Series 17 to 200 claims please welcome christopher. [applause] our next panelist is the professor himself who wrote the book he is a graduate of notre dame where hes a runnerup valedictorian. But he made up for that when he went to Harvard Law School and won the fay diploma for being top student to graduate in his class. a its a lot easier. Hes been a lawyer and professor including back at harvard for a while. Currently at vanderbilt and the author of this book makes a compelling case as to the classaction mechanism and will hear more from him in a bit. Our moderator today is judge on the night circuit, he is a graduate, a korean immigrant to start with and came to this country and graduated from i believe cornell and also Harvard Law School. Round of applause for judge kenneth lee. [applause] thank you for the introductions. I think we will have a great debate here. We have two experts on class actions. Little bit of format, i will give professor fitzpatrick the floor and let him speak for about 10 to 15 minutes to make his case and mr. abwill get another 10 to 15 minutes to rebut and after that we will open the floor for questions. Brian and i were classmates in law school we in fact live in the same dorm floor and i can tell you back in the day at harvard if you are a rockefeller republican, you were treated as if you were to the right of attila the hun. [laughter] brian more libertarian but he is very sterling conservative credentials. And stall work of the federal society. This is a very long way of asking him how does a member of the right wing conspiracy write a book in support of class actions . [laughter] thank you for that kind introduction. The reason i think conservatives 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 2010. This amicus brief really is what inspired me to write the book that you have in front of you today. The case with the Supreme Court is called at t the conception. I suspect many of you know about this case the question was,. The u. S. Supreme court said yes. My old boss Justice Scalia wrote the opinion and the court says you can ask someone to waive their right doing it classaction. If you enforce these classaction waivers then people had been injured small amounts by corporations small frogs, small breach of contract, small pricefixing injuries, people with small harms would have a very hard time Holding Companies accountable for those harms because 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 everybody down. The u. S. Chamber said dont worry if the classaction goes away. There is Something Better than the classaction federal regulators. Federal regulators should be policing our marketplaces. As judge lee mentioned, ive been a member of the vast right wing conspiracy for very long time. Ive been going to these federal Society Members a meetings, for 20 years. Ive never wanted any of these gatherings heard anyone say that federal regulators were a solution to any problem. The conservative way to police the marketplace is classaction lawsuits, not federal agencies. I start the book with some quotations from Milton Freeman 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 businesses often wax poetic about the Free Enterprise system and they are off on a plane to washington dc asking for special legislation for their company. Let chris i represented many members of the chamber of commerce when i was a lawyer at Sibley Austin washington dc. Im very grateful for all the companies do for our economy and our country but they are not the best place to find what conservative principles suggests we should do to police the marketplace. My book is built upon people like Milton Freeman. Like friedrich hayek, let gary becker, like george stigler, like frank easterbrook. Like richard epstein. Conservative and libertarian economists, scholars, lawyers, judges, and what did they say . This is what they say. We have to have some policing of our marketplace. Not even friedrich hayek, the Austrian School of economics believed in complete laissezfaire markets. In the very least, even libertarians say we need three rules in our markets no fraud, no breach of contract, and no price fix. We cannot have vibrant markets if companies can breach their promises to us if they can lie about what they are selling and if competitors can get in cahoots with one another. At least we need those rules. The question then is how are we going to enforce and abutment 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 times in 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 advocates privatizing, private solutions over government solutions. All six of these reasons apply to private enforcement of law. We lack Smaller Government. Everything else being equal we want Smaller Government means lower taxes and means fewer government bureaucrats looking around for things to do. This is consistent with private enforcement of the law. If we didnt 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 selfreliance 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. This is consistent with private enforcement of the law. Reason number three, better incentives, would like to privatize because private sector purchase of goods are motivated by profit and we think that galvanizes them to do a better job in government bureaucrats to get paid the same no matter what they do. This is consistent with private enforcement, classaction lawyers and contingency fees. These are terrific motivators so we would expect and i will explain in a moment, there is data to confirm this. We would expect classaction lawyers to do better job of enforcing the law the government lawyers do. Number four, better resources, the private sector is better resources than the government does. The government is always strapped for cash, budgets are always being cut enforcement budgets are the least sexy thing in the budget the first thing to go, the private sector can find financing for any profitable venture and we would expect the private sector to be able to bring much better resources to bear in enforcing the law. In the data is consistent with that. Reason number five, less centralization. We prefer private solutions because they are less centralized than government solutions. We dont want all our eggs in one basket. What if we dropped the basket and we get a bad result for everybody . We like to hedge our bets by decentralized solutions to problems thats why we like federalism and its 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 and should not be. Lastly, the reason we like private solutions because private solutions are more independent than government solutions. In the academy we often teach about something called agency capture, conservatives have the word for it, a term for it, crony capitalism. Government agencies are often captured by the people they are supposed to be policing. Campaign contributions, the revolving door of personnel, this makes our Government Agencies less independent and more biased. The private sector doesnt have that problem. The private sectors focused on profits and contingency fees in my view 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 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 classaction lawyers and antitrust you find the classaction lawyers are recovering more money then the government lawyers are recovering. Securities fraud is tender one in every given year securities fraud lawyers recover 10 times as much as the sec does. A lot of that is because securities fraud lawyers file more cases but even if you look at the exact same cases to go out to the exact same people for misconduct, the private bars still collects four times as much as the sec does. The theory supports private enforcement and the data suggests private enforcers are doing a better job. 