Exploding the Blackmail Myth: A New Perspective on Class Action Settlements

Abstract

In the last ten years, a number of federal courts have held that aggregating numerous claims into one class action suit puts excessive settlement pressure defendants, and renders class certification tantamount to blackmail. Accordingly, these courts have modified the class certification analysis take this alleged excessive settlement pressure into account, making it harder for plaintiffs to certify a class. In this Article, we explore the origins and merits of this argument, which we refer to as "the Blackmail Myth." Part II closely examines Chief Judge Posner's analysis in In re RhonePoulenc Rorer, Inc., the case which has become the leading authority for the Blackmail Myth. Part III explodes the myth: we survey the law and empirical evidence applicable to the myth and demonstrate that it is neither objectively accurate nor legally sound. Finally, in Part IV, we explore the relationship between the Blackmail Myth and the unfortunate phenomenon of collusive class action settlements. We conclude that the prevalence of collusion in the class action arena further undermines the Blackmail Myth.

Moreover, by systematically disadvantaging class counsel irrespective of the merits of plaintiffs' claims, the myth fosters the very sellout settlements that proponents of the myth rail against. In conclusion, we suggest that Klay v. Humana, Inc., a recent Eleventh Circuit opinion rejecting the Blackmail Myth-Judge Posner's version in particular should replace Rhone as the leading authority on the issue of settlement pressure in class actions.