The Malleability of Collective Litigation

Abstract

In Wal-Mart v. Dukes (131 S.Ct. 2541 [2011]), Wal-Mart avoided class action because employment decisions were made by local supervisors. However, it was Wal-Mart who chose to delegate discretion; by doing so, it made class litigation less likely. Wal-Mart’s choice of business administration, then, substantially reduces its expected liability. This is but one example of a broader, overlooked phenomenon. Mass defendants can control, before the occurrence of damages, the scope of future collective litigation. Collective litigation procedures are malleable, sensitive to the defendant’s pre-damages choice of actions. The Article develops and substantiates this insight.

The Article elaborates on two manifestations of this phenomenon. First, defendants can avoid class actions by “individualizing” the prospective class, injecting individual differences that preclude class treatment. Second, defendants can selectively contract with future victims, buying out the stronger, leaving only weak victims with a claimable right, and reducing the prospective class’s capacity to litigate. Against this backdrop, the Article proposes an array of mechanisms to strengthen collective litigation procedures, including shifting the burden to defendants to justify the business action that prevented collective litigation, and taxing defendants for making the plaintiffs’ case weaker.

Keywords: class actions, commonality, individual differences, divide-and-conquer

JEL Classification: K40, K41, K13