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 StatesSupreme 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 loo