You might be interested to hear about the Ticketmaster class action settlement I learned I was a party to in my email this morning.

Lawyers get $16 million, members of the class get coupons on future Ticketmaster purchases.

It's amazing that so many entrepreneurs seem to hate the large payments that class action lawyers are awarded.

Class action lawyers perform the same kind of high-risk high-reward gamble that startups engage in. While tech startups create value by making something useful, these lawyers create value by keeping powerful interests honest. The idea that they are unnecessary or should be capped because consumers will just "in the long run" "vote with their feet" has been shown to be (patently) false: corporations can take advantage of huge economies of scale when they breach millions of contracts in small, hidden ways. The only real recourse of an individual is to participate in a class action. Perhaps the biggest part of the individual's reward is that the corporation will stop its bad behavior.

I can understand distrust of the judicial system because it shows a bias in favor of the deep-pocketed. What I don't understand is why there's a distrust of class-action verdicts, where both parties compete on a relatively even playing field.

I think the main source of dislike is that the lawyers appear to be the only ones profiting: they receive substantial payouts, the lead plaintiffs they talk to receive payments, but the bulk of the class they supposedly represent receives worthless coupons. The suspicion is that they're negotiating primarily for themselves, willing to sell out the class with a shitty settlement, as long as they themselves get a good payout from it.

I've been reasonably happy with class-action lawyers when they've negotiated actual, non-trivial cash-money payments for their class. But Ticketmaster store credit, so they can take home money while failing to get anything for the class they supposedly represent? Fuck off. I filed an objection to the proposed settlement when I received that offensive proposal. If all they can negotiate is $1.50 in store credit, then I think we can safely say that they failed in their lawsuit, and shouldn't get any payment.

Sounds like a problem of the selection of legal representation. It seems there needs to be some, ah, website that helps to put together groups of plaintiffs and organizes the process of selecting a good legal team to represent them ...

... if the website got 0.25% of every settlement, it could be pretty lucrative.

As I understand it (IANAL) the vast majority of members of the class find out during the settlement process, i.e. well AFTER the lawyers have been picked.

You can technically "opt out" and go sue the company yourself, but you're not going to get people who realistically, upon receiving notice that they are getting an unexpected settlement in-between two utility bills, decide to form their own class.

Right. The point would to allow this kind of thing to happen more organically. Those with a grievance would aggregate before the legal team was chosen.

The lawyers are often "picked" because they are the only ones willing to invest many hours of legal effort out of their own pocket.

Long term, if the class action changes the practice that led to the case, than all the future customers benefit too. It's hard to calculate that kind of benefit, but it's a nice benefit.

The big difference is that successful class-action lawyers transfer wealth, while successful entrepreneurs create wealth.

When a class-action lawyer sues to enforce anti-trust laws, at least theoretically he is creating wealth. The transfer of money is incidental to an enforcement system that seeks to control the incentive structure of monopolists. Monopolies, of course, create deadweight losses in the economy. Avoidance of deadweight losses are functionally equivalent to creation of wealth.

Now, I'd certainly argue that entrepreneurs create more wealth more effectively. That said, the more we learn about economics the more situations we find where market failures undermine efficient allocations of productive capital. And by and large our solution to those market failures has involved writing laws which are enforced in many cases by plaintiff's lawyers.

If the class-actions end a practice, that frequently closes off a path where wealth would have been illegally bled off from multiple parties.

It's even funnier than that. The coupons are for $1.50 each, and you're allowed a maximum of 17 of them, no matter how many tickets you actually purchased over the years. Thanks, Ticketmaster!

I guess I'll have to reconsider then; the lawyers definitely got the short end of the stick. (;

More seriously, I would have no qualms of going into the legal profession specifically to defend against this sort of brand of crazy where possible. (And of course more mundane cases as the majority.)

I'd wake up each morning feeling MUCH better than if I became something like say, a firefighter.

Not just a coupon, but a coupon for $1.50