Reverse Sampling: Holding Lotteries to Allocate the Proceeds of Small-Claims Class Actions

Small-claims class actions pose a unique dilemma: individual awards are small, and it is often not feasible to distribute them to each and every plaintiff. Courts have devised several alternative allocation procedures to cope with this problem, but none are satisfactory. This Article proposes a different method: paying more money to fewer, randomly sampled claimants. As each individual award entails per-claim administrative costs, using lotteries to distribute the proceeds of small-claims class actions cuts these expenses. This Article demonstrates that the lottery method for dispersing small-claims class action proceeds is superior to all existing alternatives. It funnels the money back to the group of victims, achieves deterrence, and maintains administrative efficiency. Finally, the Article shows that randomization is a fair allocation mechanism, as all class members are equally treated, and that the use of lotteries in this context raises no legitimacy concerns.