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The Case Against Class Actions, Kind Of

The authors of a new report hit a wall of secrecy
A Bank of America branch in Oakland, vandalized during an Occupy protest in November 2011
A Bank of America branch in Oakland, vandalized during an Occupy protest in November 2011Photograph by Kent Porter/ZUMA PRESS

For years, the U.S. Chamber of Commerce and other business groups have tried to slow the proliferation of class actions. The reason seems obvious enough: Corporations don’t relish the prospect of being ordered to pay huge settlements to thousands of customers who band together and sue over faulty products or bad behavior. Yet the chamber argues the real reason class actions should be curbed is that they’re ineffective: Many of the cases are dropped or get thrown out by the judge. And even when the plaintiffs win money—like in 2011, when Bank of America agreed to pay $410 million to settle complaints about its overdraft fees—a lot of the money goes into the pockets of plaintiffs’ lawyers, not regular Joes. In the BofA case, attorneys came away with $123 million.

It’s hard to say whether this is true in most cases, in part because the courts don’t keep records on how class actions are resolved. So last year, the chamber hired attorneys at Mayer Brown to conduct a detailed study tallying up the winners and losers. A major firm that represents the chamber and big companies including Medtronic and Nestlé, Mayer Brown isn’t exactly an impartial arbiter. Still, the report’s conclusions, released in December, are illuminating—for reasons its authors might not have anticipated.