A challenge to the conventional wisdom that "mass actions" are a superior method for plaintiffs litigating tort claims

It is the conventional wisdom that multi-plaintiff litigation (mass actions) provides a superior vehicle for litigating tort claims.  University of Pavia Ph.D. student Margherita Saraceno offers an alternative analysis.  In her thesis, Group Litigation, Access to Justice and Deterrence, Saraceno utilizes economic analysis to propose that mass actions may reduce the overall deterrence effect of tort law.  The working paper is available through the Social Science Research Network website.  The abstract for the paper is as follows:

Policy makers are currently evaluating group litigation as a device to guarantee effective access to justice and to improve deterrence in torts with multiple victims. This paper focuses on how group litigation affects: 1) access to justice, 2) the choice between settlement and litigation, 3) the settlement amount, and finally, 4) deterrence. The main finding is that group litigation does not always improve access to justice and deterrence. On the one hand, group litigation makes it easier for victims to sue, by creating scale economies and improving their confidence in the outcome of a trial. On the other hand, the group is costly for victims to organize and reduces the injurer‘s liability costs by facilitating settlement and creating scale economies at trial. The combined effect might be a reduction, rather than an increase, in the deterrent effect of tort law.

(Margherita Saraceno, Group Litigation, Access to Justice and Deterrence (2008) Amsterdam Center for Law & Economics Working Paper No. 2008-04 Available at SSRN: http://ssrn.com/abstract=1128058.)

As a economics major in my salad days, I find the premise underlying the research interesting, if a bit scanty on sufficiently broad econometric data to convince me that she's on to something.  After reading the article, its seems like it should have been obvious that a mass litigation does create different economic incentives for a defendant.  There are two key variables that jeopardize any overarching conclusion.  First, it is difficult to say that any particular mass action will incorporate more or less litigants than single plaintiff litigation over the same issue againt the same defendant.  If the mass action accumulates more plaintiffs (perhaps because the fear factor is lessened), then the mass tort may improve deterrence.  It is difficult to find viable data to construct an econometric model that would generate valid results.

Second, it is difficult to determine whether a mass action will generate, on average, a higher or lower recovery for the relevant group than would have been recovered in individual suits.  Certainly, the defendant faces higher litigation costs if numerous litigants sue individually.  On the other hand, the extent of this effect may be de minimis, in light of the many procedural tools for consolidating or coordinating actions in a single court.  A defendant can often avoid costs imposes by multiple, concurrent litigation.

In any event, it is good food for thought.

[Via Mass Tort Litigation Blog]