Bad Bargains: The Mistake of Allowing Cost-Benefit Analyses in Class Action Certification Decisions
29 Pages Posted: 29 Jul 2008 Last revised: 19 Aug 2011
Date Written: March 28, 2009
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.
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