Popular runner guide series on 17 200 claims and constitutional law claims please welcome christopher torok. Our next panelist is the professor himself wrote the book, he is a graduate of notre dame where the was a runnerup valedictorian but the made up for that when he went to Harvard Law School and won the diploma for being top student to graduate in his class. He is, its a lot easier. A lot easier. And he has been a lawyer and a professor including back at harvard for a while, hes currently at vanderbilt and hes the author of this book. It makes a compelling case for the class action mechanism and we will hear from him and our moderator today is the judge of the ninth circuit. He is a graduate of, a korean immigrant i should start with came to this country and graduated from Ivy League Cornell and then also harvard lawschool. His classmates, magna cum laude and works at block tell, works at the associate white House Counsel i believe in a special counsel to the Judiciary Committee and recently appointed to the ninth circuit so round of applause for judge kennedy. Thank you for the introduction. I think were going to have a great debate here. We have two experts on class actions. Just a little bit of the format, i will give professor fitzpatrick the floor and let him speak for about 10, 15 minutes tomake his case. And mister torvill will get another 10, 15 minutes to relax and after that we will open the floor for questions here. I think as 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 day at harvard if you were a rockefeller republican, you were treated as if you were to the right of attila the hunt. Ryan in law school was to the right of attila the han. I say that in just, brian is actually more libertarian but very sterling,s credentials, works for judge scanlon, or Justice Scalia, worked for editor john cornyn of texas and is a stalwart of the Federalist Society so this is a long way of asking him how does a member of the vast rightwing conspiracy write about insupport of class action . Thank you for that kind introduction. The reason that i think conservatives should support class action is because we have to ask ourselves what the alternative is. And the alternative was told to us in an amicus brief filed by the United States chamber of commerce in 2010, this amicus brief is what inspired me to write the book that you have in front of you today area in the case before the Supreme Court is called at t versus conceptionon, many of you know about this case. The question was our class action waivers embedded in arbitration agreements enforceable . And the us Supreme Court said yes. My old boss Justice Scalia of the opinion and the court said you can ask to leave classaction as long as you do it in arbitration cause, any state laws to the contrary are preempted and it was apparent to everybody in 2010 that if you got rid of the class action, if you enforce these class action waivers , people who had been injured in small amounts by corporations, small fraud, small breach of contract, small pricefixing injuries, people with small arms would have a very hard time pulling Companies Accountable for those farms because if you have to go in on your own , not many people are going to do it. Everyone knew this in 2010 and the chamber of commerce island and amicus brief to calm everybody down. The us chamber said dont worry if the class action goes away. Theres somethingbetter than the class action. Quote, federal regulators. Federal regulators should be policing our marketplaces. As judge lee mentioned, ive been a member of the vast rightwing conspiracyfor a very long time. Ive been going to these Federalist Society members or 20 years. Ive never once in any of these gatherings heard anyone say that adderall regulators were a solution to any problem. And theyre not a solution to this problem as well. The conservative way to police the marketplace is class action lawsuits, not enteral agencies. I start the book with quotations from Milton Friedman who reminds us that for all of the virtues of the United States chamber of commerce , they often not very conservative. He has a wonderful passage that i quote in the book where he says listen, big businesses often waxed poetic about the Free Enterprise system and theyre off on a plane to washington dc asking for special legislation for their companies. So like chris, i represented many members of the chamber ofcommerce. When i was a lawyer in washington dc, 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 often mark my book is built upon people like miltonfriedman, like friedrichhayek , like gary becker , like stigler, like frank easterbrook, like richard epstein, conservative andlibertarian economists , scholars, lawyers, judges and what do they say often mark this is what they say. Number one, we do have to have them policing of our marketplace. Not even friedrich i, the Austrian School of economics believed in complete laissezfairemarkets. At the very least, even the libertarians say we need three rules in our markets. No fraud, no breach of contract, no pricefixing. We cannot have vibrant markets if companies can reach their promises to us. They can lie about what theyre selling and if competitors and includes with one another read at least we need those rules. And so the question then is how are we going to enforce and implement those rules and what i argue in the book is the conservative way to do it is through the private enforcement of the law and i go back to literature on privatization that was very popular during Ronald Reagan and margaret