Do Class Actions Deter Wrongdoing?

Abstract

I and other scholars have long pointed to the deterrence virtue of the class action to justify its existence even when it was doubtful that it furthered its other purposes, such as compensation or litigation efficiency. In recent years, critics have argued that class actions may not offer even this virtue. Some argue that the entire theory of general deterrence is misguided for class actions and others argue that, whatever the theory, there is no empirical proof that class actions do what the theory says. In this article, I take up these critiques. I find that the theory of deterrence remains just as strong today as it was when it was introduced 50 years ago by the “classical” law and economics movement. Moreover, although there is not a great deal of empirical evidence to support the theory for class actions, there is some, it is uncontroverted, and it is consistent with reams and reams of empirical evidence in favor of deterrence for individual lawsuits. I conclude that the conventional view that the class action can be justified by the deterrence rationale alone remains sound.

Keywords: Deterrence, Class Actions, Empirical Studies, Law and Economics, Litigation