How class actions encourage greed
OK, this blawg is my place to speak my piece (and Michael his), so once in a while I can rant a bit about things I hate.
I’m not oppposed to the very idea of class actions, and will even concede they theoretically can serve a socially useful function.
But how they work in practice stinks for a number of reasons. One of which we’ll cover today. Required reading for today is the following comment posted to one of my earlier posts on the much-discussed Abercrombie case:
Hello, I work with the team of civil rights organizations and law firms that brought the landmark civil rights class action against Abercrombie & Fitch for employment discrimination. The lawsuit alleges that Abercrombie discriminated against African Americans, Asian Americans, Latinos, and women who: 1) applied for employment (or attempted to do so but were discouraged), or 2) were employed at an Abercrombie store (including abercrombie kids and Hollister stores) at any time between February 24, 1999 and November 16, 2004.
People fitting this description may be eligible to receive compensation from the $40 million fund. To participate, people must obtain a Claim Form through the Claims website at www.abercrombieclaims.com or through the Claims Administrator, at (866) 854-4175 (toll free). Claim Forms must be postmarked by March 25, 2005. Thanks!
Now isn’t that lovely?
We go out looking for people who didn’t feel strongly enough — if at all — that they had been discriminated against to even file an EEOC charge (which costs nothing), and who still didn’t care enough to learn about and join the lawsuit, although it was well-covered in the news media.
We advertise high and low (apparently now including on blogs mentioning this case) to find these blissfully ignorant (or incredibly passive) supposed discriminatees.
Then we hand out money to compensate them for damages they didn’t know they had suffered — or never lifted a finger to try to remedy.
Is this a great country or what?
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I see…
- a free rider problem. injured persons who did not expend the search costs (or much of anything, really) to identify the problem, formalize a complaint, obtain lawyers, pursue a claim, and obtain a settlement can still collect.
- the possibility of fraud. uninjured persons who can plausibly claim to be injured might swindle their way in
- the danger of injustice. injured persons might for whatever reason not be able to or interested in collecting money, and so they don’t benefit and the cost to the defendant is also unjust.
- fakework or makework by lawyers. by dredging deeply, the plaintiffs lawyers might locate additional injured or uninjured persons, thus increasing the amount of the pot that the lawyers collect.
I would think most of these problems are not problems at all, or ought to be solved by negotiation between the defendant and others. Is there really a danger of society being hurt? Did all those free-riders really scare the company into settling, or cause an unjust verdict?
That said, the notice still clunks, and it’s perfectly fine to dislike its tone or its presence.