more on the Class Action Fairness Act

Here's an update to my previous article about the Class Action Fairness Act of 2005. The final version of the law hasn't come out yet, but when it does, you'll be able to find it here. This info is based on the version the Senate passed on Feb 10th, bill "S 5".

First off, the new law goes into effect as soon as it's enacted.

The law changes the amount-in-controversy and diversity requirements for class actions by changing the statute that controls those things, 28 USC 1332. Now, if the total amount in the class action, adding up all the plaintiffs, is more than $5 million, and at least one plaintiff and one defendant are from different states, the class action can go into federal court. Being from a different country counts as being from a different state. So, if the rogue DVD maker from the previous article were from a different country, the class action against them would be a candidate for federal court.

The federal court doesn't always have to accept the case, though.

• if more than 2/3 of the plaintiffs are from out of state, then the federal court (generally) can't turn it down
• if 1/3 to 2/3 of the plaintiffs are from out of state, the federal court may turn it down "in the interests of justice".
• if fewer than 1/3 of the plaintiffs are from out of state, the federal court has to turn it down, except there are some exceptions I don't quite understand yet

The law also applies to something called a "mass action". As far as I can tell, a "mass action" is 100 or more people suing about the same thing, where all of them have an individual claim of at least $75K. In that case, someone (presumably the defendant) can try to combine all the cases into a "mass action" and apply the class action laws to it.

Finally, the bill changes something called "removal". Removal is where you sue someone in state court, and the person you sue says "no, I'd rather be in federal court". Under certain circumstances, they can move the suit out of the state court and into the federal court, where different rules apply. This law adds a new statute, 28 USC 1453, that basically says that, in a class action, any defendant can remove to federal court without the consent of the other defendants, so the net effect is that the class action will almost certainly end up in federal court.

What's it all mean? I don't know, yet, except that, overall, class actions are going to wind up in federal court more often.

U.S. and Japanese health care costs -- and lifetimes

Let's talk for a moment about health care costs. In the year 2000, the United States spent a total of $1.3 trillion in health care costs, with a per capita expenditure of $4560. You can find those numbers at the web site for the Centers for Medicare and Medicaid Services.

Now compare with Japan. In the year 2000, Japan spent 30.4 trillion yen on health care. (Available here. According to my lovely, talented, and frighteningly brilliant translator, you can find the number on the bottom line of the file. The “12” is the year 2000 – they date based on emperor – and the “303 583” is 30.3583 trillion yen.) That's 239,200 yen per capita (4th column), or about $2,392. In other words, about half the amount per person the U.S. spent.

Ready for some more fun statistics? According to the 2000 CIA World Fact Book (grab the 04.zip file), in the year 2000, the U.S. life expectancy at birth was 77.1 years. In Japan that same year, it was 80.7. So it looks like Japanese people are spending half as much on health care as U.S. citizens and living longer.* I have it on good authority that the 2001 numbers are similar, but I haven't been able to find those numbers on the web, so I'm sticking with the 2000 ones for this article.

So what might these numbers mean?
1. somebody's fibbing,
2. Japan's getting much more health care bang for the buck than the U.S., or
3. Japan's population is healthier than the U.S.'s and therefore needs less health care.

Let's set aside #1 for the moment since it probably won't take the discussion very far.

It may be that Japan's getting more bang for the buck. That could be for a variety of reasons. Maybe Japan's drug prices are lower. Maybe its administrative costs for its health care system are lower. Or maybe it distributes health care differently, applying a lower level of care but reaching more people, thereby pushing up the average.

On the other hand, possibilities for a healthier population also leap to mind: diet and exercise, for instance. Maybe Japan has lower obesity rates, or maybe Japanese people spend more time walking and less driving.

My personal guess is it's some combination health care distribution and lifestyle factors, but it would be very interesting to see a comparative study at some point.

* It's true that Japan has an aging population, so their per-capita expenditures will go up in the future. Of course so will their life expectancy, since the population will be weighted toward older folks, but expenditures will probably grow faster than life expectancy. However, that's a separate point for a different day.

we are sorry for the inconvenience

I've heard from some folks that the white text on black background is hard to read. I'm trying a few changes to come up with something more legible. Please bear with me for the next few days as the Gazette searches for a new look.

daddy, why are there contracts?

Contract law seems to be all about maximizing wealth: we want to enforce those contracts that increase overall social wealth, and not enforce the ones that don't. For example, we usually enforce an agreement to sell a car because the person buying the car wants the car more than the money, and the person selling it wants the money more than the car. As a result, society overall is better off: both people have increased what they value. On the other hand, if the person selling the car knows it has some serious mechanical problems and lies about them, we might not enforce the contract because the person buying the car can't accurately decide how much she values it, because she doesn't know about the mechanical problems. In that case, we can't be sure overall social wealth has increased.

The question I've been mulling over is this: why is our standard maximizing overall social wealth?

Back in the middle ages, status was a big deal. People wanted to maintain their status and that of their families. And status was tied to land. As a result, we developed a whole branch of law, property law, that brought with it different kinds of estates (to manage inheritance of land), leases, easements, etc. All stuff to regulate the movement and use of land, and therefore status. Land was so central that most people probably never even stopped to wonder why it was so central.

Then we decided we should be moving money rather than land, and we developed contract law. But if you compare today's standard of maximizing overall social wealth to yesterday's of maintaining status, how much better is the modern one?

Certainly it seems to be a good thing that people are more socially mobile than they were in the middle ages: without rigid social classes maintained by land inheritance, people have the opportunity to better their lives.

