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Routing 
Class actions, as currently constituted, are a procedural nightmare. Instituted to combine sim-ilar legal claims into a single court proceeding, theclass device has evolved into a radical tool (1) forgovernment redistribution of wealth and (2) forsubversion of individual rights. Here’s why: Themodern class mechanism often forces innocentdefendants to “settle” claims, that is, to redistrib-ute wealth to lawyers and a class of consumers,without regard for plaintiffs’ responsibility fortheir own injuries. Courts pave the way for suchsettlements by depriving defendants of legaldefenses to which the law entitles them. By mak-ing it hard to fight the litigation, courts proddefendants to settle.Coercion of defendants in this manner is a constitutional problem. The Due Process Clausesof the Fifth and Fourteenth Amendments requirecourts to apply the law predictably and impartial-ly. Yet, when courts disregard the legal rights of class action defendants in the interest of coercingthem to settle, they upset expectations about thelaw’s content for plaintiffs’ benefit.Unfortunately, the Class Action Fairness Actdoes not address this problem. It merely drawsmore of these actions into federal court. Yet, studiessuch as one published by RAND in 2000 suggestthat federal judges are not more likely to protectdue process rights in class proceedings—suggesting,in turn, that the Class Action Fairness Act will dis-appoint its supporters. Without further reform—far more aggressive than Congress has considered—unconstitutional class action proceedings, and thesettlements they coerce, will continue. At a minimum, controlling unconstitutionalclass actions requires Congress to change federalclass action rules. Necessary changes include (1)requirements that absent class members “opt in”before they are counted as part of the class andthat courts assess the merits of legal claims beforeauthorizing their litigation in the form of a classaction and (2) a ban on class treatment of law-suits in which key elements can be proven only ona case-by-case basis.Changing federal class action rules is only a partial solution. Congress must also give federalcourts more power to control constitutionally problematic class actions filed in state court. Itcan do so by authorizing defendants to removeclass suits raising due process problems into fed-eral court when state courts don’t adequately pro-tect litigants’ due process rights. The latter reformnot only is consistent with the Supreme Court’sunderstanding of federalism and separation of powers but will give states greater incentives toreform their local class action procedures.
Controlling Unconstitutional Class Actions
 A Blueprint for Future Lawsuit Reform
by Mark Moller
_____________________________________________________________________________________________________
 Mark Moller is a senior fellow at the Cato Institute and editor in chief of the
Cato Supreme Court Review 
.
Executive Summary 
No. 546June 27, 2005
 
Introduction
In its first piece of serious business, the109th Congress enacted the Class ActionFairness Act,
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which President Bush signed onFebruary 18, 2005. Not surprisingly, Republi-can Party leaders immediately claimed to have“reformed” class actions—a device for aggre-gating often thousands of similar lawsuitsinto one legal proceeding. But the act, at bot-tom, simply pulls a greater number of classaction suits into federal court. It does nothingto address the fundamentals of the problem of class action abuse. Congress cannot rest on itslaurels, therefore. It must do more to reformclass actions—much more. This study analyzesthe class action problem in some detail andthen lays out a series of genuine reforms thatcan realize what the act only promises, an endto class action abuse.
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Put simply, the fundamental problem withclass action suits is that they’ve spawned a legal regime that is lawless. That contentionmay surprise, but a second look at the classaction procedure underscores that judges whomanage those actions often change the law,arbitrarily, for the benefit of plaintiffs. Why?Because doing so makes it easier for a court tomanage the aggregated lawsuits in one sitting.To understand this dynamic, consider a sim-ple example involving an imaginary statuteagainst lying. That law makes a “lying seller”pay damages to a plaintiff who “relied” on thelie—who, but for the lie, would not have pur-chased the product. Now imagine a classaction suit that targets one such lying seller,who is alleged to have lied in 10,000 separatetransactions with as many different pur-chasers. Clearly, if the court is to respect theseller’s right to defend himself by invoking a plaintiff’s lack of reliance, it will be impossibleto try all 10,000 lawsuits together, because thecourt would have to determine in each of the10,000 cases whether the purchaser relied onthe lie. If the court jettisons that defense, how-ever, it can try the cases in a single lawsuit—butonly by ignoring the law, by discarding thelimits the law places on the scope of the seller’sliability.
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In practice, courts that handle classactions often behave just like that. They change the plaintiffs’ burden of proof tomake it easier for them to aggregate theirclaims and try them as a unit. Unfortunately,that reduces the rights of the defendant. Andthat, in turn, renders the law deeply uncer-tain: In the world of class actions, where the judge has discretion to arbitrarily discard a defendant’s defenses whenever doing somight make it easier to aggregate claims, it isimpossible for a defendant to predict thecontent of his rights in court. That is the“rule-of-law” problem at the heart of the classaction debate. And it is not simply a legalproblem; it is a moral problem as well. Aslegal philosopher Lon Fuller argued, a stableset of laws is the minimum moral require-ment for a free society, because stable lawsenable people to predict the future and act asresponsible agents.
