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ECONOMIC CONSULTING

  • For some background, I used to work in economic consulting at a firm called NERA
  • This could be described as a “law and econ” job
    • PhDs at these companies (like my old boss) are testifying experts on lawsuits that call for opinions from economists
    • These experts have teams of people to help them analyze data, do other research, and prepare their report (my old job)
    • My area was antitrust and intellectual property –other areas also exist, like environmental, employment discrimination, securities, and many others!
  • Side note: several of these firms hire a lot from Vanderbilt!
  • Today we’ll talk about one thing that economists can weigh in on in tort lawsuits: Class Certification

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CLASS CERTIFICATION

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WHAT IS A CLASS ACTION LAWSUIT?

  • A lawsuit where one of the parties is a group of people represented collectively
  • Usually, the class is the plaintiff
    • The claim for all class members is argued as one, and all class members receive the same verdict
  • Not all parties are present in court (the class representative needs to be there, not everyone affected)
  • Note that this is different from a “mass tort”, where all parties file individual suits
    • In mass tort, there is some common argumentation but there are different decisions for class members

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WHY DO WE HAVE CLASS ACTION LAWSUITS?

  • Broadly, in some cases it would not be reasonable for every person wronged by an action have a separate lawsuit
    • Class action lessens litigation costs and time/effort spent in court
  • Relatedly, if the damage done to any one person is small, they may not have incentive to pursue action
    • The aggregate damage can be large even if the individual to any one person is small!
  • Can also avoid cases where different courts reach different conclusions
  • Before a class action law suit can happen, a class has to be “certified”. This is an earlier phase of the trial, and determines whether we can proceed with the trial

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ELEMENTS OF CLASS CERTIFICATION

  • Numerosity
  • Commonality
  • Typicality
  • Adequacy (of representation)
  • Predominance
  • Superiority
  • Ascertainability

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ELEMENTS OF CLASS CERTIFICATION

  • Numerosity
    • “class must be so numerous that joinder of all members is impracticable” (F.R.C.P Rule 23(a))
    • No set number!
  • Commonality
  • Typicality
  • Adequacy (of representation)
  • Predominance
  • Superiority
  • Ascertainability

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ELEMENTS OF CLASS CERTIFICATION

  • Numerosity
  • Commonality
    • “there must be questions of law or fact common to the class” (F.R.C.P Rule 23(a))
  • Typicality
  • Adequacy (of representation)
  • Predominance
  • Superiority
  • Ascertainability

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ELEMENTS OF CLASS CERTIFICATION

  • Numerosity
  • Commonality
  • Typicality
    • “the claims of the representative parties must be typical and reflective of the claims of the class” (F.R.C.P Rule 23(a))
  • Adequacy (of representation)
  • Predominance
  • Superiority
  • Ascertainability

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ELEMENTS OF CLASS CERTIFICATION

  • Numerosity
  • Commonality
  • Typicality
  • Adequacy (of representation)
    • “the representative parties will fairly and adequately protect the interests of the class” (F.R.C.P Rule 23(a))
  • Predominance
  • Superiority
  • Ascertainability

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ELEMENTS OF CLASS CERTIFICATION

  • Numerosity
  • Commonality
  • Typicality
  • Adequacy (of representation)
  • Predominance
    • “questions of law or fact common to class members predominate over any questions affecting individual members” (F.R.C.P Rule 23(b))
  • Superiority
  • Ascertainability

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ELEMENTS OF CLASS CERTIFICATION

  • Numerosity
  • Commonality
  • Typicality
  • Adequacy (of representation)
  • Predominance
  • Superiority
    • “a class action is superior to other available methods for fairly and efficiently adjudicating the controversy” (F.R.C.P Rule 23(b))
  • Ascertainability

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ELEMENTS OF CLASS CERTIFICATION

  • Numerosity
  • Commonality
  • Typicality
  • Adequacy (of representation)
  • Predominance
  • Superiority
  • Ascertainability
    • “class definition must be sufficiently definite so that it is administratively feasible for the court to determine whether a particular person is a member of the proposed class”
    • “identity of the class members must be ascertainable by reference to objective criteria” (Sadler v. Int’l Paper Co., No. 09-cv-1254, 2011 WL 3502467, at *4 (W.D. La. July 13, 2011))

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WHERE DO ECONOMISTS COME IN?

