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Exiting Litigation
Abstract
This essay, prepared for the Symposium on the Judiciary in the Twenty-First Century at Loyola University Chicago School of Law, discusses the circumstances in which courts should permit exit into non-adjudicatory processes such as ADR, mass-resolution facilities, or adjudication before administrative agencies. It begins by arguing that courts must justify their decisions to allow litigation-eligible disputes to exit into other resolution mechanisms. It then proposes three possible justifications for exit: consent of all affected parties, a lack of harm caused to any affected party, or a gain in social utility from using a non-adjudicatory process. The essay then maps those three justifications onto, respectively, ADR, mass-resolution facilities, and administrative adjudication to provide some rules of thumb to guide courts in their determinations whether and when to permit exit.
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Cases are won and lost in discovery, yet discovery draws too little academic attention. Most scholarship focuses on how much discovery to allow, not how courts decide discovery disputes - which, unlike trials, occur in most cases. The growth of e-discovery - imprudent emails or lingering deleted files - makes cost issues increasingly salient, but the e-discovery rules just reiterate existing cost/benefit proportionality limits. Proportionality limits are topic of broad consensus among civil procedure scholars and economists, but this Article deems them impossible to apply effectively. Proportionality limits fail to curb discovery excess while also disallowing discovery meritorious cases need, resulting in bad cases dominating good ones. This Article acknowledges proportionality's flaws but rejects the consensus blaming bad rulemaking or judging. Rather, proportionality requires impossible comparisons: how can courts compare discovery value and cost before parties gather the evidence? Like other arguments that procedural rulings are never truly separate from case merits, this Article notes how discovery has more probative value in the closest cases - yet case merits remain uncertain in discovery, when courts cannot yet examine all the evidence. In game theory terms, parties with discovery disputes cannot convey case merit credibly; courts have too little information, so low-merit parties can claim high merit, and courts act as if all cases warrant similar discovery. In this pooling equilibrium, ruling the same on all cases in the pool, regardless of merit, is courts' best strategy but a sub-optimal one, yielding too much discovery in low-merit cases, too little in higher-merit ones. Thus, the quest for better discovery has disappointed not because of bad rules or decisions, but because courts and parties are stuck in a pooling equilibrium with information-timing circularity: optimal evidence-gathering requires merits analysis, which requires evidence-gathering.One answer is to defer close decisions on possibly useful but costly evidence until meritorious cases separate from the pool, turning pooling equilibria into separating equilibria. Summary judgment can be this separation: cases going to trial, post-summary judgment, likely have 50/50 odds - better than most. Costly evidence has more value in 50/50 cases, where juries struggle to reach verdicts, than in weaker or stronger cases. No one yet has proposed post-summary judgment discovery to redress the costly discovery dilemma (summary judgment typically follows discovery), but high-cost evidence can be an exception: cases surviving summary judgment are close calls warranting more fact-gathering, so some costly discovery regularly denied now should be allowed after summary judgment. Thus, the existing debate is too focused on discovery quantity; it should focus more on discovery timing. Existing rules give courts discretion to use this proposal, but a new rule could minimize the risk of misusing the proposal to deny more discovery. This Article concludes by briefly noting how economic analyses must consider the details and information timing of the litigation process.
The class action is a compromise: It removes class members' right to participate in their own lawsuits, but it benefits society by holding defendants accountable for the dispersed harm they create. This compromise is captured by the idea that the named plaintiff's role is to represent the interests of the absent class members rather than to be their agent. Because the architecture of Rule 23 - the federal procedural rule that governs class actions - is inconsistent with the nature of the class action as a compromise based on interest representation, the rule should be altered dramatically. We would eliminate the core categorization scheme of 23(b) and apply limited notice, intervention, and opt-out rights to all class actions.
This article examines the increasing use of contracts of adhesion in which companies require consumers, employees, franchisees and other "little guys" to submit disputes with the company to binding arbitration. The article argues that the Supreme Court's current preference for such agreements is not statutorily well-founded. Specifically, it contends that the Federal Arbitration Act was not intended to make such agreements binding on unknowing consumers or employees.Turning next to policy analysis, the article asserts that the Supreme Court has erred in expressing a preference for binding arbitration in cases where such arbitration was not knowingly and voluntarily accepted by both parties. In particular, it argues that binding arbitration is not necessarily better and cheaper for all parties than litigation. Rather, a company can use a binding arbitration clause to secure significant strategic advantages over less knowledgeable parties. The article further argues that by using preemption principles to preclude states from protecting their own citizens from unfair binding arbitration Congress and the Supreme Court have trammeled important federalism interests.
