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Distributing Justice

Adam S. Zimmerman

Loyola Law School Los Angeles

May 30, 2011

New York University Law Review, Vol. 86, p. 500, 2011
St. John's Legal Studies Research Paper No. 1827082
Loyola-LA Legal Studies Paper No. 2014-16

This Article explores the procedural concerns that arise when regulatory agencies mimic class actions by collecting big monetary settlements on behalf of victims. Over the past decade, agencies have collected over $10 billion to compensate people hurt by massive frauds, false advertising, and defective drugs, using proceeds from penalties levied against regulatory violators. Today, the Securities and Exchange Commission regularly seeks awards against large public companies and distributes the money to injured investors through “Fair Funds.” The Federal Trade Commission similarly seeks restitution against parties profiting from unfair trade practices and distributes awards to consumers. Even the U.S. Postal Service distributes the ill-gotten profits of scam artists to victims of mail fraud.

However, unlike private lawsuits, agencies afford few safeguards for the victims they compensate. Agencies lack adequate procedures to hear victims’ claims, identify conflicts between different parties, or coordinate with other kinds of lawsuits. I argue that agencies should continue to play a role - albeit a limited one - in compensating victims for widespread harm. However, when agencies compensate victims, they should adopt rules similar to those that exist in private litigation to resolve differences between victims, improve judicial review, and coordinate with private lawsuits.

I propose three solutions to give victims more voice in their own redress, while preserving an agency’s flexibility to enforce the law: (1) that agencies involve representative stakeholders in settlement discussions through negotiated rulemaking; (2) that courts subject agency decisions to hard look review; and (3) that courts and agencies coordinate overlapping settlements before a single federal judge.

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Date posted: May 1, 2011 ; Last revised: August 16, 2014

Suggested Citation

Zimmerman, Adam S., Distributing Justice (May 30, 2011). New York University Law Review, Vol. 86, p. 500, 2011; St. John's Legal Studies Research Paper No. 1827082; Loyola-LA Legal Studies Paper No. 2014-16. Available at SSRN: https://ssrn.com/abstract=1827082

Contact Information

Adam S. Zimmerman (Contact Author)
Loyola Law School Los Angeles ( email )
919 Albany Street
Los Angeles, CA 90015-1211
United States
HOME PAGE: http://www.lls.edu/aboutus/facultyadministration/faculty/facultylists-z/zimmermanadam/

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