Class Action Democracy

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CLASS ACTION DEMOCRACY
Nicholas Almendares†
ABSTRACT
A persistent concern with class actions is that the attorney will take advantage
of the class members, conducting the litigation in a way that lines their own
pockets at the class members’ expense. Holding an agent like an attorney
accountable is always a problem, but it is especially dire in class actions
because the class cannot meaningfully participate in the litigation. If the
attorney misbehaves, class members cannot, for example, vote to replace them.
This lack of effective democratic procedures in class actions rationalizes a
range of doctrines and proposals that restrict them. Given this democratic
deficit it makes sense to treat class actions as something of a last resort.
I question this democratic critique of class actions. Despite the intuitive appeal
and legal importance of democratic procedures, they would actually do little to
benefit class members. Drawing on the economics of communication I show
that there is a fundamental trade-off between democratic control and
expertise. Taking this trade-off into account, even idealized democratic
procedures would not make class members better off: if class members could
vote to replace their attorney they would generally prefer not doing so, instead
delegating matters to their attorney. These observations defang the
democratic critique of class actions, therefore removing the most promising
justification for restricting them and treating them as a disfavored procedure.
That being said, courts should carefully scrutinize settlement and fee
arrangements to make certain that the interests of the attorney and the class
remain roughly, albeit imperfectly, aligned.
† Associate Professor of Law, Maurer School of Law, Indiana University –
Bloomington. I would like to thank John Ferejohn, Samuel Issacharoff, Geoffrey P.
Miller, Troy McKenzie, Guy-Uriel Charles, David Noll, Dimitri Landa, Catherine
Hafer, Sanford C. Gordon, Shu-Yi Oei, Ann Lipton, Adeno Addis, Adam Feibelman,
Sally Brown Richardson, Robert Force, Charles Barzun, Michael D. Gilbert, Micah J.
Schwartzman, Gregg Strauss, Robert L. Fischman, Pamela Foohey, Luis Fuentes-
Rohwer, David Gamage, Charles Gardner Geyh, Dawn Johnsen, Leandra Lederman,
Asaf Lubin, João Marinotti, Kristen E. Boon, Michael Coenen, Tim Glynn, Ed
Hartnett, Heather E. Payne, Brian Sheppard, Charles Sullivan, and workshop
participants at NYU Law, UVA Law, Seton Hall Law, Maurer School of Law, and
Fowler School of Law for all their insights and feedback. All errors and omissions are
solely mine.

2 CLASS ACTION DEMOCRACY [5-Feb-21
INTRODUCTION
The class action is … controversial and embattled, in part because it is
frequently abused. The control of the class over its lawyers usually is
attenuated, often to the point of nonexistence.1
The class action mechanism can redound more to the benefit of the
attorney than to that of the class, as counsel has an incentive to act in its
own best interest, rather than that of the class. Thus, the class action
mechanism on occasion has proved to be Janus-faced.2
Class actions were originally created to efficiently address a large
number of similar claims by people suffering small harms. Today they
are too often used to efficiently transfer the large fees to a small number
of trial lawyers, with little benefit to the plaintiffs … [this bill] will keep
class members from being used by the lawyers they never hired to engage
in litigation they do not know about or to extort money they will never
see.3
Class actions are among the most controversial elements of civil
procedure.4 This is perhaps unsurprising as they have all the
ingredients to stir up debate. They are procedurally unusual, “an
exception to the usual rule that litigation is conducted by and on behalf
of the individual named parties only,”5 even if that rule is more observed
in the breach due to joinder rules,6 preclusion,7 and group
representation.8 Class actions can also be extremely consequential.
When a single case can “hold the fate of an industry in the palm of its
1 Eubank v. Pella Corp., 753 F.3d 718, 719 (7th Cir. 2014).
2 In re Auction Houses Antitrust Litig., 197 F.R.D. 71, 72 (S.D.N.Y. 2000).
3 151 Cong. Rec. H726 (daily ed. Feb. 17, 2005) (statement of Rep. Sensenbrenner).
4 See, e.g., Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011).
5 Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 348 (2011) (internal quotations and
citations omitted).
6 Fed. R. Civ. P. 18, 19, 20, 21, 22.
7 See, e.g., 18 Fed. Prac. & Proc. Juris. Chapter 13 (3d ed.).
8 Hunt v. Washington State Apple Advertising Commission, 357 U.S. 449 (1958);
Warth v. Seldin, 422 U.S. 490 (1975).

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hand”9 or shape civil rights at a national scale10 it is hard not to conclude
that procedure really matters. The epigraph captures a widespread
persistent criticism of class actions: that the class members cannot
control their attorneys, so the litigation ends up serving the interests of
those attorneys rather than the class. In other words, class actions line
the pockets of attorneys while the class members themselves receive
little to no benefit. This concern has led to major class action decisions
at the Supreme Court,11 notably Amchem Products, Inc. v. Windsor12
and Ortiz v. Fireboard Corp.13 Worries about class actions permeate the
case law. It is a theme that runs throughout class action jurisprudence,
a judicial “mood”14 of skepticism or outright hostility towards class
actions so that each element of a class action faces substantial hurdles.15
Class action opinions routinely begin by reciting how odd and
contentious class actions are,16 even though by now they are a well-
established practice with longstanding historical antecedents.17 Many
of the doctrines that have emerged in class action law are responses to
this fundamental apprehension about accountability of class counsel.18
9 Matter of Rhone-Poulenc Rorer, Inc., 51 F.3d 1293, 1300 (7th Cir. 1995).
10 Most famously, Brown v. Board of Education of Topeka, 347 U.S. 483 (1954) was
a class action. There is also Jenson v. Eveleth Taconite Co., 130 F.3d 1287 (8th Cir.
1997).
11 For a detailed treatment connecting these decisions to the principal-agent
problem that I describe in this article, see Samuel Issacharoff, Governance and
Legitimacy in the Law of Class Actions, 1999 Sup. Ct. Rev. 337 (1999). See also Howard
M. Erichson, Cafa's Impact on Class Action Lawyers, 156 U. Pa. L. Rev. 1593, 1594
(2008).
12 521 U.S. 591 (1997).
13 527 U.S. 815 (1999).
14 See Universal Camera Corp. v. NLRB, 340 U.S. 474, 480 (1951).
15 Robert H. Klonoff, The Decline of Class Actions, 90 Wash. U.L. Rev. 729, 731-35
(2013). See also Myriam Gilles & Gary Friedman, After Class: Aggregate Litigation in
the Wake of at&t Mobility v. Concepcion, 79 U. Chi. L. Rev. 623, 626 (2012); George
Rutherglen, Wal-Mart, at&t Mobility, and the Decline of the Deterrent Class Action, 98
Va. L. Rev. In Brief 24 (2012).
16 E.g., Eubank v. Pella Corp., 753 F.3d 718, 719 (7th Cir. 2014); Wal-Mart Stores,
Inc. v. Dukes, 564 U.S. 338, 348 (2011).
17 Stephen C. Yeazell, From Medieval Group Litigation to the Modern Class Action
(Yale, 1987).
18 See, Samuel Issacharoff, The Governance Problem in Aggregate Litigation,
81 Fordham L. Rev. 3165, 3182 (2013) [hereinafter, Issacharoff, Governance in
Aggregate Litigation]; Elizabeth J. Cabraser & Samuel Issacharoff, The Participatory
Class Action, 92 N.Y.U. L. Rev. 846, 847 (2017) (“Concern over representational
legitimacy permeates the development of modern class action law.”); Samuel
Issacharoff, Governance and Legitimacy in the Law of Class Actions, 1999 Sup. Ct. Rev.

4 CLASS ACTION DEMOCRACY [5-Feb-21
The end result is that courts typically treat class actions as somewhere
on a spectrum between requiring kid gloves to handle safely and
dangerously radioactive. Class actions thus become something of a last
resort: if there is some other way for plaintiffs to press their case then
courts often push litigants in that direction. Landmark cases display
this tendency.19
The same dynamic has played out in legislatures. Revisions to
Rule 23, the provision of the Federal Rules of Civil Procedure that
governs class actions, tightened controls over class counsel.20 Higher
profile examples include the Class Action Fairness Act of 2005 (CAFA)
and the Private Securities Litigation Reform Act of 1995 (PSLRA).
Among other provisions, CAFA requires notification of government
officials, such as state attorneys general, of class action settlements,
setting them up as class action overseers.21 The PSLRA seeks to
harness the self-interest of class members that have large stakes in the
litigation to more carefully monitor and manage class counsel,22 seeking
to displace the common image of the named plaintiffs being a mere
“figurehead.”23 These laws were clearly designed to discipline class
counsel.24
337, 340 (1999); Culver v. City of Milwaukee, 277 F.3d 908, 910 (7th Cir. 2002); In re
Telectronics Pacing Sys., Inc., 221 F.3d 870, 873–74 (6th Cir. 2000); Mars Steel Corp.
v. Cont'l Illinois Nat. Bank & Tr. Co. of Chicago, 834 F.2d 677, 678 (7th Cir. 1987).
19 “The first is a concern with forcing these defendants to stake their companies on
the outcome of a single jury trial, or be forced by fear of the risk of bankruptcy to settle
even if they have no legal liability, when it is entirely feasible to allow a final,
authoritative determination of their liability for the colossal misfortune that has
befallen the hemophiliac population to emerge from a decentralized process of multiple
trials … These qualifications are important. In most class actions—and those the ones
in which the rationale for the procedure is most compelling—individual suits are
infeasible because the claim of each class member is tiny relative to the expense of
litigation. That plainly is not the situation here.” Matter of Rhone-Poulenc Rorer, Inc.,
51 F.3d 1293, 1299 (7th Cir. 1995). See also AT&T Mobility LLC v. Concepcion, 563
U.S. 333 (2011).
20 Fed. R. Civ. P. 23(e), (g), (h).
21 28 U.S.C. § 1715(b) (2006). See also Figueroa v. Sharper Image Corp., 517 F.
Supp. 2d 1292, 1301 (S.D. Fla. 2007) (noting the objection of several attorneys general
to the proposed settlement).
22 15 U.S.C. § 78u-4(a)(3)(B)(iii) (2006); In re Initial Pub. Offering Sec. Litig., 214
F.R.D. 117, 120-21 (S.D.N.Y. 2002).
23 See Elizabeth Chamblee Burch, Optimal Lead Plaintiffs, 64 Vand. L. Rev. 1109,
1111 (2011), and the cites therein.
24 See, e.g., Howard M. Erichson, Cafa's Impact on Class Action Lawyers, 156 U.

5-Feb-21] CLASS ACTION DEMOCRACY 5
For its part, the scholarly literature on class actions has been
quite explicit about this issue, and has no doubt informed the judicial
and legislative decisions.25 The concerns above are aptly described as a
governance problem—borrowing language from corporate governance,
which is itself an analogy to politics26—and it is not an exaggeration to
call this problem the dominant framework for understanding and
analyzing class actions.27 These are also referred to as principal-agent
problems, and the central issue is how to ensure that the agent (the
attorney) acts in the best interests of the principal (the class members).
These problems are ubiquitous. Indeed, ordinary litigation contains a
parallel one. The distinct problem in class actions is that class members
seem especially powerless to control their agent; they appear to lack
both the motivation and the means to effectively control the attorneys
that act in their name. Specifically, class members lack the normatively
and legally important means of disciplining their agent through voting
or some other form of democratic participation. They do not possess the
opportunity to “throw the bum out of office” if they are displeased with
their attorney, which makes that principal-agent problem look
especially dire. The governance or principal-agent problem highlighted
in the case law, legislation, and scholarship is thus best understood as a
democratic critique of class actions both because the principal under
consideration is a large group and because some kind of democratic
Pa. L. Rev. 1593 (2008) (citing legislative history).
25 See, e.g., Elliott J. Weiss & John S. Beckerman, Let the Money Do the Monitoring:
How Institutional Investors Can Reduce Agency Costs in Securities Class Actions, 104
Yale L.J. 2053 (1995).
26 See Alexandra Lahav, Fundamental Principles for Class Action Governance, 37
Ind. L. Rev. 65, 115 (2003); Samuel Issacharoff, Governance in Aggregate Litigation,
81 Fordham L. Rev. 3165.
27 A non-exhaustive list of papers on this issue, includes: Edward Brunet, Class
Action Objectors: Extortionist Free Riders or Fairness Guarantors, 2003 U. Chi. Legal
F. 403, 403–04 (2003); John C. Coffee, Jr., Class Action Accountability: Reconciling
Exit, Voice, and Loyalty in Representative Litigation, 100 Colum. L. Rev. 370 (2000)
[hereinafter, Coffee, Accountability and Exit]; R. Macey and Geoffrey P. Miller, The
Plaintiff ‘s Attorney's Role in Class Action and Derivative Litigation: Economic
Analysis and Recommendations for Reform, 58 U Chi. L. Rev. 1, 3-7 (1991); Alexandra
Lahav, Fundamental Principles for Class Action Governance, 37 Ind. L. Rev. 65 (2003);
Issacharoff, Governance in Aggregate Litigation, 81 Fordham L. Rev. at 3183; Howard
M. Downs, Federal Class Actions: Diminished Protection for the Class and the Case for
Reform, 73 Neb. L. Rev. 646, 659-63 (1994); Alon Klement, Who Should Guard The
Guardians? A New Approach For Monitoring Class Action Lawyers, 21 Rev. Litig. 25,
27-28 (2002).

6 CLASS ACTION DEMOCRACY [5-Feb-21
participation is conspicuously lacking. By way of comparison, while
principal-agent problems are at the heart of corporate law,28
shareholders have to affirmatively opt into the corporation by
purchasing shares, get to vote on various matters, and can efficiently
“vote with their feet” by selling their shares. Likewise, politics is rife
with principal-agent problems, and accountability is a central question
there as well.29 In response, most government officials are subject to
elections, either directly or indirectly. Class members, on the other
hand, do not have access to this classic tool of holding their agents
accountable, and there is some doubt whether any democratic
procedures could feasibly be introduced in class actions. 30
Unsurprisingly, the foregoing arguments have prompted numerous
proposals to increase the participation of class members, such as:
enhancing class members’ exit rights,31 leveraging mass communication
technologies,32 creating a market for legal claims,33 and substituting
non-governmental organizations in place of entrepreneurial attorneys.34
I am broadly sympathetic with these calls for reforming and
improving class action procedures. Indeed, below I present some of my
28 Michael C. Jensen & William Meckling, Theory of the Firm: Managerial
Behavior, Agency Costs, and Ownership Structure, 3 J. Fin. Econ. 305 (1976); Margaret
M. Blair & Lynn A. Stout, A Team Production Theory of Corporate Law, 85 Va. L. Rev.
247 (1999); Simone M. Sepe, Corporate Agency Problems and Dequity Contracts, 36 J.
Corp. L. 113 (2010).
29 As James Madison famously put it: “You must first enable the government to
control the governend; and in the next place, oblige it to control itself.” THE
FEDERALIST NO. 51 (James Madison).
30 Coffee, Accountability and Exit, 100 Colum. L. Rev. at 382; Issacharoff,
Governance in Aggregate Litigation, 81 Fordham L. Rev. at 3171-72, 3176-77.
Issacharoff also argues that the potential for exchange in office, that today’s losers can
become tomorrow’s winners, is essential to maintaining a stable democratic order. Id.
at 3169.
31 Coffee, Accountability and Exit, 100 Colum. L. Rev. 370.
32 Elizabeth J. Cabraser & Samuel Issacharoff, The Participatory Class Action, 92
N.Y.U. L. Rev. 846, 847 (2017). See especially id. At 866-67.
33 Minor Myers & Charles Korsmo, Aggregation by Acquisition: Replacing Class
Actions with a Market for Legal Claims, 101 Iowa L. Rev. 1323 (2016).
34 Tiana Leia Russell, Exporting Class Actions to the European Union, 28 B.U. Int’l
L.J. 141, 177 (2010); Hans-Bernd Schaefer, The Bundling of Similar Interests in
Litigation. The Incentives for Class Action and Legal Actions Taken by Associations, 9
Eur. J.L. & Econ. 183, 199–201 (2000). See generally, Issacharoff, Governance in
Aggregate Litigation (cataloguing responses to the fundamental principal-agent
problem in class actions).

