Transcripts For CSPAN2 Brian Fitzpatrick The Conservative Case For Class Actions 20240713

Want to book this week and every weekend here on cspan2. I am very delighted to welcome you to our event today but is on the conservative case for class actions, a book written by professor fitzpatrick that galvanize this debate. We got three outstanding speakers, panelists, i should say. Our first is the head of the class action practice, he has litigated and defended countless class actions including over 20 dismissals of class action cases. You may have a sense for his position on match. He is a graduate of georgetown, undergraduate and university of Virginia Law School which he was on the law review and he is also the author of a chapter in the popular guided series on [inaudible] so please welcome christopher. [applause] our next panelist is the professor himself who wrote the book, he is a graduate of notre dame where he is a runner up valedictorian but he did offer that when he went to Harvard Law School in one the diploma for being the top student to graduate in his class. He is thats a lot easier. [laughter] he has been a lawyer and a professor, including back at harvard for a while but currently at vanderbilt and author of this book, it makes a compelling case against the class action mechanism. Our moderator today is a judge on the ninth circuit. He is a graduate, a korean immigrant and came to this country and graduated from, i believe, cornell and Harvard Law School. So you are classmates. Magna cum laude and worked at associate white House Counsel for special counsel to the Judiciary Committee of the senate recently appointed to the ninth circuit so a round of applause for the judge. [applause] michael, thank you for the introductions with high think we will have a great debate here but we have two experts on class actions. Just a little bit of formats, if i will give professor fitzpatrick the floor and he will speak ten, 15 minutes to make his case and then we will get another 15 minutes to rebut and after that we will open the floor for questions here. As michael mentioned, brian and i were classmates in law school and we lived in the same dorm floor and i can tell you that back in the day at harvard if you were a republican you are treated as if you were to the right of a telephone. Brian in law school was to the right of attila the hun [laughter] i think brian is more libertarian but very sterling, conservative credentials but he clerked for justice glia and clerked for senator john cornyn of texas and is a stalwart of the Federalist Society. This is a long way of axing him how does a member of the vast rightwing conspiracy write a book in supply support of class action. [laughter] thank you for that kind introduction, judge lee. Well, the reason i think conservatives should support class actions is because we have to ask ourselves what the alternative is. The alternative was told to us in an amicus brief filed by the United States chamber of commerce in which he tendered the amicus brief really is what inspired me to write the book that you have in front of you today. The case the Supreme Court called at t [inaudible] i suspect many of you know about this case. The question was our class action waivers that are embedded in arbitration agreements enforceable. The u. S. Supreme court said yes. My old boss, justice scalia, wrote the opinion and the court said you can ask someone to waive the right to join a classaction so long as you do it in an arbitration clause in any state law to the contrary are preempted. It was apparent to everybody in 2010 that if you got rid of the class action which you enforce these class actions waivers than people who had been injured, small amounts, by corporations, small fraud, small breach of contract, small pricefixing injuries, people with small arms would have a very hard time Holding Companies accountable for those harms. If you have to go it on your own not many people are going to do it. Everyone knew this in 2010 and the chamber of commerce filed an amicus brief to calm everyone down. The u. S. Chamber said dont worry if the class action goes away there is Something Better in the class action. Quote, federal regulators. Federal regulators should be policing our marketplaces. Now, as judge lee mentioned ive been a member of the vast rightwing conspiracy for a very long time. Ive been going to these Federalist Society members for meetings for 20 years. Ive never never once at any of these gatherings say everyone federal regulars were a solution to any problem. They are not a solution to this problem as well. The conservative way to police the marketplace is class action lawsuit, not federal agencies. I start the book with quotations from Milton Freedman who reminds us that for all of the virtues of the United States chamber of commerce they are often not very conservative. He has a wonderful passage that i quote in the book where he says listen, big business often waxed poetic about the Free Enterprise system and theyre off on a plane to washington dc asking for special legislation for their company. So, like chris ike represented many members of the chamber of commerce when i was a lawyer in washington dc and im very grateful for all the company do for our economy and for our country but they are not the best place to find what the conservative principles suggest we should do to police the marketplace. What is the best place to find what conservative principles say . Well, my book is built upon people like Milton Freedman, like Friedrich Hayek and like gary becker and george stickler, frank easterbrook, richard epstein, conservative, libertarian economists, scholars lawyers, judges. What do they say . This is what they say. Number one, we do have to have some policing of our marketplace. Not even friedrich hiatt, Austrian School of economics believed in complete laws a fair markets. At the very least even the libertarians say we need three rules in our market. No fraud, no breach of contract and no pricefixing. We cannot have a vibrant market if companies can reach their promises to us and if they can lie about what theyre selling and if they can get in cahoots with one another we need those rules and the question is that how are we going to enforce an opponent those rules . What i argue in the book is the conservative way to do it is through the private enforcement of the law. I go back to the literature on privatization that was very popular during Ronald Reagan and margaret thatchers time and this literature basically says we want to privatize everything. Therefore why should we want to privatize enforcement of the law as well. I identify six reasons why this literature abdicates privatizing, private solutions over government solutions. All six of these reasons apply to private enforcement of law. Number one, we like smaller government. Every thing else being equal we want a small government means lower taxes and fewer government bureaucrats looking around for things to do. This is consistent with private enforcement of the law. If we did not have classaction lawyers Holding Companies accountable for misdeeds we have to hire thousands of more government lawyers to pick up the slack. Thats more taxes and more people looking for things to do. We like selfhelp. Thats reason number two. We like to build Self Reliance among our citizenry, people rely on themselves and their neighbors when things go wrong, not waiting around for the government to save them and bail them out. It this again is consistent with private enforcement of the law. Reason number three, better incentives. We like to privatize because private sector