Wal-Mart, AT&T Mobility, and the Decline of the Deterrent Class Action

The justification for class actions rests on two main grounds: compensating victims whose claims are too small to be brought individually and deterring wrongdoing by aggregating claims to facilitate private enforcement. These two rationales overlap and compete with one another, as does their application to class actions certified under different subdivisions of Federal Rule of Civil Procedure 23. Broadly speaking, class actions certified under subdivision (b)(3) focus on compensation to individual class members, with deterrence resulting only from the defendant’s exposure to liability for paying such compensation, while class actions certified under subdivision (b)(2) focus on injunctions that prevent or deter future wrongdoing, without regard to the relief awarded to individual class members. In the recent decisions in Wal-Mart Stores, Inc. v. Dukes and AT&T Mobility LLC v. Concepcion, the Supreme Court cast further doubt on the deterrent function of the class action. More precisely, it sacrificed deterrence when compensation could not be accurately given. Wal-Mart restricted the remedies available in (b)(2) class actions to exclude individual monetary relief, and it also restricted the conditions under which any class action could be certified. AT&T Mobility restricted the conditions under which plaintiffs could get to court to bring a class action in the face of contracts requiring individual arbitration. These decisions are all the more significant for being widely misunderstood.