Class Actions in Mississippi: To Be or Not to (B)(3)

Abstract

This paper argues that a mandatory class action rule - mandatory both in automatic certification and no opt-out - offers the most effective means of accomplishing the deterrence and compensation objectives of the civil liability system in Mississippi. Class action adjudication would proceed by decoupling the deterrence and compensation functions: at the deterrence stage, the court would determine total aggregate liability and assess damages equal to the total level of sanctionable harm; at the compensation stage, the court would distribute damages to class members based on relative severity of loss in accord with the general theory and practice of insurance. This decoupled structure overcomes the endemic conflict between deterrence and compensation objectives, enabling the civil liability system not only to motivate mass production defendants to invest optimally in precautions, but also to promote the goal of optimal insurance. The paper goes on to discuss several core questions concerning the design and management of mandatory class actions, including the timing and scope of aggregation, settlement-only versus litigation class certification, multi-state class actions, and the problems of "blackmail" and "sweetheart" settlements. We also examine instrumental and individualistic arguments opposing mandatory collectivization and favoring opt-out class actions, such as Rule 23(b)(3), Fed. R. Civ. P. Our overall conclusion is this: nothing short of complete, mandatory collectivization of all claims assures that the civil liability system can maximize individual welfare by optimally deterring unreasonable risk and optimally compensating harm from residual, reasonable risk.

JEL Classification: K13, K40, K41