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, no. We say we will put rules into place to harness the profit motive so its directed toward 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 they earn in their cases. Every of those awards must be approved by federal judge and we can direct classaction lawyer profit motives for the public good by ensuring that we only award fees when the cases are good and the lawyers get good recovery from the case. 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 reason to put rules in place to make sure the profit motive is planned in the right direction. What i argue in the book as i think we largely already have rules in place. We can always improve the system and i have a few reforms i advocate in the book but for the most part i think our system is working. I consider a few of the main arguments the chamber makes against class actions and i bring data to bear on the arguments and i conclude the chamber is basing its advocacy against class actions more on myth than realities. Let me give you a few examples. The chamber says we got so many meritless classaction cases being filed all the time. Some of the subway footlongs were only 11 inches and some classaction lawyer sued alleging Consumer Fraud. This was a frivolous lawsuit. But is this subway footlong a representative classaction or is it an outlier . In 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, 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 marine corps decided twombly and iqbal, this is the golden age of motions to dismiss if you cannot dismiss the subway footlong case after twombly and hit ball, thats on you. It is not on our classaction system. I also take a look at the chambers on lists of the 10 worst classaction atrash the 10 worst cases filed every year in america. 10 most for list cases, there were 10 classaction cases, subway footlong, some cases against starbucks because there was too much ice in the ice coffee or to eat too much foam in the latte. There were three cases on the chambers list the other seven classaction gondolas were not even frivolous. There was a case against mastercard because they ran a promotion that said if you use your mastercard we are going to donate a percentage of your purchases to charity. They didnt tell people the amount of money they would give to charity was kept at a certain level and they hit that point at month three in the year, there were nine more months they were running the promotion, use your mastercard we are contributing to charity. It wasnt true. This is at least a debatable case of misleading consumers. Most of the cases on the chambers on list fall into that category where its at least debatable. What 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 so one of the things i propose in the book is we can tamp down even further on meritless cases if youre not happy with twombly and iqbal theres other things we can do. We can put an automatic stay of discovery in place when emotion dismisses is pending. Most judges do this now but some dont. We can make it automatic. Im even willing to give defendants an interlocutory appeal. Just to make extra sure that the case is not meritless. Im willing to tweak the system a little bit but i really dont think we have a meritless case problem. What about attorneys fees . This is another big argument the chamber makes. The only people getting any money and classaction lawyers. The class members get nothing. You can find one or two or three cases were class members get nothing and 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 ive compared it to every single dollar judges award lawyers and fees and you know what the percentage of what defendants pay out is awarded in fees . 15 percent. This is not everything, this is far from everything, its far from even a normal individual case contingency fee. We dont have a problem with lawyers making too much, actually argue in the book if we want to be good law and economics conservatives we are probably paying classaction lawyers too little. Weve all kinds of ways we kept their incentives. We dont have a problem with fees. 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, the ftc just came out with a very well researched study where they show the median claims rate in consumer classaction nine percent that means 91 percent of consumers are not Getting Compensation from classaction. That doesnt mean the monies all going to the lawyers, we split the money up among the nine percent that file claims or we give leftover money to charity. But it is true in a lot of cases the classaction is not very good at compensation. I admit that. But two things about that, remember the alternative here, folks, its 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 victims. It has to go into the u. S. Treasury. On the occasions where the law permits the government to distribute money to victims, what you think the government does . They hired the same people the classaction lawyers hired to distribute their settlements. The governments claim rate is nine percent too. The government is no better at compensation. Thats the first thing to note. Number two, the case of clocks action is not dependent on compensation. Even when not everybody is getting the money that the classaction still serves an important function, deterrence, if companies no youre 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 been teaching for 50 years. Its another reason why the classaction is valuable and there are actually some very good empirical studies that show that went classaction threat goes up, corporate misconduct goes down. So im willing to rest the case of the classaction 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 we look at the theory the conservative way to police our marketplaces is not fed your 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 and i will give you one example on that. In 1978 there was a bill introduced into the congress that would have abolished consumer class actions. This is the chambers dream bill today in 1978 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 what i say to you today is we should not be taking advice from ted kennedy and jimmy carter. Thank you very much. [applause] very thoughtprovoking i didnt write a book on this but ive been doing it for about 20 years and i certainly applaud professor fitzpatrick contrary in thinking, his creative thinking on the subject. Suffice it to say i respectfully disagree. I do that from a conservative perspective. My perspective is one know of actually spending the bulk of my career defending these types of actions, litigating them in the trenches and its something im very proud to do. I work for these companies, i fundamentally disagree that the aim of these companies is to cheat consumers to take advantage of consumers, certainly we can all find highprofile examples were that has occurred and professor fitzpatrick cites a few highprofile examples in his book. But by and large the companies and privilege to defendant my firms privilege to defend value their relationship with the consumer can evaluate much more than the plaintiffs classaction lawyer, i can assure you of that. From my perspective, one of the greatest threats we face in civil litigation today is the th