Do We Need a Special Court for Class Actions?

We have two major court systems in the United States, the criminal and the civil, each with more than a thousand years of tradition and precedent. These two distinct court systems converge into a single system at the appellate level and continue from there straight into a Constitutional court structure. We have in addition several specialized judicial systems that feed into the larger structure, including maritime courts, tax courts, bankruptcy courts, military courts, patent courts, and a few others.

Criminal court is focused on individual actions, intention, and finding appropriate punishments. Jack steals a car and runs someone down while drunk. The criminal system will examine the factual basis of his actions and his motive (intention), which will be critically important; and he will be punished&emdash;with a sentence of 6 months in jail and 3 years probation, for example.

The civil system is concerned with balancing conflicting interests, particularly when damages are involved. On one side is the victim hit by the car and related persons who experienced damages, on the other side is Jack who has finite resources and other responsibilities in the world. The victim threatens civil proceedings, and Jack's insurance company settles out of court for $150,000.

Both of these court systems have roots that are so ancient that Hammurabi, King Solomon, and Justinian would recognize them. Even this particular vehicular problem is similar to ones that they dealt with.

Current Problems Can Occur on a Larger Scale

From Solomon's time to the present, natural disasters and imperious governments have been the chief causes of widespread human suffering. Genghis Kahn could destroy millions of people, and so could the plague. On a small scale, isolated individuals could wreak havoc by poisoning a well or setting fire to a village; when caught they were punished.

Today there is a new, twofold problem. First, enormous numbers of separate small groups of people cause harm to others. Second, there is a particular new harm wherein a small amount of damage can be perpetrated on a gigantic number of people. We will come back to the problem of small damage to large numbers of people later on; this is the problem typified by asbestiosis, employment discrimination, and the Dalkon shield.

The first problem arises because the small group of people is a business entity, usually a corporation. There are several million such business entities in the world. Every day we can open the newspaper and read about the damage a corporation has done to people or property: Union Carbide in Bhopal, a Southern Pacific train derailing into a housing project, an Allied Chemical Company factory exploding in a residential neighborhood, an Exxon oil tanker leaking in a major harbor.

It is almost axiomatic that the daily newspaper will tell us about a new activity by a corporation that has caused serious damage to people and property. These cases are being litigated in our current legal system. The problem with this is that the legal system is designed to deal with intention (a variation of which is negligence), damages, and punishment.

What nearly all corporate tragedies have in common is that (a) there is no intention or intention is an irrelevant issue; (b) damages are significant but more significant is the public concern that the tragedy doesn't happen again; and (c) current practices of punishment don't diminish recurrence. The public in these cases is very concerned about avoiding repetition; this concern far outweighs the need for individual compensation.

Each tragedy will of course recur, because the idea of punishment applied to a group of people as a business entity is nonsense. A sound objective of the courts should be to compensate for damages and prevent the recurrence of the tragedies.

Punishment Doesn't Work

We need to examine why punishment in the form of damages extracted from a corporation or jail terms for top management is unrelated to preventing repetition. Even in criminal law the connection between punishment and avoiding repetition is weak, because over two thirds of the punished criminals in the United States repeat their crimes. In dealing with business, the social costs of recidivism are staggering.

Unfortunately, in addressing this issue nearly all of us are stuck with a National Enquirer view of the core issue: We think that a few people or even one, called top management, make and carry out decisions in business. We operate on the metaphor of the father.

Our unfortunate courts, operating under this same notion, find negligence among these top-management people and punish them. As a consequence, the fines get paid, sometimes the individuals go to jail, and the tragedy occurs again a few years later. Such is the case with General Dynamics, which is punished on a large scale about every five years. Other recidivists include Northrup, Standard Oil, and Union Carbide.

To understand how miscreant our business entities are it helps to know that each of the top 500 U.S. corporations have a daily outstanding backlog of over 100 lawsuits. To them, lawsuits are just a cost of doing business.

Why are our notions of business management so wrong?

Only 3 to 4 percent of all Americans have personally been in management&emdash;military, academic, business or otherwise&emdash;which explains why so few people understand how management works. Without proposing any theory of management at all, it is obvious that management is as fluid as water. Get rid of person A and B comes in; get rid of person B and C comes in. The jobs in management survive the people who fill them.

