The Death of Class Actions

Miriam Gilles has an interesting article in the Michigan Law Review (earlier version available here) warning of the impending death of class action litigation. Here is an excerpt:

[T]he vast majority of the remaining class actions are based on some sort of contractual relationship. Virtually all consumer class actions, for example, arise out of some form of contract (adhesive or otherwise), just as employment discrimination class actions arise out of employment contracts. Federal antitrust class actions necessarily grow out of contracts (indeed, standing rules require as much), and the same is true for class actions relating to insurance benefits, ERISA plans, mutual funds, franchise agreements, and an endless variety of other matters.

All of these contract-based class actions are, I believe, on their way to Mauritius. Corporate caretakers have concocted an antigen, in the form of the class action waiver provision, that travels through contractual relationships and dooms the class action device. Where class actions are based on some sort of contractual relationship, this toxin is quite lethal. Developed in the late 1990s by marketers for one of the arbitral bodies, among others, the waiver works in tandem with standard arbitration provisions to ensure that any claim against the corporate defendant may be asserted only in a one-on-one, nonaggregated arbitral proceeding. More virulent strains of the clause force the would-be plaintiff to waive even her right to be represented as a passive, or absent, class member in the event some other injured person manages to commence a class proceeding.

I am not nearly as critical of arbitration as Gilles, as I have seen first-hand how international and domestic arbitration is a salutory development in the modern era of globalization. But she is focused on one type of relief that is indeed threatened by arbitration. And she is right that we should not miss the momentous importance that arbitration and waiver clauses are having on the future of class action lawsuits.

For example, if you buy a Dell computer online and it goes on the blink because of a design defect, henceforth you will be precluded from aggregating your complaint with other similarly-situated claimants. Just read Article 13 here. You can arbitrate your petty little dispute, but there will be no class action muscle behind it. (Interestingly, Dell has not included such arbitration and class-action waiver clauses in their online contracts in other countries, such as the United Kingdom, France, and Spain, where Dell provides for litigation in the domestic courts of the respective jurisdiction.)

If a contract can include a choice of law clause, a waiver of a judicial forum, and a waiver of collective relief, then Gilles may well be right that collective action waivers will be the antigen that portends the death of contractually-based class action lawsuits. That may be good or bad thing depending on your perspective of the utility of those lawsuits in their modern incarnations.