Posner and Class Actions

Abstract

The hallmark of Judge Posner’s class action decisions is rigorous review to ensure that aggregate litigation serves the best interests of class members and does not unduly pressure defendants to settle. Although he championed class actions, especially as a way to provide efficient justice in cases involving numerous small claims, Posner also recognized that, because of the agency problems that pervade class action litigation, ordinary adversary procedures were not sufficient to protect class members. As a result, the judge had to act as a fiduciary for the class, especially when approving settlements and fee awards. In addition, the colossal liabilities potentially imposed by a class action meant that a defendant might settle, even if the case had little merit, so judicial scrutiny, in particular interlocutory appellate review of certification decisions, was necessary to protect defendants. The influence of Posner’s opinions can be seen in the FRCP, especially the drafting of Rule 26(f), which, following Posner’s opinion in Rhone-Poulenc, allowed interlocutory review of certification decisions. Citation analysis also confirms Posner’s influence on the analysis of class actions, especially outside the Seventh Circuit and in academia.

Keywords: class action, Posner, agency costs, economic analysis, FRCP

JEL Classification: K40, K41, K42, K49