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Survey Finds No Benefit to Consumers from "No-Injury" Class Actions

An economic analysis of “no-injury” class actions by Emory University School of Law concludes that “much of the no-injury class action litigation harms consumers instead of helping them as intended.”

“An Empirical Survey of Non-Injury Class Actions” examined 432 class action settlements from 2005 - 2015 that met at least one of four “no-injury” criteria: (1) plaintiffs suffered no actual or imminent concrete harm giving rise to an injury-in-fact; (2) the only harm suffered was a technical statutory violation; (3) any economic loss was negligible or infinitesimal; or, (4) the recovery sought was unrelated to compensating the plaintiff for economic or other harm. Only cases in where the amounts of attorneys’ fees and settlement funds were known were included in the survey pool.

The survey found that, “many non-injury class actions are of dubious social value and end up harming the very consumers they are meant to help.” In particular:

  • “No-injury” class actions result in higher prices, reduced innovation, and lower product quality, while the business practices challenged in many “no-injury” cases cause little concrete harm. As a result, the compensation forced by the class action achieves little tangible benefit to consumers.

  • Many “no-injury” class actions produce little compensation for the members.

  • Less than 1% of eligible class members pursue claims to receive the modest compensation achieved by the settlement.

  • The survey estimates that class members receive, on average, 9% of the settlement pool. The balance of the pool is split between lawyers and the cy pres fund, with 38% going to class counsel and legal expenses and 53% going to the cy pres fund.

  • By and large, “the true beneficiaries of no-injury class actions are the lawyers.”

Other notable observations in the paper include:

  • Of the 432 cases in the survey pool, only 2.5% were resolved at trial.

  • The most common federal statutes giving rise to no-injury class action claims are the Fair Debt Collection Practices Act (37%); the Telephone Consumer Protection Act (21%); the Fair Credit Reporting Act (14%); and the Electronic Funds Transfer Act (8%).

  • The most likely venues for a no-injury class action, whether brought in state or federal court, are: California (29%); Illinois (28%); and New Jersey and Florida (6%).

“An Empirical Survey of No-Injury Class Actions” can be downloaded free of charge from the Social Science Research Network Electronic Paper Collection at http://ssrn.com/abstract=2726905

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