Settlement, ADR, and Class Action Superiority
D. Theodore Rave
University of Houston Law Center
April 17, 2014
Journal of Tort Law, 2014, Vol. 5 p. 91
U of Houston Law Center
When a defendant sets up a private voluntary compensation scheme or includes an arbitration clause in its form contracts, the resulting alternative dispute resolution (ADR) system bears striking resemblance to the typical endpoint of class action litigation — a settlement setting up an administrative claims resolution scheme as an alternative to litigation on a mass basis. This article addresses the question of when the existence of one of these ADR systems — offering a shortcut to the same endpoint — should block future class action litigation. It examines important differences in timing, bargaining dynamics, and agency costs in these three contexts. And it argues that a court asked to certify a class in the face of an existing private resolution scheme should undertake a functional and essentially comparative inquiry, considering not only the potential savings in transaction and agency costs, but also the underlying bargaining dynamics that may make these ADR shortcuts more vulnerable to unilateral manipulation by defendants than class action settlements.
Number of Pages in PDF File: 36
Keywords: class action, settlement, alternative dispute resolution, ADR, Aqua Dots, GCCF, superiority, arbitration, complex litigation, class arbitration, Concepcion, Italian Colors, voluntary refund
JEL Classification: K40, K41
Date posted: January 24, 2014 ; Last revised: May 1, 2014
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