When a consumer as prominent as Chief Judge Alex Kozinski of the US Court of Appeals for the Ninth Circuit is a member of a class action lawsuit, lawyers on both sides of the case should check their blind spots. Kozinski and his wife's blistering objection to the settlement in a defective car-battery matter last year was picked up by the media and held up as a study of what's wrong with class actions. For the Center on Civil Justice’s fall conference—The Future of Class Action Litigation: A View from the Consumer Class—Kozinski sat down with University Professor Arthur Miller to recount his disappointment observing Klee et al. v. Nissan North America as one of 18,000 estimated consumers in the class.
Kozinski conceded that class actions level the playing field when a consumer has a claim against a multimillion-dollar corporation. Without them, he said, “It would be very easy to chisel large classes of consumers for very small amounts, or to commit lots of tiny wrongs, each of which is not capable of being redressed because nobody has incentive to do it.” Nonetheless, he was of “mixed mind” about their utility.
“They seem to wind up generating a lot of money for the lawyers, and a lot of gornisht for the consumers,” he said. “Plenty of nothing.”
For instance, in Kozinski’s case, Nissan had mailed him an extended warranty to compensate for the poor battery performance of his all-electric Nissan Leaf. Initially impressed by what seemed to be Nissan’s proactive customer service, he was disturbed when he received notice months later that a consumer class action settlement was awarding him that very warranty.
“Getting five dollars in the mail or getting a coupon for future purposes or getting preferential treatment in the future—I think those are fake. Those are not real benefits. They’re more like promotional programs for the defective product.” Here, the settlement did one worse: it seemed to be giving him something he already owned.
Kozinski and his wife Marcy Tiffany responded with a thirty-six page protest to the proposed settlement.
Besides the lack of consumer benefits, they took issue with the plaintiffs’ counsel. The lawyers were making $1.9 million in the case, but from Kozinski’s perspective, they hadn’t done the legwork to earn it. They had filed a complaint, entered settlement, and gone to “confirmatory discovery,” meaning the only materials they had accessed had been provided to them by Nissan, which they “did the difficult job of reading.”
“When lawyers work hard, they deserve to be paid,” he said. But he acknowledged that lawyers have an incentive to focus on their own compensation during settlement, which can cloud their judgment. Judges overseeing settlements need to keep this tendency in mind.
Given the shortcomings of class actions, Kozinski suggested that Rule 23 of the Federal Rules of Civil Procedure, which authorizes them, may very well need to be rewritten from scratch. If the legal community can recognize that class actions rarely benefit the consumer, perhaps funds won via such cases should be distributed to other parties (and benefit, say, all taxpayers), Kozinski offered.
When a distinguished federal judge gets an eyeful from the seat of an ordinary consumer in a class action, settlement may take a back seat to reform.
Watch the conversation below (50 min):
Posted November 14, 2014