thatchers time and this literature basically says we want to privatize everything. And therefore why shouldnt we want to privatize enforcement of the law as well . Identify six reasons why. This literature advocates privatizing, private solutions over Government Solutions. All six of these reasons apply toprivate enforcement of the law. Number one, wed like mueller government, Everything Else being equal we want smaller government. It means fewer government bureaucrats looking around for things to do. This is consistent with private enforcement of the law. If we didnt have class action lawyers holding Companies Accountable we have to hire thousands more government lawyers to pick up the slack. As 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 relying on themselves and their neighbors when things go wrong, not waiting around for the government to save them and mail them. This again is consistent with private enforcement reason number three, better incentives. We like to privatize because private sector participants are motivated by profit. And we galvanize them to do a better job than government bureaucrats get paid the same no matter what they do. This is consistent with private enforcement, plaque classaction lawyers on contingency fees, theseare a terrific motivator. And so we would expect that ill explain in a moment the data to confirm this. We would expect last action lawyers to do abetter job enforcing the law than government lawyers do. Number four, better resources, private sector has better resources than the government does, the government is always tracked for cash, budgets are being cut, enforcement budgets are the least seeking and budget, thats the first thing to go. The private sector can find financing for any operable 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 data is consistent with that. Reason numberfive , less realization. We prefer private solutions because theyre less internalized than Government Solutions area and we dont want all our eggs in one basket. What if we drop the basket . Then we get a bad bet for everybody, we like to have decentralized solutions, that why we like federalism and is why we should like the class action lawyers all over the country, filing lawsuits before different judges instead of one adderall agency in washington deciding what the law should and should not be. Lastly, the reason why 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 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 read this makes for Government Agencies less independent and more biased, the private sector doesnt have a problem read the private sector focused on profit or focus on contingency fees and in my view that furor government is often focused much on who gave who want. All six of the reasonswe normally privatize. Leads to the conclusion that private enforcement of the law is preferable to the us chambers federal regulators. As i said the Empirical Data supports the theory that if you care classaction lawyers and securities fraud, classaction lawyers and antitrust, you find classaction lawyers are recovering more money than the governments lawyers are recovering. And securities fraud can do one in any given year, securities fraud or sometimes as much as the sec does read a lot of that is because the securities fraud lawyers file more cases but even if you look at the same cases where they go after the exactsame people or misconduct , the private bar still collects four times as much as the sec does. The theory supports private enforcement and the data suggest that private enforcers are doing a better job. The course is true that the private sector can go too far. Profit motives can go too far. People can use this system in order to out more profits. This is not a reason to turn everything over to the government area corporations can abuse the system in pursuit of profits. We dont say therefore lets have a government do everything instead of corporations read number we say were going to put rules in place to harness the profit motive so it is directed towards the public good. We can do the exact same thing with classaction lawyers area we have a lot of power over classaction lawyers by regulating those contingency fees that they earn in their cases read every one of those awards must be approved by a federal judge. And we can direct classaction lawyer motives for the public good by ensuring that we only award fees when the cases are good and the lawyer a good recovery from the case. So i dont think the fact that the profit motives can sometimes lead people to go to far is reason to turn things the government. Its reasonable rules in place to make sure the profit motive is pointed in the right direction but i argue in the book that i think we largely already have rules in place. We can always improve the system and i have a few reforms that i advocate in the book but for 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 data to bear on the arguments and i conclude the chamber is facing its advocacy more on myth than reality. Let me give you a few examples. The chamber says we got so many meritless classaction suit being filed all the time and they like to point to the subway footlong case, you read about this in the paper. Some of the subway footlong are only 11 inches and some classaction lawyers sued alleging Consumer Fraud. This was a frivolous lawsuit but, but is this subway footlong a representative class action or is it an outlier and in one chapter i do a deep dive into the data and i conclude no matter how you slice it, subway footlong is