Public Enforcement Compensation and Private Rights

By Prentiss Cox. Full text here.

Government enforcement actions have returned tens of billions of dollars to consumers, investors and employees. This “public enforcement compensation” is important to effective civil law enforcement, yet it is poorly understood and increasingly criticized. Recent scholarship asserts that public compensation mimics class action recoveries and raises the same concerns of accountability to recipients of relief. This Article rejects the class action analogy and presents an alternative framework grounded in the law and practice of public enforcement for understanding the relationship between public compensation and private rights.

One scholar goes further and contends that state attorneys general violate constitutional Due Process protections in obtaining public compensation, but this claim rests on a patently incorrect understanding of how courts view preclusion of private claims subsequent to a public enforcement action. This Article explicates preclusion law as applied to public compensation and explains the primary reason for the scholarly error, which is a failure to appreciate the varying legal authority for public compensation in different regulatory fields.

After clearing away the confusion resulting from the inapposite class action analogy and the incorrect understanding of preclusion, this Article focuses on two categories of cases in which public compensation can impair private rights. It proposes law reforms that would better align public enforcement with private rights in these circumstances.