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Capitol
Comment 243 - Class Action Lawsuits: America's New Boom
Industry Class actions are designed for cases such as the credit card example.
There are so many plaintiffs, that having each bring the same claim would
be an inefficient use of both time and resources. Because the plaintiff’s
claim in each case is exactly the same – did the credit card company
overcharge the credit card holder? – it is less of a strain on the court
system if the cases are consolidated into one lawsuit. The problem with the current class action landscape is that most state
courts certify classes when they should not. Specifically, state courts
certify groups of plaintiffs who do not necessarily have similar issues of
law or fact, making it less useful to try and combine the claims into one
lawsuit. Further, state courts sometimes certify classes that bring
frivolous or marginal claims. State court certification of frivolous classes often forces the
defendant to settle, even though they may not have done anything wrong.
The class action allows one lawyer to represent literally thousands of
plaintiffs against one defendant in one trial. Because of the sheer
magnitude of the class, corporations often settle class actions, rather
than risk a verdict that could force them into bankruptcy. Only plaintiffs’ lawyers benefit from current
class action rules. When a big enough class action suit is
filed, and the trial lawyer has essentially forced a settlement, that
particular lawyer gets to negotiate his own fee from the defendant, often
without his clients’ knowledge or approval. Fees that could reach into the
billions of dollars and often leave the plaintiff with next to
nothing. Even if the class wins, individuals may not see any benefit. Consumers
often receive useless coupons, while their attorneys receive millions. For
example, in a class action settled against the manufacturers of a computer
monitor, each plaintiff received a coupon for $13 off a new $250 monitor
or the right to a $6 cash rebate in the year 2000. The lawyers
representing the class received a $5.8 million fee. Like smart business people, attorneys reinvest a portion their reward
to find a new class-action target. Normally, we would applaud such enterprising behavior. After all, our
country was founded on free enterprise and the entrepreneurial spirit. But
the majority of these class-action lawyers are damaging our economy, while
benefiting no one but themselves. Injured class members do not fully
benefit. Businesses are forced to pay these outrageous fees, which end up
on the balance sheet as expenses. These new expenses are covered by higher
prices. In the end we all end up paying the lawyer’s bill. According to the Federal Judicial Conference’s advisory committee on
Civil Rules, corporations are facing a 300 percent to 1,100 percent
increase in class action lawsuits. This increase is forcing corporations
to focus on lawsuits rather than manufacturing better products or lowering
their prices. This fact alone is proof that class-action lawsuits are in
desperate need of reform. Right now the House is considering a measure that might rein in runaway
class actions lawsuits. The legislation would make it easier to get class
actions lawsuits out of state courts and into federal courts, which decide
more consistently when these lawsuits should be allowed and are better
equipped to handle these cases fairly and efficiently. Congress needs to reform class action lawsuits throughout the United
States. Reforms like those found in H.R. 1875 are needed to ensure that
this legal mechanism remains a valued option to provide justice, rather
than providing a cash cow for plaintiffs’ attorneys.
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