Class Action Accountability: Reconciling Exit, Voice, and Loyalty in Representative Litigation

Posted: 9 Dec 1999

See all articles by John C. Coffee

John C. Coffee

Columbia Law School; European Corporate Governance Institute (ECGI); American Academy of Arts & Sciences

Date Written: December 2, 1999

Abstract

This paper assesses the prospects for meaningful reform of the class action after Amchem Products v. Windsor and Ortiz v. Fibreboard Corp. It reads these decisions as viewing "class cohesion" as the essential rationale that legitimizes representative litigation. Although it agrees that a legitimacy principle must underlie representative litigation, it doubts that "class cohesion" can bear that weight, either as a theory of political representation or as an economic solution for the agency cost and collective action problems in representative litigation.

Instead, using the familiar terminology of "exit," "voice" and "loyalty," it suggests that "exit" should prove a superior remedy to voice, and can be implemented through procedures that use exit (much like the appraisal remedy in corporate law) to discipline unfaithful fiduciaries. More generally, it argues that the same accountability mechanisms that work in the field of corporate governance should work in this context as well.

Because Amchem and Ortiz may be read to require overly rigorous procedural requirements that could lead to what this article terms the "Balkanization" of the class action, this article further suggests that "exit" should sometimes constitute a functional substitute for "voice" or "loyalty." As a remedy, "exit" can be structured so as to maximize individual choice and promote competition between non-overlapping classes. Thus,the benefits of competition can be realized without increasing the the risk of collusion or a "reverse auction."

On the normative level, a choice must be made between viewing the class as an entity and viewing it as an aggregation of individuals. This article argues for the latter view and posits that the basic fiduciary duty of the counsel in representative litigation should be to protect client autonomy.

Suggested Citation

Coffee, John C., Class Action Accountability: Reconciling Exit, Voice, and Loyalty in Representative Litigation (December 2, 1999). Columbia Law Review, 2000. Available at SSRN: https://ssrn.com/abstract=194548

John C. Coffee (Contact Author)

Columbia Law School ( email )

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New York, NY 10025
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212-854-2833 (Phone)
212-854-7946 (Fax)

European Corporate Governance Institute (ECGI)

c/o ECARES ULB CP 114
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Belgium

American Academy of Arts & Sciences

136 Irving Street
Cambridge, MA 02138
United States

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