...and while I continue to agree that the solicitation he complains about is crass, I disagreed with the rant itself- that is, I chose to take an opposing position, because of my own training and inclination. I recommend reading his post, above, before reading my comment, which I repost here below.

I wrote the following as a comment on his blawg:
I see...

• a free rider problem. injured persons who did not expend the search costs (or much of anything, really) to identify the problem, formalize a complaint, obtain lawyers, pursue a claim, and obtain a settlement can still collect.



• the possibility of fraud. uninjured persons who can plausibly claim to be injured might swindle their way in



• the danger of injustice. injured persons might for whatever reason not be able to or interested in collecting money, and so they don't benefit and the cost to the defendant is also unjust.



• fakework or makework by lawyers. by dredging deeply, the plaintiffs lawyers might locate additional injured or uninjured persons, thus increasing the amount of the pot that the lawyers collect.

I would think most of these problems are not problems at all, or ought to be solved by negotiation between the defendant and others. Is there really a danger of society being hurt? Did all those free-riders really scare the company into settling, or cause an unjust verdict?

That said, the notice still clunks, and it's perfectly fine to dislike its tone or its presence.

Eh N.
-----------------------------------------

I'd welcome further discussion of the merits of his rant or my response, since Class Actions will be a continuing interest of this blawg.

...when Judge Pregerson took the time to criticize appellate counsel Theodore Boutrous (of Gibson, Dunn & Crutcher) for certain aspects of Wal-Mart's brief. The brief, which complained (among other things) that certification of the class of over 1 million female employees made it practically impossible to defend (based on the variety of claims, Wal-Mart's inability to challenge specific plaintiffs due to a ruling by the trial judge, and presumably the Bet The Company nature of such a numerous and expensive class claim), and that Judge Jenkins' decision was wrong.

More than just wrong, in fact. Wal-Mart in its brief (which Mr. Boutrous may or may not have written, I can't tell from Bob Egelko's column, available all over) (I found it by doing a google search for: pregerson boutrous apology - that should also do it) whether Boutrous did or not) apparently accused the trial judge of being verbose and of trampling on the constitutional rights of Wal-Mart. The brief itself is here, thanks to Sheridan: Con-Law for the link. In fact, his post is good in general.

I would follow on what Sheridan says: "Don't criticize the judge," even when his reasoning or conclusion is highly questionable. Argue that the reasoning our conclusion is wrong, but don't imply that the judge is guilty of dereliction of duty or worse. And try not to pick on writing styles of judges. They'll do the same to you the next time you're before them.

Most of all, though, this implicates professionalism.

Wal-mart submitted a hard-hitting brief that in my opinion may have crossed over the line of poor judgment into actual professional discourtesy, risking the various lawyers' professional licenses, their good name, and their client's case in an effort to prove how zealous they were. Talking about whether your arguments are correct, while failing to note the Federal Judiciary's disapproval of your reckless tactics, is tantamount to professional tight-rope walking, in a stiff breeze, under the influence: Not Smart.

Pregerson suggested that Wal-mart owed the judge an apology for their comments, which he likened not to civilized adversarial advocacy but to a back-alley brawl.

There's something to be said about statistical proof, and it's not entirely positive. But Wal-mart's due process claims are a little over the top, and more importantly didn't win much favor from the panel in two of three cases. Being right's no consolation if the judges won't buy into your narrative. Also, less arrogance might be good.

Before I sign off on this area, I'd like to extend a pre-pology to Mr. Boutrous, who I pick on because of his cool name, and because this out-of-context quote bothered me: "We wrote a hard-hitting brief, and I think our arguments are correct," Boutrous said. Well, I reacted poorly, because he seemed to be excusing the inexcusable. In fact, he also said that no disrespect for the judge was intended, which is a much more salient response to an accusation of professional discourtesy.

Larry Ribstein of Ideoblog (highly recommended) posts in "Fleischer on Kirkendall" about misperceptions of the infamous Nigerian Barge subissue of the Enron debacle. As Larry points out, this quite questionable financial transaction, in which Enron was selling and then (possibly through an independent subsidiary) repurchasing a barge, which resulted in huge tax benefits for Enron, was probably not criminal even if it was wrong. This is a favorite theme of Larry's, evident in his posts on the fiduciary breach case that just came out of Delaware- the Ovitz-Disney case, as a matter of fact, involving executive compensation, which is in turn a favorite hobby-horse of mine.

