Walker, Laurens, The Consumer Class Action Bill of Rights: A Policy and Political Mistake, 58 Hastings L.J. 849 (April, 2007).
In an essay entitled: The Consumer Class Action Bill of Rights: A Policy and Political Mistake, Laurens Walker of the Hastings Law Journal is the first (that we know of) to examine the policy and political implications of the Consumer Class Action Bill of Rights in CAFA. Walker, argues that Section three of the Consumer Class Action Bill of Rights (“Bill of Rights”) encourages public participation in class action settlements and will likely prove a policy and political mistake.
Walker focuses on the notice requirement contained in the Bill of Rights. The main requirement is that each defendant participating in the settlement of a federal class action must “serve upon the appropriate State official of each State in which a class member resides and the appropriate Federal official a notice of the proposed settlement.” Furthermore, the district court may not approve any settlement until ninety days after service of the notice. Absent notice, a class member may refuse to be bound by the settlement.
The implications of the notice requirement are: (1) few defendants will agree to settle without biding agreements on the entire plaintiff class, (2) notice will be burdensome for defendants and (3) public officials, specifically the State Attorney General, will become aware of proposed settlements. Walker believes the crucial question is how public officials will respond to such notices.
This Note argued that State Attorney Generals will actively respond to the Bill of Rights as a tool for political advancement. State Attorney Generals’ involvement in “multistate litigation” to promote consumer protection has become a hot political campaign topic. Walker discussed the obvious connection between political advancement and consumer protection evident in the career of New York Attorney General Eliot Spizer. Spizer was barely elected in 1998. After four years as a vigilante for consumer protection he was reelected with a 36% margin of the vote. In 2002 Spizer was named Time Magazine’s “Crusader of the Year.” The tactic of using consumer protection as a vehicle for political advancement sparked great concern with Walker.
This Note also points out public officials’ ability to use Rule 24 to intervene by right or permission in proposed settlements. Public officials likely prefer intervention by right because if demonstrated properly participation is allowed as a matter of law. On the other hand, permissive joinder may be granted where the public official shows that their interest has a question of law or fact in common with the existing action. Both forms of intervention are encouraged by the Supreme Court in the settlement of actions.
Next, Walker examines restrictions placed on settlement terms, particularly on coupon settlements, by the Bill of Rights. A coupon settlement allows class members a discount on future purchases in exchange for dismissal of the action. The Bill of Rights has placed several restrictions on coupon settlements. First, contingent fees in such settlements must be based on the value of redeemed coupons. Second, the Bill requires expert involvement and a judicial hearing to determine if the settlement is appropriate. Finally, Courts are allowed to require the unused coupons be donated to a charity as opposed to attorneys fees. Through these restrictions, Congress has expressed their intent to discourage coupon settlements.
Finally, Walker examines private versus public enforcement of legal standards. The argument for public enforcement is that the source of harm may be difficult to identify and costly to protect. Where private citizens may find such costly protection unnecessary, public officials may be compensated to take appropriate action. With regard to private enforcement, there is less of an opportunity for malfeasance that often occurs in public enforcement. Private enforcement runs less of a risk of bribery or the influence of local interest groups.
Walker argues that while public enforcement may reduce agency cost problems, there are available solutions which utilize private enforcement. For example, an efficient private enforcement model would avoid possible malfeasance of public officials and reduce costs of informational searches.
Walker argues that the Bill of Rights’ notice and term regulations are an effort to minimize the private nature of the Class Action Enforcement Model and encourage the involvement of public officials. Ultimately, Walker believes these notice and term restrictions will prove problematic and be the only significant effect on CAFA’s jurisdictional requirements.