Analysis: Class Action Litigation-A Federalist Society Survey

Class Action Watch Fall 1998
October 01, 1998

When the Class Action Watch bulletin was first being planned, we were struck by the absence of any generally available data respecting business exposure to class action litigation. We frequently heard the argument that the business community had been facing more class action litigation with each passing year. Indeed, the preliminary findings of a Rand Institute study published in 1997 say as much, with lawyers and corporate counsel who were interviewed reporting that they have witnessed a doubling or tripling of class action suits in the past few years. But we knew of no effort to actually survey companies in considerable depth regarding their own specific experiences. We therefore undertook that task in December 1998, and some of the findings from that effort are set forth and discussed here.

The first task, of course, was to devise a reasonably thorough survey that companies could readily and easily answer. We chose to ask about putative class action cases that were pending in 1988, 1993, and 1998. The hope was that these three chronological "snapshots" would provide some sense of the development of class action activity over the most recent ten-year period. The respondents were asked to provide information about federal actions, cases in all state courts, and cases just in Texas state courts. We asked for a breakout of Texas actions because it was our understanding that Texas is shaping up to be the next major battleground for legislative consideration of class action reform. And, indeed, the following analysis devotes considerable attention to the Texas survey results for that very reason.

For each of the three years, the survey asked companies to consider a wide variety of issues, including, but not limited to:

The number of putative class actions pending in federal, state, and Texas state courts.

The predominant issue in each case (e.g., securites, toxic tort, consumer fraud, etc.).

  • The size of the putative class in each case, and whether the class was local, statewide, or nationwide in its composition.
  • The number of state, federal, and Texas state cases in which classes were certified.
  • The incidence and magnitude of both initial and post-certification settlement demands.
  • The number of federal, state, and Texas state court cases that were resolved by settlement, dispositive motion, and verdict.
  • The length of time between class certification and settlement.
  • The size of the plaintiff counsel

With respect to these and other issues that we raised, bear in mind that the survey asked about cases that were pending in a given year. Therefore, when the 1993 portion of the survey asked about class certification and settlement, for example, the respondents were instructed to "count" cases that were certified or settled before, during, or after 1993. The same can be said for the 1988 and 1998 portions of the survey. This approach was most consistent with what we know about how companies keep track of their cases.

After having completed the survey, we set out to obtain some data. We mailed the survey to 100 companies consisting of: (1) most large employers in Texas, including both Texas-based companies and non-Texas-based companies with a signifiant number of employees and with annual revenues at or about $1 billion or more; and (2) Fortune 500 companies that have a demonstrated a general interest in the litigation process as expressed by corporate or general counsel membership in more than one trade organization that monitors litigation reform, including the American Corporate Counsel Committee, the Civil Justice Reform Group, and the American Tort Reform Association. The companies represented every conceivable industry--transportation, energy and utilities, pharmaceuticals, food service, banking, insurance, heavy and light manufacturing, telecommunications, and a wide range of durable and non-durable consumer goods production. We had no idea whether or not class action litigation was perceived as a "problem" by the companies we surveyed, and the fact that a company has an interest in litigation reform does not necessarily mean that it has concerns about class action activity (indeed, a number of the respondent companies had no class actions to report). Moreover, the surveys were submitted blindly, and we therefore do not know what companies responded.

The survey effort began on December 4, 1998 with a mailing to the general counsels of the 100 companies we identified. As of January 12, 30 companies responded by returning surveys (a 30 percent response rate). Given the size of these companies and the logistical difficulties associated with responding to such a survey (it was 15 pages), we were quite satisfied to have secured such business participation in this kind of a project. Indeed, we know of no similarly successful survey effort (though Rand and others have been quite successful in collecting data using other very valuable sources).

For a number of reasons, we believe the pool of respondents reflects a rather diverse collection of experiences respecting class action litigation. It is clear, for example, that the companies responding are not simply those especially concerned with or affected by class action litigation. A number of the respondents had no pending litigation at all during the years in questions (or very little), while others posted more significant numbers. The median and mean numbers of pending putative class actions reflect this distribution. At the very least, therefore, one can see the nature and extent of class action activity among nearly several dozen major American companies with a diverse array of business interests.

Putting aside our satisfaction with the response, it is crucial to note that this survey effort is not intended to be a complete scientific sample or analysis of class action activity. The data was intended to increase our understanding in this area, but it by no means completes our understanding. Moreover, as we continue to receive responses, we will adjust our analysis. And, in the coming months, we hope to release the results of two other class action survey efforts involving the business community that currently are underway.

What follows is a summary of some of the information we were able to compile from the surveys that were submitted. The data included in this article reflects the best meaningful information available from the survey effort. We did not believe it was appropriate to report on issues or questions unless all or virtually all of the respondents provided data. Thus, for example, we are not comfortable at this time discussing any of the data respecting plaintiff fee awards or the predominant issues presented by class action litigation-too many of the answers to these questions were left incomplete by the respondents. It is our hope that some of these other issues can be tackled in future survey efforts. Moreover, we purposely have avoided reaching any conclusions respecting the data. Readers can decide for themselves what the trends reflect, what has caused them, and whether a problem has been revealed here that should be addressed.