5-Feb-21] CLASS ACTION DEMOCRACY 7
own ideas on that point. But what I really want to do in this Article is
to take a step back and reexamine the problem that all these are
purported to address. The democratic critique, as I have termed it, is
the clearest and sharpest version of the accountability concerns in class
actions—it points to their distinct problem. It is not simply that class
actions entail a principal-agent problem, that hardly makes them
special, it is that this principal-agent problem is especially worrisome
because of the lack of democratic procedures. This argument would
justify the wariness towards class actions and moves to cabin them we
see in the case law. Furthermore, an array of doctrines in various areas
consider the extent of democratic participation and grant greater power
and judicial deference to more democratic institutions.35 Therefore,
democracy is important legally as well as normatively and practically;
there is some doctrinal basis for taking it into account. The democratic
critique also rationalizes a trend in recent law that expands the
litigation rights of corporations and states, litigation that sometimes
resembles class actions, in favor of formal class actions because the
former have a stronger democratic pedigree—a topic I take up in more
detail in a companion paper.36
Despite the persuasive force of this democratic critique, the lack
of participatory procedures in class actions is not nearly as fatal a flaw
as it has been taken to be. The main reason is that despite their
intuitive appeal, voting and similar participatory procedures are not
always the best mechanism for resolving principal-agent problems. This
counterintuitive conclusion is drawn from studies of principal-agent
problems in economics and political economy. Democratic control comes
at a cost; there is a trade-off between controlling the agent and being
able to take advantage of the agent’s expertise, i.e., their superior
information and understanding of the situation. When it comes to
litigation, the principal, even a sophisticated one,37 will not know the
law or how best to proceed. It will be difficult and costly for them to
determine what is the most advantageous theory of the case, what
defenses to anticipate, and so on.38 The prohibitive costs and challenges
35 See Part II, infra.
36 Nicholas Almendares, Aggregation by Other Means (working paper).
37 See Part III.D.2, infra.
38 The kind of expertise important to this paper is therefore “relationship specific.”
See Sean Gailmard & John W. Patty, Slackers and Zealots: Civil Service, Policy
Discretion, and Bureaucratic Expertise, 51 Am. J. Pol. Sci. 873, 874 (2007).

8 CLASS ACTION DEMOCRACY [5-Feb-21
of developing this expertise is the main reason to enlist an agent in the
first place. By giving up control of the litigation the class enables the
attorney to make full use of her expertise at the expense of letting her
serve her own interests.39 If, on the other hand, class members retain
control over these decisions, perhaps by conducting something like an
election for class counsel or voting directly on various litigation
decisions, class action analogues to electing representatives and
referenda, they end up losing access to a substantial amount of that
expertise.40 The reality that the attorney has her own interests prevents
her from fully conveying her valuable information to the class. The
attorney’s own interests in the case mean that class members take any
advice she could give with a grain of salt; she cannot be completely
credible to them regardless of whether she is being scrupulously
honest.41 Class members are always worried that their attorney is
mischaracterizing things in order to induce them to make the choice she
most prefers, a common dilemma highlighted by the literature on the
economics of communication. As a result, democratic procedures
inevitably result in a loss of expert information.42
There is, therefore, an unacknowledged cost to class action
democracy. Taking this into account along with other the elements of
class actions such as the way contingency fees align the interests of class
members and class counsel—albeit imperfectly—it is generally in the
class members’ best interests to delegate litigation decisions to their
attorney. In this litigation context, then, the trade-off between
democracy and expertise favors delegating to the agent rather than
controlling matters democratically. Put another way, if class members
had access to voting, setting aside any practical problems implementing
it, they would still be better off not using it. Given the option, the
members of the class would prefer delegation to democracy. That being
said, courts should be wary of circumstances that can skew this trade-
39 A number of studies support this conclusion in a variety of contexts. See, e.g.,
Wouter Dessein, Authority and Communication in Organizations, 69 Rev. of Econ.
Studs. 811 (2002); Nicholas Almendares, Blame-Shifting, Judicial Review, and Public
Welfare, 27 J.L. & Pol. 239 (2012); Sean Gailmard & John W. Patty, Slackers and
Zealots: Civil Service, Policy Discretion, and Bureaucratic Expertise, 51 Am. J. Pol. Sci.
873, 874 (2007).
40 Dessein, supra, at 812-13, 832..
41 The classic work on this issue is Vincent Crawford and Joel Sobel, Strategic
Information Transmission, 50 Econometrica 1431 (1982).
42 The dynamics of this are explained in more detail in Part III.

5-Feb-21] CLASS ACTION DEMOCRACY 9
off. To that end, settlements in class actions should be carefully
scrutinized to ensure that the attorney remains a faithful agent of the
class, something courts are empowered to do under the Federal Rules43
and are capable of doing because it only requires assessing the basic
form of the attorney’s compensation from the proposed settlement.44
Previous work on class actions has focused on the fact that
democratic procedures could not practically be implemented, motivating
a search for alternatives to mitigate the principal-agent problem and
furnish class actions with legitimacy. I show, however, that class action
democracy has inherent costs that must be weighed against the benefits.
This conclusion has wide-ranging implications. It rehabilitates class
actions by blunting one of the most important—and influential—
criticisms leveled against them. Put plainly, class actions are not as bad
as they seem, even with a clear-eyed view of their principal-agent
problems and democratic deficit. The sentiments in the epigraph do not
tell the whole story because they do not appreciate the trade-off between
expertise and control. The doctrinal trends towards limiting class
actions and searching for alternative procedural vehicles should be
reconsidered as well because the democratic critique was an especially
compelling rationale for those decisions—absent the democratic critique
there appears to be no good reason to treat class actions as a procedural
last resort. Finally, this Article helps explain why the solutions to the
fundamental principal-agent problem in class actions have yielded such
mixed results:45 the problem they aim to solve has been, to some degree,
misidentified.
Before proceeding any further I should note two caveats. First,
the response to the democratic critique of class actions contained here
can be summarized as concluding that democracy is not an unqualified
good. There can be trade-offs, implying that in some circumstances
democratic control may not be the best way to proceed. This is not
radical—the Federal Reserve is just one well-known example of
democratic control leading to potential problems and harms.46 But
43 Fed. R. Civ. P. 23(e).
44 See Part III.C, infra.
45 E.g., Elliott J. Weiss, The Lead Plaintiff Provisions of the Pslra After A Decade,
or "Look What's Happened to My Baby", 61 Vand. L. Rev. 543 (2008).
46 See, e.g., Neal Devins & David E. Lewis, Not-So Independent Agencies: Party
Polarization and the Limits of Institutional Design, 88 B.U. L. Rev. 459, 465-66 (2008).

10 CLASS ACTION DEMOCRACY [5-Feb-21
nothing here should be construed as a general statement against
democracy. It all depends on the context, and the exclusive focus of this
Article is litigation. Litigation is a rarefied environment where
expertise is extremely important and, if the class actions procedures are
functioning well,47 the members of the class share roughly the same goal
(win the case, receive a large award). This certainly does not describe
ordinary politics, where people may disagree about fundamental
conceptions of the good, priorities, and other values. It does bear some
resemblance to corporate governance since shareholders do often have
interests in common, but a persistent concern is that anyone other than
the shareholders is not well-represented. Whether voting is an essential
or effective tool of governance—whether it is the right way to address
the relevant principal-agent problems—will depend on the particular
circumstances.48 Second, the defense of class actions contained here
does not imply that current class action practice is perfect. Far from it.
Likewise, it does not imply that abuses never happen. I am answering
one especially powerful and pervasive critique of class actions, one
leveled at the institution of class actions as a whole. But there is plenty
of room to improve or refine the procedures.49 In Part III.C I make one
such proposal relating to the thorny issue of class action settlement.
The rest of this Article is divided into three Parts. Part I describes
the endemic principal-agent problem in class actions and the way it has
shaped the law, situating this Article in both the case law and the
literature. Part II explains how the lack of democratic participation by
class members might be legally relevant by pointing to areas of law that
take that into account. With the distinct problem of class action
democracy clearly identified, Part III reexamines it using the tools of
political economy and modern social science, illustrating the trade-off
between control and expertise and its effects in the specific context of
class actions.
47 I have in mind here the requirements of commonality and adequacy of
representation contained in Rule 23.
48 A one size fits all approach for even the litigation context likely has flaws. See
Pamela Bookman & David L. Noll, Ad Hoc Procedure, 92 N.Y.U. L. Rev. 767 (2017).
49 There may also be other general critiques of class actions. For one powerful
example drawn from theory see Martin H. Redish, Class Actions and the Democratic
Difficulty: Rethinking the Intersection of Private Litigation and Public Goals, 2003 U.
Chi. Legal F. 71 (2003).

5-Feb-21] CLASS ACTION DEMOCRACY 11
I. ACCOUNTABILITY IN CLASS ACTIONS
A. The Endemic Principal-Agent Problem in Class Actions
The democratic critique of class actions consists of two main
parts: (1) the presence of a principal-agent problem, and (2) that the
class members cannot resolve that problem because they lack the
opportunity to substantially participate in the litigation. Principal-
agent problems are fundamentally problems of accountability and
control; the problem is how to hold the agent accountable for their
actions and control them so that they act in the best interests of the
principal.50 Such problems are common in a variety of contexts,
including ordinary run-of-the-mill litigation. By their very structure as
an aggregation vehicle, though, class actions introduce an additional
complication, especially when we consider the archetypal class action
where numerous small claims are aggregated.
A necessary ingredient in any principal-agent problem is
divergent interests: if the principal and the agent have identical
interests, then the problem evaporates; the agent can be trusted to look
after the principal’s interests since those are really her interests, too. In
fact, one of the time-tested mechanisms for mitigating principal-agent
problems is to align the interests of the parties involved.51 However,
class actions lead the interests of the attorney (the agent) and the class
members (the principal) to diverge because the attorney unavoidably
has so much more at stake than any single class member. Their fees,
especially under the near universal contingency fee arrangement where
they are paid a portion of the plaintiffs’ recovery, are based on the class
as a whole and, by definition, classes involve numerous class members.52
To put things more concretely, imagine a case where each class member
has $30 at stake. With that relatively small claim class members would
have no problem going to a trial where they only have a 50% chance of
winning, and would happily opt for trial rather than accepting a $10
settlement. The expected value of the trial—50% of $30, or $15—is
50 Sean Gailmard, Accountability and Principal-Agent Theory in the Oxford
Handbook of Public Accountability, Mark Bovens, Robert E. Goodin, and Thomas
Schillemans, eds. 98 (2012).
51 See Part III.B, infra.
52 Fed. R. Civ. P. 23(a)(1).

12 CLASS ACTION DEMOCRACY [5-Feb-21
greater than the $10 settlement offer, and the values involved are small
enough that considerations like risk aversion should not play any
significant role. All else being equal, class members are perfectly
content with high risk, high reward litigation strategies and choices.
The attorney has a different perspective. Continuing the
example, suppose there are a million class members each with $30 at
stake.53 Under something like a 30% contingency fee, then the litigation
is worth $10 million to the attorney, a sum that dwarfs the $30 that each
class member had at stake and is likely to lead the attorney to be risk
averse. Thus the attorney views the safer option like settlement far
more favorably than a high risk one like a trial; risk aversion affects her
assessment. Similarly, the attorney might prefer lower risk theories of
the case and litigation strategies—settlement is simply a clear
illustration of the phenomenon. Moreover, we do not need to posit that
psychological tendencies like risk aversion will steer the attorney’s
interests. With a contingency fee—which, again, almost all class actions
that aggregate small individual claims utilize—the attorney is
effectively advancing the litigation expenses for the class action. They
are expending substantial resources in working on the case and
undertaking various opportunity costs; each hour they spend working
on the class action is an hour that cannot be used on another case,
investments they will not recoup unless they settle or win the case. So,
receiving nothing from the case usually carries additional costs for the
attorney—they may have to close their firm or lay off employees—all of
which leads them to behave in a risk averse manner.54 Unlike the
principal, then, the agent in a class action is not perfectly content
adopting high risk, high reward strategies; she views things differently
than the class members do.
Modern class action law exacerbates all this. Class actions are
very front-loaded, to make it past the motion for class certification—the
first step in a class action proper—the plaintiffs must satisfy demanding
procedural requirements.55 As the Supreme Court has explained: “Rule
53 This scenario is inspired by AT&T Mobility LLC v. Concepcion, 563 U.S. 333
(2011).
54 This is a version of risk averse behavior that does not depend on a particular
psychological tendency. It is “rational” risk aversion. See Nicholas Almendares, The
False Allure of Settlement Pressure, 50 Loy. U. Chi. L.J. 271, 301-02 (2018).
55 Id. at 278-90.

5-Feb-21] CLASS ACTION DEMOCRACY 13
23 does not set forth a mere pleading standard. A party seeking class
certification must affirmatively demonstrate his compliance with the
Rule—that is, he must be prepared to prove that there are in fact
sufficiently numerous parties, common questions of law or fact, etc.”56
This will involve discovery, the main source of litigation costs,57
extensive briefing, and even the plaintiffs establishing parts of their
case in chief at an early stage in the litigation,58 all increasing the
expense that the attorney is effectively advancing or investing in the
class action.
This differential valuing of the case leads to a fundamental,
structural difference in the interests of the attorney and the class
members. It is an endemic problem in class actions. Note that this
problem persists even if the class members have more individually at
stake. Suppose that rather than $30 at stake class members have
$300,000.59 Since the class action still requires numerous class
members, the attorney’s stake is still far more than theirs, even if the
class is of a much more modest size than the one million class members
I used in the previous example. Special circumstances may exist where
the class members would be similarly risk averse;60 they might be in
dire straits and have special need of some recovery, making risky
strategies less attractive. That would be a very particular set of
circumstances, though (and incidentally one that law does not do a good
job taking into account).61 As a general matter, and in the vast majority
of cases, the attorney is going to view risk differently, leading her
interests to diverge from the class members’. Thus, we should expect to
see a principal-agent problem arise in class actions—a necessary
ingredient, divergence of interests, is present.
56 Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011).
57 Richard A. Epstein, Bell Atlantic v. Twombly: How Motions to Dismiss Become
(Disguised) Summary Judgments, 25 Wash. U. J.L. & Pol’y 61, 76 (2007); William H.
Wagener, Modeling the Effect of One-Way Fee Shifting on Discovery Abuse in Private
Antitrust Litigation, 78 N.Y.U. L. Rev. 1887 (2003).
58 Almendares, The False Allure of Settlement Pressure, 50 Loy. U. Chi. L.J. at 284-
87.
59 Class actions where class members each have substantial individual claims are
less common, but not unheard of. High profile examples include Matter of Rhone-
Poulenc Rorer, Inc., 51 F.3d 1293 (7th Cir. 1995) and the NFL Concussion cases.
60 Almendares, The False Allure of Settlement Pressure, 50 Loy. U. Chi. L.J. at 302.
61 See generally id.

14 CLASS ACTION DEMOCRACY [5-Feb-21
Before proceeding further, I should discuss one of the other
central debates relating to class actions, if only to set it aside as not
especially relevant to the main issues in this article. There is a long-
running debate as to the proper way to understand a class action. On
one view, the class action is a combination of individuals, essentially a
complex joinder device. So, while we may refer to the class as a unit out
of convenience, this perspective considers it nothing more than a group
of individuals with their own distinct individual claims and nothing
about the class action procedural vehicle changes the underlying claims
or rights.62 On another view, the class is an entity unto itself, created
by the system of civil procedure, and that entity is the true client in the
case.63 On this view, the right analogy is to something like a corporation
or a government.64 While this debate has important ramifications for
class action theory and practice, it does not directly impact the principal-
agent relationship that is the focus of this piece and the line of critique
against class actions. The reason is that entities like corporations or
governments—and possibly the class itself if one adopts that view—
constantly confront principal-agent problems, and there is no question
that the law treats these as distinct entities capable of litigating and
serving as clients in their own right.65 Likewise, a group of individuals
that chooses to designate an agent can also be forced to reckon with
principal-agent problems.66 Whether the class action is a species of
joinder or creates a distinct entity recognized by the law, the principal-
agent problem still looms large and does not substantially change.67
62 Cf. Martin Redish, Class Actions and the Democratic Difficulty: Rethinking the
Intersection of Private Litigation and Public Goals, 2003 U. Chi. Legal F. 71 (2003)
(criticizing class actions because they end up differing from private suits brought by
individuals). See also Shady Grove Orthopedic Associates v. Allstate Insurance Co.,
130 S. Ct. 1431 (2010).
63 David L. Shapiro, Class Actions: The Class As Party and Client, 73 Notre Dame
L. Rev. 913, at 939 (1998); Alexandra D. Lahav, Two Views of the Class Action, 79
Fordham L. Rev. 1939, 1943 (2011).
64 Lahav, Two Views of the Class Action, 79 Fordham L. Rev. at 1946.
65 Although Hobby Lobby’s view of the corporation is at odds with treating the
corporation as a fully distinct entity from its shareholders. See Part II.B, infra.
66 One canonical work identifies Congress as a prominent example of this
phenomenon. Kenneth A. Shepsle, Congress is a ‘They,’ not an ‘It’: Legislative Intent
as Oxymoron, 12 International Review of Law & Econ. 239 (1992).
67 For the purposes of my argument here, the biggest difference would be whether
the class members themselves, that is, the principal, could have different goals or
interests.

