The Case for Ambulance Chasing Lawyers

Big business has been going after plaintiff lawyers since the 1980s. Why? 90% of antitrust cases come from private attorneys, restructuring everything from real estate to college sports to big tech.

Welcome to BIG, a newsletter on the politics of monopoly power. If you’d like to sign up to receive issues over email, you can do so here. This issue is co-authored by Lee Hepner and Matt Stoller.

Today we’re writing about a fundamental and often disdained way that Americans organize our industries and assert our rights. Plaintiff lawyers. For forty years, big business has demonized them as sleazy ambulance chasers, as a way of ensuring that ordinary business people and workers get no say in our society.

So what do these plaintiff lawyers do? Do they matter? And has this campaign succeeded? The answers may surprise you.

In this 1881 Puck magazine cartoon by Joseph Keppler, a snake representing monopoly power is coiled around the nation’s Capitol. As it threatens to strike Columbia, at left, Puck asks Uncle Sam, “What are you going to do about it?” (Wikimedia Commons)

One of the key ingredients to American success, and one that is lacking today, is optimism. From the Declaration of Independence to the Gettysburg address to Frederick Douglass’ “What does the Fourth of July Mean to the Slave” to FDR’s Four Freedoms, our deepest cultural yearning, even in our darkest moments, is for a better life for our children, and faith in the future.

Polling last week from the Wall Street Journal shows this faith has collapsed. Just 36% of Americans think the American dream holds true, vs 53% in 2021. Half of voters think life is worse than it was 50 years ago, and most think the system is rigged against them.

This collapse is not just about a fall in living standards (we are richer than we were 50 years ago), but about the pervasive unfairness of modern life. There’s a concept in psychology called “learned helplessness” that may begin to explain this modern malaise. Learned helplessness is the result of experiencing repeated traumatic events without the ability to do anything about them. It is a key ingredient in depression. It turns out that suffering is bearable if the sufferer has agency, but even small amounts of suffering become intolerable if the victim feels they can’t make any changes to their situation.

Of late, Americans have experienced learned helplessness in our economic lives. In the Washington Post, Jeff Stein and Taylor Lorenz wrote a good recent article on anger over prices, focusing on a supposed $16 McDonald’s meal whose recounting went viral on TikTok. Like many such articles, it’s a materialist analysis of frustration with inflation, and Stein-Lorenz showcase the Biden Administration gnashing its teeth, wondering why the public doesn’t sync with the lines in their charts. But those of us who read BIG know that the core question has never just been about dry technocratic resource allocation, but a moral question as well. Fairness. Are business practices, and thus how we relate to one another socially, fair? A second and equally important question is as follows: Who ensures that such practices are fair?

In America, the answer to that second question has been, since the beginning, not just government, or business, but we the people, through our court system and especially through lawyers who represent ordinary people. Or, as Judge Jerome Frank once called them, the “private attorneys general.” At least conceptually, if someone wrongs a citizen, that citizen has the right to go to court and seek relief. It’s not just an important principle of law that ordinary people can enforce laws without having to depend on the whims of elected officials, but also provides a deterrent effect against unfair business practices.

For decades, however, that right has been under siege. Substantive attacks on antitrust and consumer protection laws over the past half century, with which BIG readers are already familiar, have occurred in tandem with efforts to undermine class actions and to force arbitration of claims. It’s harder than ever for Americans to assert their rights, to have any agency in the face of unfairness, and the result is a habitual acceptance of suffering. We are becoming a land of learned helplessness.

But, as with other trends over the past 50 years, the tides might be turning.

Trust-Busting without Government Enforcers

To understand why this private right of action is so important, let’s take a look at how this unusual American legal lever is being used today to reorganize entire industries. We’ll stick to antitrust, though private litigation is common in many areas of law.

We’ll start with what I wrote up last week how antitrust lawyers smashed the egg cartel, and egg prices are coming down in time for Thanksgiving. It’s important to note that those lawyers aren’t government officials, but private litigants.

It’s not just food prices. Take one of the more important antitrust cases pending in the Middle District of Tennessee against RealPage, maker of the rent pricing software Yieldstar (which we’ve written about a couple of times). The case – which includes dozens of consolidated class actions– alleges that RealPage’s software facilitated an illegal price fixing scheme that raised rents on millions of renters across the country.