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The rule-of-law problem that surroundsclass actions is also a constitutional problem.The Due Process Clauses
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of the Fifth andFourteenth Amendments ban deprivationsof “life, liberty, and property” without “dueprocess of law.” That protection of “liberty,”at its most basic level, prohibits courts fromemploying arbitrary judicial procedures—procedures, for example, that make it hardfor a party to ascertain his rights or result inthe law being applied unevenly at the whimof a court.
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 At a minimum, those protectionsprevent courts tasked with managing classaction suits from discarding defendants’ law-ful defenses simply to make it easier to try allthe claims as a unit.In this study I argue that the rule of law should be the focus of class action reform. Ibegin by examining the due process compo-nents of the rule-of-law problem, focusingfirst on the relationship between burdens of proof and altered legal rights. Then I defendthe proposition that courts violate the DueProcess Clauses when they alter the elementsneeded to prove a set of claims in a class actioncontext. Next, turning to reform, I critique theClass Action Fairness Act and examine a seriesof alternative procedural fixes, including the
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Class action suitshave spawned alegal regime thatis lawless.
 
Right-to-Choose-Your-Own-Lawyer Act, soonto be introduced by Rep. Chris Cox (R-CA). Iargue that this act, and other commonly pro-posed changes to the class procedure, will pro-mote the rule of law at the federal level in waysthat even proponents of these reforms havenot fully appreciated.
The Rule-of-Law Problem
When a large number of lawsuits are com-bined into a “class,” plaintiffs obtain enor-mous leverage over a defendant, who mustdefend perhaps thousands of claims beforeone jury of 12. The risk of a bad judgment, oneimposing stratospheric money damages on thedefendant, is simply too high. Faced with thatprospect, many defendants rush to settle evenfrivolous class action lawsuits out of court.The coercive pressure created by classactions is not the only problem surroundingthem. Another, subtler dilemma lurks in thebackground: when class actions aggregateclaims, courts are often tempted to changethe law in order to make it easier to litigatethose claims in one sitting. After all, if proof of a claim requires that unique aspects of each class member’s transaction with a defendant be investigated, a court that aggre-gates tens of thousands of such claims facesan impossible task—conducting tens of thou-sands of mini-trials. Many courts, therefore,discard important components of the law—legal defenses against individual claims, forexample—in order to render collective man-agement of the aggregated claims feasible. An example helps to illustrate the problem.Recently, a handful of doctors brought suit onbehalf of more than 600,000 physicians who par-ticipate in health maintenance organization(HMO) practices.
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Those doctors alleged thatmajor HMOs—including Aetna, Cigna, Humana,and United Health Care—induced doctors to joinHMO networks by misrepresenting the amountof medical fees the HMOs pay under theirpatients’ health plans, thereby “defrauding” thedoctors.
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The doctors sought relief under com-mon law fraud statutes and the RacketeerInfluenced and Corrupt Organizations Act,
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both of which made plaintiffs’ showing that they “reasonably relied” on the HMOs’ supposed mis-representations a condition of recovery.
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The“reasonable reliance” requirement, as lawyers callit, is an important individualizing element of proof in a fraud case because it distinguishes real victims from plaintiffs who may have made poor judgments in a transaction and therefore shouldbe responsible for their own losses.
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Each doctormust show that he actually received a knowingly false representation from an HMO and made“reasonable” decisions based on it that he other-wise would not have made.That requirement made class certificationdifficult, since establishing reasonable reliancewould have necessitated case-by-case scrutiny of each doctor’s transactions—some 600,000transactions in all. Some doctors, for example,might have joined an HMO out of loyalty topatients who were HMO insureds, knowingthey would receive less in fees as a result. Otherdoctors, employed by large physician groups,may have been required by their employers toservice HMO patients. Obviously, scrutinizing600,000 or more individual transactions wasnot in the cards; hence, argued the defendants,the claims were not susceptible to “class treat-ment.”
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The doctors argued, in turn, that consider-ations of “fairness”
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excused them from hav-ing to prove each of the claims in the way thelaw required. “The individual claims of many [doctors],” said the plaintiffs, “are so smallthat the cost of individual litigation would befar greater than the value of those claims.”
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 Asa result, absent class certification, no HMOdoctors would file suit, leaving them withouta remedy.
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Best, they counseled, to eliminatethe reliance element of their burden of proof (as it made the class action infeasible).
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Thatargument assumed, of course, what their law-suit sought to prove—that the HMOs haddone something wrong that deserved a reme-dy. Yet the court accepted the doctors’ argu-ment. And the doctors got what they wanted:Once the court reduced the plaintiffs’ burdenby eliminating the reliance element, thusgreen-lighting the class action, Aetna, the
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When classactions aggregateclaims, courts areoften tempted tochange the law inorder to make iteasier to litigatethose claims inone sitting. Thatis the rule-of-law problem at theheart of the classaction debate.
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