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Class Action Reform & Common Sense (or Lack Thereof)
2005.02.18 (Fri) 15:48

The Class Action Fairness Act of 2005 was signed into law today by President Bush, after passing the Senate last week by a 72-26 vote, and finding approval in the House just yesterday. This bill represents the first big push for the President's tort reform agenda, and has been touted by some lawmakers as a great example of bipartisan support. Well, we don't know about that, but we do know that we absolutely support this legislation. Even though tort reform has become a taboo subject associated with Bush and the GOP, we feel that common sense — not party lines — should dictate policy decisions, and to us, it's clear that something has to be done about our out of control legal system. Put simply, this bill is a step in the right direction.

First, let's look at what the bill itself actually proposes. From Yahoo News:

Under the legislation, class-action suits seeking $5 million or more would be heard in state court if the primary defendant and more than one-third of the plaintiffs are from the same state. But if fewer than one-third of the plaintiffs are from the same state as the primary defendant, the case would go to federal court.

The bill also would limit lawyers' fees in so-called coupon settlements — when plaintiffs get discounts on products instead of financial settlements — by linking the fees to the coupon's redemption rate or the actual hours spent working on a case.

In point of fact, as we read the bill, a federal court would receive right of refusal for any case over $5M where even one plaintiff comes from a state different from that of the defendant. This provision is included so that a case which doesn't meet the one third benchmark but does substantially impact the laws of multiple states could still be heard in a federal court. This represents a loophole to be sure, but not one that we are overly concerned about.

The basis for this bill is that some trial lawyers have a practice of filing class action lawsuits in specific state courts where such suits have had a history of success. Why? The Washington Post has a possible explanation:

Though plaintiff classes can involve people from all over the country, the cases are disproportionately filed in selected counties where judges are elected -- meaning that a judge accountable to a single county can make decisions regulating products distributed nationwide.

Whatever the reason, it is not disputed (as far as we know) that these class action suits are often filed in states that have little or no actual ties to the plaintiffs or the defendants. The allowance to choose a lawsuit’s jurisdiction with no regard to the locations of any of the parties involved, or to the geographic scope of the impact of the decision, is patently absurd; the reform contained in this bill remedies this issue.

The other aspect of the bill will limit attorneys' fees associated with certain class action lawsuits. Notice that we said "certain" and not "all" class action suits; the reason for the distinction is that this aspect of the bill applies only to so-called coupon settlements. In this scenario, a settlement reached by the plaintiffs’ attorneys agrees that the plaintiffs will receive discounts on the products or services of the defendant in lieu of a monetary award, while the attorneys themselves may walk away with a pot of gold. It hardly seems fair that those people who were “injured” by the defendant receive nothing more than coupons which entice them to continue to do business with the very organization that caused their injury. It seems even less fair that the people making the decision to agree to a settlement like this are the attorneys who, in general, are the ones walking away with the money.

The conflict of interest here is massive, and this legislation seeks to end such practices by tying attorneys' fees for suits which reach coupon settlements to either the actual value of the coupons or the actual number of hours spent working on the case. This makes perfect sense. We don't know how someone could construct a logical argument against paying attorneys according to how much they work on a given case, or how much their clients receive in court.

If someone sees how either of the provisions of this legislation actually hurt the consumer, please let us know, because to us, it looks like the only people who may be hurt are a particular group of trial lawyers who are out to abuse the consumers to make a profit.

The Democratics who voted against this bill have been attempting to justify their opposition, but we don’t think they’ve been very successful. Let's look at the press snippets that we've seen which are meant to explain the reasons for opposing the bill.

The first argument seems to be that moving these cases to the federal courts will favor Big Business at the expense of the consumer, and will limit the ability of wronged consumers to bring cases to trial and receive proper awards.

From CNN:

"Are there bad lawyers that bring meritless cases? Sure there are, and we should crack down on them," said Senate Democratic leader Harry Reid of Nevada, a former trial lawyer. "But this bill is not about punishing bad lawyers. It is about hurting consumers and helping corporations avoid liability for misconduct."


"The reason why this bill is the highest priority of the Bush administration and the Republican leadership in Congress is because of one simple fact: Class action suits moved from state courts to federal court are less likely to go forward, to be tried, and they are less likely to reach a verdict where someone wins or loses," said Sen. Richard Durbin, D-Illinois.

If the plaintiffs win, businesses are "less likely to pay a reasonable amount of money in federal court than in state court," he said.

From the same Yahoo News article above:

But Democrats say Republicans just want to protect corporations from taking responsibility for their wrongdoing by keeping them clear of state courts that might issue multimillion-dollar verdicts against them.

Federal courts are expected to allow fewer large class action lawsuits to go forward, which Democrats say means more businesses will get away with wrongdoing and fewer ordinary people will be protected.