participants are motivated by profit and we think that galvanizes them to do a better job than government bureaucrats to get paid the same no matter what they do. This is consistent with private enforcement. Classaction lawyers earn contingency fees. These are terrific motivator and so we would expect and i will expand and moment there is a day to confirm this. We would expect classaction lawyers to do a better job in forcing lot the government lawyers do. Number four, better resources. The private sector is better resources than the government does with the government is always strapped for cash, budgets are being cut and enforcement budgets are the least sexy thing in the budget and there is the first thing to go. The private sector can find financing for any profitable venture and therefore we would expect the private sector to be able to bring much better resources to bear in enforcing the law. Again, the data is consistent with that. Reason number five, less centralization. We prefer private solutions because they are less centralized in government solutions. We dont want all eggs in one basket. What if we drop the basket, do you get a bad result for everyone but we like to hedge our bets by having decentralized solutions to problems and that is why we like dualism and its white we should like different classaction lawyers all over the country filing lawsuits before different judges instead of one federal agency in washington deciding what the law should and should not be. Lastly the reason we like private solutions is because the private solutions are more independent than government solutions. In the academy we often teach about something called agency capture, conservatives have a word for it, term boards, crony capitalism. Government agencies are often captured by the people they are supposed to be policing. Campaign contributions, its a revolving door of personnel and this makes our Government Agencies less independent and more biased. The private sector doesnt have that problem for the private sector is focused on profits and focused on contingencies and in my view thats purer than the government which is often focused too much on who gave who money. All six of the reasons we normally like to privatize leads to the conclusion that private enforcement of the law is preferable to the u. S. Chambers federal regulators. As i said, the Empirical Data supports the theory. If you compare classaction lawyers and securities fraud and classaction lawyers and antitrust you find the classaction lawyers are recovering more money than the government lawyers are recovering. Insecurities brought it is tenone in any given year, security fraud lawyers recover ten times as much as the sec does. A lot of that is because the securities fraud lawyers followed more cases but if you look at the exact same cases when they go to the exact same people for the misconduct the private bar is still collects four times as much as the sec does. The theory supports private enforcement of the data suggests the private enforcers are doing a better job. Now, of course it is true that the private sector can go too far. The profit motives can go too far. People can abuse the system in order to eke out more profits. This is not a reason to turn everything over to the governments. Corporations can abuse the system in pursuit of profit. We dont say therefore lets have the government do everything instead of corporations. No, we say we will put rules into place to harness the profit motives so it is directed towards the public good. We can do the exact same thing classaction lawyers but we have a lot of power over classaction lawyers by regulating those contingency fees that they earned in their cases. Every one of those fee awards must be approved by a federal judge. We can direct classaction lawyer profits motives toward the public good by ensuring that we only award fees when the cases are good and the lawyers get a good recovery from the case. And so, i dont think the fact that the profit motive can sometimes lead people to go too far is reason to turn things to the government. Is reason to put rules in place to make sure the profit motive is appointed in the right direction. What i argue in the book is i think we largely already have rules in place. We can always improve the system and i have a few reforms i advocate for in the book but in the most part, i think our system is working. I consider a few of the main arguments of the chamber it makes against classaction and i bring data to bear on the arguments and i can conclude the chamber is basing its advocacy against class actions more on myths and reality but let me give you a few examples. Number one, the chamber says we got so many meritless classaction cases being filed all the time. I always like to point to this subway footlong case but you probably read about it in the paper. Some of the subway footlongs were only 11 inches. In some classaction lawyers sued alleging Consumer Fraud. This was a frivolous lawsuit but is this subway footlong a representative classaction or is it a outlier . In one chapter of the book i tried to do a deep dive into the data and i conclude no matter how you slice it subway what long is an aberration and its not a typical case. The truth of the matter is this, its never been easier in the history of america to dismiss a meritless case in court. After the United States Supreme Court decided trombley and iqbal this is the golden age of motions to dismiss. If you cannot dismiss the subway footlong case after trombley and iqbal that is on you. It is not on our classaction system. I also take a look at the chambers own list of the ten worst class actions, ten worst cases filed every year in america. They have the ten most frivolous cases left they put out every year and i looked at five years of their list and there were ten classaction cases on there and there was subway footlong, couple of cases against starbucks, too much ice in the ice coffee or too much foam in the latte and there were three phyllis cases on the chambers list. The other seven class actions on these lists were not even frivolous. There was a case against mastercard because they ran a promotion that said if you use your mastercard we will donate a percentage of your purchases to charity but they did not tell people the amount of money they would give to charity was capped at a certain level and they hit that point at month three in the year and there were nine more months and they were running the promotion. Use your mastercard and work into beating to charity. It wasnt true. This is at least a debatable case of misleading consumers so most of the cases on the chambers own list fall into that category where is at least debatable. When i say in the book is this if in five years the United States chamber of commerce can only find three classaction cases that are clearly meritless we do not have a problem with meritless cases in our system. But, im willing to meet the chamber halfway and so one of the things i proposed in the book is we can tamp down even further on meritless cases but if you are not happy with trombley and iqbal there are other things we can do. We can put an automatic stay of discovery in place when a motion to dismiss is pending. Most judges do this now but some dont and we can make it automatic. Im even willing to give defendants an interlock jew tutorial appeal in a class action case where the most is dismissed and and i just make extra sure that the case is not meritless. Im willing to tweak the system a little bit but i can only cleave a meritless case problem. What about attorneys fees . This is another big argument a chamber at makes. The only people getting any money in class actions are lawyers. The class members get nothing. Listen, you can find one or two or three cases again where class members get nothing in the lawyers gets everything. These cases exist but i submit to you these are outliers, extreme outliers and in my empirical work as a professor i have added up every single dollar the defendants payout in class actions and i compared it to every single dollar judges award lawyers in fees and you know what the percentage of what defendants payout . You know what is awarded in fees . 