As Matt has noted, housing inflation isn’t counted in key inflation metrics, and yet it is driving people to deeply disapprove of the Biden Administration’s economic policy. And the RealPage case strikes at the collusion driving up those rents. Putting an end to it could fundamentally restructure an entire huge industry. Moreover, the RealPage case has broad implications for other price fixing schemes and data exchanges, including cases involving Las Vegas hotels and meat processors.

There’s more, a lot more. It was private enforcement that just won a $1.8 billion judgment against the National Association of Realtors, the biggest lobbyists in Washington. The cheerleading giant Varsity is being restructured by a series of private class action suits, mixed martial arts is being reorganized via a private class action case against the monopoly Ultimate Fighting Championship, college athletes are now getting paid because of NCAA vs Alston, and retailers got $5.6 billion in restitution from the monopoly cartel over at VISA-Mastercard. In Epic v. Google, which has to do with fees charged by Google through its app store, private litigation might restructure one of the most powerful Big Tech gatekeepers of our time, parallel to what the government is doing with its own cases.

The reason we write about corporate concentration is because it promotes unfairness, high prices and autocracy. What we don’t talk about nearly enough, however, is this uniquely American solution, the ability for people to take their grievances and seek compensation or injunctive relief in court. In antitrust, the private right of action is not only baked into the Sherman and Clayton Acts, it predates our antitrust laws by centuries. It’s a right that largely doesn’t exist in Europe, where, historically, the core political arrangement provides for a balance of interests in big government; comparatively, in the United States, structural accountability is enhanced by private litigation and decentralization. Put differently, if a candidate promised to reform the real estate industry, college athletics, the telecommunications industry, and the pharmaceuticals industry, most would scoff. But all of that is happening through private litigation.

Private litigation works by harnessing the profit motive – by letting lawyers get rich by doing good. In private litigation, either a client pays a lawyer directly to sue, or a lawyer gets a percentage (or “contingency”) of the ultimate settlement or award. There are various advantages to private litigation over government regulation. First, there’s less risk of corruption. Whereas Congress and other regulatory bodies are vulnerable to lobbyists, campaign contributions, and regulatory capture, private plaintiffs’ lawyers are relatively immune to lobbying. Their ability to run a business is dependent on successfully enforcing the rules of the road, whatever those rules might be. There are many exceptions and complexities to this basic model, but by and large, private litigation is about seeking relief by applying existing legal theories to new fact patterns.

Second, there’s less bias. Government enforcers can be highly ideological, choosing to enforce laws they like, and not to enforce laws they don’t. For example, price discrimination is a major problem in our economy, and there’s a 90-year old law called the Robinson-Patman Act to prevent it, but government agencies have simply stopped enforcing it. Private litigators don’t have this same bias problem. They must make payroll and are more entrepreneurial about finding problems and attacking them.

Third, private litigation facilitates a less centralized way of organizing justice, a system less dependent on, say, having to interest a government enforcer in your case. And it’s less reliant on electoral shifts in the government and associated swings of the budgetary ax. There are disadvantages as well, conflicts of interest in the profession, and a certain ingrained tackiness of justice-for-profit. But our system is based on our ability to assert our rights, and not relying on politicians or bureaucrats to do it for us. (I’ll note that in no other area except plaintiff’s law would we decry entrepreneurs getting rich by doing good.)

By some metrics, private antitrust enforcement plays a much more important role than government action. From 1975 and 2012, private litigation made up over 90% of the antitrust cases filed in federal courts in all but 8 of those years. That means that for every government case, nine more cases come from the private antitrust bar. From 1990-2011, private antitrust cases recovered $34-36 billion for victims, compared to just $8 billion for the government’s Antitrust Division. In terms of the deterrent effect of these awards, private enforcement has had much more significance.

Plaintiffs’ lawyers also go after important cases, not just lucrative ones. They are big game hunters, often spurring government action or seeking simultaneous, parallel relief. There were class action suits against Amazon that preceded the FTC’s recently-filed litigation, and private actors are now filing mass tort claims against social media firms for engineering addictive products. It was private antitrust litigation in 1968 that preceded the government’s own efforts to break up IBM, and it was private litigation again that informed the government’s case against AT&T in 1974. In 1995, private parties forced the Antitrust Division to block Microsoft’s acquisition of Intuit, a prelude to the massive antitrust suit the government brought a few years later.

