| Randy Stutz
DOJ, Class Actions
In new findings, AAI identifies changes that are needed to harmonize the Department of Justice’s Model Corporate Plea Agreement with its Corporate Leniency Policy and to respond to recent case law developments.
In antitrust criminal plea agreements, the Department of Justice (DOJ) includes provisions that forego criminal restitution when private civil damages actions challenging the same conduct are pending. The DOJ’s current practice, as reflected in its Model Corporate Plea Agreement, is to waive restitution so long as such civil actions have been filed. However, notwithstanding their filing, these civil actions may not actually lead to the recovery of private damages. When damages are not recovered and restitution is also waived, guilty criminal defendants keep ill-gotten gains (sometimes billions of dollars) and avoid making victims while.
When private civil actions following criminal guilty pleas do not lead to the recovery of damages, it is usually because the actions must be pursued as class actions to be economically viable, and the defendants are able to successfully challenge class certification. The doctrine of collateral estoppel prevents guilty criminal defendants from contesting liability in overlapping civil damages actions, but nothing—including the DOJ’s plea agreement—prevents them from challenging class certification. Accordingly, guilty defendants who confess to antitrust crimes often devote exorbitant amounts of time and resources trying to prevent class certification.
AAI finds that the DOJ’s current policy of waiving restitution prior to class certification in plea agreements exacerbates this problem and creates inefficient incentives. Defendants need not litigate class certification any differently when they have confessed guilt relative to when they profess innocence, but confessed guilt changes class certification dynamics in important respects. Certain recurring arguments defendants marshal to defeat class certification, while understandable in the absence of liability, become frivolous once liability is confirmed. In particular, guilty criminal defendants often attempt to defeat class certification on grounds that the class is defined to include uninjured members.
As AAI explains in its paper, such arguments are not only frivolous but can become absurd in antitrust cases where plaintiffs are forced to rely on aggregate damages calculations because of market uncertainties created by a confessed antitrust violation. When these inappropriate class certification challenges nonetheless succeed, they undermine plea agreements, the broader criminal enforcement mission, and the antitrust class action mechanism. Moreover, such class certification challenges are in danger of becoming far more prevalent and effective because of recent developments in class action law.
In a detailed letter to the DOJ, AAI recommends three changes to the Model Corporate Plea Agreement that would help discourage inappropriate class certification challenges and align the restitution provisions in the DOJ’s criminal plea bargains with the restitution provisions in its Corporate Leniency Policy. The latter requires cooperating defendants to assume an affirmative obligation to make victim restitution unless doing so is “impossible,” and it requires that such defendants provide “reasonably achievable” plans for making restitution and encourages them to do so through settlements that streamline damages determinations and make victims whole as swiftly as possible.
AAI makes the following recommendations in its letter:
- When a guilty criminal defendant chooses to rely on civil damages as a substitute for victim restitution in a corporate plea agreement, the Department should clarify that only the actual payment of damages, and not merely the filing of civil suits that “potentially provide for a recovery,” fulfills the defendant’s restitution obligation.
- When a guilty criminal defendant chooses to rely on a civil class action as a substitute for victim restitution in a corporate plea agreement, the Department should condition the waiver of restitution on class certification being granted.
- If the guilty criminal defendant wishes to contest class certification despite relying on the class action as a substitute for victim restitution, the Department should require the defendant to provide a “reasonably achievable” alternative plan for making restitution if class certification is denied.
The letter was written by AAI President Randy Stutz.