15 , 15 is what the lawyers are getting paid this is not everything but this is far from everything and its far from even a normal individual case contingency fee. We dont have a problem with lawyers making too much and i argue in the book if we want to be good law and economics conservatives we are probably paying to action lawyers to little bit weve always that we cap their incentives in ways that in the market no client would want their lawyers incentives to be caps. We dont have a problem with fees and it is true that not many class members recover from classaction settlements in a lot of cases. In consumer cases the claims rates are low and the ftc just came out with a very well researched study where they show the median claims rate and a consumer classaction is 9 . Thats 91 of consumers are not getting any compensation from class actions. That does not mean the money is going to all the lawyers but we split the money up among the 9 that filed claims or we get left over to charity but it is true in a lot of cases the class action is not good at compensation and i admit that. Two things about that. Number one, remember the alternative here folks is the government. Is the government going to be better at Getting Compensation to people when they go after wrongdoers. To begin with most of the time the government goes after wrongdoers they are prohibited by law from disturbing the money to victims but has to go into the u. S. Treasury. On the occasions where the law permits the government to disturb you to money to victims what you think the government does . They hire the same people that classaction lawyers hire to distribution their settlements in the government claim rate is 9 two. The government is no better compensation as the first thing to note. Number two, the case of the class action is not dependent upon compensation. Even when not everybody is getting their money back the class action still serves an important function. Its deterrence. Companies know they will have to pay when they do something wrong they are less likely to do bad things to begin with. This is a conservative law and economic theory that weve been teaching for 50 years. Its another reason why the class actions valuable. There are very good imperial coal studies that show when class actions go up corporate misconduct goes down. Im willing to rest the case of class action on deterrence alone but in a lot of cases we also at least have the side benefit of compensation. I think when you look at the data when you look at the theory the conservative way to lease our market places is not federal regulators and my view on this was really the conservative view for most of the 20th century. We can talk in a q a if you want to about why things change but until Ronald Reagan time the conservative view was private enforcement is better than the government and i will give you one example on that. In 1978 there was a bill introduced into congress that would have abolished consumer class actions. This is the chambers dream bill today. In 1928 a bill was introduced to abolished consumer class actions. This bill was introduced by ted kennedy. At the behest of jimmy carter because they were going to create a federal agency to do the Consumer Fraud policing instead. What i say in the book and when i say to you today is we should not be taking advice from ted kennedy and jimmy carter. And he very much. [laughter] [applause] very thoughtprovoking. Your response. Okay. Well, i did not write a book on this but ive been doing it about 20 years and i certainly applaud professor fitzpatrick contrary in thinking and is great at thinking on this subject but suffice it to say i respectfully disagree. Again, i do that from a conservative perspective. My perspective is one of actually spending the bulk of my career defending these types of actions, litigating them in the trenches and it is something im proud to do. I work for these companies and i fundamentally disagree that the aim of these companies is to cheat consumers and take advantage of consumers, certainly we can all find highprofile examples where that has occurred in professor fitzpatrick cites a few highprofile examples in his book. But by and large the companies that i am privileged to defend in my firm is privileged to defend value their relationship with the consumer and value it much more than the plaintiffs action i can assure you of that. From my perspective one of the greatest threats we face in the civil litigation today is the threat of the class action. I think its been taken from its historical intended purposes and it has been taken to such an extreme that i dont think anyone really intended and again, from a conservative perspective i reject the nanny state not reject the notion that consumers need the government whether in a form of a law or federal regulation or federal agency or in the form of a statute that then used in private litigation. This business in this country is considerably overregulated. We have one of the most hostile business comments in the country in this particular state and i was speaking with folks before this Program Began in i dont know how a company survives in this particular comment but we have a wage and hour laws in the state which make it impossible to comply. If you comply with one statute you are violating another regulation. Then you have the risk of a federal government coming in and plaintiff lawyer using federal statutes to say that a violation on the less. I think the classaction is used as a procedural mechanism to take advantage of this in the consumer context and in the employment context and the antitrust and these are when im describing to you is real. Its not something that is theoretical but something that happens on a daily basis. I guess i would respond to professor fitzpatrick thesis with four principal critiques and let me outline them. First, i think his theory presents a false dichotomy. You will not hear me advocate that we should supplant the class action with greater regular regulation but i do not write the amicus brief that he referenced and my firm was not involved in that amicus brief. I dont think the choice is that we face are between class actions as they exist today or even this modify and reform versus government enforcement. There is a third way and i think its a critical important tool in the use of private enforcement and that is industry selfregulation. That can take many different forms. We are all familiar with the Better Business bureau and have a division called the National Advertising division where members can petition if someone crosses the line and if they are advertising a product in a way that the competing business crosses that business line the industry works together and in that particular scenario the resolution of those disputes may often lead to violent class lawsuits but that is a situation where the business regulates itself. Im not suggesting that we replace class actions with this but its an underutilized tool. There is also competitor litigation and many federal statutes