Serving. Watch booktv this weekend on cspan2. I am very delighted to welcome you to our event today. Its on the conservative case for class actions a book written by professor fitzpatrick that galvanized this debate. We have three outstanding speakers, panelist i should say. Our first is the head of the class action practice here at gibson, dunn crutcher. Is litigated and defended countless class actions including over 20 dismissals of class action cases. You may have a sense of where his position is on that. He is a graduate of georgetown, undergraduate, and University Virginia law school where he was on the long review, and is alo the author of the chapter in the popular guide series on so please welcome christopher chorba. [applause] our next panelist is the profession selfie wrote the book. He is a graduate of notre dame where he was runnerup valedictorian, but he made up for that when he went to Harvard Law School and one the diploma. [inaudible] a lot easier, a lot easier. And he has been a lawyer and a professor, including back at harvard for well. He is currently at vanderbilt and the author of this book, makes a compelling case as to class action mechanism and will do more from him in just a bit. At our moderator today is judge on the ninth circuit. He is a graduate, a korean immigrant i should start with an came to this country and graduated from i believe cornell and it also Harvard Law School. For you guys classmates . Classmates. Magna cum laude and worked at a large law firm, was associate white House Counsel and to the judiciary of the senate and recently pointed to the ninth circuit. Surround of applause for judge kenneth lee. [applause] michael, thank you for the introductions. I i think will grant of a great debate here. We have two experts on class actions. Just a little bit of format. I will give professor fitzpatrick the floor and let them speak for about ten, 15 minutes to make his case. Chris chorba will get another ten, 15 minutes to rebut and after that we will open the floor for questions. As michael mentioned brian and i were classmates in law school. We infect lived on on the same dorm floor, and i can tell you i can the day at harvard if you were a rockefeller republican you were treated as if you were to the right of attila the hun. Brian was to the right of attila the hun. I said in jest. Brian was more libertarian but he is very sterling concert credentials. He clifford judge poe skeleton for Justice Scalia, work for senator john cornyn of texas and is a stalwart of the Federalist Society. This is a very long way of asking him, how does a member of the vast rightwing conspiracy why to book in support of class actions and plaintiffs lawyers . [laughing] well, thank you for the kind introduction, judge lee. [laughing] the reason that i think conservatives support class action is because were 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, and 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 versus conceptual. 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 says you can ask someone to waive the right to join a class action so long as you do in arbitration clause. 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 enforced these class action waivers, and people who have 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. Because if you have to go on your own, not many people are going to do it. Everyone knew this in 2010 201t the chamber of commerce filed an amicus brief to calm everybody done. The u. S. Chamber said dont worry, if the class action goes away. Theres Something Better than the class action, quote, federal regulators. Federal regulators should be policing our marketplaces. As judge lee mentioned, i have been a member of the vast rightwing conspiracy for a very long time. Ive been going to the Federalist Society members, meetings, for 20 years. Ive never once at 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 Friedman who reminds us that for all of the virtues of the United States chamber of commerce, they are often not very conservative. He had the wonderful passage that i quote in the book where he says listen, big businesses often wax poetic about the Free Enterprise system, and theyre all 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 you for our economy and for our country, but theyre not the best place to find what the conservative principle suggests we should do to police the marketplace. What is the best place to find what conservative principles say . My book, its built upon people like Milton Friedman, like friedrich hayek, like gary becker, like george stigler, like 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 some policing of our marketplace. Not even friedrich hayek, the Austrian School of economics, leak in complete laissezfaire markets. At the very least, even a libertarians say we need three rules in our markets. No fraud, no breach of contract, and no pricefixing. We cannot have vibrant markets it companies can reach the promises to us if they can lie about what theyre selling and if competitors can get in cahoots with one another. At least we need those rules. So the question then is how are you going to enforce and implement those roles . 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 the literature on privatization that was very popular during Ronald Reagan and margaret thatchers times. And 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, private solutions over government solutions. All six reasons applied to private enforcement of the law. Number one, we like smaller government. Everything else being equal, we want a smaller government, lower taxes, 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 copies the campbell chemical for misdeeds, we have to hire thousands of our government lawyers to pick up the slack. Thats more taxes and more people looking for things to do. We like selfhelp. Its reason number two. We like to build Self Reliance among our citizenry. People rely on themselves and their neighborhoods when things go wrong, not waiting around for the government to say that and bail them out. This again is consistent with private enforcement of the law. Reason number three, better instances there would like to privatize because private sector participants are motivated by profit and we think that galvanizes them to do better job and government bureaucrats they get paid the same matter what they do. This is consistent with private enforcement. Class action lawyers and contingency fees. These are a terrific motivator. And so we would expect that ill explain in a moment theres data to confirm this. We would expect class action lawyers do a better job enforcing the law then government lawyers do. Number four, better resources. The private sector is better resources than the government does. The government is always strapped for cash. By like it or always been cut. Enforcement budgets are the least sexy thing in the budget. Its the first thing to go. The private sector and 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 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 drop the basket and we get a bad result for everybody . We like to hedge our bets i having decentralized solutions to problems. Thats why would like federalism and its why we should like different class action 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 you something called agency capture. Conservatives have a word for it, a term for, crony capitalism. Government agencies are often captured on the