5-Feb-21] CLASS ACTION DEMOCRACY 15
B. Controlling Class Counsel: Exit, Loyalty, and Voice
Acknowledging the principal-agent problem in class actions is
only part of the democratic critique since such problems are ubiquitous.
What distinguishes class actions and makes the a particular cause for
concern, inspiring the widespread belief that class action attorneys are
free to use the litigation for their own ends, is that the principal in a
class action lack the means to address this problem, they cannot control
their agent. Accordingly, so the argument goes, the principal-agent
problem in class actions is out of control. Some of the most important
work on this issue uses Albert Hirshman’s tryptic of organizational
governance—exit, voice, and loyalty—which has proven quite influential
in corporate law. To keep things consistent, I adopt that terminology
here. Within this framework, while class members have access to
versions of exit and loyalty, they conspicuously lack voice.68
1. Exit
The Federal Rules provide the opportunity to exit, or “opt-out” of
many class actions, especially most claims for damages that are the
focus of this article and where the principal-agent problem is most
acute.69 Opting out is akin to a shareholder “exiting” the corporation by
selling their shares. These exit rights have been essential to class action
litigation70 and figure prominently in the understanding and proposed
answers to the democratic critique of class actions.71 John Coffee views
exit rights as the key to improving accountability in class actions, a
possible way of responding to the democratic critique as robust exit
rights can substitute for, and actually improve on, the democratic
procedures that fall into Hirshman’s “voice” category.72 In the limit, exit
and a democratic procedure like electing class counsel have similar
68 Coffee, Accountability and Exit, 100 Colum. L. Rev. at 376 (“Ultimately, what is
most distinctive about the class action is the absence of any similar mechanism.”).
69 Fed. R. Civ. P. 23(c)(2)(A).
70 George Rutherglen, Future Claims in Mass Tort Cases: Deterrence,
Compensation, and Necessity, 88 Va. L. Rev. 1989, 1995 (2002).
71 See, e.g., Theodore Eisenberg & Geoffrey P. Miller, The Role of Opt-Outs and
Objectors in Class Action Litigation: Theoretical and Empirical Issues, 57 Vand. L.
Rev. 1529, 1538-40 (2004).
72 Coffee, Accountability and Exit, 100 Colum. L. Rev. 370.

16 CLASS ACTION DEMOCRACY [5-Feb-21
effects: a mass exodus from a class action shrinks its potential recovery,
something the attorney would want to avoid and would alter her
behavior in anticipation of. En masse, then, exit and voting converge.
However, there is some indication that class members rarely exercise
their exit rights, a tendency which many of Coffee’s proposals are
designed to counteract. The empirical evidence showing that class
members rarely bother to opt out leads Theodore Eisenberg and Geoffrey
Miller to question whether exit can really play such a vital role in class
action jurisprudence.73 The low rate of opt-outs, or exit, less than one
percent in Eisenberg and Miller’s study, leads many to discount their
importance.74 Without more, though, this conclusion does not
necessarily follow: the fact that an accountability mechanism is not
utilized is consistent with it being ineffective or too burdensome to use,
but it is also consistent with the agent being effectively controlled.
Suppose that the agent desperately wants to avoid being sanctioned so
she acts according to the principal’s wishes. Then, the accountability
mechanism would be working quite well, even if it was never used. That
being said, class members with small claims likely will not put much
effort into investigating their case or bother to opt-out, curbing the
effectiveness of exit as a means of control.75
2. Loyalty
A version of loyalty also exists in class actions. Loyalty, or more
precisely legal mechanisms that foster it, can be difficult to identify,76
73 Theodore Eisenberg & Geoffrey P. Miller, The Role of Opt-Outs and Objectors in
Class Action Litigation: Theoretical and Empirical Issues, 57 Vand. L. Rev. 1529, 1560
(2004) (“In general, one may surmise that class members do not highly value these
rights that courts and commentators have so widely praised as essential to the
justification for group litigation involving absent parties.”).
74 E.g., Eubank v. Pella Corp., 753 F.3d 718, 728 (7th Cir. 2014); Nick Landsman-
Roos, Front-End Fiduciaries: Precertification Duties and Class Conflict, 65 Stan. L.
Rev. 817, 847 (2013); Antonio Gidi, Loneliness in the Crowd: Why Nobody Wants Opt-
Out Class Members to Assert Offensive Issue Preclusion Against Class Defendants, 66
SMU L. Rev. 1, 18 (2013).
75 This is consistent with Eisenberg and Miller’s findings. Eisenberg & Miller, The
Role of Opt-Outs and Objectors in Class Action Litigation: Theoretical and Empirical
Issues, 57 Vand. L. Rev. at 1555.
76 Coffee identifies the adequacy of representation element of Rule 23 and due
process with loyalty. Coffee, Accountability and Exit, 100 Colum. L. Rev. at 377-78.
Although my way of operationalizing loyalty is consistent with his approach. See id.

5-Feb-21] CLASS ACTION DEMOCRACY 17
so the comparison to corporate law is useful, especially since the central
corporate principal-agent problem has been the “master problem” of that
field for half a century.77 One way to think about it is that corporate law
generates “loyalty” through the imposition of extensive fiduciary duties
upon corporate directors, the relevant agents. A director “owes the
corporation complete loyalty, honesty, and good faith.”78 Fiduciary
duties are traditionally subdivided into the duty of care and the duty of
loyalty. The duty of care requires that directors inform themselves “of
all material information reasonably available to them.”79 But, directors
are entitled to the generous presumption known as the “business
judgment rule.” They are presumed to be acting in good faith and with
sufficient information,80 and the resulting legal standard81 in duty of
care cases is something akin to gross negligence.82 All else being equal,
the director’s decision will not violate the duty of care “unless it cannot
be attributed to any rational business purpose.”83 Further, it seems that
all that is required is that there might have been some legitimate
business reason for the choice, not that such a reason actually exists84
or actually motivated the decision. The judicial posture is similar to the
highly deferential rational basis review applied in substantive due
process, and perhaps for the same democracy-inspired reasons. 85
The duty of care is kept so lax so that the law does not stifle
entrepreneurial risk-taking.86 Moreover, courts are ill-equipped to
at 377 n.19 (characterizing active monitoring as seeking to “enhance the ‘loyalty’ of the
agent to the principal”).
77 Edward B. Rock, Adapting to the New Shareholder-Centric Reality, 161 U. Pa.
L. Rev. 1907, 1911 (2013).
78 3 Fletcher Cyc. Corp. § 837.50.
79 Smith v. Van Gorkom, 488 A.2d 858, 872 (Del. 1985) (quoting Aronson, 473 A.2d
at 812).
80 Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984).
81 But see Stephen M. Bainbridge, The Business Judgment Rule As Abstention
Doctrine, 57 Vand. L. Rev. 83, 87 (2004).
82 E.g., Aronson v. Lewis, 473 A.2d 805, 812 (Del. 1984), overruled by Brehm v.
Eisner, 746 A.2d 244 (Del. 2000). There is some disagreement as to the exact standard,
but the fact that the business judgment rule is lenient is agreed upon.
83 In re Walt Disney Co. Derivative Litig., 906 A.2d 27, 74 (Del. 2006). See also
Patricia A. Mccoy, A Political Economy of the Business Judgment Rule in Banking:
Implications for Corporate Law, 47 Case W. Res. L. Rev. 1, 7–8 (1996).
84 Stephen M. Bainbridge, The Business Judgment Rule As Abstention Doctrine, 57
Vand. L. Rev. 83, 100 (2004).
85 See Part II.A., infra.
86 Patricia A. Mccoy, A Political Economy of the Business Judgment Rule in

18 CLASS ACTION DEMOCRACY [5-Feb-21
evaluate whether a business decision makes good sense or not,87 so the
deferential business judgment rule serves as a form of judicial
restraint.88 The duty of care therefore does not do much work when it
comes to resolving principal-agent problems, including and especially
those based on risk,89 and corporations must tackle their own version of
the endemic principal-agent problem described in Part I.A. Moreover,
there is a pervasive issue of enforcement because shareholders often
have conflicting motivations that make them hesitate to mount suits to
enforce fiduciary duties.90 The duty of loyalty is much more demanding.
If the director stands to personally benefit from the corporation’s
decision or transaction, then she loses the liberal protection of the
business judgment rule.91 The consequences of the less deferential
review are that the director will have violated her fiduciary duty unless
either the transaction was approved by disinterested actors,92 or the
director can show that the decision satisfied the demanding standard of
“entire fairness.”93 Furthermore, the burden of proof shifts to the
director.94
Banking: Implications for Corporate Law, 47 Case W. Res. L. Rev. 1, 7–8 (1996).
87 William T. Allen et. al., Realigning the Standard of Review of Director Due Care
with Delaware Public Policy: A Critique of Van Gorkom and Its Progeny As A Standard
of Review Problem, 96 Nw. U. L. Rev. 449, 452 (2002).
88 E.g., Carter G. Bishop, Directorial Abdication and the Taxonomic Role of Good
Faith in Delaware Corporate Law, 2007 Mich. St. L. Rev. 905, 920 (2007).
89 Mark Roe, Corporate Law's Limits, 31 J. Legal Stud. 233 (2002). See also David
Millon, New Game Plan or Business as Usual? A Critique of the Team Production
Model of Corporate Law, 86 Va. L. Rev. 1001, 1021 (2000) (arguing that the business
judgment rule is “actually ineffective when it comes to rendering management
accountable to the shareholders”).
90 Reinier Kraakman et. al., When Are Shareholder Suits in Shareholder Interests?,
82 Geo. L.J. 1733 (1994).
91 E.g., Kenneth B. Davis, Jr., Judicial Review of Fiduciary Decision Making-Some
Theoretical Perspectives, 80 Nw. U. L. Rev. 1, 61 (1985).
92 E.g., Gottlieb v. Heyden Chem. Corp., 91 A.2d 57, 59 (1952) (“the entire
atmosphere is freshened and a new set of rules invoked where formal approval has
been given by a majority of independent, fully informed stockholder”); Beard v. Elster,
160 A.2d 731, 738 (1960); Cohen v. Ayers, 596 F.2d 733, 740 (7th Cir. 1979).
93 The classic formulation of the entire fairness standard is articulated in
Weinberger v. UOP, Inc., 457 A.2d 701, 711 (Del. 1983). “Entire fairness” is the
Delaware formulation of the standard. Kenneth Davis, Jr. aptly describes the general
state of the law as “strict scrutiny.” Kenneth B. Davis, Jr., Judicial Review of
Fiduciary Decision Making-Some Theoretical Perspectives, 80 Nw. U. L. Rev. 1, 61
(1985).
94 Kenneth B. Davis, Jr., Judicial Review of Fiduciary Decision Making-Some
Theoretical Perspectives, 80 Nw. U. L. Rev. 1, 61 (1985) (collecting cases).

5-Feb-21] CLASS ACTION DEMOCRACY 19
Class counsel are not subject to explicit fiduciary duties. But as
attorneys they are subject to an array of ethical and professional
responsibility rules. The basic duty of competent and diligent
representation serves much the same function as the duty of care, and
in a substantially more demanding fashion.95 Lawyers are also subject
to a duty of loyalty, though aggregate litigation complicates it.96 There
is some skepticism as to how successfully these provisions resolve
principal-agent problems, especially if they are supposed to force an
agent to act contrary to their own interests97 and are costly to enforce.
Yet that seems more of a general issue with legally-enforced loyalty
mechanisms overall rather than a particular pathology afflicting class
actions. There is a more basic point, though: fiduciary duties, including
the relatively robust duty of loyalty, do not genuinely address the
endemic principal-agent problem in class actions. The endemic problem
is a product of class counsel’s and class members’ different levels of
investment in the litigation: the attorney’s greater investment led her
to be risk averse when class members were not. Imposing something
like the duty of loyalty on class counsel would make little difference, that
kind of behavior does not violate that duty. If it did then corporate
executives, who almost always have a far greater stake in the firms they
manage than run of the mill shareholders do, would be in constant
danger of violating this relatively strict fiduciary duty. Yet, there is no
serious contention that directors are constantly violating their duty of
loyalty. Indeed, that would be perverse. The entire point of things like
stock options and other tools that increase the executives’ stake in the
firm is to help ensure their loyalty; if following those incentives
subjected directors to legal challenges under the demanding duty of
loyalty standard, the entire regime of modern corporate governance
would be self-defeating.98
3. Voice (or the Lack Thereof)
95 See § 1.1 - Competence, Ann. Mod. Rules Prof. Cond. 1.1; 1.3.
96 Ann Southworth, Collective Representation for the Disadvantaged: Variations in
Problems of Accountability, 67 Fordham L. Rev. 2449, 2452 (1999).
97 Coffee, Accountability and Exit, 100 Colum. L. Rev. at 376, 436-37.
98 The conventional wisdom is that stock options largely achieve the governance
goals. E.g., Simone M. Sepe, Corporate Agency Problems and Dequity Contracts, 36 J.
Corp. L. 113, 114 (2010).

20 CLASS ACTION DEMOCRACY [5-Feb-21
Loyalty and exit have their place in understanding the principal-
agent problem in class actions and especially the way jurists and
scholars have understood it. The analysis of class actions, especially in
academia, has focused on the stark lack of democratic procedures. Thus,
class members lack a “voice” in the conduct of the litigation.99 Voting is
a long-established method of holding agents accountable. If the agent
misbehaves the voters can “throw the bum out of office.”100 Like en
masse exit or other effective control mechanisms, this threat disciplines
the agent: to the extent she wants to keep her job she does what the
voters want. The vote therefore functions like a collective performance
review, with the voters expressing approbation or disapproval for the
agent’s actions. As an accountability mechanism, voting has undeniable
appeal. It embodies democratic ideals of collective decisionmaking and
is designed to represent and respect the interests and preferences of the
voters. Voting in this way, referred to as retrospective voting, is an
iconic feature of many institutions.
At present, of course, there is no real place for voting or
democratic participation for class members. Class counsel do not stand
for election, there is no “attorney primary” whereby the members of the
class democratically pick their representative, class members do not
hold a plebiscite to determine their theory of the case, and so on. Class
members do have the special power to object and possibly appeal a
settlement in their case, an option that could be expanded to involve
other litigation decisions. There are drawbacks to relying on objectors
to address the principal-agent problem in class actions stemming from
collective action problems within the class101 as well as the mixed
incentives of the objectors themselves.102 More fundamentally, though,
99 See, e.g., Coffee, Accountability and Exit, 110 Colum. L. Rev. at 377 (“one could
rely more on voice by giving class members greater authority to hire or fire the class’s
attorney (or to approve the settlement)”).
100 Voting can also be used to select the best agents for a position. The main,
distinctive issues in class actions is how to ensure the agent takes actions in the
litigants’ best interests, essentially a moral hazard problem. Hiring attorneys such as
class counsel involves participating in the market for legal services, not all that
dissimilar from hiring any attorney. Global class settlements do present unique
problems as they can encourage class counsel to engage in a “reverse auction” to settle
cheaply. These reverse auctions represent a problem distinct from the general
democratic critique of class actions and are best left to their own sustained discussion.
101 Christopher R. Leslie, The Significance of Silence: Collective Action Problems
and Class Action Settlements, 59 Fla. L. Rev. 71, 76 (2007).
102 Coffee, Accountability and Exit, 100 Colum. L. Rev. at 422-23.

5-Feb-21] CLASS ACTION DEMOCRACY 21
objection does not give class members per se the ability to control the
attorney because the ultimate decisionmaker is the court, not the class
members themselves. Objecting to a settlement triggers searching
review of it, but the court can still approve of the settlement despite
substantial objections. Objection is not a veto of a settlement, far from
it, as the court assesses the settlement on its own. Courts have approved
of settlements that a clear majority of class representatives have
objected to,103 which highlights the clear difference between this
procedure and some form of democratic participation. The power to
object or appeal, even if greatly expanded from its current form to apply
to litigation decisions beyond settlement, is not a straightforward
substitute for democratic participation.
It might, in principle, be possible to add some voting procedure to
class actions, but they are not well-suited to it. One reason put forward
for this is that class members have too little incentive to vote. The
archetypal class member has a small stake, so it is not worth it for them
to become informed or even bother voting. They are rationally apathetic
and rationally ignorant, where “rationally” here indicates that the
expected benefits from gathering information or participating do not
exceed the costs.104 The same considerations can lead to collective action
problems. If monitoring the class counsel benefits all class members
(making it a public good within the class), then class members will be
tempted to free-ride on the work of others, enjoying the benefit without
enduring the cost. Without some way to coordinate their efforts and
distribute the costs, the monitoring needed to hold the agent
accountable is unlikely to occur as everyone hopes that some other
member of the class will do it.105
Rational apathy is an argument that proves too much, however,
because it implies that voting is by and large useless. One of the most
famous results in modern political science is that it is irrational to
bother voting in a population of any significant size because the
probability of that vote actually mattering is so small.106 While voting
103 E.g., Lazy Oil. Co. V. Witco Corp., 166 F.3d 581 (3d Cir. 1999); Cty. of Suffolk v.
Long Island Lighting Co., 907 F.2d 1295, 1325 (2d Cir. 1990).
104 E.g., Coffee, Accountability and Exit, 100 Colum. L. Rev. at 382.
105 E.g., Christopher R. Leslie, The Significance of Silence: Collective Action
Problems and Class Action Settlements, 59 Fla. L. Rev. 71, 113 (2007). While framed
differently, Coffee offers a similar version of this argument.
106 The canonical citation is William H. Riker and Peter C. Ordeshook, A Theory of

22 CLASS ACTION DEMOCRACY [5-Feb-21
in a state or national election affects serious matters—the economy,
justice, foreign relations—the probability of being pivotal in any given
election is so infinitesimal that in order for voting to be rational (in the
sense used in the paragraph above) the benefits the voter would have to
receive from her preferred candidate winning would “stagger the
imagination.”107 Further, the rational apathy argument is usually
framed as the class members having too small a stake to make voting
worth the effort yet this actually makes little difference. In the case of
national elections, voters have a lot at stake, but voting is still
“irrational.” If we take the rational apathy argument seriously, then it
affects all forms of democratic participation and “voice,” as it is
commonly understood in this context, loses any utility. Democratic
procedures in a class action would not be materially worse than they
would be in any other institution where the electorate is of any
substantial size.
Another reason why voting is an awkward fit for class actions is
based on their structure. Samuel Issacharoff argues that unlike other
institutions that rely on democratic procedures, class actions are
ephemeral. While this is odd to say given that some class actions drag
on for years on end, once the case is resolved the class, as a legally
meaningful entity, disappears. Other venues where we see voting, such
as governments, do not typically have a clearly-defined end. 108 Indeed,
the rule of law is somewhat predicated on that fact.109 And perpetual
life is one of the defining characteristics of corporations. The ephemeral
nature of class actions undermines a direct application of retrospective
voting as an accountability mechanism; by the time the class members
have the chance to throw the bum out of office the office itself has
disappeared.110 Issacharoff also argues that the potential for exchange
in office—that today’s losers can become tomorrow’s winners—is
the Calculus of Voting, 62 Am. Pol. Sci. R. 25 (1968). See also Duffy and Tavits, Beliefs
and Voting Decisions: A Test of the Pivotal Voter Model, 52 Am. J. Pol. Sci. 603 (2008).
107 William H. Riker and Peter C. Ordeshook, A Theory of the Calculus of Voting,
62 Am. Pol. Sci. R. 25, 26 (1968). Riker and Ordeshook’s article is 50 years old, so the
U.S. population has increased substantially in the intervening time, but their ballpark
estimate for the probability of being pivotal is 10-8.
108 Transitional governments being the notable exception.
109 See Robert Cooter & Thomas Ulen, Law and Economics, 6th Edition at 301-04
(2016).
110 Issacharoff, Governance in Aggregate Litigation, 81 Fordham L. Rev. at 3171,
3177.

