Equifax breach victims can pick their compensation – why choice may mean cheaper and better settlements
If you are among the approximately 147 million people affected by the Equifax data breach, you may be looking forward to your cut of the US$700 million legal settlement.
Under the settlement agreement with the Federal Trade Commission, Equifax hacking victims get a choice: free credit monitoring for 10 years or $125 in cash.
Most experts recommended taking the credit monitoring, which is valued at thousands of dollars.
Choices in compensation are relatively rare in the law. But my research on legal remedies suggests they shouldn’t be.
Giving plaintiffs choices allows judges to offer different types of compensation to different types of plaintiffs. Doing so actually increases the accuracy of compensation, helping justice be served.
Peevyhouse v. Garland Coal & Mining Co.
One of the most famous contract breach cases of all time, Peevyhouse v. Garland Coal & Mining Co., demonstrates the potential benefits of choice in legal compensation.
In 1954, an Oklahoma couple named Lucille and Willie Peevyhouse leased their land to a coal company. The agreement was for the company to strip mine the land in exchange for payment. At the Peevyhouses’ request, the contract also required that company perform restorative work.
The company mined the land and, in 1957, paid the Peevyhouses royalties of $2,500 – which would be $24,000 today.
But the land was never restored.
Lucille and Willie Peevyhouse were left with a farm marred by an open mining pit and massive piles of upturned earth. They sued the company. At trial, the company admitted that it had not performed the restorative work.
The Peevyhouses asked for $25,000 in compensation, which reflected their perceived loss.
The coal company had a different view. Restoring the Peevyhouses’ land would cost $29,000, according to an expert witness, but only increase its value by $300. The company said it was happy to make the Peevyhouses whole by paying the $300.
Benefits of choice
It didn’t have to turn out this way.
My research on how to appropriately compensate plaintiffs for subjective harms indicates that judges should offer plaintiffs in breach of contract suits a choice: accept an intermediate award of damages that sits somewhere between the objective and subjective harms, or order the defendant to perform on the contract.
Suppose that the judge in the Peevyhouse case had offered Lucille and Willie the choice between $5,000 or a court order forcing the company to restore their land.
If the Peevyhouses valued the restored land at more than $5,000, they could have chosen the court order. But if they valued the restored land at less than $5,000, they could have taken the money.
In either case, the Peevyhouses would be more accurately compensated for their subjective value.
By giving plaintiffs choices, judges can separate them into two groups and compensate them differentially. Those with high subjective values opt for the court order and are compensated in a costly manner. And those with low subjective values choose cash and are compensated relatively inexpensively.
The choice fully compensates all plaintiffs. And, on average, the costs are lower for the company being sued than they would be if the subjective compensation was awarded without choice.