people they are supposed to be policing. Campaign contributions, the revolving door of personnel. This makes our Government Agencies last independent and more biased the private sector doesnt have that problem. The private sector is focused on profits can focus on contingency fees. In my view that is more pure than the government which is often focused too much on who gave you 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 class action lawyers and securities fraud, class action lawyers and antitrust, you find that class action lawyers are recovering more money than the government lawyers are recovering. And securities fraud it is ten to one. A lot of that is because Security Fund lawyers by a marchesa but if you look at the exact same cases with regard to the exact same people for the misconduct, the private bar still collects four times as much as the sec does. The three supports private enforcement and the data suggest the private enforcers are doing a better job. Of course it is true that the private sector can go too far. The profit motive 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 government. Corporations can abuse of the system in pursuit of profit. We dont say, therefore, lets have the into everything instead of corporations. No, we say we going to put rules into place to harness the profit motive so it is directed towards the public good. We can do the exact same thing with class action lawyers. We have a lot of power over classaction lawyers by regulating this contingency fees that they earn in their cases. Every one of those awards must be approved by a federal judge, and we can direct classaction lawyer profit motives towards 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. If the recent put rules in place to make sure the profit motive is pointed 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 have a few reforms that 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 entering data to bear on the arguments and i conclude the chamber is basing its advocacy against class actions more on myth than reality. Let me give you a few examples. The chamber says we have so many meritless class action cases being filed all the time and i was like to point to the subway football case. You probably read about this in the paper. Some of the subway footlong were only 11 inches, and some class action lawyers sued alleging Consumer Fraud. This was a frivolous lawsuit, but if this subway footlong of representative class action or is it an outlier . In one chapter 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. It has never been easier in the history of america to dismiss a meritless case in court. After the United StatesSupreme Court decided twombly, this is a golden age of motions to dismiss. If you cannot dismiss the subway footlong case after twombly, that is on you. It is not on our class action system. I also take a look at the chambers own list of the ten worst the ten worst cases filed every year in america. They have ten most frivolous cases list they put out every your a look at five years of the list. There were ten ten class action cases on there. Subway footlong, a couple of cases get starbucks because there was too much ice in the ice coffee or too much foam and a latte. There were three frivolous cases. The other seven class actions on these lists were not even frivolous. There was a case against mastercard because the rent a promotion the said if the user mastercard we will donate a percentage of your purchases to charity. They didnt tell people the amount of money it would give to chad was capped at a certain level and they hid that at month three in the year. There were nine more months they were running the promotion. This is a least a debatable case of misleading consumers. Most of the cases on the chambers unless fall in that category were it is at least debatable. What i say in the book is in this. If in five years the United States chamber of commerce can only find three class action 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 as one of the things i propose in the book is we can tap down even further on meritless cases. If enough happy with twombly, theres other things we can do. We can put an automatic stay of discovery in place when in motion dismiss is pending. Most judges do this but some dont. We can make it automatic. Im willing to give defendants and interlocutors appeal and a class action case when a motion to dismiss is denied just to make extra sure that the case is not meritless. Im willing to tweak the system but are really dont think we have meritless case of it. What about attorneys fees . Another the argument the chamber makes. The only people getting any money and class actions are the lawyers. The class members get nothing. Listen, you can find one or two or three cases again where class dems get nothing in the lawyers get everything. These cases exist but i submit to you these are outliers, extreme outliers. And in my empirical work as a professor, i added up every single dollar that defendants pay out in class actions, and i compared it to every single dollar judges awards lawyers in fees and you know what . The percentage of what defenders pay out is awarded in fees . 15 , 15 is what the lawyers are getting. This is that everything. This 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. I argue in the book if you want to be good law and economics conservatives, we are probably hang paying class action lawyers too little. We have all kinds of ways to tap the incentives in ways in the market no client would want their lawyers incentives to be capped. We dont have a problem with fees. It is true that not many class members recover from Class Action Settlements in a lot of cases. In consumer cases the claims rates are low. The ftc came out with a very well researched study where they show the meeting claims rates any consumer class action is 9 . That means 91 of consumers are not getting any compensation from class actions. That doesnt mean the money is all going to the lawyers. We split the money up among the 9 who filed claims for or begin some leftover money to charity. But it is true in a lot of cases the class action is not very good at compensation. I admit that but two things about that. Number one, remember the alternative 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 they come it goes after wrongdoers they are prohibited by law from distributing the money to the victims. It has to go into the u. S. Treasury. On vacations on the occasions ww permits the government to distribute money to victims, what you think the government does . They hired the same people the class action lawyer hires to distribute their settlements. Regardless claimant is 9 , too. So the governor is no better at compensation. Thats 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. Deterrence. If Companies Know theyre going to have to pay when you do something wrong, they are less likely to do bad things to begin with. This is a conservative law and economics degree. Weve been teaching it for 50 years, and its another reason why the class action is valuable. Theres some very good empirical studies that show when class action threat goes up, corporate misconduct goes down. So im willing to rest the case on deterrence alone, but in a lot of cases we also least have to decide the side benefit of compensation. I think when you look at the date, when you look at the theory, the conservative way to police our marketplace it is not federal regulat