that are used if not exclusively almost exclusively by competitors, the federal false advertising law is used most often following those nad proceedings that i reference. The robinson act which is a corollary to the federal antitrust laws is often used by Small Business who are soothing suing under businesses in ways that they view as anticompetitive. We are all familiar with the Patent Infringement suits and brief of contracts and some of the largest trials that we seen in recent years have not been class actions and then between competitors, the apple qualcomm case the result earlier this year is one of the ways latest examples. I view these private lawsuits where the incentives are ethically aligned and companies will not go overboard with let me give you an example of a company that i believe may have gone a little overboard. A few years ago Pom Wonderful instituted proceedings and instituted a number of false advertising laws where it sued its competitors and argued that their pomegranate juice wasnt pure pomegranate juice and it was flavored but they were advertising upon the ground when Pom Wonderful believed they were the only ones that were manufacturing pure pomegranate juice they instituted all these lawsuits and had quite a bit of success and then the industry got together and started going after palm wonderful with actions and nad proceedings because these comedies felt that pom was crossing a line in the way that it advertises products. And so this is a private way and a free and fair market place for businesses to regulate themselves and for businesses without distributing the windfalls from those results to the wrong group, namely classaction lawyers. As a child of the cold war i believe in this concept that we all studied which is mutually assured destruction but it worked in the nuclear age and i think it could work here as well. I think the problem that we have in his country is over litigation. Theres too much litigation into it litigation over over it we might disagree where we draw that frivolous line and there were too many instances were folks are taking advantage of very broad laws and regulations and they are bringing class actions based on that. I will discuss a few that i have read about or i had the privilege of defending. My second critique is what i described as the law of unintended consequences. One of the most fascinating things that i read and i learned in professor fitzpatrick burke and i would incur all of you is the history of the classaction and news to me that build to introduce a policy and consumer class actions was introduced by ted kennedy. I did not know that. Certainly i dont want to take outside of this debate. I think the world has changed quite a bit since 1978. You dont have any lawsuit in state or federal court. What does a look like today as opposed to 1978. I would argue we were overregulated and i can 70. Today we are even more of a regularly. Thats the fundamental problem is youre seeing the Business Committee react to these days is the fact the class action is being used in all of these different scenarios to enforce privately statutes that were never really designed or intended to be enforced in a classaction. By all objective measures class actions, they are more significant class action and more in total number filed today than there were in 1978. A law youll doesnt annual study of class actions as you read this on an annual basis this idea which are noted even if yeartoyear the aggregate filing numbers may dip, the ebb and flow quite a bit, what you find it these are being concentrated more and more in what they call the highest stakes class actions. For those of you that work in law firms like mine youd be surprised to see the way they define the most significant that the competent litigation, is a little different than what our clients with the fighter. Theyre not talking the multibilliondollar lawsuit. Theyre talking lawsuits tens of millions of dollars. Thats what youre funny. If you look at the history that professor fitzpatrick lays out its a lot different today that it was back then. I agree as outlined in his book that the core laws that conservatives believe in, breach of contract, the loss of fraud and the antitrust laws are sensible regulations. Any free marketplace needs the baseline. So a company or an individual that looks to start a business wants to ensure that the marketplace is free and the marketplace is fair. Professor fitzpatrick uses an example in his book of a company that is struggling because there are seeds that are sold in the south American Country and there can be no assurance that the seeds are going to work. The market is flooded with fake seeds and is no recourse to the legal system. That is not our problem. Our problem is the other one where companies can even begin a business because they have to comply with all of these federal and state regulations to even start a business, and once they do and achieve that success they are immediately hit with a class action. I remember a few years ago meeting with the client downtown, and he was about to present to the board. It was their first class action and he was furious. He had no idea, why is my company being hit . Were trying to make it against some of the biggest players in this industry. I mentioned to him i was in your lobby waiting to meet you. There was this industry magazine and i saw your big smiley face on the front of it. The reason youre hit with a class action is it because you did anything wrong. Its because youre successful. Heres a few changed a little bit in ways i wasnt really appreciating. He was proud all of a sudden had a class action. I told him no, no. [laughing] this is not something to be proud of. Please dont misunderstand me. But that anecdote tells you a lot about the way the plaintiffs bar use of these, not going after truly legitimate cases but going after the pocket. You talk to these lawyers over a beer at the end of the case and thats what youre looking to do. I also reject the notion that the Business Community had this organized lobby and is a public, has lobbyists and are trying to Lobby Congress for favorable laws. Of course thats happening but in my experience in my world which is largely consumer class actions i find the plaintiffs bar is far more organized and far more strategic about how they lobby our governments, particularly the California Assembly to get lost to change. Look at for example, the california privacy act thats been passed modeled after the eu privacy regulation, for which advocates freely acknowledge theres not a set of guidelines, not a set of regulations to explain companies, heres what you need to do, heres how you comply. Heres a safe harbor, if you do this you will not. They tell you way into enforce it a few times, wait until we have some scalps on the wall, the way they put it and then youll know how to comply with the law. That is no way to regulate in any modern economy but thats whats happening in this country. I wouldnt model any of our laws after the eu but yet thats exactly what happened. Whats interesting about this or asia look at its history, who lobbied for it, who passed it . Is the plaintiffs class action bar and you go through the details of the statute, theres no requirement usual actual injury. Theres an automatic entitlement to Attorney Fees if you prevail, and again what goal is that advocating or dancing a bit of consumers . Its not. Its the interests of the private class action bar. My third critique is several times in his book, professor fitzpatrick outlines how the at t case that upheld arbitration clauses and class action waivers in