The proliferation of alternative dispute resolution (ADR) has transformed the administration of civil justice. As both a rival and a complement to formal adjudication, ADR presents an alternative forum for most disputes. ADR offers a system with procedural flexibility, a broad range of remedial options, and a focus on individualized justice. ADR performs convenient and useful works that cannot be done, or cannot easily be done, through formal adjudication. And in every case in which one of the various modes of ADR offers a process or reaches a result that differs materially from those of the formal courts, there is in fact a rival system. Thus, contemporary civil justice is administered by dual systems, with formal adjudication on one hand, and a constellation of ADR methods on the other. The administration of justice through divided systems is a familiar model. For centuries the Anglo-American legal system administered justice through the systems of Law and Equity. The Law courts ensured uniformity and predictability, while courts in Equity tempered the law to the needs of the particular case. Although there was considerable tension between the two regimes, they were also symbiotic. Over time the Law courts adopted many of the best practices of Equity. Meanwhile, efforts to crystallize the jurisdiction of Equity introduced complexity and procedural technicalities that turned that system into a jus strictum differing little from the Common Law. With each system looking increasingly like the other, Law and Equity were merged into a single system in a wave of reforms in the late nineteenth and early twentieth centuries. The reformers envisioned a unified procedural apparatus that would permit judges to jointly administer the substance of both law and equity. However, an important ingredient of the jurisprudence of Equity was displaced by the procedural merger: a merged system offered no recourse from the procedural apparatus itself when the unique needs of a particular case demanded a different procedure. Moreover, the substance of equity lost much of its vitality in the merged system. The system of ADR stands in this breach created by the merger of Law and Equity. ADR offers an alternative system for relief from the hardship created by the substantive and procedural law of formal adjudication. Moreover, the freedom, elasticity, and luminance of ADR bear a striking resemblance to traditional Equity, offering relaxed rules of evidence and procedure, tailored remedies, a simpler and less legalistic structure, improved access to justice, and a casual relationship with the substantive law. Alas, the dark side of ADR is also reminiscent of Equity: unaccountability, secrecy, an inability to extend its jurisdictional reach beyond the parties immediately before it, and a certain vulnerability to capture by special interests. The reincarnation of equity through ADR illustrates a pervasive dialectic between law and equity. Conflict between the goals of certainty and individual justice has created an ambivalent attitude in the law toward equity, to which the law is attracted by reason of the identification of equity with a general sense of justice, but which the law ultimately rejects because of the laws concern for certainty. Hence, a vibrant system of Equity mediated the strict law until it, too, became bound and confined by the channels of its own precedents and the technicalities of its own procedures. ADR emerged, in turn, as the equitable alternative. And the pattern repeats: the remarkable popularity of ADR leads inevitably, albeit ironically, to reforms that would constrain that very system. This Article uses an equity paradigm to develop a theory of ADR and, where necessary, to guide reform. Preserving equity through ADR is important because no set of prohibitive or declaratory rules will do justice in all cases or will anticipate all situations. Because unimaginable events are inevitable, some alternative or escape from rule-bound formalism is important. Indeed, equity is a progressive force in the law. When formal adjudication cannot provide a plain, adequate, and complete remedy, the system of ADR should be flexible enough to deliver individualized justice. The repeated exercise of that protean jurisdiction identifies systemic failures of the formal system and ultimately wields a reforming influence. The need for an autonomous system of discretionary law may be as great as or greater than ever. Thus, the Article argues that equity should make the most of the modern instrument, ADR, as it once did of the subpoena. Specifically, I argue that flexibility and discretion should prevail in ADR processes even when pragmatism may demand detail and complexity. ADR must be free of the procedural paraphernalia of certainty and predictability to perform its complementary role in the administration of justice through dual systems. Contemporary efforts to standardize and restrict the processes of ADR recognize the right problem, but propose the wrong solution. The problem is the number and significance of cases that are resolved outside of formal adjudication. The solution is not reform of the alternative system that is drawing them in, but rather reform of the formal system that is driving them away.