On the other hand, the contrast in wealth between Bill Gates and a someone selling burgers at McDonald's is pretty stark: the standard of maximizing overall social wealth doesn't really care how much that wealth accumulates in any particular person, which is probably one of the reasons we have social mobility.

What have we gained and lost? Is this the best of all possible standards, or is there a better standard out there somewhere?

simulated smallpox and calling in sick

The March 2005 issue of Scientific American (available at a grocery store magazine rack near you) has a fascinating article, "If Smallpox Strikes Portland" by Chris Barrett, Stephen Eubank, and James Smith, on some work they did with simulating the spread of disease in a very realistically modeled city. They model the actual geography of the city, use census data to model its population, and track people moving around in a way that looks a lot like the sort of finite element analysis weather prediction models use. Then, they drop in a virtual disease like smallpox or flu, and see how it spread given different ways of responding to it.

Anyway, the results are what grabbed my attention. The two most important factors for controlling the spread of disease turned out to be

1. whether or not contagous people stayed home, and

2. how quickly the government responded to the outbreak.

Not whether they used vaccines or quarantines, or whether it was massive vaccination or targeted vaccination, just whether people went home when they got sick and how quickly the government responded.

Let's ponder that first factor for a moment.

I listed those factors in order of impact, so people staying home when they felt sick (when the symptoms first stated to appear, at which point they became contagous) had the strongest impact on disease spread.

Now, consider the policies where you work. Do they encourage sick people to come in or stay home? At one previous job, we had a single pool of "personal days", no separate sick and vacation days. Net result: you wanted to use all those days for vacation, so you came in even when you were feeling marginally sick, i.e. when the symptoms first started appearing but hadn't gotten strong yet.

If you're someone in charge of writing those policies, it might be good to think about disease spread and productivity. You're dealing with a population -- employees -- and this study suggests that the best way to spread disease through a population is to get contagous people to spend more time in the population. So, the question is whether it's better to take the productivity hit from encouraging contagous people to stay home, or from having them come in and getting wider spread of the disease. Sorry, I don't have a right answer for you, but it's definitely worth thinking about.

The Class Action Fairness Act of 2005

Interesting news from the legal world. The Class Action Fairness Act of 2005 apparently became law yesterday. I haven't been able to get the details on it, but from what I understand it has the effect of forcing nationwide class action lawsuits into federal courts: you can't have a nationwide class action in state courts any more.

"So, False, why should I care?" I hear you ask. Well, I'll tell you.

One of the reasons for having class action suits is to stop people from doing things they oughtn't but that fall under the radar. So, let's say some consumer electronics company comes up with this great scam: they're going to sell DVD players for $80, but they'll offer a $30 mail-in rebate. Except they decide they won't pay the rebates. So you go to Frys, plonk down your 80 bucks, send off the form, and never get your rebate check back.

Now what? Are you going to sue over a lousy 30 bucks? Probably not, since that's probably, what, ten minutes' worth of your lawyer's time, and the court's not likely to award you attorneys fees if you win. And even if you do win, the company may just give you your 30 bucks, chalk it up to the cost of doing business, and keep on ripping off everyone else.

Enter class actions. One of the original ideas behind a class action was that a whole bunch of these 30 buck plantiffs can get together and take on the company that's intentionally ripping them off. They get to split the cost of their lawyer, they get a sizeable chunk of their 30 bucks back, but more importantly the company gets spanked for ripping people off in a way that will actually get its attention. That's the theory, anyway. As you can imagine, there's a lot of debate over whether the system gets abused or not. You can probably also imagine who tends to wind up on what side of the debate.

Anyway, there's something else that comes into the picture. Federal courts want to keep out piddly little claims, so one of the things they have is called an "amount in controversy" requirement: you can't sue someone in federal court unless there's at least $75K at stake. So, how does that relate to your piddly little 30 buck claim?

Well, every class action has some named plaintiffs, folks who are suing who actually have their names on the paperwork, and a whole bunch of unnamed plaintiffs. The named plaintiffs act as representatives for the unnamed ones. That way, if our DVD company rips off a million people, all million of those people don't have to go trooping over to the courthouse. In 1969, the Supreme Court said that you don't get to add up all the 30 buck claims from the unnamed plaintiffs to meet the amount in controversy.

What you do have to do is kind of confusing.

Some courts interpret a law, 28 USC 1367, as saying that all the named plaintiffs have to individually meet the amount in controversy requirement, which means that you'd have to find some representatives who bought a ton of DVD players and sent in a huge load of rebate forms. If you can find enough of those people to be named plaintiffs, you're good to go in federal court: they can represent the folks like you and me who just bought one lousy DVD player and want our 30 bucks.

Other courts follow a 1973 Supreme Court case called Zahn v. International Paper, which says that everyone, even the unnamed plaintiffs, have to meet the $75K amount in controversy. So, you and I with our one lousy DVD player don't get to be a part of the class action in federal court.

In the past, you could get around this problem by just filing in state court, which doesn't have that amount in controversy requirement. But remember, this new act says that a nationwide class action has to be in federal court if it's going to be anywhere at all. I don't know what it says about the amount in controversy. It might change the rules, to let the 30 buck claims in. It might also keep them out. I haven't been able to find out.

Also, I'm not sure what a "nationwide" class action is. It's probably a class action where the plaintiffs come from two or more states. That'd mean you could theoretically file 50 class actions, one in each state, against our DVD maker. In practice, though, you'd probably skip most of the states because there just aren't enough people to make it worthwhile, so those of us in California, Texas, and New York might get our thirty bucks, but everyone else is SOL.

It will be interesting to see how this develops. In the meantime, be careful buying those DVD players.

see the follow-up post here for more specifics on what the law does