Review. He is also the author of the chapter in the popular guide series on 17200 claims so please welcome christopher sure about. [applause] our next panelist is the professor himself he wrote the book. He is a graduate of notre dame where he was a runnerup valedictorian. But he made up for that when he went to Harvard Law School in one of the diploma for being top student to graduate in his class. [inaudible] and he has been a lawyer and a professor including back at harvard for a while. Is currently a vanderbilt and hes the author of this book and makes get compelling case on the class action mechanism that we will hear more from him in just just a bit. And our moderator today, is judge on the ninth circuits, he is a graduate of well hes a korean immigrant to start with and came to this country and graduated from i believe cornell, and then Harvard Law School. He has classmates . Is magna cum laude and it works out several places special counsel to the judiciary committed he was recently appointed to the ninth circuit. So around of applause for dodge kenly. Michael thank you for the introductions, i think were going to have a great debate here. We have two experts on class actions, little bit of format, i will give professor Pitts Fitzpatrick the floor let him speak for 1015 minutes to make his case and then there will be ten to 15 minutes to rebut and then we will open up the floor for questions. I guess michael mentioned brian and i were classmates in law school. We in fact lived in the same dorm floor. And i can tell you that back in the data harvard if you were a rocksolid republican you are treated as if you were to write of attila the hun. Brian was actually was to the right of attila the hun. [laughter] brian was actually more of a libertarian. But verily sterling conservative credentials he clerked for justice glia works for senator jon cornyn of texas and is a stalwart of the federal society. So this is a very long way of asking him how does a member of the vast rightwing conspiracy write a book in support of class actions. [laughter] thank you for that kind introduction. [laughter] the reason i think conservatives should support class actions is because we have to ask ourselves what the alternative is. And the alternative is told to us in an amicus brief, filed by the United States chamber of commerce in 2010. In this amicus brief is really what inspired me to it write the book you have in front of you today. The case with the Supreme Court is called at t d conceptually on. I suspect many of you know about this case. The quest was our class action waivers that are embedded in arbitration agreements enforceable . In the u. S. Supreme court said yes. My old boss justice glia wrote the opinion in the court said you can ask someone to waive their right to join a class action as long as you do it in an arbitration clause. Any state laws to the contrary are preempted. It was apparent to everybody than 2010 that if you got rid of the class action waivers, the people who were injured in small amounts by corporis amounts, small frauds small pricefixing, small injuries. People with small harms way to have a very hard time Holding Accountable for those small harms not remaining people are gonna do that on their own. Everybody knew this in 2010 and the chamber of commerce filed this to calm everybody down. The u. S. Chamber said dont worry if the class action goes away there is something than the class action. Quotes federal regulators. Fag federal regulators should be policing our marketplaces. Now as judge lee mentioned, i have been a member of the vast rightwing conspiracy for very long time. I have been going to these Federalist Society members for 20 years. I have never once in any of these gatherings heard anyone say that federal regulators were a solution to any problem. And they are not a solution to this problem as well. The conservative way to police the marketplace is class action lawsuits not federal agencies. I start the book with some 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 a quote in the book where he says listen big businesses often waxed poetic about the Free Enterprise system and they are off on a plane to washington d. C. Asking for special legislation for their company. So like chris, i represented many members of the chamber of commerce when i was a lawyer in washington d. C. Im very grateful for all the companies do for our economy and for our country. But they are not the best place to find what the conservative principles suggests 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 freedman hyatt. Like terry becker, like george stickler. Like Frank Easterbrook like richard epstein. Conservative and libertarian, economists, scholars, lawyers, judges. What do they say . This is what they say. Number one. We do have to have policing of our marketplace. Not even friedrich hyde, the Austrian School of economics beliefs incomplete laws a fair market. The very least even libertarian say we need three rules in our markets. No fraud, no breach of contract, and no pricefixing. We cannot have vibrant markets if companies can breach their promises to us. If they could lie about what they are selling, and if can editors can get in cahoots with one another. At least we need those rules. So the question then is how are we going to enforce and implement those rules. I argue in the book 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 times. In this literature basically says we want to privatize