Larry's most interesting point, I thought, was that Ken Lay has been demonized. Maybe a "favorable story" is going too far, muses Larry. But I've seen a fairly positive piece, and it goes like this: Ken Lay does not deserve to be indicted, just broke. He blew it, and took actions which he knew or should have known would hurt his employees, who continued investing in Enron stock even while he himself knew the situation was likely dire.

But deluded's not the same as criminal. Ken Lay took a bath, financially speaking, when Enron came down. His personal wealth was pegged on Enron stock; he was betting heavily that Enron would recover, almost right to the end, when any rational actor would have stopped. But CEOs aren't rational actors; they are supremely confident leadership machines, and when they're wrong, or even just half right, they're not stars, they're gas giants (to continue to steal a phrase, from Spider Robinson).

So: blow a big call, lose your shirt. Fair enough. "He deserved to go broke for his own hubris" Larry writes, and I agree. But does he deserve to be vilified? By his former employees, sure. But to be called a devious manipulator by the press and the public? I'm not sure it's deserved. Self-delusion is not usually enough for criminal liability. By this standard, the President couldn't be tried for most of the things I think he's guilty of; he's honestly unable to understand why some of his actions are indefensible in my view. Which isn't a justification (making an action morally and legally right), but it's an excuse (giving a reason for the action, which means society might consider not holding the defendant responsible).

This is tied up with the business judgment rule, about which Larry has much to say... as does Delaware itself. Again, Larry's post is a must-read.

...which is in my view stupid, but we'll discuss why I'm probably incompetent to hold that opinion shortly.

Prof B. opines in this short post that "he's right" [meaning Bartlett] and without further ado [although I'm sure that Prof B has explained why he says so, and has blogged and published his views elsewhere], encourages us to read the whole thing. Well, please do, and get back to me with your reactions, if you would.

Here's my beef: SOx has costly reporting requirements. It costs billions (no exaggeration) a year to get together all the information necessary to be able to certify that your company is in compliance. And if you aren't in compliance, you're essentially out of business (for better explanations of what the legislation does and doesn't do, see Wikipedia, which has an article which to my surprise is not marked as disputed. I guess everyone so far has agreed that the entry is non-POV (doesn't take on partisan view, just reports objective facts) and non-partisan.

But Bruce whines (as do many CEOs and CFOs, he's not alone) that the Economy is doing just fine, or would be, but that the stock market is being artificially depressed by the "intangible costs" of SOx. There are legitimate criticisms of Sarbox; see the Wiki article, or Bruce's reference to Yale Lawprof Roberta Romano, which calls out Congress for doing what it always does:

• waiting until a visible scandal to do anything



• throwing together a mess of unrelated proposals which have been stewing for years



• enacting them without forethought or adequate comment, and without understanding whether they will have any impact on
  the scandal at hand



• applauding itself for a timely intervention, and then going on holiday.

Compliance is costly, in terms of both money and time; it took companies over a hundred million person-hours to get in compliance last year, by one estimate, and that's not a trivial cost. The Sun Microsystem CEO had a lovely sabotage-related image: "throwing buckets of sand into the economy." Well, news flash for CEOs and professors: the economy is not a finely tuned watch, with gears meshing ever so neatly. It's a great rollicking machine, with steam and bells and whistles and, oddly enough, a raquetball court.

The intangible cost: the undermining of federalism. I can hear you all sighing in despair. Well, come along with me: in this national economy, with coast-to-coast ownership of companies and foreign investment and the nation's interests riding on trust in the market, isn't it important that federalism be paramount? Shouldn't we have a race to the bottom in terms of regulation? Can't we just find a way to allow companies to pull frauds on the market?

Short answer, no, we can't, and there's no intangible value of federalism. There are only tangible gains or losses based on federalist values in conflict with nationlist ones. Here's one area where I don't know very much about business and local regulation, or regulation in general for that matter. Call me ignorant, I'm certainly naive, but don't try to pull the federalism argument this time.

