A View from Within the Fortune 500: An Empirical Study of Negative Value Class Actions and Deterrence
59 Pages Posted: 28 Sep 2013 Last revised: 8 Oct 2013
Date Written: September 26, 2013
This paper takes a look inside the Fortune 500 to analyze the deterrent effect of negative value class actions. The study focuses on the relationship between litigation maturity and deterrence by testing three inter-related hypotheses: (1) Future liability is easier to anticipate when there is a well-developed record of the factual and legal issues from previous litigation than when there is no track record from previous litigation; (2) Corporations who have been held liable for particular conduct will successfully change their conduct to avoid future litigation regarding similar conduct; (3) Corporations who are informed about lawsuits filed against their competitors and who rely upon this information in making their own business decisions will successfully change their conduct to avoid subsequent similar litigation.
The study presents compelling evidence to advance our understanding of deterrence and to answer the question that has plagued negative value class actions for nearly half a century: when, if ever, does the social utility of these actions outweigh their cost?
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