  • Mostly on the commonality, ascertainability, and predominance criteria
    • Practically, there is often overlap between these (and other) criteria
  • Not all class members need to have identical claims. Rather, impact (think: damages) needs to be identifiable by a simple model
    • This is in part an econometric question
      • Can we construct a simple economic model (e.g., a regression) that calculates damages given observable and objective criteria about the class members?
        • If not, even a decent claim can be dead in the water!
  • Now, let’s try applying these with some hypothetical examples

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HYPOTHETICAL EXAMPLE 1

  • A pharmaceutical company sells a drug to treat an illness, and it turns out that they misreported data from their clinical trials and the drug was not safe – people have adverse reactions to the drug. There are thousands of people who have taken the drug and virtually are all harmed in some way, with a wide variety of symptoms ranging from mild shortness of breath to severe pneumonia resulting in hospitalization.

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The people who took the drug want to register as a class. What issue might they find in their ability to certify?

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HYPOTHETICAL EXAMPLE 1

  • A pharmaceutical company sells a drug to treat an illness, and it turns out that they misreported data from their clinical trials and the drug was not safe – people have adverse reactions to the drug. There are thousands of people who have taken the drug and virtually are all harmed in some way, with a wide variety of symptoms ranging from mild shortness of breath to severe pneumonia resulting in hospitalization.

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The people who took the drug want to register as a class. What issue might they find in their ability to certify?

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Predominance is a potential problem – hard to say how much each person is owed!

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HYPOTHETICAL EXAMPLE 2

  • I, along with the other five members of my PhD cohort, decide we want to sue Vanderbilt because we are unhappy with the job opportunities we have after graduation. We want to certify as a class.

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What obstacle may we face in doing so (besides Vanderbilt having a great program that didn’t actually scam us!)?

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HYPOTHETICAL EXAMPLE 2

  • I, along with the other five members of my PhD cohort, decide we want to sue Vanderbilt because we are unhappy with the job opportunities we have after graduation. We want to certify as a class.

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What obstacle may we face in doing so (besides Vanderbilt having a great program that didn’t actually scam us!)?

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Numerosity is a potential problem – there are only six of us!

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HYPOTHETICAL EXAMPLE 3

  • A company commits an antitrust violation that makes them a monopolist and artificially increases their prices. Recall from principles of micro what a monopolist does: increase prices by restricting the quantity:

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The people who would have bought the product but did not because of the artificially high prices (consumers between points B and A on the demand curve) want to sue for the fact that they did not get the product, which would have made their lives better. What problems might they face in registering as a class?

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HYPOTHETICAL EXAMPLE 3

  • A company commits an antitrust violation that makes them a monopolist and artificially increases their prices. Recall from principles of micro what a monopolist does: increase prices by restricting the quantity:

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The people who would have bought the product but did not because of the artificially high prices (consumers between points B and A on the demand curve) want to sue for the fact that they did not get the product, which would have made their lives better. What problems might they face in registering as a class?

Ascertainability may be an issue – how do we know who would have bought the product?

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EXAMPLE: JOHN ROCK V. NCAA

  • Former Gardner-Webb University Quarterback John Rock filed suit against the NCAA challenging the NCAA’s cap on number of athletic aid grants as an antitrust issue
    • Gist of this: claiming that the NCAA reduced competition by artificially decreasing supply of scholarships for student-athletes
  • Dr. Lauren Stiroh challenged the class definition largely based on predominance and ascertainability
    • Why?
  • This busted class certification, and the trial didn’t go on

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MORE NCAA TROUBLE: O’BANNON V. NCAA

  • This was another NCAA antitrust suit, related to “Name, Image, and Likeness” (NIL)
    • Former NCAA athletes alleged that the NCAA used its monopoly power to keep players from making money from their NIL
  • Class certification was a major hurdle in this case
  • Judge ruled that schools should be allowed to offer full cost-of-attendance scholarships (which cover cost of living)
  • Only a partial victory for the athletes. Did class certification issues prevent them from going for more (e.g., damages for past athletes?)
    • Almost definitely! It is hard to calculate damages for past athletes because their NIL is so personal to them.

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QUESTIONS/COMMENTS?