SOx may have been poorly enacted, without justification, without connection to the situation at hand. But tighter reporting requirements, _if effective at preventing crime_, have tangible benefits that are _hard to measure_. How can you calculate the cost of a disaster that is averted? By guessing, that's how. Enron and Worldcom and Global Crossing and Healthsouth and many others that I can't name, but that others can, were warnings. Big flashing red lights. Shareholders took notice. The government took notice, including the Justice Department. So'd the SEC. With any luck, forcing CEOs and CFOs to personally sign off on financial statements will prevent some of the problems we've seen, with Three Little Monkeys (Didn't see a problem, didn't hear a problem, couldn't say there was a problem) at the wheel.

I have less to say, thankfully, on this subject.

Blawg Review is a rotating Carnival, in the Blog sense: a different host has it each week, and you can tell who had it when, who hosted last, and who's up next at www.blawgreview.com.

I support Blawg Review; look to the left side of my blog, notice my blogroll (permanent list of noteworthy blogs). It's on there, under its descriptive name, the Carnival of the Blawgers. Blog carnivals are a fascinating topic which I will cover some other time. For now, let me just point out the page itself, and highly recommend #18, hosted at the Common Scold, which is a tour de force and uses a fun geography/ baseball theme to do the job: collecting some of the best and most interesting posts of the last week by blawgers. There are links to previous episodes (issues? iterations? incarnations?) of Blawg Review, submission guidelines, and a fun little tool called the Google Guest Map, which uses the same technology as Google Map plus a very picky pushpin interface to let you (if you're careful enough) mark the exact location, at the street level, you are blogging or reading from.

Blawg Review also hosts reviews (get it?) of blawgs, written by - well, you, if you want. Read some of the past reviews to get an idea of what they're after.

The links down the right side of the BR page are highly useful; they explain what a blog carnival is, and have links to some of the better or more famous ones.

Also, a note of clarification: this is not "the blawg review" (blueblanket.net) which is about _law reviews_ and is technically a blog, and therefore is a blawg. Same name. Big difference.

claiming to have a J.D. (law degree) willing to write publishable articles for professors, for money. Also, they are willing to Blue Book, meaning cite check (verify accuracy and form of all the citations) for $150-$1000. This reminded some of us of Nigerian scams, which are concisely described, with examples, at Snopes. See David's hilarious take on the offer, and my (hopefully amusing) response, in the comments. I swear to you, all my typos really were intentional that time.

• - the class has So Many People that joinder of their actions is impracticable (Numerosity is met)
  
  - and they all have the Same Issues In Common, or at least most of their Issues Are In Common (Commonality is met; this is a hot-button one, since it's much harder to prove than most of the others, even if it happens to be true)
  
  - this procedural tool is as good as (or better than; see your local jurisdiction) other available methods for achieving a good outcome. In Pennsylvania, the requirement is that a class action be "Superior to other available methods for the fair and efficient adjudication" of the lawsuit(s). This is a much harder test, in theory, than one requiring that it merely be No Worse than The Best Alternative. Equally adequate among good alternatives is one thing; better than any possible alternative is a really stringent requirement.)
  
  - the class has a representative - a plaintiff willing to take on the necessary responsibility and time to see the case through
  
  • who is similarly situated with the proposed class, meaning they have the same type of claims and the same sorts of defenses at issue (Typicality is met), and
  
  
  • who is not in a position of conflict-of-interest with other class members, and is represented by capable class counsel (Adequacy of Representation is met).
    

The idea is: is it unfair (or unworkable) to do this other than as a class action? Would it be fair to hold absent class members (people covered by the class definition but not necessarily active in the litigation) to the outcome obtained by the class counsel and class representative? Is it ethical to have this representative in court on behalf of that proposed class? Is it fair to defendant to have this particular class certified, or does it force them to defend an unworkably large number of different claims?

Obviously, anytime class certification is contested there are going to be at least two views as to the right answer to at least one of those questions.

Sometimes a defendant won't deny the claim that the accused conduct is unitary and universal, meaning it's common to all of the proposed class members (say if the decision was to change a vacation or maternity or retirement policy that affected everyone in the described class) and so that they can't with a straight face argue that there's no commonality of claims, and that since approximately 50,000 employees were affected there's no way of arguing for an absence of numerosity without turning purple - the Purple Test, as one of my professors used to say.