The new treasurer still gets the same information to make decisions as did the old treasurer, and so does the new head of marketing and the new VP of quality control. Each will continue to be surrounded by the same type of people, whom the personnel department hired when their predecessor was hired, before he was sent to prison. The type of people are the same, the jobs are the same, and the information the incumbent filling the job gets is the same. Our courts and public presume that the introduction of fear of punishment into this closed system will somehow change behavior. It doesn't, or at least not for long.

Top managers are in fact people who balance conflicting pressures. They resemble legislators in this regard. They weigh alternatives and lean one way or the other. They virtually never take initiative, and they avoid decisions whenever possible, just like a legislator. Punishing a manager is like punishing 30 members of Congress for the way they voted. The manager and the legislators represent real forces that will still be there even if the individual isn't. The forces themselves and the channels in which those forces flow need to be changed to effect real change in outcome.

We face a new social and legal problem with the advent of myriad corporations (and other business entities) that inflict social damage but are inherently unaffected by traditional forms of punishment. We need a court that can change the structure of business entities to alter the flow of forces in ways that make a significant difference. Changing structure is not punishment, it is making effective corrections in business behavior.

Small Damages to Many People

Let's discuss the issue of small damages to many people. With toxic waste, pesticides, and pollution becoming increasingly common problems, plus the abundance of dangerous technology loose in our society&emdash;from Pinto gas tanks to Thalidomide&emdash;a whole new area of concern enters the legal domain.

It's no longer the poisoning of one well or the burning of one village that represents the hazards of daily life; we are daily deluged by every conceivable form of damage on a scale that affects tens of millions of us at a time.

The Legal System Has a Long History of Adjusting

The court system we inherited from King Arthur is expected to cope with this new situation. Brilliant and flexible as the court system is, the dictates of modern life require some new adjustments.

We have adjusted to the ubiquitous automobile in our lives by changing the legal system. We now have traffic courts, a citation system, and court-ordered driving classes that handle a monumental volume of people who otherwise would have destroyed the older courts system by their sheer numbers.

Similarly, we have adjusted to the countless small interpersonal financial conflicts and business-debt collection problems of today's commercial society. We created the small claims court, which handles all minor civil cases without lawyers and without juries. We are clearly a people ready and willing to change our court system to accommodate modern life as the pressures evidence the need for change.

Most assuredly, the problems of relentless corporate recidivism and the unending daily stream of small damages to large classes of people warrant our concern and attention.

Do We Need a Public Injury Court?

The time may have come for a public injury court. This court would operate at the same functional level as our present-day superior courts and federal district courts and would develop its own operating procedures.

The new court would receive cases involving corporate punishment and class actions. Whenever a corporation (or similar entity) was found guilty of a serious offense, criminal or civil, it would be diverted to the Public Injury Court for the penalty phase of the trial. Just as death-penalty trials are divided into two phases, establishing guilt and determining the sentence, because of the seriousness of the matter so would corporate trials.

After the guilt phase, the sentencing phase would be moved to the Public Injury Court, because this court would have experience in effective forms of restructuring corporations to reduce corporate recidivism.

Similarly, the Public Injury Court would handle all class actions; that is, all cases where damages were done to a group of people. Often such groups of people cannot be easily identified or located and they present unusual legal problems. Most of the people harmed over a period of 50 years by asbestos don't even know that they were affected. Only a small number, who formerly worked in the industry, recognized the problem and hired lawyers to pursue the case.

In price-fixing cases, where millions of people were charged an extra amount over a period of years in the purchase of a specific product or service, most do not even remember their purchases, yet the guilty price-fixers may have made millions in illegal profit that needs to be distributed as compensation.

Unique Problems Require Specific Proposals for Change

We are today faced with a corporate-penalty problem and a widespread damage problem that are not readily soluble. No body of people has the skills, experience, and wisdom to fashion a remedy. The creation of a specific court for this purpose is what is known as a process solution. In a process solution, we acknowledge the problem and create a process that attracts the people interested in that problem and we immerse those people in the problem for a long period of time. The outcome is an institution that can solve the original problem. In this case it would be the Public Injury Court.