This article comments on Professor Geoffrey Miller's article about pleading under Tellabs and goes on (1) to use Tellabs, Bell Atlantic Corp. v Twombly, and Iqbal v. Hasty (in which the Court has granted review) to illustrate the limits of, and costs created by, certain foundational assumptions and operating principles that are associated with the Rules Enabling Act's requirement of "general rules," and (2) more generally, to illustrate the costs of the complex procedural system that we have created. Thus, for instance, the argument that the standards emerging from Twombly should be confined to antitrust conspiracy cases confronts the foundational assumptions that the Federal Rules are trans-substantive and that they cannot be amended by judicial interpretation. Similarly, in Iqbal, the Government presumably denies that it is calling for the imposition of a heightened fact pleading requirement in cases involving high government officials entitled to an immunity defense because the Court seems to have made it impossible for the judiciary openly to impose such a requirement other than through "The Enabling Act Process." The Court may, however, take a different view of the appropriate contextual plausibility judgment than did the lower court in Iqbal. If so, however, the Court would thereby confirm the view that Twombly is an invitation to the lower courts to make ad hoc decisions reflecting buried policy choices. I therefore argue that, if the Court is persuaded that the changes already made to pleading jurisprudence are insufficient to accommodate the needs of the immunity defense, it should forthrightly require fact pleading as a matter of substantive federal common law.
Part I of this Article first looks at the major components of common law and equity procedure, and then examines the domination of an equity mentality in the Federal Rules. Part II explores the American procedural experience before the twentieth century, and demonstrates how David Dudley Field and his 1848 New York Code were tied to a common law procedural outlook. Part III concentrates on Roscoe Pound (who initiated the twentieth century procedural reform effort), Thomas Shelton (who led the American Bar Association Enabling Act Movement), and Charles Clark (the major draftsman of the Federal Rules). Through understanding these men and the interests they represented, one can see that we did not stumble into an equity system; people with identifiable agendas wanted it. Part IV examines how the Federal Rules advocate rejected methods that might have helped balance and control their equity procedure, why the methods of confining the system failed, and why current approaches to redress the imbalance of an equity-dominated system will also fail. It concludes with a summary of fundamental constraints rejected by the advocates of uniform federal rules of procedure. My goal is to rescue some quite profound voices from the wilderness.
This article, one of several for the seventy-fifth anniversary volume of the University of Chicago Law Review, assesses the intellectual contribution of Harry Kalven, Jr. and Maurice Rosenfield's 1941 article in that journal on "The Contemporary Function of the Class Suit." Kalven and Rosenfield anticipated what would emerge thereafter as among the most distinctive features of the American civil justice system: the elaboration, in parallel, of both private class action litigation and public enforcement by the administrative state. Whereas Kalven and Rosenfield sought to delineate the "contemporary function" of the class action, the agenda for the law today consists of resolving two contemporary dilemmas to which that function has given rise. The first dilemma speaks to the tension between the class action device as a vehicle for privatized enforcement and the allocation of authority within the United States along both federal-versus-state and public-versus-private lines. The challenges for the law today in these regards consist of addressing two situations that are the converse of each other. The first consists of what one might describe as a class in search of a settlement; the second involves a settlement in search of a class. Recent developments from the Class Action Fairness Act to the controversial employment discrimination class action in Dukes v. Wal-Mart, Inc. are discussed in this light. The second dilemma stems from the recognition that settlements, not adversarial trials, stand as the endgame for class actions. Here, there is a need both for finality by way of class settlements and for attentiveness to the process due to absent class members. Kalven and Rosenfield's comparison of class actions and the administrative state has the potential to set longstanding debates over due process for absent class members on a new path. Current doctrine casts the basis for preclusion of class members in terms of a mixture of protections in the nature of individual autonomy (rights to participate and to opt out) and fiduciary oversight (from both class counsel and the rendering court). Since the early twentieth century, however, procedural thinking in connection with the administrative state has focused less on the individual autonomy familiar to one-on-one litigation and more on measures to hew - if only roughly - the loyalties of regulators over time to the interests of those they purport to serve. In an era when empirical research has documented the rarity with which rights of individual autonomy are actually exercised in class actions, the law of due process in that sphere would benefit from redirection along lines familiar to the administrative state. The article closes with analysis of some promising developments along these lines, with reference to the emerging literature on positive political accounts of the administrative state.
