A Normative Evaluation of Actuarial Litigation

Abstract:     
This Article addresses the normative issues raised by the use of statistical sampling to adjudicate large case aggregations. In its recent decision, Wal-Mart Stores, Inc. v. Dukes, the Supreme Court referred to sampling pejoratively as “Trial by Formula.” This Article argues that the pejorative label is undeserved. In fact, sampling can be justified in many more situations than courts currently apply it, and society is paying a very high price for limiting its use. I explored some of the normative issues in an earlier publication, Statistical Adjudication: Rights, Justice, and Utility in a World of Process Scarcity, and the current Article expands on my earlier analysis in four respects. First, it analyzes the effect of sampling on settlement and discusses in more detail the problem of frivolous and weak filings. Sampling tends to reduce the likelihood of settlement and also provides cover for undesirable lawsuits. However, while both of these effects must be considered in any efficiency analysis, neither is likely to tip the cost-benefit balance against the use of sampling in large enough case aggregations. Second, this Article evaluates sampling in the context of an outcome-oriented rights-based theory. In this connection, the most serious problem is that sampling gives high value plaintiffs only an average recovery. Statistical Adjudication discussed this topic as well, but the current Article generalizes the analysis in a useful way. Third, the Article offers some further thoughts about process-based participation and the day-in-court right based on work that post-dates Statistical Adjudication. Fourth, the Article explores another possible objection to sampling that Statistical Adjudication did not address. This objection, which I call the “methodological legitimacy objection,” is distinct from adverse effects on outcome and limitations on individual participation. It rests ultimately on the assumption that adjudication at its core involves reasoned deliberation that engages the facts of particular cases. The problem with sampling from this perspective is that it substitutes a formulaic method for fact-sensitive reasoning. This Article shows that while the methodological legitimacy objection has some intuitive appeal, it is very difficult to sustain in a rigorous way.

Number of Pages in PDF File: 51

Keywords: actuarial litigation, statistical adjudication, case aggregation, sampling, economics of litigation, settlement, adjudicative legitimacy

JEL Classification: K00, K40, K41

Accepted Paper Series