these agreements are ultimately going to lead to the demise. At one point in the book he even suggests that state Court Class Actions are all but irrelevant these days and that is just again from a practitioners standpoint that is just not consistent. We can all site around this table im sure we can spend the whole session discussing frivolous class actions that we view either write about or we had to defend. Im here to tell the red bull does not actually give you wings. Wings. Im also here to tell you that froot loops does not contain actual fruit. Nor does crunch berries. Subway footlong sandwiches, example that professor fitzpatrick uses may not measure exactly 12 inches when the bread is actually baked. Those are obviously once we all laugh about, we joke about, and i agree they are relatively rare but a few observations. Those are not always dismissed on the pleadings and unlike professor fitzpatrick i dont blame you if you bring a motion to dismiss and they are not. Because i can tell you most of the cases where i defended its basically a jump ball as to whether or not the case is going to be dismissed on the pleadings. Notwithstanding twombly, and i would note most judges when you talk to him im interested in judge lees perspective on this, they have whats called twombly fatigue. They see them not only frivolous cases, they see them in every case. It is difficult to get a case dismissed on the pleadings before any discovery and part of that it isnt the skill of the advocate in making the argument in my humble opinion, my experience. A lot of judges are predisposed to let these cases go into discovery. Most federal judges did not have judge lees background when he worked at a from and they saw the enormous cost and settlement pressures that getting a case into discovery places on the defendant. Subway actually reach the Appellate Courts because it settled the case and i didnt represent subway, i wasnt involved in the case but i can only assume it wasnt the lack of skill of the advocate or rather their assessment of the risk of that case going into discovery is why they settled that particular case. There are the obvious frivolous ones but there are the ones that on the surface you might look and say this might actually have some merit. One example i would get he is our firm was defending a major Motor Vehicle manufacturer in the case involving the breaks in these hybrid vehicles. One day after the client announced the recall of those vehicles to do what you would expect in a responsible Corporate Citizen to do to address the issue wasnt and safety issue but nevertheless, involved vehicles breaks, they wanted fix it come 11 day later after it announced they got hit with a class action. The class action alleges your recall is for this generation of vehicles and would like whenever claimant for those but it must be that the earlier generation vehicle breaks are defective as well. It was a completely different model, a completely different brake system in the vehicles. This case went on for three years. There were multiple millions of dollars a discovery that this defendant had to face. It had to turn over its source code to the plaintiffs lawyers to allow them to probe through and try to find something to support their claims. They couldnt do it. It was only when our firm was brought in to take over for the appeal we got into the ninth circuit and the ninth circuit laughed the plaintiffs out of course. They said this theory is ridiculous, absolutely no matter. The court should have thrown out on the pleadings, it didnt. But he can those on after my client had invest millions of dollars. Its a rare client that will actually do that, that has the resources and commitment to see those particular cases through. So again my third critique is i do not think class actions were on the road to demise. I think theres more incentives for plaintiffs to bring these cases today than there were many, many years ago. I also think as a noted state Court Class Actions are just as vibrant today as they were after the passage of the class action fairness act in 2005. For those of you not familiar this was a law Congress Passed one of the most signature port reform changes at least at the federal level in my lifetime and the time ive been practicing, and the goal was to take these National Class actions and move them into federal court. Why . Because companies are finding themselves stuck in some hometown jurisdictions where the plaintiffs lawyer they were really friendly. Ive been due hearings in texarkana and im sure many of you have as well where the judge comes out of chambers with his arm around the plaintiffs lawyer and they are best friends. The father of the plaintiffs lawyer went to law school with the judge, and then they get on the record and the judge defers ruling to dismiss until all the discoveries produced, just exorbitant settlement pressures placed on the defendant. The goal was where you have multiple or very, very large multistate class actions, crossing state lines, those belong in federal court. Defense were unable to bring those into federal court because under traditional rules of diversity jurisdiction where u. S. Citizen from different states you need complete diversity and you also couldnt aggravate the claims. Claimant, each class member had a claim for five dollars and they were 10 million class members, thats a 50 million claim any stretch of imagination but under the traditional rules you couldnt aggregate. The class action fairness act change that. Everyone predicted and even judges in l. A. Predicted that we are just like when a class action to do more. Ask any practicing loads of it if thats the case. What youve seen as more concentration, plaintiff slurping strategic, they will bring a statewide class action in california, one in texas, new york, eleanor and of the more populous states and try it and see how it goes and then expect the settlement as best they can. Wage and hour lawsuit are almost exclusively in state court, in my experience. Not exclusively but almost exclusively. I think that point is one we shouldnt just gloss over. Class actions are abusive and rethink their continuing to rise. My fourth and final critique, im not going to defend the chambers advocacy of the more federal regulation but a want to give you made a slightly different perspective that a think many businesses have when it comes to this issue. And that its its very, very difficult these days for companies to achieve global peace. It used to be if you settle a major National Class action you get the release of all class members and you could count on the fact that youre putting this issue behind you. Thats the motivation for the recent a lot of clients pay really, really big dollars to settle something, just get it behind them. But again to my first point what i dont think this is a dichotomy between federal enforcement and private class action enforcement, im finding its both. Our clients are being sued in class actions and then the state regulators are coming after them. They are also being pursued by the federal or state regulators and then you have copycat class actions. There really is no easy mechanism under our constitution or our laws for a company to basically by global peace unless the brings all of those people to the table. What kind of incentive does that create . You get basically an auction between the two trying to get more than the last. Im finding local city attorneys the spatial in california and even state ags are partnering now with private plaintiffs class action lawyers and bringing these bounty lawsuits. In california leased under the unfair