Internal and External Governance in Complex Litigation

Abstract

In this Article, Professor McKenzie distinguishes between two types of governance problems in aggregate litigation: internal and external governance concerns. Internal governance concerns focus on the organization of the collective—how it is structured, who represents it, and how best to protect the interests of those within it. For these problems, there is a robust governance model drawn from the literature on organizations. In that model, exit, voice, and loyalty provide a stable set of considerations. External governance concerns, by contrast, focus on the proper role of litigation within the larger polity. Rather than addressing the relationship among members of the collective, external governance concerns test the relationship among the state, civil society, and the individual. For these problems, exit, voice, and loyalty provide less traction. When external governance concerns arise, there is no comparable framework to match the organizational model that guides courts and scholars when internal governance concerns arise.

Using this vocabulary, Professor McKenzie considers a number of puzzling class action decisions, including In re National Prescription Opiate Litigation, the Sixth Circuit opinion that reversed the certification of a “negotiation class.” The Article suggests that the unsatisfying nature of these decisions can be explained in part by the absence of a helpful external governance model. This absence leads to two types of distortions in cases that raise potential external governance concerns. Courts either resort to excessive formalism in the application of Rule 23 or try to shoehorn anxieties about the outward effects of the class action into the internal governance framework, which is ill suited to resolve them.