5-Feb-21] CLASS ACTION DEMOCRACY 23
essential for a stable democratic system, something that the nature of
class actions does not readily allow.111
I have some reservations about these arguments. As I mentioned
previously the arguments against exit being a useful means of
disciplining class action attorneys would seem to apply equally to other
participatory procedures. In fact exit has the potential to be a bit more
nuanced than a simple winner take all election. In such an election
winning a narrow majority even when 49% of the voters utterly despite
you means capturing the whole prize, although features of class actions,
like Rule 23’s adequacy of representation requirement, make that sort
of scenario quite unlikely. The fact that the attorney does not want class
members to opt-out gives her incentive to win the support of as many of
them as she can, potentially inducing behavior that further benefits the
entire class over and above what would be needed to win a majority. All
of this does require overcoming rational apathy and ignorance, however,
and there are ways politics has managed to mitigate that issue that are
not present in class actions. Intermediaries, party identification, and
media coverage all lower the cost of being informed voters (although
almost assuredly not enough to resolve the conundrum of voting). Some
proposals for class action reform seek to create analogous structures,
thereby improving class action governance.112 What ought to be
avoided, though, is holding class actions to a wildly unrealistic standard,
one far higher than other institutions that facilitate collective action and
almost always encounter principal-agent problems.
That being said, the democratic critique has persuasive force and
has been a longstanding feature of the class action debate for a reason.
It captures something significant, namely the anxiety that the attorney
is free to take advantage of the class. Moreover, I think the use of
Hirshman’s exit, voice, and loyalty heuristic illustrates that the critique
contends that class actions perform substantially worse than
comparable institutions with respect to accountability. And
observations like rational apathy or the structural inappropriateness of
retrospective voting to class actions underscore the force of the
democratic critique. It is not just that class actions as presently
111 Id. At 3169.
112 E.g., Coffee, Accountability and Exit, 100 Colum. L. Rev. 370; Minor Myers &
Charles Korsmo, Aggregation by Acquisition: Replacing Class Actions with a Market
for Legal Claims, 101 Iowa L. Rev. 1323 (2016).

24 CLASS ACTION DEMOCRACY [5-Feb-21
constituted do not allow for robust democratic participation by class
members; the problem is deeper than that because the argument is that
in principle we could not have that kind of participation. Or, put more
accurately, we cannot expect that simply including such procedures
would resolve the principal-agent problem at the heart of class actions.
This forms the second part of the longstanding criticism of class actions.
II. THE ROLE OF DEMOCRACY IN THE LAW
A. Public Law: Democratic Pedigrees
At bottom, the critique of class actions that this Article
reexamines is based on accountability—class actions cannot hold their
attorneys accountable, i.e., those attorneys are agents that are not
subject to (effective) control by their principal.113 Accountability, in
turn, is tied to legitimacy. There are pragmatic reasons to worry about
class action accountability, accountable agents will, all else being equal,
increase the recoveries of class members and make them better off. In
addition, if class action attorneys can run amok and pursue their own
interests, then that undermines the legitimacy of class actions in
general.114 Furthermore, what we are concerned with here is democratic
accountability because there are large numbers of class members. It
would make little sense to inject democratic values into every principal-
agent relationship; they have little place in, say, the employment
relationship between a shipper and their delivery agent. The foregoing
helps explain why democratic issues emerge in the somewhat surprising
113 Inevitably, there are considerations that I have neglected here. One that
springs to mind is the danger of divergent interests within the class itself. The focus
of this Article is the democratic critique, though, which applies even if the class
members are unified in their interests. That is, even class actions with perfect
commonality or perfectly-crafted subclasses would still be subject to the democratic
critique.
114 See, e.g., Samuel Issacharoff, Governance and Legitimacy in the Law of Class
Actions, 1999 Sup. Ct. Rev. 337, 354 (1999) (discussing the U.S. Supreme Court’s
approach to adequacy of representation and stating that “[t]o the extent that the Rules
direct courts to focus on the named class parties, they provide what is at best a
distraction from the real source of legitimacy in class actions: the incentives for faithful
representation by class counsel”). Jay Tidmarsh, Rethinking Adequacy of
Representation, 87 Tex. L. Rev. 1137, 1176 (2009). See also Alexandra
Lahav, Fundamental Principles for Class Action Governance, 37 Ind. L. Rev. 65, 71–74
(2003).

5-Feb-21] CLASS ACTION DEMOCRACY 25
context of litigation procedures. Class actions are special because they
are a type of collective action, that distinguishes them from prototypical
individual litigation, and when looking for ways to hold agents of such a
collective principal accountable, it is natural to look to democratic
examples to see how they have addressed this fundamental issue of
accountability.115
Democracy has instant appeal and is the default arrangement for
many kinds of collective action. Building on this, Alexandra Lahav
argues that making class actions more similar to other institutions that
are themselves deemed legitimate will further bolster their
legitimacy.116 That does not automatically make democracy legally
relevant, though. While it might be a good idea or good policy, strictly-
speaking nothing in Rule 23 instructs courts to pay attention to the
amount of democratic accountability in class actions, though some
specific provisions were enacted for that purpose. Looking broadly,
though, there are a number of doctrines that take democratic procedures
into account, allowing for greater leeway when they are in place and
authorizing more intense judicial scrutiny when they are not. Modern
rational basis review is a pervasive example. Due process protects
against arbitrary impositions by the government,117 and in order to
determine whether a law or policy is arbitrary due process requires that
there be some appropriate goal that the law seeks to achieve and that
there is reason to believe it will be at least a positive step towards
accomplishing that end.118 This kind of review reaches its zenith in
cases like the infamous Lochner, where the Supreme Court closely
scrutinized the state’s rationale for the regulation and found it
wanting.119 In stark contrast, modern rational basis review is
extraordinarily deferential. The standard only requires that the
115 For another reason to consider democratic values and processes in class actions,
see Alexandra Lahav, Fundamental Principles for Class Action Governance, 37 Ind. L.
Rev. 65, 99-101 (2003).
116 Alexandra Lahav, Fundamental Principles for Class Action Governance, 37 Ind.
L. Rev. 65, 74 (2003).
117 See, e.g., Planned Parenthood of Se. Pa. v. Casey, 505 U.S. 833, 849 (1992)
(collecting cases).
118 Nebbia v. People of New York, 291 U.S. 502, 510-11 (1934). For a short
treatment of this substantive due process doctrine, see Nicholas Almendares &
Catherine Hafer, Beyond Citizens United, 84 Fordham L. Rev. 2755, 2781-85 (2016).
119 Lochner v. New York, 198 U.S. 45, 57, 25 S. Ct. 539, 543 (1905), abrogated by W.
Coast Hotel Co. v. Parrish, 300 U.S. 379 (1937).

26 CLASS ACTION DEMOCRACY [5-Feb-21
challenged law or policy bear some vague relationship to any conceivable
government interest,120 one that can even be offered post-hoc. Further,
courts presume that the facts support the government’s position exist.121
In retreating from Lochner to this much more deferential stance where
nearly any law will be upheld,122 the Supreme Court relied on
democracy. Lee Optical, a touchstone for modern rational basis review
doctrine, puts it rather bluntly: “The Oklahoma law [challenged in the
case] may exact a needless, wasteful requirement in many cases. But it
is for the legislature, not the courts, to balance the advantages and
disadvantages of the new requirement … For protection against abuses
by legislatures the people must resort to the polls, not to the courts.”123
A similar dynamic has played out in administrative law. The
Chevron doctrine, arguably the most significant single piece of
administrative law jurisprudence, instructs courts to defer to agency
interpretations of the statutes that grant them authority. Chevron has
been discussed at length,124 and relies, in part, on a democratic
argument:
While agencies are not directly accountable to the people,
the Chief Executive is, and it is entirely appropriate for this
political branch of the Government to make such policy
120 Williamson v. Lee Optical of Okla., Inc., 348 U.S. 483, 490 (1955) (citing a
number of conclusions the legislature might have arrived at to justify the legislation);
Ry. Express Agency, Inc., 336 U.S. at 109-10 (“We would be trespassing on one of the
most intensely local and specialized of all municipal problems if we held that this
regulation had no relation to the traffic problem of New York City. It is the judgment
of the local authorities that it does have such a relation. And nothing has been
advanced which shows that to be palpably false .... The local authorities may well have
concluded that those who advertise their own wares on their trucks do not present the
same traffic problem in view of the nature or extent of the advertising which they use.
It would take a degree of omniscience which we lack to say that such is not the case.”).
121 Lindsley v. Nat. Carbonic Gas Co., 220 U.S. 61, 78-79 (1911); accord United
States v. Carolene Prods. Co., 304 U.S. 144, 153-54 (1938).
122 Some notable exceptions exist where courts apply a stricter standard, such as
“rational basis review with bite.” See City of Cleburne v. Cleburne Living Ctr., 473
U.S. 432, 455, 465-70 (1985) (Marshall, J., concurring in part and dissenting in part);
see also Lawrence v. Texas, 539 U.S. 558, 580 (2003) (O'Connor, J., concurring).
123 Williamson v. Lee Optical of Oklahoma Inc., 348 U.S. 483, 487-88 (1955)
(internal quotation marks and citations omitted).
124 E.g., Evan J. Criddle, Chevron's Consensus, 88 B.U. L. Rev. 1271 (2008); Cass
R. Sunstein, Law and Administration After Chevron, 90 Colum. L. Rev. 2071, 2083
(1990).

5-Feb-21] CLASS ACTION DEMOCRACY 27
choices … Our Constitution vests such responsibilities in
the political branches.125
I have also argued for an alternative, though not mutually-exclusive,
democratic justification for Chevron deference based not on the
democratic accountability of the president (which would not apply for
independent agencies as it is)126 but on the legislature because the kinds
of statutes that give rise to deference are enacted by Congress and
sanctioned by the voters.127
Both Chevron and modern rational basis review are
instantiations of a general proposition: democratic accountability
translates into deference. At the expense of over-simplifying, courts will
not second-guess a decision that has a good democratic pedigree. This
proposition may be perhaps most clearly displayed when we look at
doctrines responding to an absence and especially a breakdown of
democratic procedures where, unlike in cases of Chevron deference or
rational basis review, serious judicial intervention is warranted. Courts
have been willing to wade into the “political thicket” and find exceptions
to the political question doctrine’s bar on justiciability128 when
125 Chevron U.S.A. Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 865-66
(1984) (internal quotation marks and citations omitted). See also Thomas W. Merrill,
Judicial Deference to Executive Precedent, 101 Yale L.J. 969, 978-79 (“In addition to its
novel framework, Chevron also broke new ground by invoking democratic theory as a
basis for requiring deference to executive interpretations”).
126 Chevron does apply to independent agencies, but the justification presented in
the case does not apply. See FCC v. Fox Television Stations, Inc., 129 S. Ct. 1800 (2009)
(see especially Breyer, J., dissenting; Stevens, J., dissenting); Nat'l Cable &
Telecomms. Ass'n v. Brand-X Internet Servs., 545 U.S. 967 (2005) (applying Chevron
deference where the Federal Communications Commission, an independent agency,
interpreted a statute); Barry Friedman, The Birth of an Academic Obsession: The
History of the Countermajoritarian Difficulty, Part Five, 112 Yale L.J. 153, 164 n.31
(2002) (“Deference under the Chevron principle is justified in part (by courts) based
upon the greater accountability of administrative agencies. Especially with regard to
independent agencies, under control of officials appointed much like Supreme Court
Justices, this claim is more than a little difficult to support, yet has received
insufficient attention in the literature.”); Randolph J. May, Defining Deference Down:
Independent Agencies and Chevron Deference, 58 Admin. L. Rev. 429 (2006) (citing,
inter alia, Elena Kagan, Presidential Administration, 114 Harv. L. Rev. 2245 (2001)).
127 Nicholas Almendares, Blame-Shifting, Judicial Review, and Public Welfare, 27
J.L. & Pol. 239, 285-86 (2012).
128 Nixon v. United States, 506 U.S. 224 (1993); United States v. Munoz-Flores, 495
U.S. 385 (1990).

28 CLASS ACTION DEMOCRACY [5-Feb-21
democratic accountability is sorely lacking. In his Baker v. Carr
concurrence, Justice Clark explained:
I would not consider intervention by this Court into so
delicate a field if there were any other relief available to
the people of Tennessee. But the majority of the people of
Tennessee have no practical opportunities for exerting
their political weight at the polls … the people of Tennessee
are stymied … without judicial intervention.129
Similarly, courts have regularly intervened to ensure that democracy is
functioning well.130
The most famous example of this reasoning is Carolene Products,
which alters the usual extremely deferential rational basis review when
democratic accountability may not be present. Normally, a law is
entitled to the deferential rational basis review described above.
However, if the law either restricts the political process or prejudices
“discrete and insular minorities” then Carolene Products’ well-known
footnote 4 indicates it should be subject to more “exacting” and
“searching” review.131 The doctrine directs attention to discrete and
insular minorities on the theory that they would be unable to protect
themselves politically—in an ordinary democratic process they would
end up being perpetual losers. Although there are some reasons to doubt
this premise.132 The overarching idea is that in the ordinary course of
events decisions should be made by the democratic process, i.e., with no
intervention by the courts. But, when that process is blocked in some
way or breaks down, then (and only then) courts should intervene.133 All
this is very much the exception rather than the rule, though. Indeed, in
Carolene Products the Supreme Court determined that the lax rational
basis standard applied, and even in the decisions where the Court opts
129 Baker v. Carr, 369 U.S. 186, 258–59 (1962) (Clark, J., concurring) (internal
quotation marks omitted).
130 E.g., Miller v. Cunningham, 512 F.3d 98, 102 (4th Cir. 2007); White v. Regester,
412 U.S. 755, 756 (1973); Williams v. Rhodes, 393 U.S. 23, 31 (1968) (forming politically
viable parties); Lucas v. Forty-Fourth Gen. Assembly, 377 U.S. 713, 753-54 (1964)
(Stewart, J., dissenting) (arguing that systematic frustration of the majority violates
the Constitution).
131 United States v. Carolene Prod. Co., 304 U.S. 144, 152 n.4 (citations omitted).
132 Nicholas Almendares & Catherine Hafer, Beyond Citizens United, 84 Fordham
L. Rev. 2755, 2798 (2016).
133 David A. Strauss, Is Carolene Products Obsolete?, 2010 U. Ill. L. Rev. 1251, 1256
(2010).