Private Enforcers Are Older than Government Enforcers

Dig a bit deeper and it’s no understatement to say that private litigation is a cornerstone of American democracy. In his important article “The Myth of the ‘Weak’ American State,” historian Bill Novak describes private litigation as part of the far-reaching fabric of American governance, which he contrasts with the centralized, oft-despotic structure of European states. The American state is designed to function through a diffuse and horizontal power structure, and fundamentally that structure includes the power of individuals to exercise their rights through the courts.

With this capacity, Americans were able to shape their society through the actual use of laws, without which the laws had no meaning. And though their ability to shape society was circumscribed by laws and other rules, that ability did not require having to trust a central public sovereign. American history is replete with this reliance on private litigation to accomplish public objectives, from the False Claims Act to the Americans with Disabilities Act – and the Sherman Act, our country’s foundational antitrust law.

Private enforcement was critical to the framers of the Sherman Act in 1890, who allowed private actors to obtain three-fold (or “treble”) damages for any violation of the law. “My own opinion is that the damages should be commensurate with the difficulty of maintaining a private suit against a combination such as is described,” said Senator John Sherman while arguing in favor of the antitrust law that would bear his name. Sherman was concerned not with state-driven despotism, but despotism at the hands of monopolists. And he sought to correct the asymmetry of power between monopolists and the private individuals willing to confront them, describing monopolistic overcharges as “extorted wealth” and “overcharges which make the people poor.”

Indeed, the framers of the Sherman Act hadn’t planned for much public enforcement of the law at all. There was no budget allocation in 1890 for public enforcement of the new law, and the Federal Trade Commission wouldn’t be established for another 24 years. When dedicated government enforcement did start, both state and Federal enforcers built on, and contributed to, case law involving private parties.

This continues today. For instance, the Department of Justice (DOJ) weighed in on the RealPage case by filing a Statement of Interest, which is something the Attorney General can do any time it feels the need to “attend to the interests of the United States” in a suit pending in any federal court. Judges take these statements seriously, so the DOJ action is an important show of support for renters in a moment when rents continue to be too damn high across the country. But this public policy move is built on private rights of action.

And yet, for more than a half century, this unique non-state-based American system has been under assault. We know that the government enforcers have gotten weaker – the Justice Department’s Antitrust Division is smaller than it was in 1979, despite an economy that has grown more than five-fold over the same period. It turns out private enforcement has fallen off even more precipitously. In 1977, there were 1611 private antitrust cases filed in federal courts, roughly 1.2% of all federal civil cases. By 2014, that number had collapsed to 782, just 0.26% of all civil cases in federal courts.

That’s because today, private cases are harder to bring and win. One illustrative example: earlier this year, three judges ruled that Live Nation-Ticketmaster could avoid its day in court, despite obvious and scandalous behavior, because of an arbitration clause buried in their website’s Terms of Use. And even when private plaintiffs do get their day in court, cases take much longer, often frustrating the basic element of justice that timeliness in restitution matters. The Ultimate Fighting Championship antitrust suit, for instance, has been going on since 2014, buried in the courts.

Private Antitrust In the Crosshairs

The diminution of private antitrust litigation is part of the broader ideological attack on the anti-monopoly tradition. In 1971, just as soon-to-be Justice of the Supreme Court Lewis Powell wrote his historic memo to the Chamber of Commerce condemning attacks on American “free enterprise,” the Chicago School was steadily advancing its own assault on foundational antitrust laws. As readers of BIG know, the core ideological goal of the Chicago School was to focus on efficiency rather than concentration of power, and with private litigation that was no different.

In 1968, Chicago School scholar Richard Posner argued that private antitrust cases were inefficient, a “delusion” and “a device by which enterprising lawyers obtain large fees,” asserting – without evidence – they cost more than they helped consumers, and were thus inefficient. The private system should be banned, and replaced, Posner argued, with more government enforcement and fines (a strikingly statist argument for a libertarian.)

