We're Scared to Death: Does Class Certification Subject Defendants to Blackmail?

Abstract:     
This Article discusses the thesis that, by certifying class actions, trial judges subject defendants to so much pressure to settle that defendants are effectively blackmailed. Prominent federal judges including Frank Easterbrook, Henry Friendly, Richard Posner, and Jerry Smith have endorsed this proposition, which is drawn from a famous law review article by Professor Milton Handler.

The Article starts by examining the blackmail thesis in detail. A close reading reveals four different versions of the thesis, some of which are factually or normatively incompatible with others. The proponents of the thesis have missed these important differences.

The Article then assesses the soundness of the empirical and normative claims made in each version of the thesis. No version survives scrutiny. All use an analogy to blackmail that is faulty and unhelpful. All make factual assertions of questionable or unproven validity, such as the claim that class actions always settle or that risk aversion drives the decision to settle on the defense side. All also employ normative theories of settlement bargaining that are undeveloped, defective, and unpersuasive.

Number of Pages in PDF File: 55

Keywords: class actions, settlements, blackmail

JEL Classification: K13, K41

Accepted Paper Series