Tag: Litigation

“Fair, Reasonable, and Adequate” According to Who? Cy Pres Distributions That Result in Cheap Settlements and Generous Attorney Fees, but No Financial Benefit to Class Members – Postscript (Response) by Linda Sandstrom Simard

From Volume 88, Number 5 (July 2015)
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In her recent article, Professor Rhonda Wasserman argues that class action settlements that distribute funds cy pres raise a very serious risk of prejudice to absent class members. The problem, she asserts, is the temptation for class counsel to sell out the interests of absent class members in exchange for a discounted settlement for the defendant and a generous fee for class counsel. To illustrate her concern, she cites the $9.5 million settlement in Lane v. Facebook, Inc. that directed approximately $6.5 million to a nascent charity that was controlled—at least partially—by the defendant, $3 million to class counsel and nothing to the three million absent class members. Professor Wasserman argues that courts cannot have a laissez faire attitude toward protecting absent class members and she proposes a number of procedural reforms to ensure that cy pres distributions are only used when absolutely necessary. While her proposals are likely to provoke increased judicial scrutiny of cy pres distributions, the article stops short of addressing the principal question: when, if ever, is a settlement that distributes funds cy pres “fair, reasonable and adequate” to the absent class members?

 

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Cy Pres in Class Action Settlements – Article by Rhonda Wasserman

From Volume 88, Number 1 (September 2014)
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Monies reserved to settle class action lawsuits often go unclaimed because absent class members cannot be identified or notified or because the paperwork required is too onerous. Rather than allow the unclaimed funds to revert to the defendant or escheat to the state, courts are experimenting with cy pres distributions—they award the funds to charities whose work ostensibly serves the interests of the class “as nearly as possible.”

Although laudable in theory, cy pres distributions raise a host of problems in practice. They often stray far from the “next best use,” sometimes benefitting the defendant more than the class. Class counsel often lacks a personal financial interest in maximizing direct payments to class members because the fee is just as large if the money is paid cy pres to charity. And if the judge has discretion to select the charitable recipient of the unclaimed funds, she may select her alma mater or another favored charity, thereby creating an appearance of impropriety.

 

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Enabling Class Litigation as an Approach to Regulating For-Profit Colleges – Note by Blake Shinoda

From Volume 87, Number 4 (May 2014)
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The above quotes from two of the primary players in the for-profit college industry highlight the industry’s polarizing and divisive regulatory issues. This industry has seen unprecedented growth in recent years, increasing enrollment by 225% from 1998-2008. In fact, for-profit colleges received $32 billion in federal grants and loans from 2009-2010. This number accounted for about 25% of all federal student aid distributed despite the industry enrolling only 10-13% of all college students (about 2.4 million students). The prominence and growth of for-profit colleges is highlighted by one for-profit college’s recent entry into a Division I athletic conference.

However, recent reports of fraudulent and deceptive recruiting, and high student default rates have plagued the industry, culminating in the release of a negative Senate report by the Health, Education, Labor, and Pensions Committee (“HELP Report”). One such report was an undercover U.S. Government Accountability Office (“GAO”) report of fifteen for-profit colleges that found that each school made questionable or deceptive recruiting statements. Additionally, the HELP Report found that the average tuition at for-profit colleges exceeds that of their respective public school counterparts (for certificate programs, associate’s degrees, and bachelor’s degrees). For example, a bachelor’s degree in business administration at the for-profit Alta College in Colorado costs $80,466 compared to $60,704 at the University of Colorado Boulder.” Moreover, the Education Department recently released the three-year cohort default rate from 2009, measured by the percentage of student borrowers who entered repayment and defaulted within the past three years for a given school. The three-year default rate was 22.7% in the for-profit college sector compared to only 11% in public colleges and 7.5% for nonprofit private colleges.

 

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How Lawyers’ Intuitions Prolong Litigation – Article by Andrew J. Wistrich & Jeffrey J. Rachlinski

From Volume 86, Number 3 (March 2013)
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Most lawsuits settle, but some settle later than they should. Too many compromises occur only after protracted discovery and expensive motion practice. Sometimes the delay precludes settlement altogether. Why does this happen? Several possibilities—such as the alleged greed of lawyers paid on an hourly basis—have been suggested, but they are insufficient to explain why so many cases do not settle until the eve of trial. We offer a novel account of the phenomenon of settling on the courthouse steps that is based upon empirical research concerning judgment and choice. Several cognitive illusions—the framing effect, the confirmation bias, nonconsequentialist reasoning, and the sunk-cost fallacy—produce intuitions in lawyers that can induce them to postpone serious settlement negotiations or to reject settlement proposals that should be accepted. Lawyers’ tendency to rely excessively on intuition exacerbate the impact of those cognitive illusions. The experiments presented in this Article indicate that the vulnerability of experienced lawyers to these cognitive errors can prolong litigation.

