, 19 F3d 1291, 1296 (9th Cir 1994); Gootlieb v Barry, 43 F3d 474, 483 (10th Cir 1994); Camden I, 946 F2d at 771-74; Swedish Hospital Corp. v Shalala, 1 F3d 1261, 1267-71 (DC Cir 1993).
242. This is the traditional basis for compensating attorneys when settlements or judgments create common funds and there is no contract between the lawyer and the beneficiaries. See, e.g., Trustees v Greenough, 105 US 527 (1881), and Central Railroad & Baring Co. of Georgia v Pettus, 113 US 116, 124 (1885). The Supreme Court reaffirmed the percentage recovery method of compensating attorneys who generate a common fund in Blum v Stenson, 465 US 886, 900 n 16 (1984) (observing that "under the 'common fund doctrine' . . . a reasonable fee is based on a percentage of the fund bestowed on the class"). See also Camden I Condominium Ass'n v Dunkle, 946 F2d 768, 771 (11th Cir 1991) ("From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund . . . were computed as a percentage of the fund."). The percentage approach is also routinely employed in common fund cases in the vast majority of federal circuits. See, e.g., In re Thirteen Appeals Arising Out of the San Juan DuPont Plaza Hotel Fire Litigation, 56 F3d 295, e 513, 516 (6th Cir 1993); Florin v Nations Bank of Georgia, 34 F3d 560, 565-66 (7th Cir 1994); Johnston v Comenca Mort. Corp., 83 F3d 241, 246 (8th Cir 1996); In re Washington Public Power Supply Sytem Securities Litigation, 19 F3d 1291, 1296 (9th Cir 1994); Gootlieb v Barry, 43 F3d 474, 483 (10th Cir 1994); Camden I, 946 F2d at 771-74; Swedish Hospital Corp. v Shalala, 1 F3d 1261, 1267-71 (DC Cir 1993).
243. This is the traditional basis for compensating attorneys when settlements or judgments create common funds and there is no contract between the lawyer and the beneficiaries. See, e.g., Trustees v Greenough, 105 US 527 (1881), and Central Railroad & Baring Co. of Georgia v Pettus, 113 US 116, 124 (1885). The Supreme Court reaffirmed the percentage recovery method of compensating attorneys who generate a common fund in Blum v Stenson, 465 US 886, 900 n 16 (1984) (observing that "under the 'common fund doctrine' . . . a reasonable fee is based on a percentage of the fund bestowed on the class"). See also Camden I Condominium Ass'n v Dunkle, 946 F2d 768, 771 (11th Cir 1991) ("From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund . . . were computed as a percentage of the fund."). The percentage approach is also routinely employed in common fund cases in the vast majority of federal circuits. See, e.g., In re Thirteen Appeals Arising Out of the San Juan DuPont Plaza Hotel Fire Litigation, 56 F3d 295, e 513, 516 (6th Cir 1993); Florin v Nations Bank of Georgia, 34 F3d 560, 565-66 (7th Cir 1994); Johnston v Comenca Mort. Corp., 83 F3d 241, 246 (8th Cir 1996); In re Washington Public Power Supply Sytem Securities Litigation, 19 F3d 1291, 1296 (9th Cir 1994); Gootlieb v Barry, 43 F3d 474, 483 (10th Cir 1994); Camden I, 946 F2d at 771-74; Swedish Hospital Corp. v Shalala, 1 F3d 1261, 1267-71 (DC Cir 1993).
244. This is the traditional basis for compensating attorneys when settlements or judgments create common funds and there is no contract between the lawyer and the beneficiaries. See, e.g., Trustees v Greenough, 105 US 527 (1881), and Central Railroad & Baring Co. of Georgia v Pettus, 113 US 116, 124 (1885). The Supreme Court reaffirmed the percentage recovery method of compensating attorneys who generate a common fund in Blum v Stenson, 465 US 886, 900 n 16 (1984) (observing that "under the 'common fund doctrine' . . . a reasonable fee is based on a percentage of the fund bestowed on the class"). See also Camden I Condominium Ass'n v Dunkle, 946 F2d 768, 771 (11th Cir 1991) ("From the time of the Pettus decision in 1885 until 1973, fee awards granted pursuant to the common fund . . . were computed as a percentage of the fund."). The percentage approach is also routinely employed in common fund cases in the vast majority of federal circuits. See, e.g., In re Thirteen Appeals Arising Out of the San Juan DuPont Plaza Hotel Fire Litigation, 56 F3d 295, e 513, 516 (6th Cir 1993); Florin v Nations Bank of Georgia, 34 F3d 560, 565-66 (7th Cir 1994); Johnston v Comenca Mort. Corp., 83 F3d 241, 246 (8th Cir 1996); In re Washington Public Power Supply Sytem Securities Litigation, 19 F3d 1291, 1296 (9th Cir 1994); Gootlieb v Barry, 43 F3d 474, 483 (10th Cir 1994); Camden I, 946 F2d at 771-74; Swedish Hospital Corp. v Shalala, 1 F3d 1261, 1267-71 (DC Cir 1993).
245. 521 US at 619-22
246. Id at 619-20.
247. 119 S Ct at 2317-18.
248. See Coffee, Class Wars at 1366-67 (cited in note 11); Richard A. Nagareda, Turning from Tort to Administration, 94 Mich L Rev 899, 960 (1996); Kahan and Silberman, Matsushita and Beyond at 238-39 (cited in note 123) (referring to this problem as "plaintiff shopping").
249. See Coffee, Class Wars at 1366-67 (cited in note 11); Richard A. Nagareda, Turning from Tort to Administration, 94 Mich L Rev 899, 960 (1996); Kahan and Silberman, Matsushita and Beyond at 238-39 (cited in note 123) (referring to this problem as "plaintiff shopping").
250. See Coffee, Class Wars at 1354 (cited in note 11); Kahan and Silberman, Matsushita and Beyond at 235-38 (cited in note 123). I want to stress, however, that the threat need not be trial in the particular forum as structured through the proposed class action. A trial threat is not necessarily less credible because it will involve multiple actions.
251. See Coffee, Class Wars at 1354 (cited in note 11); Kahan and Silberman, Matsushita and Beyond at 235-38 (cited in note 123). I want to stress, however, that the threat need not be trial in the particular forum as structured through the proposed class action. A trial threat is not necessarily less credible because it will involve multiple actions.
252. This is discussed in Issacharoff, Class Action Conflicts at 811-13 (cited in note 11).
253. 516 US 367 (1996).
254. Id at 373-86.
255. Id at 399.
256. On this score I agree with Professors Kahan and Silberman. Although they are generally supportive of the Court's reasoning in Matsushita, see Kahan and Silberman, Matsushita and Beyond at 230 (cited in note 123), they argue for far greater deference to a settlement in state court if the federal plaintiff is present as well as a proponent of the settlement. Id at 260-61.
257. Martin also anticipates that the process of judicial review in a fairness hearing under Rule 23(e) is not a substitute for adequate representation in the underlying litigation. 490 US 755 (1989).