But other times, a defendant can raise legitimate interests that may militate against applying the rule. I think that's what Wal-Mart was trying to do.

Sometimes when two interests or rules are in conflict, there's an easy solution. A federal statute and a state statute cover a specific area where both legislatures have authority to regulate: Supremacy Clause says the federal statute wins. Easy.

But sometimes, application of competing rules and competing analyses does not produce a clean outcome.
Sometimes... sometimes we have the Interesting Situations, where the right solution to a conflict is not as obvious.

Leiter has mentioned this (halfway down the post), and it bears repeating: some cases are Easy, and some are Not, and the Easy ones are not especially interesting. If a rule requires that a class be "so numerous that joinder is a practical impossibility" or equivalent language, and the proposed class is over a million people, then it's an easy case. There's no valid argument on the other side. It's bizarre to say that a class action is "too numerous to be a workable class action" - that's not one of the requirements, that a class be _small_ enough. I think Wal-Mart is really arguing that if the class action proceeds it could kill the company, and they don't think that's fair. That's a different sort of claim about a different rule (perhaps about substantive fairness), perhaps of their own devising.

Hard cases are those where you have multiple answers that are arguably correct, or non-congruent values that appear to be in conflict. (In Leiter's post, above, he talks about questions to which reasonable people could come to different yet reasoned conclusions; I'm talking here about situations where it's unclear that there is any conclusion that is reasoned and unquestionably correct.)

This applies throughout the law: the interesting situations are those where it's not (or wasn't before) obvious which of multiple modes of analysis or endpoint solutions were the correct (or best available) ones.

It's not "interesting" in the analytical sense when an innocent man is wrongfully put to death. It's exciting in the sense of horrific, moronic, evil, and stupid — aside: although some will argue it may be "necessary," but I would look at these people with much suspicion; what are their values, exactly? Pro-death? Law And Order? It can't be Justice; I don't think that's the way Law And Order cuts; are they just conservative? Racist? Hateful? Are they a pragmatist and don't think it matters? Are they atheist? Why would they hold this morally indefensible view? Scalia, I'm particularly thinking about you this time....

But "interesting" in the sense that there's much to say about it, not so much. There are no competing values against the loss to the individual, the community, public respect for law and order, the country, the human race when the wrong person is put to death. It may not be a big loss- if that's your view, there's still not much to talk about- but there's no upside whatsoever. Even the vengeance felt by the friends or relatives of the victims isn't a positive; it's an undesirable joy, speaking as an armchair social utilitarian.

Since it's relevant, here's an even older link, familiar to class action lawyers in the Third Circuit but maybe not to everyone else: the Third Circuit Task Force on the Selection of Class Counsel (PDF) issued its report a few years back, but almost as interesting is what the Task Force weighed.

See the Witness Statements and other Q&A (warning: many interesting links herein). Judge Arlin Adams' (link goes to Oral History interview) lengthy comments are particularly intriguing, but there were some very heavy hitters in that crowd.

The danger is really a conflict of interest: if a law firm has an incentive to settle more cheaply, because they won't get paid unless they do, their interests really diverge from that of the class, which "wants" the best possible recovery. It's a conflict of interest, even if the firm won't be paid at all unless the class recovers _something_, because once the firm makes back its sunk costs it has far less interest in the incremental dollars.

Worse, if a small and highly skilled firm does the necessary spadework to determine that a particular case has sufficient merits and sufficient damages to make it cost-effective to file a class action, and a much larger or richer (but much less specialized or capable) firm follows on in 24 hours, they can "outbid" the highly skilled small firm, stealing the prize and wasting the investment of time and money spent investigation and evaluating the claim. See, for example, some of those witness statements, above.

Such free-riding threatens the incentive of these specialized firms to investigate and file those class actions.

Not all class actions depend on headline-reading; some involve careful analysis and interpretation of public but opaque information, coupled with the excellent reputation for work in that area which will draw potential plaintiffs with relevant information to seek out the firm. Derivative shareholder suits for a drop in stock price immediately following the indictment of the CEO for false statements are one of the "race to the courthouse" types of class actions. Inevitably there will be multiple filings, so long as it is not prohibitively expensive to file. But not every case is that kind.

Howard Bashman's insightful December, 2001 summary of the Task Force Report is available here.