Crowd-Classing Individual Arbitrations in a Post-Class Action Era

Myriam E. Gilles

Benjamin N. Cardozo School of Law

Anthony J. Sebok

Yeshiva University - Benjamin N. Cardozo School of Law

May 10, 2013

DePaul Law Review, Forthcoming
Cardozo Legal Studies Research Paper No. 392

Class actions are in decline, while arbitration is ascendant. This raises the question: will plaintiffs’ lawyers skilled in bringing small-value, large-scale litigation – the typical consumer, employment, and antitrust claims that have made up the bulk of class action litigation over the past forty years – hit upon a viable business model which would allow them to arbitrate one-on-one claims efficiently and profitably. The obstacles are tremendous: without some means of recreating the economies of scale and reaping the fees provided by the aggregative device of Rule 23, no rational lawyer would expend the resources to develop and arbitrate individual, small-value claims against well-heeled defendants. But despite these complications, we think there are at least two possible models that might allow for informal aggregation of like claims in at least some subset of cases.

One hybrid model would seek a judicial liability judgment upon which serial, individual arbitrations could later rely. This judgment could take a number of different forms – whether a declaratory class action judgment or a decision rendered in a public enforcement action – so long as it has preclusive force that can be leveraged in subsequent arbitration hearings. A second, complementary model envisions “arbitration entrepreneurs” (either lawyers or non-lawyers) purchasing legally-identical, individual claims which our legal capitalists believe to have value in the arbitral forum. Upon procuring as many discrete claims as the market will bear, the arbitration entrepreneur would seek to resolve the hundreds or even thousands of claims she has amassed in a single arbitral session. With one arbitration entrepreneur as the lawful owner of a multitude of claims, this form of aggregation implicates neither the prohibition against class arbitration nor the contractual definition of “a claim” subject to arbitration.

The hybrid model and the claims-buying model may work independently or synergistically, depending on the case, the form that the public declaration of liability takes, and the incentives of the lawyers and entrepreneurs involved. For example, in the appropriate case, claims-buying entrepreneurs may determine that a (b)(2) declaratory judgment class action creates more and better opportunities to bundle and capture claims than market forces alone. Similarly, lawyers who obtain a judgment under the hybrid approach may determine that the best way to monetize this victory is to buy up many claims for collective arbitration. Indeed, these models present a host of possibilities, and an equal number of potential challenges; this paper is but a first step in describing and analyzing the benefits and costs of these approaches.

Number of Pages in PDF File: 43

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Date posted: May 11, 2013 ; Last revised: July 1, 2013

Suggested Citation

Gilles, Myriam E. and Sebok, Anthony J., Crowd-Classing Individual Arbitrations in a Post-Class Action Era (May 10, 2013). DePaul Law Review, Forthcoming; Cardozo Legal Studies Research Paper No. 392. Available at SSRN: http://ssrn.com/abstract=2263443

Contact Information

Myriam Gilles (Contact Author)
Benjamin N. Cardozo School of Law ( email )
55 Fifth Ave.
New York, NY 10003
United States
212-790-0344 (Phone)
212-790-0205 (Fax)
Anthony J. Sebok
Yeshiva University - Benjamin N. Cardozo School of Law ( email )
55 Fifth Ave.
New York, NY 10003
United States

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