an aberration. Its not atypical case. The truth of the matter is this, it has never been easier in the history of america to dismiss a meritless case in court. At the United StatesSupreme Court decided calmly, this is the golden age of motions to dismiss. If you cannot dismiss the subway footlong case after twombly and a bar, that is on you. It is not on our classaction system. And i also take a look at the chambers own list of the 10 worst class action, the 10 worst cases filed every year in america, the 10 most ruthless cases list i put out every year, i looked at their list and there were 10 class action cases on there, subway footlong and there were a couple of cases against starbucks that there was too much ice in the ice coffee and too much foam in the latte, there were three frivolous cases, the other seven actions on the list were not even frivolous and there was 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 gifted charity was capped at a certain level and they hit that point at month three in the year, there were nine more months and they were running the promotion. It wasnt true. There was at least a debatable case of misleading consumers so most of the cases on the chambers list fall into that category where its at least debatable and what i say is this, if in five years the United States chamber of commerce can only find 3 class action cases that are clearly meritless,we do not have a problem of meritless cases in our system but im willing to meet the chamber halfway. Thats one of the things i propose in the book is that we can tap down even further on meritless cases, if youre not happy with twombly and igbaugh theres other things we can do. Wecan make it automatic. Im even willing to give defendants an interlocutor appeal in a classaction case when their most in dismissal just to make extra sure that the case is not meritless so im willing to tweak the system a little bit but i dont think we have a meritless case. What about attorneys fees . This is another big argument the chamber makes, the only people getting any money in class actions are the lawyers, the class members get nothing and listen, you can find one or two or three cases again where class members did nothing and the lawyers get everything, these cases existbut i submit to you, these are outliers , extreme outliers and in my empirical work as a professor, i have added up every single dollar that the defendants pay out in class action and i had compared 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, 15 percent is what the lawyers are getting, this is not everything. This is far from everything. Its far from even a normal individual case contingency fee. We donthave a problem with lawyers making too much. I actually argue in the book if we want to be good law and economic conservatives, where probably a classaction lawyers too little. We have all kinds of ways we their incentives in ways that in the market no client would want their lawyers incentives so we dont have a problem with these area it is true that not many class members recover from Class Action Settlement in a lot of cases. And instant consumer cases, the claims rates are low. The ftc just came out with a very well researched study where they showed a median claims rate in a consumer class action is nine percent read that means 91 percent of consumers are not getting any compensation on class actions but it doesnt mean the money is all going to the lawyers. We split the money up among the nine percent that filed claims or less money to charity that it is true in a lot of cases the class action is not good at compensation, i admit that but two things about that, number one, remember the alternative here, folks is a government. It the government going to be better at gettingcompensation to people when they go after wrongdoers. Indian with, most of the time the government goes after wrongdoers , they are prohibited by law and distribute the money to the victims you it has to go into the u. S. Treasury area on the occasions where the law permits the government to distribute money to victims, what you think the government does mark they hire the same evil the class action lawyer hired to distribute their moment. The government claim rate is nine percent you. So the government is no better at compensation, thats the first thing to note, number two, the case of the class action is not dependenton compensation. Even when not everybody is getting their money back, the class action still serves an important function. Deterrence. Companies know theyregoing to have to pay when they do something wrong , they are less likely to do that bad thing to begin with this is a conservative law and economics theory, weve been teaching it for 50 years and its another reason why the class action is valuable and there are actually some good empirical studies thatshow that when classaction press goes up , corporate misconduct those down and 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 area so i think you look at the data, when you look at the theory, the conservative way to police our marketplace is not federal regulators, and my view on this was really a conservative view for most of the 20th century, we can talk in the q a if you want to about why things change but until Ronald Reagans time, the conservative view was private enforcement is better than the government and ill give you one example, on that. In 1978, there was a bill introduced into the congress that would have abolished consumer class action. 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 inste