competition law, private parties cannot get Civil Penalties. What a civil penalty is, if you established, for example, used the crunch berries case, if a joint suit in a class action get the three dollars back, under civil penalty theory if its established that the violation of the false advertising laws you can get up to 2500 per violation and there are enhancements if you are an elderly person and you purchased and you were deceived or you are part of some other protected category. And senate each three dollars box its you has become a a 20 box, enormous settlement pressure. The law todays only Public Officials may pursue the Civil Penalties for false advertising, and that money must be directed to the enforcement of the unfair competition of false advertising laws. What has that done . The primary, as private lawyers were always marketing ourselves to nuclides trying to pitch new cases, what is the plaintiffs are doing . What theyre doing is they are making pitches to Public Officials and saying mr. City attorney how would you like to be attorney general and the government and then president . Hears of this statute and i can bring it on a contingency fee basis, and i can actually enforce it whether or not theres a class action or Class Action Settlement and and i wio ahead and bring this lawsuit and you get to keep every single dollar that we recover at 2500 a 2500 a pop. And you get to build this little Enforcement Unit in your office and bring all this money into the state. Now, thats a little bit beyond the problem were talking about today but thats the perspective of the Business Community today and some of the risks they are facing on top of these class actions. It makes it very difficult for them to achieve global peace which again i think is part of the conservative case for why you would want class actions, right enforcement and get some global peace. So whats the most basic level i would say i cant i applaud professor fitzpatricks three. I think its created. I loved the country thinking that went behind it theory. Personal i dont view this as liberal versus conservative issue. And may be a debate between capitalism and socialism. Im not of course calling professor fitzpatrick a socialist. I would never do that, please understand me. I dont think this business of a conservative or liberal issue. I think this is a smart government. Its maybe considered probusiness perspective but i think again from the perspective of which i operate i think companies are trying to do the best they can to deliver great products to consumers and to survive in a hypercompetitive environment and in and overregulated economy. And as you noted i dont think conservatives are for ending all class actions. Thats certainly not my position. When you look at the history of this country, certainly during the civil rights era, class actions played a critically Important Role in bringing justice to people who would ordinarily not have been entitled to it. But i think if you look at where we are today versus when we were 50 years ago, i dont think anyone would say that this is the right way to set up an economy, this is the right way to align incentives amongst lawyers and amongst the Business Community and consumers. So again i would say some of the most obvious poster children for the tort Reform Movement happen to be class actions, and theres a reason for that. Thank you. [applause] thank you for the very thoughtful counterpoint. I want to open it to the floor and ask if anyone has questions for either professor fitzpatrick or mr. Chorba. Thank you for real wonderful presentation. [inaudible] as an empirical matter defined that movement is a leading to a more federal regulation, or is it do you fear that it will be earmarked . My second question is, is there kind of a rhythm to her sometimes the private attorney general system works better than the public policy, and vice versa . And for that reason you need to have both and you need to be working on perfecting both because of certain times one will fill in gaps for the other one. I can take a stab at answering that. I will take your second question first. Absolutely i think we need both, that my book is not for private enforcement only. There are times when the government is going to be the best enforcer. Sometimes theres not a lot of profit to be made in private enforcement. In those cases if we want any enforcement we are going after light on the government. One of the interesting things i found the date on the fcc versus the private bar, the sec brings lots and lots of cases against very small fraudsters because they know the private bar will not go after those people. Theres an interesting synergy that its built between the government and the private bar. I think you do need both. Chris notes sometimes you cannot vote in the same case, and highly gone. I think can be piling on. I absolutely think that companies should not pay more than the harm they have caused. If they pay out fully in case one, they havent offset in case to the max i agree with it we need to make sure we are not over deterring the companies. On the first question its interesting empirical question about whether regulars have become more activist and class actions have declined. I dont think ive seen anyone tried to gather data like that. I will note that after concepcion the cfpb can kind ok it into high gear for a while because they were worried that has actions going away would make it hard for consumers to get a fair shake. Since weve had a in administration i dont know how active cfpb is a more but for allawi think there was some notion that because the cost actions going away that cfpb needs to pick up the slack. I cassette i dont know if that thought has continued. I guess from my perspective, again a a book i think is a rey nice job walking through the potential impact of concepcion and where it will affect. From my perspective, litigating these cases its led to figure think more litigation. What you found is the plaintiffs lawyers are not just going to go away. You have a whole industry in this state in particular but other states as well that made their livelihood and made a lot of money on consumer class actions. Concepcion didnt just wipe those away. First of all you need to have a contractual relationship with your customer. Food and beverage is a huge ferry of litigation in the state. Despite my best attempts my clients to want to put an arbitration clause on the froot loops. Yet theyre being sued for breach of working which the last time i checked was a contract claim, nevertheless. But which are finding is, number one its only a class of cases with us his express contractual relationship with the customer. You need to have the contractor of the waiver to have the arbitration. Even in this case is what weve been litigating for the last 10 years is the plaintiffs lawyers force attack contract formation. They argued i didnt understand the contract, i didnt read the contract of the arbitration clause was at the end instead of the beginning, it was a black text and wasnt capitalized instead of in red text in all caps, all those types of arguments. You also see an online commerce, the apps and that sort of thing, the whole click wrap argument and those sorts of things. You also saw and this is a led to concepcion in the first place was the reason why the Supreme Court reversed the california Supreme Court in that case in the ninth circuit was because the states started using contractual defense which is the unconscionability doctrine. Essentially if your contract is overly onesided or in the formation process you didnt disclose certain things, if