5-Feb-21] CLASS ACTION DEMOCRACY 29
to intervene it goes out of its way to express its customary reliance on
the democratic process. All this indicates a potent baseline faith in
democratic procedures and the importance of democratic accountability
in the law.
B. Private Law: Faith in Corporate Governance
The weight put on democratic accountability is not confined to
regulation and public law. Courts, especially the Supreme Court, have
put overwhelming faith in corporate democracy. Citizens United hardly
needs an introduction; its holding expanding the speech rights of
corporations and its impact on campaign financing has garnered
widespread attention.134 Citizens United started with the unexceptional
premise that corporations have some First Amendment rights.135 Then,
the Court proceeded to dismantle the possible reasons for those rights
being any different from those of natural persons. First Amendment
doctrine subjects campaign finance regulation to the demanding
standard of strict scrutiny, equating the money spent to fund a political
campaign with political speech itself136 which is itself entitled to the
utmost constitutional protections.137 The usual formulation for strict
scrutiny is that the law or other government action only passes
constitutional muster if it “furthers a compelling interest and is
narrowly tailored to achieve that interest.”138 So, the standard has two
parts: the law cannot be over- or underinclusive, i.e., it cannot burden
too much unproblematic speech, and there must be a good reason for the
regulation in the first place.
The Citizens United majority concluded that the challenged
restrictions on corporate campaign activities were not narrowly tailored
to the interest of avoiding corruption or the appearance of corruption in
134 E.g., New York Times Editorial Jan. 21, 2010 (“The majority is deeply wrong on
the law. Most wrongheaded of all is its insistence that corporations are just like people
and entitled to the same First Amendment rights.”). See also Nicholas Almendares
and Catherine Hafer, Beyond Citizens United, 84 Fordham L. Rev. 2755 (2016).
135 Citizens United v. Fed. Election Comm'n, 558 U.S. 310, 342 (2010).
136 E.g., McCutcheon v. FEC, 134 S. Ct. 1434, 1440–41 (2014).
137 See, e.g., Eu v. S.F. Cty. Democratic Cent. Comm., 489 U.S. 214, 223 (1989)
(“[T]he First Amendment ‘has its fullest and most urgent application’ to speech uttered
during a campaign for political office”) (internal citations omitted).
138 Fed. Election Comm'n v. Wisconsin Right To Life, Inc., 551 U.S. 449, 564 (2007).

30 CLASS ACTION DEMOCRACY [5-Feb-21
the form of a quid pro quo where campaign funds are being exchanged
for political favors.139 Following the strict scrutiny standard, in order to
hold that the challenged regulations were unconstitutional, the Court
also had to conclude that there were not alternative compelling interests
that the regulations could have fulfilled; in theory, the regulations could
have been perfectly narrowly-tailored to those ends.140 Previous
campaign finance jurisprudence had suggested that the government
might have in interest in protecting shareholders from, in effect, being
forced to subsidize political advocacy they might disagree with. When a
corporation uses its resources in a campaign it is using the shareholders’
property to that end. If the corporation is one explicitly designed for
political purposes then this does not pose much of a problem. Anyone
not interested in the group’s message or policy goals should simply not
invest in it. The same, however, cannot be assumed for a run of the mill
for-profit corporation with no express political commitments. Investing
money in General Electric, this argument goes, is not the same as giving
money to the Sierra Club.
Citizens United decisively rejected this shareholder protection
interest on a number of grounds,141 one of which was confidence in
corporate governance. The Court was skeptical of this shareholder
interest because corporate democracy, along with corporate bylaws and
the potential for derivative suits, would deter corporations from
engaging in speech disapproved of by shareholders.142 So, the
mechanisms of corporate governance, that is, the ways that the relevant
principals in a corporate context can hold their agents accountable,
would prevent corporations from appropriating shareholders’ property
to support speech they disfavored.
The Supreme Court’s faith in corporate democracy and
accountability is also on display in Burwell v. Hobby Lobby Stores,
139 Citizens United v. FEC, 558 U.S. 310, 361–62 (2010).
140 The alternative way of reaching the same result, of course, would be to identify
those additional compelling interests and then conclude that the regulations were not
narrowly-tailored towards achieving them either.
141 Citizens United v. Fed. Election Comm'n, 558 U.S. 310, 361 (2010).
142 On this point, the Supreme Court was expanding on the earlier Bellotti decision
that had noted the possibility of this shareholder protection interest but also noted
that there was no evidence in the record that shareholders were having their property
used to support positions they disfavored. First Nat. Bank of Boston v. Bellotti, 435
U.S. 765, 794–95 (1978).

5-Feb-21] CLASS ACTION DEMOCRACY 31
Inc.143 Hobby Lobby has much in common with Citizens United. They
both address the First Amendment—albeit different parts and Hobby
Lobby actually centers on the interpretation of the Religious Freedom
Restoration Act (RFRA) rather than the Constitution, a difference courts
tend to elide.144 In Hobby Lobby a majority of the Court closely
identified the corporation’s rights and interests with those of its owners
and managers. Justice Alito explained that RFRA protected the rights
of such people by
employing a familiar legal fiction: It included corporations
within RFRA's definition of ‘persons’ But it is important to
keep in mind that the purpose of this fiction is to provide
protection for human beings. A corporation is simply a form
of organization used by human beings to achieve desired
ends. An established body of law specifies the rights and
obligations of the people (including shareholders, officers,
and employees) who are associated with a corporation in
one way or another. When rights, whether constitutional
or statutory, are extended to corporations, the purpose is
to protect the rights of these people.145
In characterizing corporations this way, the Supreme Court seemingly
abandoned the “separateness” of a corporation, one of the defining
characteristics of the corporate form.146 Without much analysis or
fanfare, it selected one of the competing views of the nature of a
corporation,147 treating it as a conglomeration of individuals rather than
an entity in its own right, even though the law has stubbornly shown
vestiges of both accounts of the corporation.148
143 573 U.S. 682 (2014).
144 Elizabeth Sepper, Free Exercise Lochnerism, 115 Colum. L. Rev. 1453, 1468–69
(2015).
145 Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 682, 706–07 (2014).
146 The canonical citation is Trustees of Dartmouth Coll. v. Woodward, 17 U.S. 518,
667, 4 L. Ed. 629 (1819). See also Thomas E. Rutledge, A Corporation Has No Soul-
the Business Entity Law Response to Challenges to the Ppaca Contraceptive Mandate,
5 Wm. & Mary Bus. L. Rev. 1, 18 (2014) (collecting cases and examples).
147 James D. Nelson, Conscience, Incorporated, 2013 Mich. St. L. Rev. 1565, 1570
(2013).
148 See, e.g., Darrell A.H. Miller, Guns, Inc.: Citizens United, Mcdonald, and the
Future of Corporate Constitutional Rights, 86 N.Y.U. L. Rev. 887 (2011); Gregory A.
Mark, The Personification of the Business Corporation in American Law, 54 U. Chi. L.
Rev. 1441 (1987).

32 CLASS ACTION DEMOCRACY [5-Feb-21
There is something radical in Hobby Lobby’s account of the
corporation; if we take it seriously it would have far-reaching
implications and should reshape corporate law. The ruling paves the
way for disagreements within a corporation as to its religious
commitments and how to fulfill them. The majority in Hobby Lobby
emphasized the limited scope of the ruling, confining it to closely-held
corporations like the ones involved in the suit and not to large publicly-
traded companies.149 But, nothing in the logic of the case confines it to
those entities. Further, the centerpiece of the decision is the proposition
that there is no good reason to read RFRA and the other relevant
statutes as excluding for-profit corporations while simultaneously
applying religious protections to ordinary people and nonprofit
corporations,150 clearly indicating that all corporations should be treated
the same for these purposes, regardless of whether they are, or are not,
closely-held.151 At most, publicly-traded corporations would present a
challenge for figuring out what their religious commitments, if any, are.
Hobby Lobby does not require the corporation to do much in order to
assert a religious commitment, though. The corporations involved in the
actual case included their religious commitments in mission statements
and their boards adopted resolutions to that effect. Any corporation,
regardless of its size, is capable of doing the same if it were so motivated.
The only potential restrictions on publicly traded corporations
exercising these religious freedoms are practical—the board, and
possibly the shareholders, would simply have to agree to it.
Hobby Lobby paves the way for disagreements within a
corporation as to its religious commitments and how to fulfill them.
Closely-held corporations are not immune to these disagreements—a
small group or family can certainly disagree on these matters152—and
such disagreements become virtually guaranteed when we apply Hobby
Lobby’s logic to a large corporation with a diverse set of shareholders.
As in Citizens United, the Hobby Lobby majority trusted in corporate
governance structures: “State corporate law provides a ready means for
resolving any conflicts [relating to religion] by, for example, dictating
149 Burwell v. Hobby Lobby Stores, Inc., 573 U.S. 682, 717 (2014).
150 Id. at 708-09.
151 “Although the Court attempts to cabin its language to closely held corporations,
its logic extends to corporations of any size, public or private.” Id. at 756-57 (Ginsburg,
J., dissenting).
152 A famous, and extreme example would be Elizabeth I and Mary Queen of Scots.

5-Feb-21] CLASS ACTION DEMOCRACY 33
how a corporation can establish its governing structure … Courts will
turn to that structure and the underlying state law in resolving
disputes.”153 Hobby Lobby relies on the accountability structures
established in corporate law to paper over any problems that arise from
the decision. Citizens United and Hobby Lobby are complex cases—they
each have many elements and raise several issues—but an important
one in each case is the presence of robust mechanisms for accountability.
The recent corporate law jurisprudence along with the Chevron
doctrine, Carolene Products, and the other examples mentioned in this
Part reveal a pattern across areas of law: courts are more suspicious
and impose far more rigorous scrutiny when an institution lacks
accountability, especially democratic accountability. Democracy
translates into judicial deference. When elected officials make decisions,
usually the courts’ review is so lax as to be virtually nonexistent.154 But,
if there is a defect in the democratic procedures, undermining that
accountability, then there will be searching review and the government
decisions will have to be defended in court. Along similar lines, while
courts frequently hold a jaundiced view of the accountability procedures
entailed in class actions, the Supreme Court at least treats corporate
governance as sterling. This difference helps rationalize the starkly
different treatment these institutions: corporations are mostly left to
their own devices while courts actively police class actions. In Hobby
Lobby and especially in Citizens United the Supreme Court trusted
participatory procedures embedded in corporate law to protect
shareholders (the principal) from being taken advantage of by corporate
leadership (the agents), whereas class action law is dominated by this
exact concern. This is all the more striking when we realize that class
action attorneys and corporate leadership are subject to an essentially
identical divergence of interests from their respective principals, i.e., the
principal-agent problems in these two contexts are startlingly similar.155
The difference in democratic accountability may not be what led to these
decisions—the shape of the doctrine might well be simply a happy
153 Id. at 685 (internal citations omitted).
154 Specifically regarding litigation decisions, attorneys general are almost all
elected directly. In some states they are indirectly accountable to the voters because
they are appointed by elected officials like the governor, though in Maine the
legislature has this responsibility. The most democratically-insulated state attorney
general is Tennessee’s, where the position is chosen by the state supreme court, which
is itself only subject to retention elections.
155 See Part III.B.2, below.

34 CLASS ACTION DEMOCRACY [5-Feb-21
accident—but making the extent of scrutiny depend on the democratic
pedigree of the decisionmaker is a plausible approach.
The general treatment of democracy in the law helps connect the
theoretical arguments relating to the democratic deficit in class
actions—the democratic critique of class actions—to the law. While
there is nothing directly apposite in Rule 23, no direct instruction for
courts to weigh the democratic pedigree in a class action, if it is true that
the lack of democratic procedures seriously undermines accountability
in class actions so that the principal-agent problem present in class
actions is especially acute, then there is ample doctrinal support for
some sort of legal response. Throughout the law courts look to the
quantity and quality of democratic procedures and, all else being equal,
grant greater leeway to institutions that are more democratic. In the
next Part, however, I want to question this seemingly obvious or even
self-evident position and show that even though class actions lack
democratic or participatory procedures such procedures would not
actually make the members of the class better off, so the democratic
critique of class actions misses the mark.
III. THE POLITICAL ECONOMY OF CLASS ACTIONS
To restate the democratic critique of class actions in light of the
foregoing, current class action law does not provide many opportunities
for class members to hold their attorneys accountable. They lack some
mechanism like voting that would help them control the attorneys. At
best, they have attenuated options, like objecting to a settlement or
exiting the litigation, and even those might not even work well within
their limited ambit. Consequently, class action attorneys are free to
pursue their own interests rather than those of the members of the class.
And because the attorney has such a different stake than any of the class
members their interests are bound to diverge—in short, the attorney has
the means and the motivation to pursue their own interests in the
litigation, even at the expense of the interests of the members of the
class itself. Moreover, I have noted that responding to this problem
would be consistent with a number of well-established doctrines and
legal rules.156 An important aspect of this critique is that it makes no
assumptions about the attorney’s motives. The problem is not that
156 See Part II, supra.

5-Feb-21] CLASS ACTION DEMOCRACY 35
plaintiffs’ attorneys are somehow greedy or venal or irresponsible.
These potential issues are inherent in the structure of class actions; they
are “baked in.”
A. The Fundamental Trade-off: Expertise vs. Control
The accountability critique or democratic deficit creates the
problem that courts, theorists, and lawmakers have all tried to solve in
various ways. It motivates class action legislation,157 proposals for
procedural reform,158 and widespread skepticism or hostility towards
the class action device, especially in courts.159 Yet here I want to
question it. In this Part I will explain that the lack of active control
mechanisms that the class can exercise over their attorney, this
democratic deficit, is not as bad for class members as it appears. In fact,
if class members had access to robust accountability procedures, if, for
example, they could vote to retain or dismiss their attorneys giving them
“voice” in the terminology the class action literature has adopted, that
option would generally not make them better off. This observation
should lead us to rethink the democratic critique and its implications.
This counterintuitive result is based on a strain of the principal-
agent literature related to the economics of communication and eliciting
the information an agent possesses. The canonical study in this area is
by Vincent Crawford and Joel Sobel, which has been subsequently tested
and expanded on.160 A crucial feature of the litigation environment is
that the attorney (the agent) has valuable expertise. The agent has
access to private information, about both the law in general and the
157 E.g., 28 U.S.C. § 1715(b) (2006); 15 U.S.C. § 78u-4(a)(3)(B)(iii) (2006); In re
Initial Pub. Offering Sec. Litig., 214 F.R.D. 117, 120-21 (S.D.N.Y. 2002); Howard M.
Erichson, Cafa's Impact on Class Action Lawyers, 156 U. Pa. L. Rev. 1593 (2008)
158 E.g., Coffee, Accountability and Exit, 100 Colum. L. Rev. 370; Elizabeth J.
Cabraser & Samuel Issacharoff, The Participatory Class Action, 92 N.Y.U. L. Rev. 846
(2017); Minor Myers & Charles Korsmo, Aggregation by Acquisition: Replacing Class
Actions with a Market for Legal Claims, 101 Iowa L. Rev. 1323 (2016; Hans-Bernd
Schaefer, The Bundling of Similar Interests in Litigation. The Incentives for Class
Action and Legal Actions Taken by Associations, 9 Eur. J.L. & Econ. 183, 199–201
(2000).
159 E.g., Amchem Products, Inc. v. Windsor, 521 U.S. 591 (1997); Eubank v. Pella
Corp., 753 F.3d 718, 719 (7th Cir. 2014).
160 Vincent Crawford and Joel Sobel, Strategic Information Transmission, 50
Econometrica 1431 (1982).

36 CLASS ACTION DEMOCRACY [5-Feb-21
specific case, that the class members (the principal) want to take
advantage of. The principal might not know the best theory of the case
or the strength of the case (which would in turn influence their decision
whether to accept a settlement offer or not) without having legal
training or investigating the case law. Furthermore, the private
information possessed by the agent cannot be easily, conveniently, and
verifiably transferred to the principal. Thus, there is no simple (and
inexpensive) way for the principal to verify the information coming from
the agent. To take a non-legal example, scientists may conclude that
there is a lake on Mars, but few people will be able to determine whether
their research was reliable. An attorney’s private information is the
same. While the client may be well-informed about the facts—they
experienced them firsthand—how those facts affect the litigation will be
largely mysterious to them. Making that assessment involves, inter
alia, looking to precedent, judging some facts relevant and others
irrelevant, and identifying areas where the law might reasonably be
modified, all things that lack an objective, easily accessed rubric. In the
language of economics, anything the agent says about their private
information in this context is therefore “cheap talk.”161
A consistent finding in the principal-agent literature is that there
is a trade-off between control over the agent and access to its
expertise.162 The principal might be able to make the decisions, but it
also might not know what the best course of action for it is. Research in
economics and political economy shows that sometimes surrendering
control over the agent can be good for the principal. Control in and of
itself is not in the best interests for the principal. It is a means to an
end. As Bengt Holmstrom and others have demonstrated, sometimes
the principal “sacrifices control because doing so gives the agent greater
161 The contrast to cheap talk is costly signaling, where the agent’s messages about
their private information carry a direct cost to the agent or are binding on the agent in
some fashion.
162 See Sean Gailmard, Accountability and Principal-Agent Theory in the Oxford
Handbook of Public Accountability, Mark Bovens, Robert E. Goodin, and Thomas
Schillemans, eds. 98, 97-98 (2012) and the cites therein. This is a common
phenomenon in principal-agent situations. See, e.g., Nicholas Almendares, Blame-
Shifting, Judicial Review, and Public Welfare, 27 J.L. & Pol. 239 (2012); Sean
Gailmard & John W. Patty, Slackers and Zealots: Civil Service, Policy Discretion, and
Bureaucratic Expertise, 51 Am. J. Pol. Sci. 873, 874 (2007).