 

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The Neurobiology of Opinions: Can Judges and Juries Be Impartial? – Article by Isabelle Brocas & Juan D. Carrillo

From Volume 86, Number 3 (March 2013)
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In this Article we build on neuroscience evidence to model belief formation and study decisionmaking by judges and juries. We show that physiological constraints generate posterior beliefs with properties that are qualitatively different from traditional Bayesian theory. In particular, decisionmakers will tend to reinforce their prior beliefs and to hold posteriors influenced by their preferences. We study the implications of the theory for decisions rendered by judges and juries. We show that early cases in judges’ careers may affect their decisions later on, and that early evidence produced in a trial may matter more than late evidence. In the case of juries, we show that the well-known polarization effect is a direct consequence of physiological constraints. It is more likely to be observed when information is mixed, as behavioral evidence suggests, and when prior beliefs and preferences are initially more divergent across jurors.

 

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The Rise of U.S. Food Sustainability Litigation – Article by Stephanie Tai

From Volume 85, Number 4 (May 2012)
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This Article provides one of the first critical looks at the interface between the values of the sustainable food movement and its rising use of litigation. In particular, it focuses on two growing areas of food sustainability litigation–challenges to Concentrated Animal Feeding Operations (“CAFOs”) and challenges to the use of genetically modified organisms (“GMOs”) in the food system–chosen because they involve growing sectors of U.S. agriculture over which members of the sustainable food movement have raised significant concerns.

 

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The Strategic Use of Public and Private Litigation in Antitrust as Business Strategy – Article by D. Daniel Sokol

From Volume 85, Number 3 (March 2012)
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One understudied area of the formative period of antitrust and of Standard Oil’s conduct during this period is in the use and nature of antitrust private claims against Standard Oil. In contemporary antitrust, the ratio of private to government brought cases is ten to one. In contrast, one hundred years ago government cases constituted nearly all antitrust cases, and many of such cases were state cases. On the hundredth anniversary of the Standard Oil decision, the present Article uses a discussion of the antitrust private actions against Standard Oil prior to the company’s court-ordered break up in 1911 as a starting point for a broader discussion about the interaction between public and private rights of action in antitrust in the modern era. Traditionally, government will bring antitrust cases to offset competitive distortions in the market either because private plaintiffs do not bring the right kinds of antitrust cases or because private actors lack the resources of government to bring good cases. This Article suggests circumstances in which government not only does not correct but also actually creates the market distortion by bringing a nonmeritorious case that aids the firm’s competitors rather than a case that helps consumers. In identifying this behavior, this Article combines two strands of literature–the strategic use of antitrust by private actors on the one hand and a public choice based economic theory of regulation on the other.

 

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Resolving the Dilemma of Nonjusticiable Causation in Failure-to-Warn Litigation – Article by Aaron D. Twerski & Neil B. Cohen

From Volume 84, Number 1 (November 2010)
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Failure-to-warn cases represent a significant portion of product liability law, yet the core concepts of this body of law are poorly developed. In particular, the standard tort requirement that the injured party demonstrate a causal connection between the defendant’s violation of duty and the injury simply does not work in the vast majority of failure-to-warn cases. A substantial body of social science literature demonstrates that, in all but extreme cases, it is impossible for an injured party to demonstrate by a preponderance of the evidence—and thus for a court credibly to conclude—that the party would have acted differently had a warning been provided. Thus, a rigorous application of the causation requirement would result in defeat for most injured parties. Yet, some injuries certainly could be prevented by effective warnings, even if those beneficiaries cannot be easily identified. A legal system that denies recovery to virtually all injured parties because it cannot ascertain which parties’ injuries would have been prevented undercompensates victims and underdeters dangerous practices by product manufacturers and distributors, and thus does not fulfill the goals of the tort system. Some courts and commentators have recognized this problem and have put forth a variety of mechanisms to resolve it. Those mechanisms—such as “heeding presumptions” and enterprise liability—suffer from the opposite problem: they compensate injured parties without regard for whether there is a causal connection between the lack of a warning and the injuries. The result is overcompensation of plaintiffs, overdeterrence of manufacturers, and underdeterrence of risky consumer conduct. This too fails to fulfill the goals of tort law. In this Article, the authors propose eliminating causation as an independent requirement in most failure-to-warn cases and instead determining an injured party’s recovery by allowing proportional recovery, taking into account both the severity of the manufacturer’s fault in failing to warn of the dangers associated with its product and the likelihood that the plaintiff’s injuries would have been prevented by a warning. Such a system would recognize that some failures to warn are more egregious than others and would generate a closer match between aggregate compensation and aggregate injuries caused by a failure to warn.

 

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