The waiting field. Photograph and text Copyright Dennis J. Wall. All rights reserved.
Echoing the justifications for the origin of class actions, it has been said that the main purpose of class actions should be to deter wrongdoing. Moreover, with deterrence of wrongdoing being the prime reason for having class actions in the first place, class actions should be made available in ways which recognize that main purpose and so structure monetary recoveries and fee awards as secondary to the prime purpose of deterrence of wrongdoing:
Yet at least when it comes to securities class actions, this deterrence function should arguably be the chief measure of class actions' value -- not the number of zeroes on settlement agreements that reflect a recycling of money from one innocent group of shareholders to another, sometimes overlapping group of innocent shareholders.
Yet contemporary class actions, particularly securities class actions, seem to have the chief purpose of deterring people from seeking remedies. Along with money, this appears to be the chief motivator of many settlement agreements in class action cases including lender force-placed insurance cases. Deterring people from seeking remedies, for example, certainly seems to be the prime mover behind the settlement in a case filed as a class action seeking remedies because of the defendants', investment banks and others, alleged secrecy conduct surrounding the issuance and making of a specialized form of credit insurance without reserves, credit default swaps. The plaintiffs' and defendants' agreed final order asks the Court to approve their settlement agreement. The plaintiffs and defendants have provided that the defendants shall be immunized not only from further lawsuits by the plaintiffs but from lawsuits filed by other persons who are not before the Court:
- The Released Parties may file the Agreement and/or this Final Judgment and Order of Dismissal in any action that may be brought against them in order to support a defense or counterclaim based on the principles of res judicata, collateral estoppel, full faith and credit, release, good faith settlement, judgment bar, or reduction or any other theory of claim preclusion or issue preclusion or similar defense or counterclaim.
In re Credit Default Swaps Antitrust Litigation, Dkt. No. 445-2, ¶ 17, at p. 5 of "[PROPOSED] FINAL JUDGMENT AND ORDER OF DISMISSAL AS TO BNP PARIBAS," which is Exhibit "B" to "Stipulation and Agreement of Settlement with BNP Paribas," Filed October 16, 2015 (S.D.N.Y. Case No. 1:13-md-02476 (DLC)). Download In re Credit Default Swaps Antitr Lit. Ex 2 to Declar Daniel Brockett.101615 Dkt No. 445-2 (SNDY Case No 13 MD 2476).INCLUDES A SETTLEMENT AGREEMENT. The plaintiffs and the defendants included the same provision in the same or virtually the same language in every one of the ten or eleven such proposed final orders which would approve their settlement in this case. The parties have captioned their proposed final orders approving their settlement as proposed final judgments of dismissal in this format.
Particular questions arise such as whether issue preclusion or claim preclusion or res judicata could apply to an order effectively approving a settlement without adjudication of any facts such as a final judgment entered after trial. If a settlement can preclude actions of aggrieved parties not actually before the Court, who could agree to that?
The bigger picture here, at the moment, is the chief purpose of class action settlements. Is it to deter wrongdoing, which was the prime reason behind the origin of class actions? Or is the contemporary main purpose of class action settlements shown by the evidence and not by the argument, namely, that defendants successfully buy class action settlement agreements to deter remedies?
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