"It's the final payback to the tobacco industry, to the asbestos industry, to the oil industry, to the chemical industry at the expense of ordinary families who need to be able go to court to protect their loved ones when their health has been compromised," said Rep. Ed Markey, D-Mass. "And these people are saying that your state isn't smart enough, your jurors aren't smart enough" to hear those cases.

So, this argument maintains that the bill will hurt consumers because federal courts are less likely to allow cases to move forward, and if they do hear these cases, they are likely to award lower monetary awards than the state courts have in the past. We see no merit — and in fact no logic — to this line of reasoning.

First, let's remember that this legislation applies to class action lawsuits only, not individual suits. The vast majority of personal injury actions will remain unaffected by this legislation. While we believe that reforming the system for all personal injury lawsuits is something that needs to be done, for the purposes of this discussion, we are talking only about class action suits; so the implication that more businesses will get away with wrongdoing and more consumers will be unable to protect themselves is fairly misleading.

Second, we certainly hope that some of the frivolous, ridiculous class actions suits that have made it through the state courts in the past are stopped by the federal courts. That would be a good thing. And if the monetary awards are lowered, we see no reason to assume that they will be lowered unreasonably — in fact, lowering them reasonably in some cases would be another good thing.

We wonder if Rep. Markey (D-Mass) sees the logical flaw in his statements when he says that the bill's supporters are implying that the courts and the jurors at the state level aren't smart enough. If Markey and the rest of the opposition truly believe that the federal courts will block cases that legitimately should be heard and that they will lower monetary awards to unreasonable levels, then they are simply accusing the federal courts of "not being smart enough," in the same way that they are accusing the bill’s supporters of insulting the state courts. It is circular reasoning and utter nonsense. Sure, the federal courts may look at these lawsuits more skeptically, but skeptical does not equal unreasonable. In fact, skepticism is exactly what is missing when it comes to many class action lawsuits.

The second argument from the opposition seems to imply that the passage of this bill will inevitably lead to a host of nasty reform aimed at screwing the consumer. From the same Yahoo News article:

Republicans will try the same thing with other types of lawsuits, Democrats warned.

"Today we will attempt to pre-empt state class action," said Rep. John Conyers, D-Mich. "Next month we will take up a bankruptcy bill that massively tilts the playing field in favor of credit card companies and against ordinary consumers and workers alike. On deck are equally one-sided medical malpractice bills and asbestos bills that both cap damages and eliminate liability to protect some of the most egregious wrongdoing in America."

That sounds like the old slippery slope argument. "This month, if we allow terminally sick dogs to be put to sleep, then next month it will lead to the wholesale slaughter of healthy kittens!" Again, this is just nonsense. The vote in question only took into account the bill in question, not a whole host of other initiatives. When and if these other initiatives are put into a bill and given to Congress, we would expect our representatives to vote against the bad ones and in favor of the good ones. These potential future bills have nothing to do with the Class Action Reform bill, and reasoning like that used by Rep. Conyers (D-Mich) is a detrimental and flawed method for determining how to vote.

Of course, it's possible that these arguments against the Class Action Reform bill sound vacuous because they are vacuous. Maybe the real reason for the opposition is something else entirely:


Opponents say the president and his allies on this issue are trying to help businesses escape proper judgments for their wrongdoing, and are going after the trial lawyers -- including some major contributors to the Democrats -- who litigate the cases.

Yahoo News:

But Democrats say the legislation is aimed at protecting GOP business donors and hurting trial lawyers, a traditional part of their base. They also warn that Republican changes to the legal system will only make it harder for people to sue over injuries caused by corporations.

The legislation is "a payback to big business at the expense of consumers," said House Minority Leader Nancy Pelosi, D-Calif.

Ah, we get it. So, while the Dems are accusing the GOP of favoring Big Business at the expense of the consumer, the Democrats themselves are simply trying to favor trial lawyers at the expense of the consumer. The fact that this vote split pretty much along party lines lends credence to this speculation. Pot? Kettle? Black?

The partisan split of votes also begs other questions, like what happened to common sense? All of the Republicans in the Senate voted in favor of this measure (with two abstentions), and roughly two-thirds of the Democrats opposed it. But all we've seen in the way of reasons on both sides are the usual party lines. We wonder if any of these people have actual logical reasons for voting how they did, or if they are simply voting their affiliation because that's how the game is played. To us, the answer seems pretty obvious.

We don't agree with all of the items on the President's agenda for tort reform — we feel that some of his proposals are, in fact, unfair to consumers; this just isn't one of them. We have our own ideas about tort reform, and in this case, our ideas agreed with the President's ideas. Hey, the sun even shines on a dog's ass some days.

To us, this is not an example of bipartisan support for an initiative, but quite frankly, bipartisan support isn't what we should be striving for. Instead, we should be striving for our elected representatives to use their own common sense in their decision making. We know it's a lot to ask for from our Congressional leaders, but hey, we can dream.

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