Book Review: ‘Entrepreneurial Litigation: Its Rise, Fall, and Future’ by John C. Coffee (Harvard 2015)

by Pedro Fortes[1]

Among the scholars who have shaped the debate on class actions in the US, John C. Coffee, Jr is the one most focused on the monetary incentives leading that class counsel to litigate and, in general, on how collective litigation is influenced by money. His most recent book Entrepreneurial Litigation: Its Rise, Fall, and Future (Harvard 2015) is the consolidation of decades of successful academic work, in which Coffee, Director of the Center on Corporate Governance at Columbia Law School, has studied plaintiff attorneys as ‘private attorney generals’, pursuing public goals for private gain.[2] In this mature work, he investigates the origins, the emergence and globalisation of class actions, analysing possible reforms to improve the potential of these juridical instruments to enhance access to justice, judicial economy, and corporate deterrence.

Entrepreneurial Litigation is mandatory reading for everyone interested in the possibilities and limitations of collective actions for law enforcement in contemporary societies. This book is an instant classic, because of its clear argumentation, comprehensive scope, and sharp defence of a hybrid combination of public and private enforcement. The role of law as the guardian of democracy requires litigation to implement protective legislation in society,[3] leading to the establishment of a normative architecture in the US that aggregates multiple small value claims and encourages legal entrepreneurs to pursue collective actions.[4] Particularly for a socio-legal audience, this book explains the growth of collective action in connection with transformations of the legal profession and the plaintiff bar, focusing also on the practical application and the impact of the law. However, some arguments seem to be supported only by anecdotal evidence and socio-legal researchers may find inspiration for comprehensive empirical research related to collective actions, especially the actual experience with public and private enforcement.

In this book, the growth of entrepreneurial litigation is illustrated by concrete historical examples. The reader learns more about Clarence H. Venner, a pioneer of derivative suits in the 1910s – labeled as a “menace to corporate society” and a “professional agitator”, even if his judicial actions were the result of careful research and based on legal flaws and procedural errors.[5] The historical account also describes the appearance of Abraham Pomerantz as the ‘father of the Shareholder Suit’ in the aftermath of the Great Depression,[6] inspiring the development of a professional plaintiff bar led by Harry Lewis, William Weinberger, and Alan Kahn.[7] In the particular case of securities class actions, Lawrence Milberg and Melvin Weiss led the rise of a network of class counsel with strong control over the collective action, low oversight from the client, and the risk of collusive settlements.[8] This book therefore provides a historical account that links to the conceptual analysis Coffee has already developed in a series of articles between 1983 and 2006.

Additionally, the author examines the class action reform that restricted the possibilities for collective actions in the US through a series of laws[9] and judicial precedents.[10] Coffee provides a list of the typical critiques of class actions: collective litigation leads to extortion as a form of ‘legalised blackmail’;[11] collective litigation leads to the exploitation of clients, because only lawyers benefit from collusive settlements;[12] collective litigation does not produce any social benefits for anyone;[13] class actions are undemocratic and violate the separation of powers.[14] All these critiques are dismissed as exaggerated, anecdotal, inconsistent, or rhetorical. For instance, the criticism of opt-out collective actions is dismissed as a mere formalist defence of litigation autonomy that would impose insurmountable obstacles for access to justice and the protection of substantive rights of poor claimants.[15] In a remarkable passage of this book, Coffee puts the figure of the private attorney general in perspective by defending its democratic credentials as ‘a private enforcer performing a public role in order to solve collective action problems…by protecting the public against nonenforcement by public enforcers’.[16] Coffee proves his point with empirical evidence, showing that monetary recovery from securities class actions is often much higher than parallel recovery by the Securities and Exchange Commission.[17] According to him, public enforcement is limited because public bureaus are underfunded, resource-constrained, risk averse, and have limited capacity to deal with a sudden flood of cases or even a single costly and complex case.[18]

This diagnosis leads the author to the defence of a model of semiprivate attorney general, consisting in a hybrid combination of public and private enforcement. On one hand, the architecture of class actions may enable well-funded legal entrepreneurs to litigate complex cases and advance the private enforcement of law.[19] On the other hand, the regime of monetary incentives may distort the collective action, by inducing class counsel to settle cases in their own interest instead of their clients. [20] Coffee proposes a division of labour between class counsel and public officials, suggesting that public enforcers should be responsible for the regular and more urgent cases, leaving the major complex class actions to specially retained law firms operating under supervision of the public bureau.[21] The presence and oversight of public bureaus could also reduce risks of collusion,[22] excessive aggregation of weak claims,[23] and lack of political accountability.[24] Coffee defends reforms that will increase the interaction between private and public enforcement and greater oversight of the private attorney general.[25] According to the author, the objective of this model of semiprivate attorney general ‘is a strategy to combine entrepreneurial zeal with greater accountability and thereby to improve both public and private enforcement’.[26]

This is a very important debate not only for the US class actions, but also for the European model of collective redress and for the Latin American tradition of civil public actions. However, the treatment of the international experience with collective actions in the book is problematic. First, the book seems to suggest the expansion of collective actions across the globe as an imitation of American ideas abroad,[27] failing to recognise the existence of the different families or traditions of Latin America[28] and Europe.[29] Collective redress is not really the European style of class actions,[30] but an alternative approach to collective actions – just like the Latin American tradition of civil public actions.