Legal realism is well known, but generally misunderstood. Through a close examination of the work of the legal realists and their predecessors, this article presents a complete reconstruction of legal realism. The most startling finding of this article is that all the key insights now identified with the realists were set forth by prominent jurists much earlier. The article shows that Pound, Cardozo, and the legal realists, and their entire (respective) legal generations, were exposed to so much realism that they could not help but see judging in realistic terms. It is often said today, We are all realists now. Ample evidence will be presented in this article to show that at least three decades before the arrival of the legal realists, They were all realists then too. What was said about judging at the time - a full century ago - sounds exactly like what is said about judging today. The reconstruction completed in this article will simultaneously confirm the insights of realism about judging while dissolving the historical distinctiveness of the legal realists as a group. This finding is consistent with Llewellyn's own insistence (in the closing words of his essay defining legal realism) that a group philosophy or program, a group credo of social welfare, these realists have not. They are not a group. Llewellyn also wrote that Their differences in point of view, in interest, in emphasis, in field of work, are huge. They differ among themselves well-nigh as much as any of them differs from, say, Langdell. Modern accounts of legal realism, which typically present the legal realists as a distinctive group, have ignored these puzzling assertions, but they hold the key to understanding what legal realism was about. The aim of this exploration is to rescue realistic views about judging from the clutches of the prevailing misunderstanding about legal realism. It is a follow-up to The Bogus Tale About the Legal Formalists (available on SSRN). The combined effect of these two pieces is to show that the formalist-realist divide is entirely false as a historical matter, and should be discarded. Modern debates about judging are structured by and remain trapped within this false antithesis.
During much of the twentieth century, civil processes in the United States relied on a conceptual framework anchored in the constitutional and common law of due process. More recently, the case law looks to doctrines of contract and agency law to enforce contracts to preclude litigation and to encourage the entry of contracts to conclude litigation. While "bargaining in the shadow of the law" is a phrase often invoked, bargaining is increasingly a requirement of the law of conflict resolution both civil and criminal. Therefore, analyses of the meaning of agreements, familiar features of the law of contract, are becoming central elements of the new law of Civil Procedure. As a consequence, debate needs to center on what the law of "Contract Procedure" should provide. Central questions include whether parties ought to be able to contract for jurisdiction (both state and federal), for choice-of-law rules and for privacy. Contract Procedure needs also to decide how to regulate the role of judges (who sometimes participate in shaping civil bargains) and what rights parties have when post-agreement conflicts arise either about the existence of a settlement or about the meaning of its terms. As Contract Procedure supplements and sometimes supplants "Due Process Procedure," the rules of bargaining for legally binding judgments need to identify what bargains law cannot abide.
This paper assesses the prospects for meaningful reform of the class action after Amchem Products v. Windsor and Ortiz v. Fibreboard Corp. It reads these decisions as viewing "class cohesion" as the essential rationale that legitimizes representative litigation. Although it agrees that a legitimacy principle must underlie representative litigation, it doubts that "class cohesion" can bear that weight, either as a theory of political representation or as an economic solution for the agency cost and collective action problems in representative litigation. Instead, using the familiar terminology of "exit," "voice" and "loyalty," it suggests that "exit" should prove a superior remedy to voice, and can be implemented through procedures that use exit (much like the appraisal remedy in corporate law) to discipline unfaithful fiduciaries. More generally, it argues that the same accountability mechanisms that work in the field of corporate governance should work in this context as well. Because Amchem and Ortiz may be read to require overly rigorous procedural requirements that could lead to what this article terms the "Balkanization" of the class action, this article further suggests that "exit" should sometimes constitute a functional substitute for "voice" or "loyalty." As a remedy, "exit" can be structured so as to maximize individual choice and promote competition between non-overlapping classes. Thus,the benefits of competition can be realized without increasing the the risk of collusion or a "reverse auction." On the normative level, a choice must be made between viewing the class as an entity and viewing it as an aggregation of individuals. This article argues for the latter view and posits that the basic fiduciary duty of the counsel in representative litigation should be to protect client autonomy.
Class actions regulate when government fails. Perhaps this use as an ex post remedy when ex ante regulation founders explains the fervor and rhetoric surrounding Rule 23's political life. In truth, the class action does more than aggregate; it augments government policing and generates external societal benefits. These societal benefits - externalities - are the spillover effects from facilitating small claims litigation. In federalizing class actions through the Class Action Fairness Act (CAFA), Congress, in some ways, impeded class action practice, thereby negating its positive externalities and inhibiting backdoor regulation. This Article critically considers those effects on the common good. It also develops an implicit but overlooked theme within the CAFA debate - the notion that litigation itself is a public good.
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