5-Feb-21] CLASS ACTION DEMOCRACY 37
incentive to use its information” which ultimately makes the principal
better off.163
B. Delegation vs. Democracy in Litigation
1. Illustrative Models
To illustrate the effects of democratic accountability on the
principal-agent problem present in class actions and present the
intuitions behind this trade-off between control and expertise let us
assume that we could institute some sort of idealized voting procedure
whereby class members could vote on litigation decisions. There are a
range of practical reservations with this proposal, such as the timing of
these votes or how we would go about conducting them efficiently, not to
mention the inherent challenges of instituting democratic procedures in
class actions outlined in Part II. But for the purposes of this discussion
I bracket them. The voting procedure under consideration is thus highly
idealized; it is an unrealistic best-case scenario for class action
democracy. This stacks the deck against my conclusion—if even that
sort of idealized arrangement does little to improve the lot of class
members, then instituting imperfect versions of it cannot do better.
Also, I choose this hypothetical where voters directly vote on litigation
decisions for ease of exposition. We could alternatively suppose that
class members engage in retrospective voting where they decide to
retain the attorney or elect an attorney from a slate of candidates; it
does not materially affect the analysis. With this idealized voting in
place, class counsel presents her arguments in favor of her proposed
strategy, acting essentially as an advisor to the class who then makes
the ultimate decision. Equivalently, we can think of the attorney’s
choices of litigation strategy as something like a political platform—it is
what she would do if elected. The other scenario does not have these
voting procedures, so the decision is delegated to the attorney.
Delegation entails the class being unable to reverse the attorney’s
decisions. It is thus a kind of commitment. The delegation option
resembles, in a simplified and stark form, the current state of class
163 Sean Gailmard, Accountability and Principal-Agent Theory in the Oxford
Handbook of Public Accountability, Mark Bovens, Robert E. Goodin, and Thomas
Schillemans, eds. 98 (2012).

38 CLASS ACTION DEMOCRACY [5-Feb-21
action law where there is no democratic check on class counsel. For
example, the power of class members to opt-out and thereby exit the
litigation is not included in these models, taking on board the arguments
about the weakness of this as a means to hold class counsel
accountable.164
So we have two scenarios—delegation of litigation decisions to an
attorney and one where class members get to vote on them after
receiving some advice from the attorney that they are free to disregard.
Suppose that there is a class action and that the litigation decision at
hand is setting a settlement threshold: any settlement offer from the
defendant greater than that threshold will be accepted by the plaintiff
class. The class action attorney’s ideal settlement threshold is depicted
in Figure 1 as point A, any settlement offer greater than that she would
accept. She arrives at that value by making full use of all the
information available to her, her analysis of the case, assessment of how
strong the plaintiff’s claim is, likely defenses and procedural hurdles,
and so forth. In short, she uses her expertise. Point C on the figure
depicts the class members’ ideal settlement threshold if they also had
access to the attorneys’ expertise, that is, if they knew everything that
she did. These values are not identical because of the different stakes
that the attorney and the class members have in the litigation. There
will be some settlements that the attorney would accept that the class
members, if they were fully-informed, would reject, preferring the
riskier option of a trial to the proffered settlement. Hence, in this
example there exists a genuine principal-agent problem between the
class and their attorney; the endemic principal-agent problem of class
actions is in full effect. What happens in the delegation scenario is
straightforward. The attorney makes the litigation decisions, so she
adopts the settlement threshold A.
The voting scenario is more complicated. The attorney knows
that the class members are a bit more aggressive or comfortable with
164 See Part I.B.1, supra.
Figure 1: Delegation

5-Feb-21] CLASS ACTION DEMOCRACY 39
risk than she is. As noted above, there are settlement offers she would
happily accept that they would reject. With voting, they are the ones
ultimately making the decision, but the attorney can offer advice.
Consistent with her role as class counsel, she can advise the class
members about the strength of their case and explain what settlement
threshold they should choose to adopt. Because of the endemic
principal-agent problem in class actions, though, she has incentive to be
strategic in her advice. She wants the class members to adopt
settlement threshold A, so in advising the class she could downplay the
strength of the case, emphasizing its possible flaws, in an effort to
encourage class members to be less risky and adopt a threshold more
like the one the attorney herself prefers. She has the ability to do this
because, as noted above, class members cannot easily verify her advice.
If the attorney tells the class that they are unlikely to prevail because of
a contrary Supreme Court precedent or because the panel of judges is
especially hostile to their interest, the cannot readily determine if she is
telling them the truth or lying.
As depicted in Figure 2, the attorney might suggest that class
members choose settlement threshold A′, less than even the attorney’s
ideal settlement threshold of A, in order to induce class members to vote
the way she wants them to. The attorney can craft her advice in order
to account for the class members’ greater tolerance for risk. For their
part, class members can anticipate all this, so they take the attorney’s
advice with a grain of salt. In the language of economics the attorney’s
advice becomes a “noisy signal” that does not convey that much
information. So, when the attorney gives them advice to the effect of A′
all the class members can really infer from it is something in the
depicted “grain of salt” interval. The attorney’s advice communicates
some information but I t ends up being noisy, i.e., imprecise. The
attorney has incentive to downplay the strength of the class’ case and
that incentive gets in the way of effective communication—the attorney
is unable to share all the information at her disposal. On the basis of
this imprecise advice that they should vote for settlement threshold A′,
the class members might end up picking settlement threshold C′′, which
is greater than C, their ideal settlement threshold if they were fully
informed. This decision is something of a mistake, though, and class
members will end up rejecting some settlement offers that it would be
in their interests to accept, namely any offer greater than C but less
than C′′.

40 CLASS ACTION DEMOCRACY [5-Feb-21
The problem of strategic communication is more fundamental and
to some degree unavoidable. Let us consider a variation of the voting
and advice scenario where the attorney was being scrupulously honest
in her advice telling the class members exactly what she would do if she
were setting the settlement threshold. In this “honest advice” scenario
her advice is, labeled A*, is identical to her ideal threshold of A. Yet
there is still no way for the attorney to prove her honesty to the class
members.165 The fact that the attorney might use her advice
strategically means that the class members have to treat it with the
same grain of salt, leading them to again adopt a settlement threshold
that is too high according to their own preferences and interests. As
shown in Figure 3, this honest advice leads class members to adopt C*.
So honest advice actually makes class members worse off than the
strategic advice did—they end up selecting the a far too high settlement
threshold, leading them to reject perfectly reasonable settlement offers
and opting for a risky and costly trial that they would prefer to avoid.
The honest advice variant shows that even well-meaning attorneys (and
agents in general, for that matter), have to confront the difficult realities
of strategic communication. We cannot rely on professional ethics,
norms, or other forms of “loyalty” to resolve this problem.
165 In a more complicated model we could include things like reputational effects
that could help. However, (1) there are serious challenges to relying on reputational
effects in plaintiff class actions, such as that learning about the lawyers’ reputations
runs into its own rational ignorance and apathy problem, and (2) the basic dynamic
described here is still present, a credible reputation for honesty can only mitigate it to
some degree. In other words, such a reputation is a potential response to the trade-off
described in this Article.
Figure 2: Voting

5-Feb-21] CLASS ACTION DEMOCRACY 41
These are fairly simple scenarios relating to a single litigation
decision, and I picked settlement thresholds as the litigation decision for
ease of exposition. Unlike the theory of the case, the extent of discovery,
and other litigation decisions166 it is easy to see how preferences over
risk influence settlement thresholds and there is a natural ordering of
them. This is not to say that if we were to somehow implement this sort
of idealized voting procedure in class actions these exact scenarios would
play out.167 They merely illustrate the consistent conclusion of studies
of principal-agent models in a variety of contexts that there is a trade-
off between expertise and control.168 More specific to the topic at hand,
democratic procedures come at some cost. Even idealized democratic
procedures—ones that sidestep rational apathy or practical
implementation inconveniences—would entail a loss in terms of the
expert information that the attorney possesses and would make full use
of if she were making the decision on her own. Moreover, it bears
keeping in mind that this is a feature of the relationship between the
class and their attorney—the same divergent interests that formed the
166 All of which could be treated as bundled together in the equivalent of a
“platform” when the class voted to select an attorney.
167 The point of the modeling methodology referenced here is to illustrate the effects
of different procedures or other institutional arrangements. See, e.g., Ariel Rubinstein,
Comments on the Interpretation of Game Theory, 59 Econometrica 909, 909 (1991) (“I
view game theory as an analysis of the concepts used in social reasoning when dealing
with situations of conflict. It is an abstract inquiry into the function and logic of social
institutions and patterns of behavior.”); id. at 918 (“Models are not supposed to be
isomorphic with reality.”); Debra Satz & John Ferejohn, Rational Choice and Social
Theory, 91 J. Phil. 71 (1994).
168 See, e.g., Wouter Dessein, Authority and Communication in Organizations, 69
Rev. of Econ. Studs. 811 (2002) [hereinafter Dessein, Authority and Control]; Nicholas
Almendares, Blame-Shifting, Judicial Review, and Public Welfare, 27 J.L. & Pol. 239
(2012); Sean Gailmard & John W. Patty, Slackers and Zealots: Civil Service, Policy
Discretion, and Bureaucratic Expertise, 51 Am. J. Pol. Sci. 873, 874 (2007).
Figure 3: Honest Advice

42 CLASS ACTION DEMOCRACY [5-Feb-21
basis of the endemic principal-agent problem in class actions
complicates the communication between class members and their
counsel.
2. Reevaluating Accountability in Class Actions
This close examination of the interaction between members of a
class and their attorney raises the natural question: which is better? If
presented with the choice between delegation or voting which one would
make class members better off? Put another way, once we acknowledge
the losses and drawbacks associated with democratic control, products
of strategic interaction between the principal and the agent, the
question then becomes whether the information lost outpaces the loss of
control entailed in delegation. There are trade-offs, even with
democracy, that often go unacknowledged. The normative position I
adopt—looking to the well-being of the class—is unremarkable. We
would hope the class action procedures serve the interests of the
plaintiffs, and it is broadly similar to other treatments in the
literature.169 Perhaps even more important, the normative framework
of the class members’ best interests is entirely consistent with the
democratic critique.
As is often the case, it depends. Specifically, delegation is better
for class members when:170 (1) when the agent’s specialized information
is sufficiently valuable to the principal, and (2) the divergence interests
between the principal and the agent—or the agent’s bias—is not too
great.171 These conditions are related, they can substitute for each
other, so the more one is satisfied the less the other needs to be for
delegation to outperform voting. Thus, the more important the agent’s
expertise (Condition (1)), the less their interests need to align with those
of the principal (Condition (2)), and vice-versa. While the main
conclusion that surrendering control can be useful to a principal seems
169 See Jay Tidmarsh, Rethinking Adequacy of Representation, 87 Tex. L. Rev. 1137
(2009); Coffee, Accountability and Exit, 100 Colum. L. Rev. 370.
170 An implicit condition is that there is a single or primary dimension of interest
to the parties involved. That is, there are not cross-cutting considerations.
171 Dessein, Authority and Control 69 Rev. of Econ. Studs. at 812-13. See also Sean
Gailmard, Discretion Rather than Rules: Choice of Instruments to Control
Bureaucratic Policy Making, 17 Pol. Analaysis 25 (2008).

5-Feb-21] CLASS ACTION DEMOCRACY 43
odd at first,172 there is something intuitive about both conditions. The
more valuable the agent’s private information, their expertise, the more
loathe the principal will be to throw it away. In other words, the more
costly the grain of salt interval and the mistakes it leads to like picking
too high a settlement threshold will become. Likewise, the more trust
the principal can have that their agent has their best interests at heart
because their interests are actually all similar, the less dangerous
delegation becomes. Delegating to someone with identical interests is
safe, they would make the same decision you would anyway, and it
renders control mechanisms like retrospective voting superfluous.
When the agent is relatively unbiased—so that her interests and the
principal’s are closely aligned—any advice given will be more
informative. But, in his study of this issue Wouter Dessein finds that
even then the principal is still better off delegating: assuming there is
any divergence in interests, then there will still be some “noise” in the
advice, the principal will still have to take the advice with a grain of salt,
just a smaller one. With delegation, there is still the agent’s bias, but
this additional distortion, the product of communication, is not present.
An agent with any level of bias will not be able to credibly convey to the
principal what is exactly in the principal’s best interests. But, when
given the responsibility to make the decision, the agent will use all the
information at her disposal.173
Our assessment of the need for democratic participation in class
actions, and in turn the force of the influential democratic critique of
them, depends on the extent to which these conditions are typically
satisfied in class actions. Condition (1) is reasonably straightforward:
members of the class, especially if the stakes are small individually, will
assuredly know less about the case than the attorney. To the extent
that rational ignorance or apathy has any impact, it will preclude class
members with small claims from bothering to become substantially
informed about the case, litigation strategies, potential defenses, and so
forth. Moreover, the attorney has specialized legal training, so they can
far better understand the relevant nuances and precedents. This kind
of training cannot be easily transferred to class members, arguably they
172 Note that while they both entail surrendering some control, the logic here differs
from precommitment devices like those contained in constitutions. See Jon Elster,
Ulysses and the Sirens: Studies in Rationality and Irrationality (Cambridge, 1979).
173 Dessein, Authority and Control, 69 Rev. of Econ. Studs. at 832. Part of the
reason for this is that the decision made matters to the agent.

44 CLASS ACTION DEMOCRACY [5-Feb-21
would have to attend law school themselves, so class members will find
it difficult to judge or contradict the attorney’s own assessments. In
class actions, (and litigation generally) the role of counsel as an expert
agent is uncontroversial.174
Condition (2) is more complicated. If the attorney and the class
had identical interests then this condition would be easy to satisfy, but
then of course we would have no principal-agent problem in the first
place. As we have already seen there is an endemic principal-agent
problem in class actions—by virtue of their structure and the incentives
it creates the interests of the class and of their attorney will diverge.
Some bias is inevitable. What needs to be determined is the extent of
this bias. With one important caveat I will address in Part III.C below,
Condition (2) is likely to be (sufficiently) satisfied. That is, when it
comes to class actions the divergence in interests between members of
the class and the class counsel should not be too great, especially taking
into account how significantly the class action environment satisfies
Condition (1). First, and this bears emphasizing given the overall tenor
of the discussion around class actions, both the class and their attorney
want to win the case. They share this basic goal, so they are not at
loggerheads. Furthermore, the customary contingency fee
arrangement—which was part of the cause for the endemic principal-
agent problem—does do a decent job at aligning the interests of the
attorney with those of her client: she does better as the class does better.
It is hard to definitively say that a contingency fee does “enough”
to connect the interests of the class to their attorney, especially as a
general matter. But the attorney’s position closely resembles the also
ubiquitous practice of compensating executives according to the firm’s
performance, typically through stock options, one of the main tools of
corporate governance and commonly considered quite effective. As one
corporate law scholar puts it: “Although one can find outliers, there
is no empirical basis for assuming any general divergence between the
CEO's incentives and shareholder [the corporate principal] value.”175
174 I consider the idea of more sophisticated members of the class below, see Part
III.D.2.
175 Edward B. Rock, Adapting to the New Shareholder-Centric Reality, 161 U. Pa.
L. Rev. 1907, 1918–19 (2013). See also id. at 1926 (“As interesting as these issues are,
they are better characterized as “mopping up operations” than the grand battles
against entrenchment and agency costs of the 1980s.”).

5-Feb-21] CLASS ACTION DEMOCRACY 45
This comparison is especially apt because the principal-agent problems
involved with corporate executives and class counsel are startlingly
similar. The principal-agent problem in class actions was based on
differential stakes in the litigation—the attorney has far more at stake
in the litigation, or a far greater investment in it, than any individual
class member, which led them to have substantially different tastes in
risk. Likewise, executives are far more invested and have far greater
stakes in the firms they manage than the vast majority of shareholders.
The typical shareholder’s investment in any single corporation tends to
be quite small, whereas the executives are nearly always far more
sensitive to changes in the firm’s value or the risk of bankruptcy. In
modern corporations stock options are pervasive and account for most of
an executive’s compensation, over 85% of it according to one study.176
Furthermore, the executive has less tangible considerations that tie her
to the firm: if it goes bankrupt that would represent a major disruption
in her life, involve searching for another job, and could harm her
reputation. This is not to imply that corporate governance is without its
problems. There are persistent worries that corporate leadership ends
up ignoring important stakeholders other than the shareholders177 or
overemphasizing shareholder value over all else.178 Besides, even if the
compensation structure aligns the agent’s interests with the principal’s,
the respective agent may still be overpaid: they may be receiving too big
a slice of the shared pie.179 But, the executive compensation scheme
does a good job at reducing the fundamental problem of bias.
Given the prevailing view that executive compensation
successfully aligns the interests of the executive with the shareholders’,
it stands to reason that the similar arrangements in class actions do a
respectable job of performing the same function. The effects should be
similar. There are additional structures that help limit the amount of
176 Edward B. Rock, Adapting to the New Shareholder-Centric Reality, 161 U. Pa.
L. Rev. 1907, 1918–19 (2013).
177 Simone M. Sepe, Corporate Agency Problems and Dequity Contracts, 36 J. Corp.
L. 113 (2010); id. Edward B. Rock, Adapting to the New Shareholder-Centric Reality,
161 U. Pa. L. Rev. 1907 (2013).
178 Reinier Kraakman et. al., When Are Shareholder Suits in Shareholder
Interests?, 82 Geo. L.J. 1733 (1994); Kent Greenfield, Reclaiming Corporate Law in A
New Gilded Age, 2 Harv. L. & Pol'y Rev. 1 (2008).
179 “Management compensation can be too high even if its structure is appropriate.”
Edward B. Rock, Adapting to the New Shareholder-Centric Reality, 161 U. Pa. L. Rev.
1907, 1926 (2013).

