Courtroom Incentives

Karen Donovan‘s book V. Goliath: The Trials of David Boies discusses an interesting set of incentives that Boies insisted upon as lead counsel for a class of plaintiffs who were suing manufacturers of vitamins for overcharging.

Boies got the judge to agree to a “most favored nation” clause. The amount given to each class member could be no less than the highest amount obtained by any plaintiff who opted out of the class and settled on its own with the defendants.

The other plaintiffs’ attorneys argued that this only gave incentives to remain in the class and that it was a “tax” on opting out. Boies argued that it prevented others from piggybacking on all his efforts for class members. Seems to be that both Boies and the group of other plaintiffs’ attorneys were correct.


Just another reason to conclude that class actions are the creatures of the lawyers who conduct them. Participation in a settlement is "voluntary?" Judges love these strongarm settlements - they mop up all the mess and leave no plaintiff standing.

Garvit Sah

Every individual should have the right to opt out of class suit if he feels that his interests are not well protected in the class suit action. It is a decision that, however, must me made by a plaintiff prior to the case. At that point of time he can make a choice on whether he is better off going solo. The "most favored nation" clause helps the economically disadvantaged and discourages individual negotiations while one is still part of the group which is a good thing as such negotiations are more prone to underhand tactics and corruption. It would be interesting to compare this to trade union negotiations and see whether non unionized workers earn less than unionized ones .