everything. And therefore, why should we want to privatize enforcement of the law as well. Identified six reasons why. This literature advocates privatizing over government solutions. All six of these apply to private enforcement of the law. Number one, we would like Smaller Governments. Everything else being equal we want a Smaller Government that means lower taxes fewer bureaucrats looking around for things to do. This is consistent with private enforcement of the law. If we didnt have classaction lawyers Holding Accountable for misdeeds we have to hire thousands of more lawyers and thats more taxes and more people to do. We like selfhelp. Thats reason number two. We like to build selfreliance among our citizenry, people relying on themselves and their neighbors when things go wrong. Not waiting around for the government to save them and bail them out. 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 in Government Bureau but bureaucrats get paid the same no matter what they do. This is consistent with private enforcement. Classaction lawyers earn contingency fees. These are two horrific motivator. So we would expect and ill explain in a moment there is data to confirm this. We would expect classaction lawyers to do a better job than lawyers do. Number four, better resources. The private sector has better resources and the government does. The government is always strapped for cash, budgets are always being cut. Enforcement budgets of the least sexy thing in the budget, its 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. And again, the date is consistent with that. Reason number five, less centralization. We prefer private solutions because they are less centralized than government solutions. We do not want all their eggs in one basket. What if we drop the basket . Do you get bad results for everybody. We like to hedge your bets by having decentralized solutions to problems. That is why we like federalism. That is why 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 insured not be. Lastly, the reason we like private solutions is because private solutions are more independent than government solutions. And the in the academy we often teach about something called agency capture. Conservatives have a word for it, term four called crony capitalism. Government agencies are often captured by the people they are supposed to be policing. Campaign contributions, the revolving door personnel, this makes our Government Agencies less independent and more biased. The private sector does not have that problem. The private sector is focused on profits. Their focus on contingency fees. Thats purer than the government which is often focus 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 laws preferable to the u. S. Chambers of federal regulators. As i said, the Empirical Data supports the theory. If you compare classaction lawyers in securities fraud, classaction lawyers in antitrust, you will find that classaction lawyers are recovering more money than the government lawyers are recovering. In securities fraud its ten the one in any given year security fraud lawyers are covering ten times as many because they file more cases. But even if you look at the exact same cases when they got to the exact same people for misconducts, the private bar still collects four times as much as the sec does. The theory supports private enforcement and the data suggest private enforcement does a better job. Now of course it is true, that the private sector can go too far. The profit motives can go too far. And people can abuse the system in order to eke out more profits. This is not a reason to turn everything over to the government. Corporations can abuse the system in pursuit of profit. We dont say therefore lets have the government do everything instead of corporations. Now, we say we are going to put rules into place. To harness the profit motive so that it is directed towards the public good. We can do the exact same thing with classaction lawyers. We have a lot of power over classaction lawyers by regulating those contingency fees that they earned in their cases. Every one of those awards must be approved by a federal judge. And we can direct classaction lawyer profit 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. Its recent but rules in place to make sure the profit motive is pointed in the right direction. What i argue in the book as i think we have largely already have rules in place. We can always improve the system and i have a few reforms that i advocate for in the book. But the most part i think our system is working. And i consider a few of the main arguments the chamber makes against class actions and i bring dated to bear on the arguments. And i conclude the chamber is basing its advocacy against class actions more and miss then reality. Let me give you a few examples. Number when the chamber says we have so many meritless class actions being filed all the time. And i always like to. To the subway footlong case. Some of the subway footlongs were only 11 inches. And some classaction lawyers sued alleging Consumer Fraud. This was a frivolous lawsuit. But is this subway footlong a representative class action or as an outlier . And one chapter of the book i try to do a deep dive into the data and i conclude no matter how you slice it, subway footlong is an aberration, it is 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. At the United StatesSupreme Court decided this is the golden age of motions to dismiss. If you cannot