Congress must put an end to trial lawyers' abuse of the class action system. Sending multistate cases to federal court is good start.
Published July 17, 2003
Class action lawsuits are an important tool for protecting the interests of average Americans against the deep-pocket power of large automakers, pharmaceutical giants and polluting industries. The lawsuits give people whose harm is too minor to attract counsel or justify an individual lawsuit the ability to join with others to obtain redress. Rather than hundreds or thousands of small suits, the courts save resources by adjudicating the same issue in a single case.
That's the way the class action system is supposed to work. However, unscrupulous trial lawyers have abused and corrupted the class action system to the point that it's become a legal extortion racket. Because these greedy lawyers don't seem willing to police themselves and state bar associations won't hold attorneys to professional standards, Congress needs to provide relief.
How do trial lawyers abuse class action suits? Let us count some of the ways. One of the worst is by venue-shopping. Attorneys search out communities with low negligence standards, sympathetic juries and state court judges who, in many states, rely on contributions from trial lawyers to finance their campaigns. Places such as Madison County, Ill., known to be especially friendly to plaintiffs, end up with an inordinate number of class action suits, even when the corporate defendant and the bulk of plaintiffs have little or no relationship to the place.
Lawyers also will file cases on behalf of huge classes of people - many of whom are not even aware that they are suing anyone - and then settle, obtaining for their class-member clients a nearly worthless coupon, while they walk away with multimillion-dollar attorney fees. This game is typically played with the collusion of the corporation being sued, which is all too happy to be relieved of liability by issuing a coupon.
Unfortunately, the litigation reforms introduced in Congress would do very little to address the problem of consumers being cheated this way. Neither the House bill, H.R. 1115, passed last month, nor the Senate measure, S.B. 274, proposed by Sens. Charles Grassley, R-Iowa, and Herb Kohl, D-Wis., which is awaiting floor action, has as its primary purpose protecting the little guy.
Instead, this legislative battle is a clash between titans - big business interests vs. the trial bar. Nearly 500 lobbyists have been enlisted by industry groups to get these reforms passed. Democrats, of course, are the biggest obstacle to reform. They are as addicted to trial lawyer political money as Republicans are to corporate money.
The proposed bills would shift large class action suits - those with claims totaling at least $5-million and including a certain percentage of plaintiffs from more than one state - from state to federal court, where the judges tend to be less friendly to these suits. In concept, a move in this direction is a sensible reform. The federal courts were set up in part to settle disputes among multistate litigants. They also hold class certifications to a stricter standard of scrutiny than state courts.
Opponents raise a legitimate concern when they argue that class action reform will only add to the overstuffed dockets of the federal courts, which could lead to significant delays. Such delays almost always benefit the business being sued, because they are typically in a much better position to wait out the process than are injured litigants. Of course, if Congress would stop federalizing street and drug crime, the federal court dockets would have room for all the nation's complex class action suits.
The Senate bill comes closer than the House version to striking a reasonable balance between the interests of aggrieved plaintiffs and corporate defendants. For instance, the Senate version would not make these new rules retroactive, nor would it give business interests the ability to delay cases by granting automatic appeals of class certification. An appeal to a federal circuit court can often take years.
Sen. Patrick Leahy, D-Vt., plans to propose an amendment that would mark a significant improvement to the Senate bill. His changes are designed to reduce the abuses that occur in class action suits on both sides. Leahy's bill would address the problem of collusive settlements by limiting the fees lawyers collect to a proportion of the value of the coupons redeemed. It would also more narrowly define the cases that could be shifted to federal court by raising the threshold to $15-million. The amendment also would allow cases to remain in state court when most of the plaintiff class are from the same state, or when defendants have "significant contacts" with a state. Leahy's approach offers a variety of other small fixes that would substantially clean up class action suits and make them more responsive to the interests of both plaintiffs and defendants.
Contrary to the trial lawyers' propaganda, class action abuse is a serious national problem that calls for congressional action. The big multistate cases should be directed to federal court, but Congress should take care that it doesn't trample the rights of consumers along the way.