the state law doctrine you can invalidate the contract because it is procedures are substantively unconscionable. Ironically after concepcion you and resurrection of that doctrine and immediately thereafter the court started invalidating the clauses as in the employment context and the consumer context as unconscionable. Those cases made her way to the Supreme Court who said no, we really meant what we said in concepcion, please listen to us. They had to take five or six cases since concepcion but my point is you are finding more ways in which the plaintiffs bar can basic attack those. Where you both have concepcion having as most forces in the consumer context and employment context and at least to date in the ninth circuit due to have a single case that i think delivers the Silver Bullet based on a class action waiver and arbitration clause. That is because in an application will find a private attorney general act which the Supreme Court has held you cannot arbitrate pick a basic allows any bring action as a private attorney general, get their attorneys fees and it is not subject to arbitration. The second is in california even more ridiculous in my own personal view is theres an argument that if you as a consumer are seeking whats described as public injunctive relief, again in the Food Labeling context if you want a company part of your action is to get the company to change the label in the way you allege or continues to longer deceptive, thats considered public injunctive early. Thats not it every single consumer class action ive ever seen. That cannot be arbitrated. What you have now is even in cases where you have a rocksolid arbitration agreement is enforceable. If its an employment context the paga claim is sheared off. States in court court and the public injunctive relief claim in a in a consumer case is shaved off and stays in court. Courts are mixed as to whether they are those gophers so they have arbitration go first. I dont think concepcion is have the impact a lot of people have predicted. I want to add one thing to that and i think that when the paga dispute actually goes to the nice state Supreme Court they are going to rule that it cannot withstand arbitration and able order arbitration in the paga case if the u. S. Supreme court ever builds on it. But i do want to emphasize one source of agreement that chris and i have added you talk a lot about in the book and that is we do have way too many laws on our companies, way too many legal constraints on our companies. We are way beyond friedrich contract fraud and pricefixing. What i say in the book is i agree with our over regulating. All i advocate for it is this. I say rather than class action waivers which are a very blunt instrument, you can insulate yourself from liability, for wrongdoing in any kind of case with clacks action waiver. Rather than allow this blunt instrument class action waiver. Why do we focus on the laws we dont like and said you cant use class actions in the situations but allow the class action and for the loss would you like, fraud, breach of contract and pricefixing. I advocate in the book we should breach this principle that the rules of civil procedure is based on transsubstantive ready here we dont have to have the exact same rules of procedure in every case country to what we learned all these years. Hasnt been handed down by god, that principle. We can change. I say lets use rule 23 for the laws we think should be in place and should be enforced robustly. I agree with way too many laws. The edges not not get rid of all class actions. Class action waiver thursday. Lets limit where they can use the class action to the laws we like. Any other questions . I have one question. In my experience most of the majority of class actions brought with an individual plaintiff is not the plaintiff that walked across the transit of Lawyers Office saying i did wrong to the tune of three dollars, 30, these represent me and others. There generated by lawyers and does that w at all in terms of the class action mechanism . It doesnt trouble me. I actually asked class action lawyers with the get the cases, where they get the representative plaintiffs from and ive been surprised that often people actually him him him him him find someone to stand in as representative, i do have a problem with that because we need sophisticated intelligent well resourced people to sometimes uncover wrongdoing. I dont action lawyer for being the type of policeman. Ive talked class action lawyers who have done years and years of analysis with professors to try to figure out whether theres pricefixing going on in industry. Its very hard for any particular consumer to know that theres pricefixing going on but if review investigation thats expensive as a place to be encouraging people with the resources with the sophistication to find the wrongdoing. The class action mechanism it seems to me is a specialty of the United States. It didnt originate either i teach in europe and another concept is quite foreign there. Its starting to write. Before designing him with it resemble the transinvolve copycat cases in other countries. Its that much rightly described as liberal for our country in todays politics to get more conservative, certainly in europe politically. In those countries the perspective that they take on class actions, again a modern class action which arose after the 1960 amendments to rule 23 and we know today as the class action is called the opt out class action. You are presumptively in with a class is certified, and if you dont have to affirmatively in him. Him him him him i can you please him so yet more mass actions, challenges and benefits to defendants, Basis Community picky of fewer, smaller class actions in which is people dont opt in. They wait and see other key skills and its a lot more difficult to get global peace. At your question i i dont think either system is perfect but i think if i were designing something i would bar from our print in the uk who i think i had a pretty important election today, i would borrow him have system him him him and brian had a good idea in his book about a week and him and and i agree wh most of the reforms that advocates by the way. There needs to be some skin in the game for the lawyers bring these cases here right now understand the contingency fee is part of that because theyre taking the risk of investing but it would be invested if they were recovering a handsome sum on their investments, at least the successful ones. For example, with respect to discovery requests brian talks about this, how would plaintiff lawyer cant just ask for you to bob work is a trial or at the firm and i learned under his wing and he said these discovery requests are the grabbing my client by the ankle and shaking him and took everything up any false out of his pocket. Its very much what weeks. In civil discovery. If there was a loser pays system or some more robust Cost Shifting if i were designing a class action system, i dont know how i would feel about the opt in versus opt out. I see benefits to our system but i would definitely have the ability of our clients to get some of our fees back and we have to incur to defend against these cases. Any other questions . I have a question for mr. Chorba. And youre experienced the class action of defense lawyer what percentage of the cases deeply are frivolous . And of those hammett of them were dismissed by the court . Ill stipulate it has no bearing on your ability as a lawyer. Thank you. I appreciate that. Thats an important caveat. Every lawyer would say whenever meritless, lets put it that way. 100 were meritless. But i