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Companies that find themselves members of a class action often want to stay there. In commercial cases, they generally prefer the relative anonymity because, if they filed their own law-suit, they would have to sue a supplier -- usually one whose goods or services their business depends on. Unhappy relations with a key vendor can really hurt.

So why would a company choose to pursue a claim outside of a class action? Many do. Why do they risk upsetting an important supplier in hopes of getting a few more bucks?

Let me suggest an answer, which builds on several realities.

First, an ongoing business relationship gives large purchasers more bargaining leverage with suppliers than they have as class members. It may also provide the basis for a friendly negotiation, which may enhance the relationship.

Second, existing customers can get a dollar of benefit from in-kind benefits (such as future discounts) that cost suppliers less than a dollar. That can maximize the value of a settlement to the buyer, who must otherwise depend on the class action to recover harder-to-afford (and therefore harder-to-get) cash.

Third, trying to hide in a class doesn't work all that well. The vendor knows about you already. He may in fact approach you to ask that you not participate in the class.

Fourth, choosing not to opt out of a class cedes substantial control of your claim, often to lawyers you don't know.

Finally, class actions usually recover direct overcharges only and don't recoup other kinds of losses, including a hit to your profits.

These realities will seldom justify initially taking an aggressive posture with suppliers. But they do support having a backup plan.

Law firms that specialize in representing potential opt-out plaintiffs can help you realize maximum benefit on your claim without harming your vital relationships with vendors. Their expertise in the governing law, familiarity with the morass of class litigation procedures, thorough investigation of your claims, and close monitoring of class proceedings can significantly strengthen your position and give you a readily available alternative to class membership.

Your agreement with such counsel -- whether on an hourly or contingent fee basis --should state that you alone will decide whether and when to opt out of the class case. That will preserve your flexibility by saving you from having to commit to opt out too early. It will also free you to make your own best deal with the supplier.

If you choose the contingent route, the agreement should also specify the percentages for recoveries at different stages. The rates should start relatively low for settlements you reach before the filing of an individual lawsuit and ramp up only after you actually do file.

This strategy allows you to choose the alternative that best serves the overall interests of your company. And that can't hurt.

Hot Lunch

Learning from Intelligent Design

Charles Darwin.

A recent on-line item startled me. The piece criticizes intelligent design advocates on the ground that they don't use the scientific method to evaluate their central hypothesis that an all-knowing creator designed the heavens and the earth and breathed life into critters that fly, walk, slither, and osmose. Instead, it says, intelligent designers start with a belief in a creator and look for evidence that supports their faith.

Whatever the merits of the debate over intelligent design v. Darwin's The Origin of Species (1859), that someone would cast asparagus on intelligent design didn't surprise me. Most people I know accept the Darwinian theory of evolution as the most plausible explanation of the world around us (though many also believe in the existence of God). But the way the author expresses the criticism did unsettle me. He says, you see, that intelligent designers think like lawyers . Huh?

The author explains that lawyers use logic differently from scientists. Okay. An advocate's cerebration does generally start with a conclusion -- the one that the client wants. Microsoft wishes for a finding of no liability, for example, so its counsel begins with that goal and goes back to the evidence to look for ways to achieve it. Nothing remarkable about that.

The scientific method, on the other hand, observes phenomena (differentiation of the same species of turtles on Island A and Island B), hypothesizes a cause (that different environments produce new turtle traits over time), uses the hypothesis to predict other phenomena (that a bird species on Island C and Island D will also exhibit different traits), and tests the hypothesis with a replicable experiment (actual observation of whether birds on Island C and Island D do display different traits).

The difference between lawyerly logic and the scientific method carries practical consequences. People admire scientists. They instinctively trust science practitioners precisely because of their reputation for dispassion and neutrality. The reputation results in no small part from their use of the scientific method. Can commercial trial lawyers do the same?

Unfortunately, no. The bloody deaths of two people may suggest that someone knifed them, but the hypothesis predicts only that slashing people with a sharp blade will kill them. The destruction of a competitor likewise may imply that a stronger rival brought about its demise, but the hypothetical inference hardly establishes that the dominant firm broke the law against monopolization. Science has an important place in the court room, of course, but the quest for justice remains an art that produces debatable -- and risks wrong -- conclusions.

Still, commercial trial lawyers would do well to become more like scientists. They should admit obvious weaknesses. Concede the undeniable. Bring out bad facts (before the other side does!). Show dedication to the truth and faith in the process. Model restraint and exhibit respect for the decision-maker.

You will of course present your best case with supreme confidence and awesome rhetorical power. But, through demonstrating in all you do your moral character -- Aristotle's ethos -- you will gain the trust essential for persuasion. And persuasion wins cases. By intelligent design.

Barry Barnett, Editor

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If the Law Supposes That . . . .

Mr. Bumble from Oliver Twist (1837-38).

Nineteenth-century England also figures in our next subject. Mr. Bumble -- the Dickensian beadle who presides over the workhouse that confined the orphan Oliver Twist -- tries to give the law the slip by contending that he has no idea his wife swiped a ring and locket belonging to Oliver's mother. When the gentleman Mr. Brownlow explains that the law presumes that Mr. Bumble directed his wife and that he therefore bears the greater guilt, the spluttering Mr. Bumble famously says: "If the law supposes that, the law is a ass -- a idiot."