The Public Injury Court would bring together on a daily basis the lawyers, plaintiffs, and judges who would focus their working lives on the problem. Over years and years, our society&emdash;via the Public Injury Court&emdash;could hammer out the workable solutions, and these could become a body of case law that incorporates experience and, hopefully, the wisdom to cope with our modern menaces.

A process solution that gathers learning into a single institution would create an effective social structure. Just as the growth of medical cases funnelled through the emergency rooms of hospitals has created a specialized form of emergency medicine that is saving lives, so would a public injury court benefit our society.

Implications for the Future

We can look forward to a day when there are thousands of specialized lawyers and hundreds of judges whose working lives are devoted to prosecuting, defending, and restructuring the miscreants of environmental and social damage. There will be new courses in law schools to focus the legal mind on these problems; ordinary citizens will come to understand the mechanism for correcting corporate misbehavior. We can expect legislatures to pass new laws and eliminate ineffective ones in the slow march to bring understanding and experience to bear on the horrendous problems that corporations and class action suits are bringing to our commonweal.

But most importantly, we will begin to grasp the problem. Today we search vainly for answers and look hopelessly on while injury and harm spreads in wider circles. In the future, we can say "This problem belongs in the Public Injury Court." "This toxic waste facility will be cleaned up"; "these minorities will find their abuses remedied"; "these older people will have a forum in which to be heard."

We Can Achieve Concensus on This Issue

Even corporations will find this proposal valuable. Today, when a corporation finds itself in trouble from creditors, often because of a national economic recession or an unfortunate mistake in the past, it has recourse to Chapter 11 and a specialized court: the Bankruptcy Court. There, the corporation finds specialized judges and lawyers who can work for months on end pouring through the tedious details of corporate records to settle on a plan that will resolve the creditors' needs and keep the corporation functioning. The corporation will therefore be able to continue to provide jobs for its employees, markets for its suppliers, and products for its customers. Corporations appreciate the existence of the Bankruptcy Court.

Just as a ship captain would prefer to face a maritime court that understands the life of the sea rather than a superior court in Oklahoma City, so would an investment banker prefer a tax court that can read a financial statement and patiently listen to the intricacies of a defaulted international letter of credit.

The same will be true for the Public Injury Court. The day will come when corporations will feel grateful that a court exists to understand their unique needs and to also find workable remedies for their shareholders, employees, customers, and the general public.

Major Questions and Answers

Q. Won't this cost more in taxes?

A. No. It may cost less. Today, cases of this sort are tried in countless different courts where each judge has to learn a whole new body of law, which is costly. Judge Green's court in New York adjudicated the Ma Bell case for years and then supervised the outcome for decades, while Judge Harris's court in Texas spent the same number of years trying John Mansville in a similar case. Two courts in San Francisco spent decades on the Intel case. In each instance,and in thousands of others, whole courts filled with high-priced workers rehash the same laws and undergo the same learning process, and it is virtually all wasted because the next nearly identical case will often end up in a new courtroom with an inexperienced judge.

Moreover, the penalties our current courts invoke usually fail to deter the penalized action, and the same corporation is soon back in court for a repeat problem, at the expense of the taxpayer.

Q. Do we need more lawyers and more litigation?

A. No. The reason we have more lawyers today is not because we have a greater variety of specialized courts. More specialized courts create more specialization among existing lawyers, which is neither good nor bad in itself.

The Public Injury Court could reduce the amount of litigation in our society significantly for two reasons. First, if corporate recidivism is reduced or curtailed, the resulting environmental damage and social injury would be reduced. Less corporate damage means fewer trials. Second, widespread damage, which is what creates class actions to be brought before the court in the first place, would be effectively bundled into single cases for the Public Injury Court. The asbestiosis cases and the Dalkon shield cases were originally litigated in dozens of different courts around the country. This type of case would come before one court at the outset. The result would be a decrease in the volume and extent of litigation, not to mention the decrease in time spent in each court when the principals understand the procedures and details.


Michael Phillips, 1988 (revised 2000)


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