If the corporate movement couldn’t repeal popular laws, defanging enforcement was the next best option. And in targeting enforcement, they went after both public and private enforcers. In 1980, Posner and his colleague George Stigler authored a memo for the Reagan administration transition team arguing for what became the most significant shifts in antitrust in U.S. history, noting that they couldn’t get the statutes changed in Congress, so they’d have to rewrite it through administration. BIG featured that memo last year in a piece about the ‘conspiracy’ to secretly rewrite merger law without having to go through Congress. In that same memo, they argued for killing private enforcement as well:

“Private actions, with their potentially unlimited treble damage judgments,” they wrote, “are a source of considerable resentment (and expensive distraction) among businessmen.” “The growth of the private antitrust suit to the point where it dominates antitrust enforcement … has injected a wild card into the antitrust game,” never mind that private litigation was originally envisioned as the only method of antitrust enforcement. Posner and Stigler recommended Reagan find an antitrust chief who would “announce his willingness to intervene in FTC and private cases where the position of the plaintiff is contrary to sound antitrust principles.”

And they found him in Bill Baxter, who created an amicus program that encouraged the courts to narrow antitrust law and limit private rights of action. Chicago Schoolers saw getting rid of antitrust enforcement, both private and public, as part of their deregulatory project.

Courts began rolling back private rights of action, making it harder to sue, harder to pass key stages of litigation like motions to dismiss, and harder to certify plaintiffs’ classes. Corporations also organized a movement to force plaintiffs out of the courtroom and into what is called private arbitration. In arbitration, proceedings are secret and the arbiter is often paid by the big business defendant itself. It’s no surprise that big business almost always wins. According to a 2021 report by the American Association for Justice, consumers were more likely to be struck be lightning than win a monetary award in forced arbitration.

When it comes to the last four decades’ rise in forced arbitration, the Supreme Court has carried the bag the entire way. In 1925, Congress passed the Federal Arbitration Act, which was a minor law meant to allow merchants to use arbitration if they wanted. But in 1984, the Supreme Court invented a new interpretation in Southerland Corp. v. Keating, finding that by allowing for arbitration, Congress had actually sought a broader federal policy favoring arbitration, opening the door to ubiquitous, “mandatory arbitration” clauses in consumer contracts, employment contracts, credit card agreements and even the terms of use when you buy a concert ticket using Ticketmaster.

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Over the course of decades, culminating in a series of cases in the 2010s, the Supreme Court made it virtually impossible to bring a complaint if a business slipped an arbitration clause in a product or employment contract, or even just stuck some words on the side of a package or an interminable screen you have to click ‘Accept’ on to get to a product. (If you want the more detailed legal history or analysis, read either conservative former Scalia clerk Brian Fitzpatrick or 2017 writing by Deepak Gupta and Lina Khan, who referred to forced arbitration as a form of wealth transfer.)

The whittling away of private antitrust litigation by the courts was an extension of the efforts by corporate lobbyists to demonize the private right of action more generally. Enter the archetypal, parasitic ambulance chaser, a distorted depiction of private lawyers helping people get compensation for their injuries. Recall the case of Stacey Liebeck, who, in 1992, bought a cup of coffee at a McDonald’s drive-through in Albuquerque, New Mexico, accidentally spilled it on herself, and sued because it was too hot. A jury ultimately awarded Ms. Liebeck nearly $3 million, what seemed to be a textbook example of the sue-happy culture in America and a perfect vehicle for arguing that ordinary people should get no say in what happens in commerce. As it turns out, most of the narrative in this story was dishonest. McDonald’s knew the coffee was dangerously hot, it had received hundreds of complaints, as the heat caused third degree burns. Moreover, Liebeck sought to settle the case for $11,000, an offer which McDonald’s rejected.

By the late 90s, a Republican pollster advised the GOP about private trial lawyers, “They truly are the one group in American society that you can attack with near impunity.” The ambulance chaser myth had taken full and total control of the conversation, and it became good politics to erode laws aimed at holding corporations accountable for their bad behavior.

In the 2000s, the disparagement of private enforcement had become conventional wisdom. The Antitrust Modernization Commission recommended rolling back private rights of action. “Private rights of actions U.S. style are poison,” said former FTC Chair Bill Kovacic. Ex-government enforcer Thomas Rosch went so far as to call class action treble damages, which were a core part of Senator Sherman’s vision to ensure enforcement of the antitrust laws, “almost as scandalous as price-fixing cartels.”

