A Company's Voluntary Refund Program for Consumers Can Be a Fair and Efficient Alternative to a Class Action to Warrant the Denial of Class Certification

Eric P. Voigt, Faulkner University, Jones School of Law

Abstract

Consumer product companies are establishing internal programs under which they are voluntarily compensating consumers for damages caused by their products. When a company has such a program and is faced with a subsequent class action, may federal courts rely on the voluntary refunds in denying class certification? The short answer is yes.

This Article analyzes Rule 23(b)(3) of the Federal Rules of Civil Procedure and the requirement that a class action be "superior to other available methods for fairly and efficiently adjudicating the controversy." The Article argues that courts must compare the superiority of a class action not only to judicial procedures but also to a company's voluntary refund program. This Article also contends that a court must deny class certification when a reimbursement policy is fair and efficient. These arguments are based on unexplored commentary by two members of the Advisory Committee authoring the 1966 amendment to Rule 23. Last, the Article discusses what features a refund program must have to be a fair and efficient alternative to a class action. A reimbursement policy is fair and efficient when it fully and timely compensates consumers for out-of-pocket expenses.

Surprisingly, no federal court or scholar has analyzed the historical meaning of Rule 23(b)(3) as it applies to voluntary refund programs. Further, other than a handful of courts and one published note (which took an opposing view), whether a refund program is relevant to the denial of class certification has not been addressed.