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May 5, 2011

"The Criminal Class Action"

The title of this post is the title of this very interesting looking new piece by Adam Zimmerman and David Jaros, which is now available via SSRN. Here is the abstract:

Over the past ten years, in a variety of high-profile corporate scandals, prosecutors have sought billions of dollars in restitution for crimes ranging from environmental dumping and consumer scams to financial fraud.  In what we call “criminal class action” settlements, prosecutors distribute that money to groups of victims as in a civil class action while continuing to pursue the traditional criminal justice goals of retribution and deterrence.

Unlike civil class actions, however, the emerging criminal class action lacks critical safeguards for victims entitled to compensation.  While prosecutors are encouraged, and even required by statute, to seek victim restitution, they lack adequate rules requiring them to (1) coordinate with other civil lawsuits that seek the same relief for victims, (2) hear victims’ claims, (3) identify conflicts between different parties, and (4) divide the award among victims.

We argue that prosecutors may continue to play a limited role in compensating victims for widespread harm.  However, when prosecutors compensate multiple victims in a criminal class action, prosecutors should adopt rules similar to those that exist in private litigation to ensure that the victims receive fair and efficient compensation.  We propose four solutions to give victims more voice in their own redress while preserving prosecutorial discretion: (1) that prosecutors and courts coordinate overlapping settlements before a single federal judge, (2) that prosecutors involve representative stakeholders in settlement discussions through a mediation-like process, (3) that courts subject prosecutors’ distribution plans to independent review to police potential conflicts of interest, and (4) that prosecutors adopt the distribution guidelines the American Law Institute developed for large-scale civil litigation to balance victims’ competing interests.

May 5, 2011 at 10:52 AM | Permalink


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Last weekend, I was part of the Federalist Society's faculty symposium on corporate criminal liability, held at the Airlie Foundation in Warrenton, VA. Topics like this were in the mix.

I am not opposed to corporate criminal liability (who could be after rampant fraud in the banking, housing and insurance industries triggered the Great Recession?), but I am very much opposed to the sort of prosecutorial involvement being discussed here. By temperment and experience, prosecutors tend not to have the expertise needed to fashion long-term, business-oriented regulation, nor is regulation, as understood in the modern sense, a part of traditional prosecution decision-making.

There is some rehabilitative value to punishment, more so in the corporate context than in others. (Businesses depend on their public reputation; meth dealers don't). But the prospect for government-engineered rehabilitation is insufficient, and the knowledge of how to go about it so lacking, as to justify inviting prosecutors to have a hand.

It's a sort of administrative state mission creep. Let regulators be regulators, and prosecutors be prosecutors. The power of prosecution does not mix well with the nanny state, and poses some potential danger. Let's keep it separate.

Posted by: Bill Otis | May 5, 2011 11:22:46 AM

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