This is the principal finding in Class Action Dilemmas: Pursuing Public Goals for Private Gain,the most comprehensive report on the contentious issue to date. The study offers jurists a long list of concrete guidelines to aid them in exercising closer scrutiny over settlements and attorney fees in class actions seeking money damages.

Business leaders have called for reform in class action rules to respond to increased class action activity. The study confirms that there has been a surge in damage class actions, particularly in the consumer arena and in state courts. But the researchers say that such surges have occurred in the past as well, and that the current controversy over class actions is actually a continuation of an old controversy that dates back at least until 1966. Prior efforts to reform the system have failed, except in the case of securities litigation.

The project was conducted by a five-member research team from RAND's Institute for Civil Justice. Copies of the executive summary of the study are being released today. The full report, including a description and comparative analysis of 10 consumer and mass tort class actions, will be published early next year.

The release comes in the midst of intense maneuvering on Capitol Hill. A House-passed bill that would move many state class action lawsuits into the federal courts is currently hanging fire in the Senate.

The roiling debate over damage class actions has been largely about whether, when and where they should be allowed. Those in favor of drastic change argue that bounty-hunting trial lawyers have increased the amount of litigation dramatically, imposing higher costs for business and greater burdens on the courts. Class action's proponents contend that the suits are a necessary means of securing remedies for wronged consumers and mass tort victims while encouraging more responsible behavior on the part of corporate defendants.

"These proposals raise hot-button political issues on which there is no consensus and that are unlikely to be resolved anytime soon," observes lead author Deborah R. Hensler, a RAND senior fellow and Stanford University Law School professor. "However, many of those on both sides of the political divide share concerns about current class action practices in money damage suits. By shifting the focus of the debate to improving the way these suits are litigated, the antagonists could find common ground."

Emphasizing that "judges hold the key" to better practices, Hensler and her colleagues make numerous, detailed suggestions about how to evaluate settlements and attorney fees. "The single most important action that judges can take to support the public goals of class action litigation is to reward class action attorneys only for lawsuits that actually accomplish something of value to class members and society," the analysts declare. They also urge that judges dismiss cases that have no legal merits and refuse approval for settlements that lack worthwhile outcomes.

Judges already have the power to regulate class actions along these lines, the study notes. So what stands in their way? The authors, pulling no punches, cite three obstacles: A judicial culture that stresses calendar-clearing above all other values; a belief that court efficiency is measured in terms of dollars spent rather than dollars spent effectively; and an absence of broadly available information on class action practices and outcomes that might provide an incentive for class action practitioners and judges to elevate their performance.

Many judges "need to be educated" about their obligations and powers in class actions by more experienced colleagues, the analysts state flatly. Acknowledging that better judicial management might be more costly, they argue that saving money by limiting judicial scrutiny is "a foolish economy that has the long-term consequence of wasting society's resources."

The public policy question at stake in class actions that seek money "is whether the entrepreneurial behavior of private attorneys produces litigation that is, on balance, socially beneficial," the study points out. Judges must police the balance between public good and private gain because members of the class rarely monitor the behavior of their lawyers and because "the powerful financial incentives that drive plaintiff attorneys to assume the risk of litigation intersect with powerful interests on the defense side in settling litigation as early and as cheaply as possible, with the least publicity."

Recent reform efforts have focused on eliminating abuses by incorporating guidelines for distinguishing "good" and "bad" cases in the procedural criteria for class certification. But the lack of political consensus about what distinguishes meritorious and non-meritorious class actions at their inception has stymied such efforts. The researchers also argue that judges with different beliefs about the proper objectives of damage class actions are unlikely to apply guidelines such as these consistently.

However, judges can be given guidelines for assessing settlements and attorney efforts in cases that satisfy existing certification criteria, the researchers say. By denying approval to settlements that lack merit and rewarding attorneys only for what they accomplish, over the long run judges can drive "bad" cases from the system--benefiting consumers and industry alike.

In undertaking their project, the researchers encountered a dearth of statistical information. There are no reliable estimates of how much class action litigation there is, for example, or how the numbers have changed over time. The researchers based their findings on recent trends on electronic data sources and interviews with plaintiff attorneys and defendants. In addition to conducting case studies, the researchers interviewed scores of practitioners in dozens of law firms, corporations and public interest groups, reviewed the academic and official literature, and gathered data from a wide range of print and electronic records.

Major support for the study was provided by Neuberger Berman, the New York-based investment management firm. Additional support was provided by more than a dozen law firms, corporations and individuals, and by core funds from the Institute for Civil Justice.

RAND is a nonprofit institution that helps improve policy and decision making through research and analysis.

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For interviews with lead author Deborah Hensler, call 831-761-9604 or 650-723-0146.