would say frivolous is, has, its illegally charged true. It means there is no good faith or objective basis bring a lawsuit and candidly in the consumer context i would say its probably at least half of them. Im not saying frivolous in the sense it has to rise to the level of the froot loops or just something completely silly and red bull gives you wings, but theres nothing there and there was no good faith basis for bringing it. There was a news report. There was one customer came to them and complaint about something and then launched a class action. Of those 50 , i defended many hundred lawsuits, class action lawsuits, lets say thats about 250. I would see giving it dismissed on the pleadings when that dismissal is upheld, its less than a quarter. Its extremely rare to get the case knocked out that early. Its extremely rare that you get the case knocked out that early and then he goes that to your court and the Court Affirms it. And again im not speaking anything out of turn here. Its just most courts especially in the circuit they view it as very high bar to get a case dismissed on the pleadings. They want folks to have their day in court and the operating presumption with most judges before whom ive appeared is that if a lawyer puts his her name of this document and under rule 11 certifies it is brought in good faith and i have no basis before me today to question that, and if youre in the pleadings, theres been a discovery, there usually isnt a basis to get that into the record, they believe lawyers bring lawsuits in good faith. From that perspective even if its superficially frivolous, the subway sandwiches case. Lets take that as an example. Im not saying i wouldnt have moved to dismiss in that case. I probably would have but im unsympathetic with the defense lawyer who informed the client that they face an uphill battle. Subway, you are advertising or sandwiches as footlong sandwiches, not large submarine sandwiches. Your advertising the best football. You go to the store and this is a 12inch sub, sixinch sub when you look at the menu. Every state in this country has a law that prohibits false or deceptive advertising even if thats not outright false its at a minimum deceptive. You expect and his pictures displaying the subs already baked. They dont show a lump of dell. Theres no disclaimer. Im not defending that lawsuit but would we characterize that as ive just framed as objectively frivolous . What is the law or decision that subway could cite to the federal judge to say they have not stated a claim, they cant get to discovery, you must dismiss it. We all listen to this and say its absurd, ridiculous. Everybody knows. And thats what the judge did with the starbucks case. Everyone knows when you buy a latte at starbucks and dd did with ice ice is going to consume some of the volume. Its not going to be exactly 20 ounces or 22 ounces. The judge looked at that and applied commonsense. I applaud that. But those instances are extremely rare in my experience and its unfortunate. I think we need more of that anything that would alleviate a lot of the problems we have discussed today. I do want to say one thing that also i think emphasizes an area of agreements that chris and i have an one thing frankly ive learned is ive been on this book tour because i am a professor and i dont get to practice in our courts as often as chris does, and when thing that i have learned is that lawyers are not very careful about what they are willing to a ledge. And i have a very good friend who is a very liberal Federal District court judge, and he told me recently that every year he asks his law clerks, what is the thing that surprises you most about your clerkship . And he said every year its almost unanimous, the same answer he gets, how willing lawyers are to lie. And so i do think we may have a problem people not doing any investigation before the file complaints as their supposed you under rule 11, and just taking a shot and see what might happen. I think that is a problem and we probably do need to do something to strengthen rule 11 sanctions and the rule 11 procedures so that people cant just make up a fact. Because it is true if youre making up facts it is even harder under twombly to get this case is dismissed. I know judges hate to order book 11 sanctions, and theres been efforts in the past to try to change that and they been unsuccessful. I dont know, chris, if giving ideas what could be done to make rule 11 sanctions more of a deterrent to lawyers but i have been persuaded both by things youve said and thinks ive heard elsewhere on this tour that we may need to do something with rule 11 as well. One last question. Professor fitzpatrick, id like to hear chriss [inaudible] its interesting you asked me about that because i explicitly say in the book in my last chapter where i advocate for reforms, its transection be one of the lawsuit we do not allow class actions to enforce. Tcpa is a Telephone Consumer Protection Act that says if you get a robocall or a roba text you are entitled to 51,500 every time. When you combine those bounties which have no relation to how much were actually harmed from the robocalls with the class action, you wind up threatening companies with massive over deterrence. There are some tcpa cases where the defendant is facing, im not making this up, 1 trillion of liability. Thats ridiculous and it gives you obviously incredible settlement leverage if youre the plaintiff lawyers and you can bankrupt the company with a robocall case. I say we should not use the class action device when it would result in over returns. Statutory damages cases, treble damages cases, punitive damages cases are not appropriate in my view for the class action device. Device. I will say this, however, when i got around to other Federalist Society audiences and i have mentioned the tcpa as one of the things that we shouldnt use the class action for because it can result in over deterrence, the reaction i usually get is professor fitzpatrick, its not resulting in over deterrence. Im still getting robocalls and robo text all the time. We need to double down, triple down, more class actions. [laughing] so, you know, thats with the theory and the rally maybe dont meet. I suppose its fitting we ended our point of agreement because obviously i agree. [laughing] and professor fitzpatrick does walk through that in his book and it shows what even those of us who practice can find a lot of areas of agreement with his thesis. Look, the purpose of the statutory is because congress its very, very hard to quantify you are eating dinner and are disrupted. Its a very dear hard damages case to make so we offset the statutory damages penalties in an amount to encourage individuals to bring these lawsuits come small claims court, wherever you want to do. I think its an abuse of the congressional intent certainly abuse of the statute to lay the class action procedure over that particular law to lead to these trillion dollar i have defended many of these lawsuits and the client often asks was a potential exposure here next i find out how many allegedly spam texts the extent. By the way, 90 of the time its in response to your request to get a text or your opt in. It adds up very, very, very quickly. Or to thank professor fitzpatrick and mr. Chorba for a very provoking discussion. I think everyone has learned quite a bit today. Thank you. Thank you. [applause] [inaudible conversations] weeknights this month were featuring booktv programs showcasing whats available every weekend here on cspan2. Tonight our focus is the founding fathers. 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