Over the past decade, several courts have supposed that consumers can get effective justice by arbitrating miniscule claims individually rather than in class (or mass) arbitrations. These courts accepted the fiction that bans on class arbitrations don't make pursuing valid but small claims uneconomic. Mr. Bumble himself might admire the courts' suppositional virtuosity.

But the tide may have started to turn. On April 20, 2006, the U.S. Court of Appeals for the First Circuit became the first federal appeals court to strike down a ban on class arbitrations on the ground that it would frustrate vindication of federal statutory rights. The decision, in Kristian v. Comcast Corp., 2006 WL 1028758 (1st Cir. Apr. 20, 2006), marks a key victory for consumers whose little claims do not justify an individual arbitration.

Kristian involves state and federal antitrust claims against Comcast, the largest provider of cable television services in the U.S. Martha Kristian, James Masterman, Jack Rogers, and Paul Pinella subscribed to Comcast's premium cable services in metropolitan Boston. They allege that Comcast built a fortress market in Boston and environs by swapping Comcast subscribers in other cities for Boston area subscribers. The trading of territories with competitors and other conduct eliminated actual and potential competition and resulted in sharply higher charges for cable service, according to the Kristian complaint.

Anxious to insulate itself from lawsuits by customers, Comcast started inserting arbitration agreements in its form contracts with subscribers. But Comcast -- like many other companies that provide goods and services directly to consumers -- didn't stop at requiring arbitration. It also added clauses that purported to ban class or mass arbitrations, to prohibit recovery of treble damages and attorneys' fees, and to shorten the statute of limitations from four plus years to one.

Ms. Kristian and the other plaintiffs opposed Comcast's motion to compel arbitration by presenting evidence about the prohibitive cost of prosecuting antitrust claims in stand-alone arbitrations. The evidence showed that no individual subscriber could afford to arbitrate such a complex claim. The Court pointed to that proof in holding that the ban on class arbitrations would frustrate enforcement of state and federal antitrust law. The Court also invalidated provisions that would bar an arbitrator from awarding treble damages or attorneys' fees, both of which the federal Sherman Act entitles prevailing plaintiffs to recover.

What does Kristian portend for efforts to restrict consumer remedies in arbitrations? It may signal that U.S. courts have reached the end of their tolerance for arbitration agreements that effectively immunize businesses for violations of federal statutes. Companies have already managed to defeat antitrust and other federal claims through clever use of arbitration clauses. In this case, the corporate defendant got a little too smart. Amen.

By the way, Mr. Bumble doesn't escape the law by blaming his helpmate. He loses his beadleship and ends up a resident in his own workhouse. And Oliver, of course, inherits a fortune. Let's hope that Martha Kristian's story has a similarly happy ending.

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Get Pre-Discovery Agreements Before Discovery Starts

In Techniques for Expediting and Streamlining Litigation, Steve Susman and I exhort commercial lawyers to negotiate up-front agreements with opposing counsel on a range of procedural issues. "These agreements will make life easier for both sides and do not obviously advantage one side over the other." We also counsel lawyers to conclude the agreements before discovery begins. "If the lawyers wait until they are in the heat of battle to reach these agreements, one side or the other will feel at a disadvantage. So try it very early."

The wisdom of this advice came back to me recently in a price-discrimination case under the Robinson-Patman Act. I took my own recommendation by sending a draft of a pre-discovery agreement to defense counsel just after they filed their first appearance. I followed up a few weeks later and re-sent the draft, this time with their names and places for me and them to sign. They responded favorably and made a few comments on the draft. We revised it and asked them to sign it. But just then a dispute flared.

I had asked opposing counsel for dates in the next few weeks for the deposition of a key witness. Defense counsel didn't answer. I inquired again. No response. I tried once more, but -- instead of offering dates -- they sent me a boatload of interrogatories, requests for admission, and a request for production of documents. When I reiterated my query about deposition dates, they insisted that it wait until after document discovery. I said I didn't want to wait. They replied by demanding that my client agree not to re-depose the witness later. I said I didn't think we would re-depose her but couldn't categorically promise that a second deposition wouldn't become necessary. They finally gave me a couple of dates -- which coincide with my 25th college reunion -- and noted that they might seek relief from the court. I told them that I couldn't stop them from asking the court to resolve a dispute that didn't yet exist, but I thanked them for the dates and said I would now appreciate an address for the deposition's location.

The little dust-up doomed my hopes for an agreement on deposition-scheduling. The draft pre-discovery agreement required depositions to occur within four weeks. Defense counsel wanted no time limits but later offered to present witnesses in eight weeks. So much for expediting discovery!

This fencing over a minor matter underscores the importance of getting pre-discovery agreements at the outset. But maybe it also illustrates the unwisdom in seeing commercial litigation as a Darwinian contest in which winning points assures survival. If lawyers suppose that a taste for mindless combat proves their superiority, they risk becoming what Mr. Bumble ascribed to the law itself.

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Copyright © The New Yorker. Used with permission.

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