Secondly, Coffee seems to ignore the possibility of legal entrepreneurship within public enforcement, by considering public interest litigation as non-entrepreneurial[31] and focusing on compensatory damages as the main goal of collective actions.[32] This position downplays the possibilities of public entrepreneurship[33] and the Brazilian experience of developing legal institutions through collective litigation by public actors.[34] This important book therefore fails to connect its core ideas to the international experience, but European and Latin American scholars may still examine those ideas from the standpoint of their own respective traditions of collective actions, economic incentives, and possibilities for both private and public entrepreneurship. The regime of these economic incentives and the coordination of political aspects are essential factors for the design of these juridical mechanisms and the future of collective actions.

[1] Pedro Fortes is an Associate Professor of Law at FGV Law School (Rio de Janeiro) and a public prosecutor at the Attorney General’s Office of the State of Rio de Janeiro.

[2] John C. Coffee, Jr, ‘Rescuing the private attorney general: Why the model of the lawyer as bounty hunter is not working’ (1983) 42 Maryland Law Review 215; John C. Coffee, Jr, ‘Understanding the plaintiff’s attorney: The implications of economic theory for private enforcement of law through class and derivative actions’ (1986) 86 Columbia Law Review 669; John C. Coffee, Jr, ‘The regulation of entrepreneurial litigation: balancing fairness and efficiency in the large class action’, (1987) 54 The University of Chicago Law Review 877; John C. Coffee Jr (1995) 95 ‘Class wars: The dilemma of the mass tort class action’, Columbia Law Review 1343; John C. Coffee, Jr, ‘Class action accountability: Reconciling exit, voice, and loyalty in representative litigation’ (2000) 100 Columbia Law Review 370; John C. Coffee, Jr, ‘Reforming the securities class action: An essay on deterrence and its implementation’ (2006) 106 Columbia law review 1534.

[3] John Coffee, Jr, Entrepreneurial Litigation: Its Rise, Fall, and Future (Harvard 2015) 11.

[4] Ibid 28.

[5] Ibid 34-5.

[6] Ibid 36-8.

[7] Ibid 39-40.

[8] Ibid 64-77.

[9] The Private Securities Litigation Act (1995); The Securities Litigation Uniform Standards Act (1998); The Class Action Fairness Act (2005).

[10] Walmart Stores, Inc v. Dukes 131 S. Ct. 2541 (2011); AT&T Mobility LLC v. Concepcion, 131 S. Ct. 1740 (2011); Comcast v. Behrend, 133 S. Ct. 1426 (2013).

[11] Coffee, Entrepreneurial Litigation (n 3) 133-6.

[12] Ibid 136.

[13] Ibid 136-7.

[14] Ibid 149-51.

[15] Ibid 151.

[16] Ibid 152.

[17] Ibid 174-6.

[18] Ibid 176-80.

[19] Ibid 219.

[20] Ibid 219.

[21] Ibid 222.

[22] Ibid 223-4.

[23] Ibid 224-5.

[24] Ibid 225-7.

[25] Ibid 232-6.

[26] Ibid 236.

[27] Ibid 197.

[28] Angel Oquendo, ‘Upping the Ante: Collective Litigation in Latin America’ (2009) 47 Columbia Journal of Transnational Law 248; Manuel A. Gómez, ‘Will the Birds Stay South? The Rise of Class Actions and Other Forms of Group Litigation Across Latin America’ (2012) 43 The University of Miami Inter-American Law Review 481; Manuel A. Gómez, ‘Smoke signals from the south: the unanticipated effects of an ‘unsuccessful’ litigation on Brazil’s anti-tobacco war’, in Deborah Hensler, Christopher Hodges, and Ianika Tzankova (eds), Class actions in context: how culture, economics, and politics shape collective litigation (Edward Elgar 2016); Antonio Gidi, ‘Class actions in Brazil: a model for civil law countries’ (2003) 51  The American journal of comparative law 311; Antonio Gidi, ‘Class Action Code: A Model for Civil Law Countries’ (2005) 23 The Arizona Journal International & Comparative Law 37; Agustin Barroilhet, ‘Self-interested gate-keeping? Clashes between public and private enforcers in two Chileans class actions’ in Deborah Hensler, Christopher Hodges, and Ianika Tzankova (eds), Class actions in context: how culture, economics, and politics shape collective litigation (Edward Elgar 2016).

[29] Stefan Wrbka, Steven van Uytsel, and Mathias Siems, Collective actions (CUP 2015); Eva Lein and others (eds), Collective redress in Europe: why and how? (BICCL 2015); V. Harsági and C. H. van Rhee (eds), Multi-party redress mechanisms in Europe: squeaking mice? (Intersentia 2014); Christopher Hodges, ‘Collective redress in Europe: the new model’ [2010] Civil justice quarterly 370.

[30] Coffee (n 3) 201-2.

[31] Ibid 7.

 [32] Ibid 204.

[33] See Elinor Ostrom, Public entrepreneurship: a case study in ground water basin management (PhD Thesis, UCLA 1965).

[34] See Salo Coslovsky, Compliance and competitiveness: how prosecutors enforce labour and environmental laws and promote economic development in Brazil (PhD Thesis, MIT 2009); Lesley McAllister, Making law matter: environmental protection and legal institutions in Brazil (Stanford 2008).

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