46 CLASS ACTION DEMOCRACY [5-Feb-21
bias of class counsel. Being able to tout successes and developing a
reputation for winning large awards is valuable in enticing new clients.
Along similar lines, class actions are a specialized practice and they not
infrequently involve a small, tightly-knit legal community. Asbestos, for
example, has given rise to numerous mass tort cases, and the field is
dominated by repeat players.180 Not only does this foster impactful
reputational effects, a repeat player has a separate incentive to
forcefully litigate: the value of this particular case can affect future
similar cases, so the class action attorney wants to avoid setting a bad
precedent.181 Rules of professional responsibility, possibly buttressed by
Rule 23’s specific requirements182 and due process,183 while insufficient
to resolve principal-agent problems in and of themselves, guard against
egregious instances of attorney shirking or misconduct. All of this
together keeps class counsel’s interests reasonably well-aligned with the
class as a whole. And, as explained above, their interests do not need to
be identical for delegation to be the optimal strategy—just not too
divergent considering counsel’s (not insignificant) expertise compared to
that of the members of the class.
Where does all this leave class actions? Worries that members of
a class cannot control their attorneys have dominated the conversation
and profoundly shaped the law.184 I styled this the democratic critique
as the main thrust of it is that class members conspicuously lack ways
to meaningfully participate in and steer the litigation that proceeds in
their name. They lack a real “voice” in the litigation, or equivalently,
they cannot discipline their attorney the way voters can turn a governor
out on their ear, and as that comparison implies this democratic deficit
sets them apart from other collective institutions. This democratic
critique inspires a search for substitutes for the democratic participation
and leads courts and other government actors to treat class actions
180 John C. Coffee, Jr., Class Wars: The Dilemma of the Mass Tort Class Action, 95
Colum. L. Rev. 1343, 1365 (1995).
181 Charles Silver & Lynn Baker, I Cut, You Choose: The Role of Plaintiffs' Counsel
in Allocating Settlement Proceeds, 84 Va. L. Rev. 1465, 1528–29 (1998).
182 See Rule 23(a); 23(g).
183 Failure to adequately represent the interests of absent plaintiffs may make the
action nonbinding on the absent plaintiff. See Hansberry v. Lee, 311 U.S. 32, 42-43
(1940) (discussing the Due Process Clause); see also Roger C. Cramton, Individualized
Justice, Mass Torts, and “Settlement Class Actions”: An Introduction, 80 Cornell L.
Rev. 811, 827-28 (1995).
184 See notes 11-13, 18, 21-27, supra.

5-Feb-21] CLASS ACTION DEMOCRACY 47
warily and to try and engineer safeguards to stop them from being
abused.185 It is hard to overstate how influential this critique has been.
It is not difficult to see why, democracy has tremendous normative force.
Democracy furnishes legitimacy and all else being equal is a good way
to make decisions, especially when a large group of people, like a class
of plaintiffs, is involved. But surprisingly in the specific context of class
actions democracy does not benefit the class. If given the opportunity to
meaningfully participate in the litigation—if we set aside any practical
problems and institute class action democracy—then the members of the
class would by and large prefer not to use it. They would rather delegate
the decisions to their attorney. This says less about voting and
democracy and more about the distinctive rarefied environment of
litigation. In this context voting inevitably results in some loss of
information—even if class members can consult with an attorney they
have to take any advice with a grain of salt (the size of which will vary
based on the attorney’s bias). There is a trade-off between expertise and
control, and in the case of class actions this trade-off ultimately favors
conceding some control over the litigation. The expertise is too valuable
to sacrifice and the attorney’s interests, while not identical to those of
her clients, are close enough that this delegation is, in expectation, a
good thing for the class. This does not imply that class counsel never
abuse their position. But at the level of generality of this debate, when
we are looking at the institution as a whole, that is not really the case.
Better said, such abuse is not product of the incentives and
circumstances inherent in class actions. Furthermore, the Honest
Advice scenario reveals that we cannot rely on “good apples” to resolve
the fundamental principal-agent problem in class actions. Therefore,
despite its intuitive force and impact the democratic critique misses the
mark. The lack of democratic procedures in class actions is thus not a
fatal flaw.186 We should still look for ways to improve and refine class
185 See, e.g., Samuel Issacharoff, Governance and Legitimacy in the Law of Class
Actions, 1999 Sup. Ct. Rev. 337, 340 (1999).
186 There is an alternative kind of democratic critique that could, in principle, be
leveled against class actions: that democratic participation is intrinsically good in all
contexts. Democracy would then be an end in itself rather than a means to one such
as controlling an agent. That would be a fundamentally different critique than the one
presented in the academic literature and the law. Coffee has some hints of this kind
of argument when he privileges client autonomy. Coffee, Accountability and Exit, 100
Colum. L. Rev. at 380, 437. But then he defines autonomy as “the idea that the
attorney should abide by the client’s preferences and litigation goals,” id. at 417. On
that understanding, the client, members of the class, would prefer delegation.

48 CLASS ACTION DEMOCRACY [5-Feb-21
action practice. I propose one in the next section. We should not start
from the position that the lack of democracy in class actions renders
them profoundly flawed and illegitimate. My point is to rehabilitee class
actions, to move them out of their “last resort” status, by showing that
their glaring defect does not, in light of my analysis of class action
democracy, have much bite.
C. The Challenge of Settlement
A key criterion for assessing the trade-off between expertise and
control in class actions was Condition (2), that the principal and the
agent had interests that were not too different. There is some confidence
that this condition is satisfied because both the attorney and the class
members want to prevail in the litigation and arrangements like the
contingency fee keep their interests aligned—the attorney does better
the better the class does. Settlement, which is common in all litigation
and especially class actions,187 can undermine this connection.188 To
borrow an example from Charles Silver and Lynn Baker, suppose that
early in the case, before the plaintiff’s attorney has invested heavily in
it, the defendant makes a settlement offer that rewards the attorney,
paying her far in excess of her usual hourly rate.189 It might make
economic sense to the attorney to accept the offer, especially since she
would be free to take on other work (although the reputational and
repeat player effects described previously would counteract this
temptation). Along similar lines, there are the infamous coupon
settlements, where the defendant offers coupons for purchases of their
goods or services in lieu of money damages while the attorney typically
receives cash payment.190 Settlements like this can pull apart the
interests of the class and the attorney and threaten Condition (2),
aggravating the basic principal-agent problem in class actions and with
it the democratic critique.
187 See, e.g., Janet Cooper Alexander, Do the Merits Matter? A Study of Settlements
in Securities Class Actions, 43 Stan. L. Rev. 497, 498 (1991).
188 It can also ruin the analogy between corporate and class attorney compensation.
189 Charles Silver & Lynn Baker, I Cut, You Choose: The Role of Plaintiffs' Counsel
in Allocating Settlement Proceeds, 84 Va. L. Rev. 1465, 1527–28 (1998).
190 See, e.g., Christopher R. Leslie, A Market-Based Approach to Coupon
Settlements in Antitrust and Consumer Class Action Litigation, 49 UCLA L. Rev. 991
(2002).

5-Feb-21] CLASS ACTION DEMOCRACY 49
Courts are quite involved in class action settlement. Rule 23
requires judicial approval of a class action settlement, in a process
usually referred to as a “fairness hearing,” designed to address
principal-agent problems.191 However, there is justifiable skepticism
about the utility of this process.192 The legal standard is quite vague,
with the Federal Rules only stating that a hearing must be held and that
the court must conclude that the settlement is “fair, reasonable, and
adequate.”193 The case law has developed a complicated open-ended
rubric, requiring, among other things, an assessment of the merits of the
case.194 While it makes perfect sense that the merits would affect
settlement value,195 settlement removes the adversarial process courts
rely on to make these assessments. When presenting a settlement all
the litigants have agreed upon to the court for approval the plaintiffs
and defendants are no longer at odds.196 In the worst case scenario the
attorney who has been “bribed” by a preemptive settlement offer like the
one presented by Silver and Baker has no incentive to argue against it.
So, any evaluation of the merits at a fairness hearing, not to mention
situating it within the “totality of the circumstances”197 is a fraught
endeavor.
The analysis needed to ensure that class counsel’s interests do not
diverge too much from their client’s is relatively simple, though. There
is no real need for the court to estimate the merits, weigh the costs of
continued litigation, and myriad other considerations.198 The court need
191 See Wright & Miller, 7B Fed. Prac. & Proc. Civ. § 1797 (3d ed.) and sources cited
therein.
192 E.g., William B. Rubenstein, The Fairness Hearing: Adversarial and Regulatory
Approaches, 53 UCLA L. Rev. 1435, 1481 (2006); Christopher R. Leslie, A Market-
Based Approach to Coupon Settlements in Antitrust and Consumer Class Action
Litigation, 49 UCLA L. Rev. 991, 1053–54 (2002); Samuel Issacharoff, Class Action
Conflicts, 30 U.C. Davis L. Rev. 805, 832–33 (1997).
193 Fed. R. Civ. P. 23(e).
194 See, e.g., In re Agent Orange Prod. Liab. Litig., 597 F. Supp. 740, 761 (E.D.N.Y.
1984), aff'd sub nom. In re Agent Orange Prod. Liab. Litig. MDL No. 381, 818 F.2d 145
(2d Cir. 1987) (collecting cases).
195 See, e.g., Nicholas Almendares, The False Allure of Settlement Pressure, 50 Loy.
U. Chi. L.J. 271, 294 (2018) and the cites therein.
196 For a detailed analysis, see William B. Rubenstein, The Fairness Hearing:
Adversarial and Regulatory Approaches, 53 UCLA L. Rev. 1435, 1469 (2006).
197 In re Agent Orange Prod. Liab. Litig., 597 F. Supp. 740, 761 (E.D.N.Y.
1984), aff'd sub nom. In re Agent Orange Prod. Liab. Litig. MDL No. 381, 818 F.2d 145
(2d Cir. 1987) (citing Grunin v. International House of Pancakes, 513 F.2d at 124.)
198 See, e.g., id. at 762 (collecting cases).

50 CLASS ACTION DEMOCRACY [5-Feb-21
only make a much coarser assessment about the proposed settlement—
which here ends up being a virtue. We can continue the analogy to
corporate law and the principal-agent problem between executives and
shareholders, looking to that example helped us determine that
Condition (2) was likely satisfied by class counsel. Settlement raises a
real risk of self-dealing, which as noted in Part I.B. corporate law
addresses through the duty of loyalty. As in that context, a more
process-based approach has appeal when assessing class action
settlement. A self-dealing transaction by someone with a corporate
fiduciary duty is subject to entire fairness review, a thorough
investigation of the transaction where the executive bears the burden of
establishing that the transaction was fair, i.e., that her conflict of
interest did not actually affect it.199 This broad-ranging inquiry has a
lot in common with a class action fairness hearing, and is quite difficult
for a court to perform with any degree of confidence. Alternatively, there
is the procedural safe harbor of having the transaction ratified by
parties that do not have a conflict of interest.200 This is much easier to
assess because all a court needs to do is evaluate the procedures; the
court does not have to check whether this was a good deal or a bad one,
merely that the proper procedures were followed.201
In similar fashion, courts are more capable of checking to see that
a class action fee arrangement or settlement has the right form—namely
that it connects the attorney’s interests to the class’—than a much more
involved determination. That should be the court’s focus, and is
relatively easy to judge.202 The interests need not be identical, that
would be unrealistic and none of my conclusions depend on the attorney
and the class being in perfect harmony. Others have similarly advocated
for a “good enough” approach by courts in this area; the goal should not
be an unattainable goal of judges ensuring class counsel behaves
perfectly.203
199 See Part I.B..2, supra. See also, e.g., Weinberger v. UOP, Inc., 457 A.2d 701,
711 (Del. 1983); Geddes v. Anaconda Copper Mining Co., 254 U.S. 590, 41 S. Ct. 209,
65 L. Ed. 425 (1921); Transactions between corporations having common directors or
other officers—Burden of proof, 3 Fletcher Cyc. Corp. § 974.
200 Gottlieb v. Heyden Chem. Corp., 91 A.2d 57, 59 (1952); Beard v. Elster, 60 A.2d
731, 738 (1960); Cohen v. Ayers, 596 F.2d 733, 740 (7th Cir. 1979).
201 D. Theodore Rave, Politicians as Fiduciaries, 126 Harv. L. Rev. 672, 704 (2013).
202 See Jessica Erickson, The Gatekeepers of Shareholder Litigation, 70 Oklahoma
L. Rev. 237, 271 (2017) for a similar suggestion.
203 See Jay Tidmarsh, Rethinking Adequacy of Representation, 87 Tex. L. Rev. 1137,

5-Feb-21] CLASS ACTION DEMOCRACY 51
In weighing the potential for fairness hearings to address the
problems created by settlement several things are worth keeping in
mind. First, we routinely ask courts to do more with less: summary
judgment, plausibility pleadings, judging decisions by administrative
agencies, and preliminary injunctions all require courts to make quite
consequential decisions usually without the well-developed record
present at a fairness hearing. Here the thoroughness of class
certification pays some dividends as the court will have a lot of
information—developed when the parties were adverse—available to
it.204 Second, the difference between class members and plaintiffs in
more ordinary litigation is really one of degree rather than kind. In the
archetypal class action each member of the class has little at stake and
so has correspondingly little interest in carefully reviewing the
settlement terms, going to court to object to them, and so forth. This is
simply rational ignorance and apathy emerging again.205 The same
holds true for the named plaintiffs, while they have been willing to play
a larger role in the case there will be serious limits to how extensively
they will “double check” their attorney’s work. Yet an individual
plaintiff is in a similar, if not the same, boat. Even if they have
thousands of dollars at stake, a client’s capacity, if not their incentive,
to monitory their attorney is quite limited. Outside of special
circumstances a client would have to, in effect, solicit a second opinion
to evaluate their attorney, and there would have to be a lot at stake to
make that worth the expense.206 Of course in class actions there is just
such a second opinion available—the court. Moreover, the court could
order briefing and evidence, if needed on the issue as they have for other
parts of Rule 23. In short, we should not hold class actions to a far
stricter, unrealistic standard than we apply to other civil litigation.
Finally, it bears underscoring just what is needed for the kind of
structural evaluation of class action settlements I propose. To make
things a bit more concrete, suppose we have a class action worth $100
1179 (2009).
204 Another thing to be avoided at settlement is giving judges perverse incentives
to dispose of the cases before them regardless of the merits of the settlement. This
would be a serious problem, though the informational challenges are by far the most
cited issue.
205 Though there are proposals to counter it. Coffee, Accountability and Exit, 110
Colum. L. Rev. at 423-25.
206 I consider this issue again in Part III.D.2., infra.

52 CLASS ACTION DEMOCRACY [5-Feb-21
million where plaintiffs have a 60% chance of winning, implying an
expected value of $60M. At a fairness hearing a court would not be able
to be nearly this precise, so it could not say whether a $50M settlement
was “fair, reasonable, or adequate.” But, even though the settlement is
less than the expected value of the case, that does not necessarily mean
that the settlement is unfair, unreasonable, or indeed, not in the best
interests of the class. That would depend, inter alia, on the relative
bargaining power of the plaintiffs and defendants that determines who
can capture the available surplus from trade (i.e., the benefits the
parties receive by not having to pay the costs of the full trial), attitudes
towards risk, and even more specific factors like the defendant’s
solvency.207 For example, plaintiffs might accept a $50M settlement
even when they could press for more if a larger figure would drive the
defendant into bankruptcy and complicate their recovery. In principle,
all of this could be presented to the court with supporting evidence,
under seal if needs be.208 Yet this example with its nuanced analysis of
settlement bargaining is not what we really care about. This example
is a far cry from Silver and Barker’s collusive settlement or one where
class members receive pennies on the dollar for their claims. While
there are good reasons to doubt whether a court can effectively judge a
$60M vs. a $50M one, at the scale considered here those values are fairly
close. Plaintiffs would be receiving a significant recovery and there were
substantial defenses—a 40% chance that plaintiffs lose is certainly non-
negligible. If the settlement in this example were instead for merely
$5M, that seems like the sort of difference that a could detect. It is this
kind of gross disparity that ought to concern us here because they can
pull apart the interests of the class and the attorney. As explained in
Part III.B., these interests need not be perfectly connected, especially in
light of the critical value of the attorney’s expertise, and courts seem
capable of making these coarse assessments.
Approaching the fairness hearing in this way would naturally be
permitted under the current law since the present standard is so open-
ended. At most, this represents a small revision of the current practice
by focusing the fairness hearing. Rather than checking to make sure
207 See, e.g., Ken Binmore, Ariel Rubinstein, and Asher Wolinksy, The Nash
Bargaining Solution in Economic Modeling, 17 RAND J. Econ. 176 (1986).
208 Nicholas Almendares, The False Allure of Settlement Pressure, 50 Loy. U. Chi.
L.J. 271, 309-10 (2018).
CITE false allure of settlement pressure.

