Corporations Have Hobbled Class Actions—Reforms Are Needed

There is something going wrong with class action settlements, and there are two high profile examples.

First is the social media giant TikTok, which violated 89 million minors’ privacy according to a proposed settlement. But only 1.2 million of those people will receive compensation.

And after credit bureau Equifax exposed the sensitive personal information of 147 million consumers (more than 40% of the population) in 2017, government agencies and class action lawyers promised the victims whose data was stolen a cash payment of $125. That dollar number is now closer to $7, and consumers are still waiting for their money.

Years of corporate propagandizing have convinced the public that paltry class action settlements like these are the fault of unscrupulous plaintiffs’ lawyers. But a four-year investigation of America’s civil justice system shows that these subpar deals are the unsurprising product of a rigged legal system.

50-Year Corporate Assault on Class Actions

Since the 1970s, corporate interests have constructed a massive edifice of law firms, trade associations, think tanks, and public relations businesses, subsidized the campaigns of elected officials, and ensured that judges are in power who are disposed to favor corporate power over people.

A main target of this group is one of the great procedural tools of modern jurisprudence: the class action lawsuit. It was intended to empower and incentivize citizens to join together to challenge misconduct that affects people’s civil rights, health, safety, and economic security, where the cost of litigation would otherwise be far beyond the financial means of any one person.

When class actions succeed, they deter wrongdoing, stop illegal practices, and compensate those who are harmed. Class actions are a crucial alternative to government agencies that are corrupted by corporate lobbyists or lack the budgetary resources to protect the public.

The corporate cartel’s assault on class action litigation paid off with a trifecta of U.S. Supreme Court cases since 2011 that:

• Approved forced arbitration clauses—AT&T Mobility LLC v. Concepcion (2011);
• Created class certification hurdles—Wal-Mart Stores Inc. v. Dukes (2011); Comcast Corp. v. Behrend (2013); and
• Limited citizens’ standing to sue—Transunion LLC v. Ramirez (2021); Spokeo Inc. v. Robins (2016).

These decisions made it harder for consumers to bring class actions. Forced arbitration and limited standing prevents many righteous lawsuits from going forward; those cases that do make it past preliminary stages may never get past class certification.

If a case is not certified, it usually dies because the expense of bringing it on behalf of one individual is too high. When that happens, the question of whether the defendant corporation violated the law is never explored or answered.

Not content to hobble collective justice, big business has continuously killed proposals that would address new wrongs with new rights. Take laws that would regulate the tech industry, for example: it is astonishing that, in this age of rapidly evolving technologies, no comprehensive federal privacy or data protection legislation has been passed.

Thanks to the lobbying efforts of Big Tech, state laws are mostly toothless. They lack or have limited private rights of action that would allow consumers to bring class actions for violations, and do not provide strong remedies that would incentivize companies—like TikTok or Equifax—to agree to meaningful settlements that would get real money to victims.

The lawyers who represent consumers are frequently forced to settle righteous class action lawsuits on less-than-ideal terms because current laws and judicial procedures are stacked in favor of corporate defendants. Few ever go to trial—an estimated 2% per year nationwide.

Reform Proposal: A Model State Law

Without fundamental reform, our legal system will be unable to confront the complex challenges of the coming decades. We propose radical changes to the civil justice system in the form of a model state law.

Many of its reforms could also be implemented at the federal level. The model law:

• Prohibits the technology-fueled abuses and traditional scams perpetuated by corporations.
• Broadens citizens’ ability to enforce their rights when a company violates the law by providing a private right of action that empowers consumers and nonprofits to bring cases regardless of whether they lost money.
• Gives consumers the right to hold corporate executives personally liable in civil suits.
• Defines new, more easily met “class certification” standards, eliminating difficult evidentiary burdens.
• Imposes potent remedies, including statutory damages of $1,000 per violation and compensation for time spent trying to resolve problems through customer service. These enhanced tools would give plaintiffs’ attorneys more leverage to negotiate valuable settlements.
• Outlaws “red flags” in class action settlements that discourage consumer participation or undermine public confidence in class actions, such as meaningless “coupon” relief, terms that allow defendants to keep unclaimed or unpaid money intended for consumers, and unnecessary claims requirements. Where a claim form is truly necessary to get consumers the relief to which they are entitled, the model law sets claims rate benchmarks—up to 80% in some circumstances—to ensure maximum class participation.

Flaws in the class action system come at a very high price, and not just for the people who are denied their full measure of redress in any one case. The precipitous collapse of public confidence in the judicial branch is a transcendent threat to America.

Access to justice and the opportunity for every American to have their day in court is a foundational principle of democracy. When the rules no longer work, the system eventually crashes.

It is time to reboot the laws—and the class action system—so that they work for the people, and not corporations.

This article does not necessarily reflect the opinion of The Bureau of National Affairs, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

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Laura Antonini is a California-based consumer advocate, attorney, and the policy director of #REPRESENT, a project of the nonprofit Consumer Education Foundation.