The End of Learned Helplessness

Learned helplessness is a useful way to articulate a basic frustration most of us have with our society, but it isn’t permanent. As people see things change, they relearn civic muscles. And that is starting to happen. With the return of high-profile antitrust litigation, private antitrust litigation is seeing a resurgence through creative legal theories. Journalists are writing about the inability of ordinary people to seek justice through the courts - the New York Times has been doing stories on the extent of arbitration agreements, and it is now a widely understood problem. This newsletter, which now has more than 100,000 readers - many of whom are plaintiffs’ lawyers – is, hopefully, also helping.

Already, Congress has started to widen the scope of who can get into court. In 2022, Congress passed a law that precludes employers from requiring employees to arbitrate disputes related to sexual assault or harassment, which Republican Ken Buck led, contra the wishes of his committee chair, Jim Jordan.

A broader piece of pending legislation is the “FAIR” Act (short for the Forced Arbitration Injustice Repeal Act) which would invalidate forced arbitration agreements and allow Americans their day in court. That change in the law would have allowed a class of ticket purchasers to hold Live Nation and Ticketmaster accountable earlier this year. With decisions like Apple v. Pepper, and NCAA v. Alston, the Supreme Court is setting a new stage for this renewed interest in the use of private antitrust litigation, and renewed regulatory efforts are on the horizon to make it easier for plaintiffs to sue for illegal price fixing. Given the right case, it wouldn’t be a surprise if the Supreme Court began reversing itself on arbitration.

And that’s because politically speaking, some of the most interesting change in viewpoint is not on the left, but on the right. Two weeks ago, the conservative Federalist Society, the beating heart of the right-wing bar and where Supreme Court Justices network with legal thinkers, hosted a panel called, “Why is there not a larger conservative plaintiffs’ bar?” It’s an important question to ask and reflects a potential realignment around Novak’s conception of the American state as the product of a diffuse, bottom-up base of private enforcers.

There’s a reason for this revival on the right. Private enforcement should be more compelling to conservatives. They already distrust government, and they like self-reliance. Private litigation satisfies both. As they turn less trusting of corporations, plaintiff law offers a mechanism to enforce laws against dominant firms doing things they dislike, such as suppressing forms of speech or harming conservative farmers.

The FedSoc panel was moderated by the Solicitor General of Virginia (and recent FTC nominee) Andrew Ferguson, and included the Chief of Staff to the Tennessee Attorney General leading fights against Big Tech, and Ashley Keller, who is litigating the Texas case against Google. (Keller, a conservative, recently successfully argued before the Supreme Court in Mallory v. Norfolk Southern Railway Co., a case that allows out-of-state companies to be sued in any state that they do business. It’s a huge win for plaintiffs’ litigation, and – fittingly – scrambled the Court’s ideological divisions, with both liberal and conservative justices on either side.)

The FedSoc panelists talked about an emerging conservative distrust of big corporations, borne out of a dislike of “woke” capitalism. Conservative scholars are making their own case for private class actions as a tool for holding corporate power accountable without relying on big government. The alternative is government regulation, which they don’t like. As Fitzpatrick put it, “it’s either private litigation or socialism!” The surging conservative interest in private litigation is a departure from the influence of corporate lobbyists and the Chamber of Commerce, but it’s also a return to first principles.

Private antitrust enforcement is – and always was – more than a passing trend owned by any partisan political framework. For anyone wringing their hands about whether the current reassessment of antitrust laws can produce durable change, this is all welcome news.

Which brings us back to the beginning of this article, because it’s not just a reassessment of antitrust laws, but an overdue reckoning with a true source of American liberty: the ability for private individuals to shape society themselves. Private litigation was always about allowing real people the authority to hold power to account. Without it, America is profoundly unbalanced, and learned helplessness becomes the norm.

At its core, learned helplessness is a habit, and just as it can be learned, it can also be unlearned. In stark contrast to previous officials, the current DOJ Antitrust Division and FTC have been weighing in on the side of workers, purchasers, athletes, students, and consumers – not just in their own enforcement efforts, but in many private enforcement cases. We are reversing the last forty years of un-American activity. As Louis Brandeis put it, “The longing for freedom is ineradicable. It will express itself in protest against servitude and inaction unless the striving for freedom be made to seem immoral.”

We the people are waking up.

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Thanks for reading!

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If you want to reach me, my email is Lee.a.hepner (at) gmail.com.

Thanks,

Lee Hepner