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Businessweek on class actions

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Businessweek mentions the pending CCAF Marek v. Lane Facebook cy pres certiorari petition (on the calendar for tomorrow) in a larger article about how the Supreme Court is supposedly squelching the class action by issuing rulings against abusive class-action certifications. Public Citizen got to Businessweek apparently, with the author warning that a cert grant could be bad for consumers. It's hard to see how consumers could be made worse off than a $0 settlement; such settlements hurt consumers by raising their costs without any corresponding benefit. Defense attorney John Beisner tells me of being on an American Constitution Society panel and asking the audience to identify a consumer class action where the consumers got more than the attorneys, and no one being able to name one.

One quote stands out as especially poor analysis, though:

Reliable data on class actions are in regrettably short supply because courts don't track them. The only helpful gauge over time measures just a slice of the relevant cases: federal securities fraud claims. The economic consulting firm Cornerstone Research says in the first six months of 2013, 74 securities class actions were filed in U.S. district courts. That's down 22 percent from the 16-year average from 1997 to 2012 and off 42 percent from the peak in the second half of 1998.

The problem here is that the Supreme Court has consistently ruled in favor of plaintiffs in securities cases in the last few years. If securities filings have gone down, it's because the stock market has gone up in the last four years, and securities filings go up and down in inverse correlation to the market direction—which does a lot to demonstrate that securities lawsuits tend to be less about fraud than about rent-seeking. In any event, the direction of securities class actions tells us nothing about the direction of consumer class actions.

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Isaac Gorodetski
Project Manager,
Center for Legal Policy at the
Manhattan Institute
igorodetski@manhattan-institute.org

Katherine Lazarski
Press Officer,
Manhattan Institute
klazarski@manhattan-institute.org

 

Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.