Keeping Class Actions Honest

| Wed Dec. 23, 2009 7:24 PM EST

I don't generally support the conservative crusade against class action lawsuits, but there's not much question that some can be pretty abusive while others are little more than fee generators with no real benefit for consumers. In particular, I really hate class actions that generate nothing for consumers but minuscule coupons that are basically just free marketing gimmicks for the companies that ripped them off in the first place. On this score, Todd Zywicki praises Ted Frank's Center for Class Action Fairness:

This is an issue that I worked on extensively while I was at the FTC, so I have some familiarity with how outrageous some of these settlements are and how important work like Ted’s is in protecting consumers.  In particular, what I became aware of is how many of these lawsuits are essentially settled in a collusive bargain between class counsel and the defendant.  Usually the defendant pays a couple million dollars to the lawyers and gives coupons or some similar redress to the members of the class.  In one case a judge noted that the coupons — which allowed class members to get discounts on future purchases — essentially amounted to a request for a court-ordered promotional scheme.  An example (in a case well after I left the Commission) was the FTC’s intervention in the Netflix settlement.

The danger here for a liberal, of course, is that there's no telling how much of the CCAF's work is genuinely dedicated to preventing consumer ripoffs and how much — either now or later — shades into a more general assault on the civil tort system. I'm in favor of the former, not so much the latter. Worth keeping an eye on, though, if Frank really does stick to consumer protection.  CCAF's website is here.

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