Bad Bargains: The Mistake of Allowing Cost-Benefit Analyses in Class Action Certification Decisions

Abstract:     
It is often argued that class actions are unfair to businesses and individuals alike. In recognition of these complaints, it has been suggested that, in determining whether or not to certify a class action, the judge should weigh the perceived costs and benefits that the certification decision would produce. In fact, a rule proposed in 1996 would have required courts to consider the costs and benefits of a class action in deciding whether to certify a class. Despite this proposed rule's failure, courts continue to use a cost-benefit analysis in making their certification decisions. This Article demonstrates that the arguments that favor a cost-benefit analysis stage in class action certifications fail because they are based on insufficient or misguided criteria. This Article emphasizes that the correct criteria by which to judge class-certification decisions are deterrence of socially harmful conduct and individual compensation for wrongdoing. In assessing courts' use of cost-benefit analyses in class action certifications, this Article concludes that using such a test defeats the goals of compensation and deterrence, which are the proper ends of the class action device.

Number of Pages in PDF File: 29

Accepted Paper Series