Making Securities Fraud Class Actions Virtuous

Few things are as American as the class action. Housed in this single
procedural device is the mechanism that accords equal footing to the common man
in his dispute with the large corporation. Where the single claimant could not
proceed individually because her expenses would dwarf the expected recover, the
class action can be brought on behalf of all who are similarly situated. And the
sheer size of the aggregated claim attracts not only the entrepreneurial instincts of
the class lawyer but also commands the full attention of the defendant. The class
action thereby has an important deterrent feature which give it a quasi-public
character; it can thus be seen as an extension of the state’s enforcement arm and an
expression of society’s will. Though the class action is the great equalizer of our
day, it is not intended as a tool for redistributing wealth. Securities class actions
proceed with the objective of permitting those separated wrongfully from their
wealth to get some of it back. It is in the class action’s empowerment of the small
claimant that we find the spirit of America—“equal justice for all under the law.”
The spirit is further unleashed by the American Rule whereby the party losing the
suit is not required to pay his opponents’ litigation costs. We thus openly
encourage pressing out on doctrinal frontiers through novel theories for which
recovery is sought. Moreover, the class action provides the economic basis for
much of the expansion of rights for groups, such as consumers and investors.
Because risks are not lightly taken in the expensive litigation world, the prospect of
a large recovery, and hence an equally large fee, is necessary to attract the attention
of the creative entrepreneurial attorney. The potential recovery on behalf of a large
class offers just such a reward. Here, too, the class action captures the spirit of
capitalism that is America. And nothing is more representative of capitalism than
the image of the class action attorney whose mission is quite similar to that of the
bounty hunters who populated the West in the 19th century. Though we may see all
litigators as hired guns of one sort of another, the class action attorney is not on a
retainer but lives on his skill of bringing down his prey. But her efforts, according
to the classic descriptions of the class action attorney, are all driven by a calculus
that is bounded by relative risks and rewards of continued pursuit of the case.