The overlooked utility of the defendant class action

Francis X. Shen

Research output: Contribution to journalReview article

1 Scopus citations

Abstract

When and how can defendant class actions serve the goal of increasing social welfare? Existing literature on class actions has overlooked the utility of defendant class actions, and thus, has failed to answer this question. This Article presents a general theory of defendant class actions, and argues that three interrelated principles should guide the use and evaluation of defendant class actions. (1) Forward looking deterrence principle. The forward looking deterrence principle holds that the utility of defendant class actions should be measured by its contribution to future deterrence of harms by the proposed defendant class. (2) Dynamic effects principle. The dynamic effects principle holds that evaluation of a defendant class action should include all secondary effects such as feedbacks, price adjustments, new incentive structures, and changing group dynamics. (3) Aggregate analysis principle. Taking the dynamic effects principle one step further, the aggregate analysis principle holds that the evaluation of defendant class actions should ultimately rest on an aggregate, society-wide cost-benefit analysis. In developing its general theory, and synthesizing these three principles, this Article utilizes a newly constructed database of 177 cases considering defendant class action certification. This Article also spends significant time analyzing deficiencies in Hamdani and Klement's 2005 proposal for "the class defense." Three potential applications for defendant classes are considered at various points in the paper: (1) illegal file sharing on the Internet, (2) corporate fraud and illegal dealing, and (3) copyright infringement. In each context, this Article argues that existing literature and jurisprudence generally take a backwards looking approach, do not properly account for dynamic effects, and too often ignore aggregate analyses.

Original languageEnglish (US)
Pages (from-to)73-181
Number of pages109
JournalDenver University Law Review
Volume88
Issue number1
StatePublished - Dec 1 2010

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