dismiss the subway footlong case after their. [inaudible] that is on you that is not on our classaction system. I also take a look at the chambers own lists of the ten worst class action ten worst cases filed every year in america. They have a ten most frivolous cases list. I looked at five years of their list, there tend classaction cases on there. There subway footlong, a couple of cases against starbucks because theres too much ice in the ice coffee or too much from when the latte. There are three frivolous cases on the list the other seven class actions were not even frivolous. There is a case against mastercard because they ran a promotion that said if you use your mastercard were going to donate a percentage of your purchases to charity. They didnt tell people the amount of money they would give to charity was capped at a certain level. And they hit that. In mid third month of the year end they thought they were this was a debatable case on misleading consumers. So most of the cases on the chambers list fond of that category that are at least debatable. And what to say in this book is that in five years if the United States chamber of commerce could only find three classaction cases that are clearly meritless, we do not have a problem with meritless cases in her system. But i am 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. If youre not happy theres 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 it now but some dont. We can make it automatic. I am even willing to give defendants an appeal in a classaction case when their motion to dismiss is denied. Just to make extra sure that cases not meritless. So i am willing to tweak the system a little bit but i dont think we have a meritless cases problem. What about attorneys fees . This is another big argument the chamber makes. The only people getting money in classaction is the lawyers. Classaction gets nothing. You can find one or two or three cases again were class members get nothing in the lawyers get everything. These cases exist, but i submit to you these are outliers. Extreme outliers in my empirical work as a professor, i have added up every single dollar the defendants pay out in class actions. And i have compared it to every single dollar, judges award lawyers and fees. And you know what, the percentage of what defendants payout is awarded in fees. 15 . 15 . Its with the lawyers are getting. Its not everything. Its far from everything its far from even a normal individual case contingency fee. We do not have a problem with lawyers making too much. We actually argue in the book if we want to be good law conservatives we are probably playing classaction lawyers too little. Theyre all kinds kinds of ways of the capital their incentive and no one once those to be capped. We dont have a problem with fees. It is true not many class members recover from Class Action Settlements in a lot of cases. In consumer cases the claims rates are low. The ftc just came out with a very well researched study where they showed the median claims rate and a consumer class action is 9 . That means 91 of consumers are not getting any compensation from classaction. That doesnt mean soleimani theyre all going to the lawyers. We split the money up among the 9 that file claims. Every good left of her money to charity. But it is true in a lot of cases that the classaction is not regular compensation, i admit that. But 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 that are prohibited by law from distributing the money to the victims. That has to go into the u. S. Treasury. On the occasions where the law permits the government to distribute money to victims, what he think the government does her they hired the same people to classaction lawyers do to distribute their settlements. On governments claim is 9 two. The government is no better compensation thats first thing to know. Number two, the case of the lot classaction is not dependent upon classaction. Even when not everybody is getting their money back the class action serves as an important function. Deterrence. If Companies Know they are going to 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 economics theory. We have been teaching for 50 years. Its another reason why the class action is valuable. And actually theres some very good empirical studies that show when classaction goes up corporate misconduct goes down. So i am willing to rest a case on deterrence alone, but in a lot of cases we also have to at least have the side benefit of compensation. So i think when you look at the data, when you look at the theory, the conservative way to please our marketplaces is not enteral regulators. My view on this was really the conservative view for most of the 20th century. We can talk in the q a about why things change, but until Ronald Reagans time, the conservative view was private enforcement is better than the government. I will give you one example. In 1978s, was a bill introduced into congress that wouldve abolished consumer class actions. This is the chambers dream bill today. In 1978 a bill was introduced to abolish 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 what i say to you today as we should not be taking advice from ted kennedy and jimmy carter. Thank you very much. [applause] very thoughtprovoking your response. Will i did not write a book on this, but ive been doing it for about 20 years. And i certainly applaud professor fitzpatricks contrary in thinking his creative thinking on this subject, but i r