Eric Voigt on Voluntary Refund Policies as an Alternative to Class Actions

 

Eric Voigt

 of Faulkner University, Jones School of Law has written A Company's Voluntary Refund Program for Consumers Can Be a Fair and Efficient Alternative to a Class Action, 31 Review of Litigation 617 (University of Texas) 2012. Here's the abstract:

Consumer product companies are establishing internal programs where they are voluntarily compensating consumers for damages caused by their products. When a company implements a refund program in response to a threatened or pending class action, may federal courts rely solely on the voluntary refunds in denying class certification? The short answer is yes.

This Article analyzes Rule 23(b)(3) of the Federal Rules of Civil Procedure and the requirement that a class action be "superior to other available methods for fairly and efficiently adjudicating the controversy." The Article argues that courts must compare the superiority of a class action not only to judicial procedures but also to a company's voluntary refund program. This Article also contends that a court must deny class certification when a reimbursement policy is fair and efficient. These arguments are strongly supported by the Advisory Committee Notes to the 1966 amendment to Rule 23, commentary by two former members of the Committee, the original purpose of the superiority requirement, and courts' and commentators' initial interpretations of the 1966 amendment. Last, the Article discusses what features a refund program must have to be a fair and efficient alternative to a class action.

Surprisingly, no federal court or scholar has analyzed the history or purpose of Rule 23(b)(3) as it applies to voluntary refund programs. Further, the relevancy of a refund program to the denial of class certification has been addressed in only one article (which took an opposing view) and by only a few courts.

 

Comments

[Eric]

My article explains why Judge Easterbrook incorrectly concluded that a refund program cannot be considered under the superiority requirement. In short, he failed to analyze the historical meaning of the 1966 amendment.

[RPD]

Judge Easterbrook on the 7th Circuit actually has addressed a very similar issue in 2011's Aqua Dots decision, where he said that the same result can be achieved by relying on "Rule 23(a)(4), which says that a court may certify a class action only if “the representative parties will fairly and adequately protect the interests of the class.” Plaintiffs want relief that duplicates a remedy that most buyers already have received, and that remains available to all members of the putative class. A representative who proposes that high transaction costs (notice and attorneys’ fees) be incurred at the class members’ expense to obtain a refund that already is on offer is not adequately protecting the class members’ interests."