5-Feb-21] CLASS ACTION DEMOCRACY 53
the settlement is the best or the “correct” one, the court just needs to
assess its structure, forbidding settlements like the bribery one.
(Although the front-loaded nature of modern class actions also
counteracts a bribery settlement—by the time the class is certified the
attorney has usually already put a lot of effort into it.209) If their take
home pay depends on the class’ award, the attorney’s incentives will
take care of the rest.
Settlement is surely a looming problem for accountability in class
actions.210 At its best it represents bargaining in the shadow of the law
that improves efficiency by dispensing with a costly complicated trial,
but it poses significant risks that courts should be vigilant against.
There have been a series of proposals to strengthen the review of class
action settlements,211 and my arguments lend further support to robust
fairness hearings, especially if they are designed to ensure the attorney
is acting as a faithful agent. The advantage of the proposal in this
Article—concentrating fairness hearings on the connection between the
attorney’s pay and the class’ interests—is that it solves a persistent
difficulties in fairness hearings by providing a clear criteria for judges
to apply.212
D. Some Complications
1. Voting Pathologies—Pandering
209 See notes 55-58, supra.
210 See, e.g., Bruce L. Hay, Optimal Contingent Fees in A World of Settlement, 26
J. Legal Stud. 259 (1997); Charles Silver & Lynn Baker, I Cut, You Choose: The Role
of Plaintiffs' Counsel in Allocating Settlement Proceeds, 84 Va. L. Rev. 1465 (1998);
Christopher R. Leslie, A Market-Based Approach to Coupon Settlements in Antitrust
and Consumer Class Action Litigation, 49 UCLA L. Rev. 991 (2002); Amchem Prod.,
Inc. v. Windsor, 521 U.S. 591 (1997).
211 E.g., Christopher R. Leslie, A Market-Based Approach to Coupon Settlements in
Antitrust and Consumer Class Action Litigation, 49 UCLA L. Rev. 991, 1087–88 (2002);
Samuel Issacharoff, Class Action Conflicts, 30 U.C. Davis L. Rev. 805, 829–30 (1997);
William B. Rubenstein, The Fairness Hearing: Adversarial and Regulatory
Approaches, 53 UCLA L. Rev. 1435, 1474 (2006).
212 William B. Rubenstein, The Fairness Hearing: Adversarial and Regulatory
Approaches, 53 UCLA L. Rev. 1435, 1444–45 (2006).

54 CLASS ACTION DEMOCRACY [5-Feb-21
To summarize, something like voting is not essential to manage
the principal-agent problem in class actions when all their
characteristics, like the need for the attorney’s expertise, are taken into
account. This defangs the democratic critique, the primary point of this
Article, but there are still substantial agency costs. Class members
simply cannot do better with democratic participation. The Panglossian
scenario is for the agent to have interests identical to the principal.
(More accurately, the agent would have identical preferences and it
would be costless for it to develop expertise, which just serves to
highlight how unrealistic this situation would be.) But, since the
attorneys typically have so much more at stake in the litigation, we will
not expect this to be the case.
Not only is voting not indispensable, it carries some risks as well.
When the agent has expertise, voting creates the possibility of
pandering: where the agent disregards her superior information and
opts to do what the voters prefer in order to win their approval. So, the
agent ends up doing something she knows is “wrong” in the sense that
it is not in the voters’ best interests, perversely in order to win their
votes.213 Class actions are ripe for pandering because a key
requirement214 is that the principal is unlikely to learn whether the
choices made were the right ones or not. If the agent expects the
principal to learn the results of her action, then pandering becomes
pointless: in that case, the agent should just choose the right action,
confident that truth will out. So, for example, pandering might occur
when the effects of a tax plan will not be realized before the next election.
In litigation, it will be difficult for any client—class or otherwise—to
determine whether the strategies used were the best ones available,
especially before the litigation itself has ended. Certainly, if we doubt
that the presiding judge can accurately assess the merits of a case, we
should be all the more skeptical about the average client’s ability to do
so. The attorney has greater information than class members, another
important condition for pandering.215 The pandering phenomenon
213 The canonical model of pandering is found in Canes-Wrone, et al. There are
additional complications in their model, such as variation in the expertise of agents
(although all agents are more informed than the principal). Canes-Wrone, Michael C.
Herron & Kenneth W. Shotts, Leadership and Pandering: A Theory of Executive
Policymaking, 45 Am. J. Pol. Sci. 532, 533 (2001).
214 Another condition is that the elections are competitive. If the agent has no real
chance of winning or losing, then pandering has no utility. Id. at 537.
215 Id. at 537 (see especially Proposition 1).

5-Feb-21] CLASS ACTION DEMOCRACY 55
indicates that if elections were instituted in class actions, not only would
they likely devolve into “beauty contests,” where rivals presented the
most attractive scenarios they could, regardless of whether they are
realistic or not. But, the very presence of the election creates an obstacle
for the class as the attorneys pander in lieu of using their judgment and
training.
2. Sophisticated Plaintiffs
An important premise has been that the class members have little
at stake individually. That was the source of the endemic principal-
agent problem in class actions as well as the rational apathy and
ignorance that interfered with various mechanisms of accountability.
Sometimes that characterization might not be true, and a principal with
a far greater stake in the litigation might approach their interaction
with the agent differently. One example is institutional investors like
pension funds, who own vast quantities of shares. Over the past 20
years, institutions like these have come to own the majority of corporate
stock, especially in the largest corporations.216 They thus have a lot
more at stake than the average shareholder, so they have incentive to
investigate what the firm is doing. They also have enough clout to make
a tangible difference; they do not face quite the same irrationality of
voting dilemma—if one represents 30% of the electorate then the
probability of being pivotal skyrockets. There have been serious
attempts to harness this dynamic in class actions, replacing the
“figurehead” class representative217 with one that will vigorously
monitor class counsel in the same way institutional investors might
carefully monitor firms. In securities class actions, the Private
Securities Litigation Reform Act (PSLRA) creates a rebuttable
presumption that the class representative or “lead plaintiff” will be the
one who has the largest financial stake and satisfies Rule 23’s
216 Ronald J. Gilson & Jeffrey N. Gordon, The Agency Costs of Agency Capitalism:
Activist Investors and the Revaluation of Governance Rights, 113 Colum. L. Rev. 863,
874 (2013).
217 See, Elizabeth Chamblee Burch, Optimal Lead Plaintiffs, 64 Vand. L. Rev.
1109, 1111 (2011), and the cites therein.

56 CLASS ACTION DEMOCRACY [5-Feb-21
requirements218 in the hope that a lead plaintiff who has a lot more at
stake in the case will closely monitor the attorney.219
The results of this initiative have been mixed. Ronald Gilson and
Jeffrey Gordon argue that institutional investors actually create an
additional principal-agent problem by interposing a new agent—the
institutional investor—between shareholders and executives.220
Sometimes an extra agent can be helpful, but other times it can intensify
principal-agent problems.221 Gilson and Gordon identify a number of
incentives that would lead institutional investors to rarely exercise their
corporate governance power.222 Among these, they point out that
institutional investors possess extremely diversified stock portfolios, so
while in absolute terms an institutional investor may own large
quantities of stock, proportionally its investment in any single firm is
small,223 limiting how much effort they will put into monitoring any
single firm.224 These are just a few of the explanations in the literature
for why institutional investors may not have that great an impact on
corporate governance.225
Regarding the PSLRA, which attempts to harness the benefits of
institutional investors for class actions, courts have shown some
reticence in appointing institutional investors to serve as lead
plaintiffs.226 Although the majority of contemporary securities cases
218 15 U.S.C. § 78u-4(a)(3)(B)(iii) (2006); In re Initial Pub. Offering Sec. Litig., 214
F.R.D. 117, 120-21 (S.D.N.Y. 2002).
219 Elizabeth Chamblee Burch, Optimal Lead Plaintiffs, 64 Vand. L. Rev. 1109,
1116 (2011); see generally Elliott J. Weiss & John S. Beckerman, Let the Money Do the
Monitoring: How Institutional Investors Can Reduce Agency Costs in Securities Class
Actions, 104 Yale L.J. 2053, 2054 (1995); Jessica Erickson, The Gatekeepers of
Shareholder Litigation, 70 Oklahoma L. Rev. 237, 246-48 (2017).
220 Ronald J. Gilson & Jeffrey N. Gordon, The Agency Costs of Agency Capitalism:
Activist Investors and the Revaluation of Governance Rights, 113 Colum. L. Rev. 863,
865 (2013).
221 Dessein, Authority and Control, 69 Rev. of Econ. Studs. at 825-27.
222 Ronald J. Gilson & Jeffrey N. Gordon, The Agency Costs of Agency Capitalism:
Activist Investors and the Revaluation of Governance Rights, 113 Colum. L. Rev. 863,
890 (2013).
223 The tax code and other statutes lead to a maximum of 10% investment for
mutual funds. See id. at 890-91.
224 Id. at 885–86.
225 See generally, Jennifer S. Taub, Able but Not Willing: The Failure of Mutual
Fund Advisers to Advocate for Shareholders' Rights, 34 J. Corp. L. 843 (2009).
226 “Put simply, some trial judges have gone to considerable lengths to nullify this

5-Feb-21] CLASS ACTION DEMOCRACY 57
have institutional investors as lead plaintiffs.227 Not entirely unlike
Gilson and Gordon’s analysis, Elizabeth Chamblee Burch points out that
these lead plaintiffs will tend to have divergent interests from the rank
and file class members and proposes appointing lead plaintiff groups in
order to better represent the diversity of interests within the class.228
For example, the institutional investor may be more intimately
connected to the defendant corporation and want to maintain an ongoing
relationship with it, giving it an interest in the long-term health of the
defendant that other class members do not share.229 As with
corporations, then, the benefits of having something like a subset of the
principal with a greater stake in the litigation may be limited.
The presence of this kind of “high stakes plaintiff” like an
institutional investor is important to take into account in civil procedure
and corporate law.230 For my purposes, though, they do not play that
big a role. It comes down to what problem they are thought to solve.
The conventional wisdom is that institutional investors, by virtue of
having more at stake, will not be subject to rational apathy, resulting in
more active monitoring and engagement. However, the delegation
choices detailed above are not in essence a product of rational apathy.
Condition (1) does not require that the principal be extremely
uninformed (even if that is what we expect to see in a class action), just
that the agent be sufficiently more informed than the principal.231 Even
very sophisticated parties will naturally not have the same case-specific
information available to them as the attorney who has been working on
it. To take one example, Lazy Oil co. v. Witco Corp.232 involved an
objection to a settlement by class representatives that were both
power to select class counsel.” Coffee, Accountability and Exit, 100 Colum. L. Rev. at
414.
227 James D. Cox et al., There Are Plaintiffs and ... There Are Plaintiffs: An
Empirical Analysis of Securities Class Action Settlements, 61 Vand. L. Rev. 355 (2008).
228 Elizabeth Chamblee Burch, Optimal Lead Plaintiffs, 64 Vand. L. Rev. 1109,
1111 (2011).
229 Id. at 1124.
230 Intermediaries can substantially affect the outcomes of an expertise-laden
relationship. For examples, see Dessein, Authority and Control, 69 Rev. of Econ. Studs;
Sean Gailmard and Jeffrey A. Jenkins, Agency Problems, the 17th Amendment, and
Representation in the Senate, 53 Am. J. Pol. Sci. 324 (2009). See also Elizabeth J.
Cabraser & Samuel Issacharoff, The Participatory Class Action, 92 N.Y.U. L. Rev. 846
(2017).
231 Exactly how much more informed the agent needs to be to
232 166 F.3d 581, 583 (3d Cir. 1999).

58 CLASS ACTION DEMOCRACY [5-Feb-21
sophisticated and actively involved in the litigation.233 In his analysis
of the case, Coffee notes that the objectors’ legal reasoning was weak:
the odds of winning the case at trial were “formidably stacked against”
the class after discovery and “the objectors’ theory for why greater
damagers were obtainable seemed tenuous.”234 Even if the principal is
sophisticated and has a large stake in the case—like the institutional
investor that leads a securities class action—understanding how the
facts map onto the law and the vagaries of litigation is not their
bailiwick. Short of the lead plaintiff doing a full investigation itself—
thereby obviating the utility of having an agent—the attorney who has
been working on the case will know more about it than even a high
stakes principal. Put another way, the delegation strategy I have
described is not the product of the principal’s cluelessness; rather, it is
created by the agent’s expertise. Sophisticated plaintiffs do not solve
the problem that motivated delegation of the type discussed in this
paper, namely that strategic considerations made the agent’s
information hard to convey with any degree of precision. Provisions like
the PSLRA’s lead plaintiff presumption are not irrelevant,235 especially
if the lead plaintiff takes on an active role. Indeed, they might be
especially helpful in negotiating the class counsel’s fee to help ensure
she is a faithful agent to the class. But, they do not fundamentally alter
the dynamics discussed in this Part.236
233 Coffee, Accountability and Exit, 100 Colum. L. Rev. at 408-09; Lazy Oil Co. v.
Witco Corp., 166 F.3d 581, 583 (3d Cir. 1999).
234 Coffee, Accountability and Exit, 100 Colum. L. Rev. 370 at 408-09.
235 The impact of institutional investors as lead plaintiffs is mixed. See, e.g.,
Elizabeth Chamblee Burch, Optimal Lead Plaintiffs, 64 Vand. L. Rev. 1109, 1120,
1149-51 (2011). There are also many effects to disentangle. For example, lead
plaintiffs will tend to be repeat players, so they might much more thoroughly scrutinize
the attorney’s qualifications. Also, the attorney, recognizing that the lead plaintiff is
likely to be a repeat player, will work harder and drive a harder bargain at settlement
in order to gain its business in the future. There is even some possibility of behavioral
economics effects: the title of “lead plaintiff,” enshrined in statute and blessed by a
judge, might motivate institutional investors to take their position seriously, operating
like a nudge.
236 More specifically, a sophisticated party likely affects condition (2) in the
delegation model. Whether delegation is the best option for the principal depends on
a relationship between the amount of bias and the informational gap between the
principal and the agent. For rank and file class members, this gap will be extremely
large. The phenomenon of rational ignorance implies that class members and
shareholders will put virtually no effort into learning about the case. The institutional
investor (or similarly-situated party with a considerable individual stake in the
litigation), on the other hand, could have incentive to do a thorough investigation. This

5-Feb-21] CLASS ACTION DEMOCRACY 59
CONCLUSION
A central issue regarding class actions is their endemic principal-
agent problem. Members of the class have little capacity to control their
attorneys, they do not get to vote and characteristics like rational apathy
and the ephemeral nature of class actions stand in the way of
meaningful class action democracy. This democratic critique of class
actions has support in the case law as wide-ranging doctrines like
Chevron deference and expanded corporate rights are justified by
reference to democratic participation. The effect of the democratic
critique is to pose an immediate and profound question about the
legitimacy and efficacy of class actions. In light of the critique one can
readily see why, among other things, it would be desirable to find other,
less democratically-unsound, means to pursue aggregate litigation.
This Article’s main contribution has been to push back on the
democratic critique by carefully examining class action democracy.
Along the way I have clarified the critique as well. Despite democracy’s
normative pull—not to mention the role it plays in law and theory—it is
not always the best way to proceed. I have added to the ongoing project
of class action reform by highlighting the inherent trade-off between
control and expertise. Given this trade-off, strengthening class action
democracy does not actually help the class. Accordingly, the fact that
class action democracy is weak—in other words, the democratic
critique—loses its force. If presented with the option class members
would rather delegate litigation decisions to the attorney rather than
exercise even an idealized form of democracy. This responds to the deep
question posed by the democratic critique. It also suggests that the most
promising avenues for class action reform are better aligning the
interests of the class action attorney with their client. One step along
this path is my proposal that fairness hearings be more process-oriented
would mean that delegation is optimal only when the agent has relatively little bias
(which the sophisticated party can reduce by hiring the right attorney, something they
have sufficient incentive to invest in doing).
In cases where there is relatively little bias, Dessein’s study shows that
delegation makes the principal better off. The agent’s advice is more accurate and
therefore more valuable. But, delegation performs even better. In short, one should
delegate to trustworthy agents. Also, from a social policy perspective, it is probably
easier to design institutions to mitigate the agent’s bias.

60 CLASS ACTION DEMOCRACY [5-Feb-21
and ensure that even at settlement an attorney’s fees have the right
structure, that is, that the attorney does well only if and when their
client does.