The Conservative Case for Class Actions

Jim Harper

If it’s surprising to hear, it shouldn’t be: Ideologues take a lot of things on faith. I did so as a young policy analyst focusing on technology and privacy. Absorbed with my own area, I ingested without close analysis what others told me about theirs.

“We don’t like lawsuits any more than government regulation” was a message I picked up about civil law enforcement. When it comes to contracts, “reading the fine print is a part of personal responsibility,” so challenging contract terms is off base. I adopted that view even though my law school contracts professor, a practitioner of the Socratic method, made me an involuntary expert on adhesion contracts. Also known as “take-it-or-leave-it” contracts, their unreasonable terms can be stricken in court. Perhaps through neglect, I have long been mildly opposed to class action lawsuits and ready to believe that arbitration clauses in companies’ terms sheets were a good way to avoid them.

In my policy area, there is a peculiar nest of problems related to all this. It’s a miracle of modern technology that one company can serve millions, even billions, of people. But when large companies violate privacy, the result is often a small measure of harm (or maybe just risk, or maybe just annoyance) befalling many minor victims. Those victims must act irrationally to pursue individual justice. They would have to spend far more than the value of their claims to get compensation or other remedies.

Without lawsuits, we have only government regulators to pursue violations of law. But that approach has significant defects. For one, government agencies have limited budgets and no obligation to pursue anyone’s case. Imagine suffering a violation of privacy at the hands of a health care provider, then finding that one’s federal remedy is to ask the Department of Health and Human Services’ Office of Civil Rights to look into it.

Another problem is the propensity of agencies to pursue cases based on what is politically popular. It is my strong suspicion (an unpopular opinion, no doubt) that data security has gotten too much attention from state legislatures and the Federal Trade Commission. Thus it has gotten too much attention from companies. Your typical data breach doesn’t create all that much risk to individuals, much less harm. Overspending on data security reduces our overall welfare because it makes the goods and services we actually want cost more.

Forced to familiarize myself with it as a congressional staffer, I’ve been dubious of regulation for a long time and intrigued by lawsuits in which carelessness with data has had significant liability. Link rot has hit the 17-year-old piece linked above. One case it points to is Remsburg v. Docusearch (2003), in which the New Hampshire Supreme Court held that stalking and identity theft were sufficiently foreseeable that an investigator has a duty to exercise reasonable care in disclosing a third person’s personal information to a client. Another is an unpublished 2005 Michigan Court of Appeals case holding that a union could be liable (to the tune of $275,000) for negligence with its members’ data. No warranty is made that this is the current state of the law in these states or elsewhere.

But what about the smaller harms and wrongs done to greater numbers of people by the internet’s large and gigantic companies? The Conservative Case for Class Actions by Vanderbilt University law professor Brian Fitzpatrick (now out in paperback) has me reconsidering some of the priors I adopted long ago. In the book, Fitzpatrick argues that class actions, long derided on the right as a tool for the trial bar’s anti-corporate exploitations, are an effective and appropriate way to pursue civil justice. Arbitration is often an effective bar on recovery, he says.

The book includes important caveats. Liquidated damages, such as those Congress created in the Telephone Consumer Protection Act, should probably not be available in class actions. Five-hundred dollars is way too much compensation for the damage unwanted phone calls do—even during the dinner hour! How class action attorneys are compensated should be tuned so that their incentives align with their clients’ interests to the greatest extent possible. There are more.

Fitzpatrick urges the comparison of like with like—government regulation with litigation. Don’t let the Nirvana fallacy drive the belief that class action law and practice must be perfected before it is a good way to pursue civil justice. In our growing information economy, privacy offenses are numerous but small—and significant in the aggregate. I’ve written before that I am dubious of inventing new privacy harms, a position the Supreme Court shares. That doesn’t mean privacy should get short shrift. When small privacy offenses aggregate across large populations, the class action lawsuit may be part of making things right, even for people “on the right.”

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