Limits On Class-Action Lawsuits
Should states pit top pros against corporate lawyers?
NO: Sue-happy state attorneys general have overstepped bounds
July 24, 2006
JACK STRAYER MCCLATCHY TRIBUNE
ALEXANDRIA, Va. – While casting themselves as modern-day Robin Hoods, a new breed of state attorneys general increasingly are filing lawsuits that actually steal from middle-income consumers and give to personal injury lawyers.
This “reverse Robin Hood” development is disturbing because it involves state AGs overstepping the limits of their jurisdiction, and often compromising the interests of the citizens they represent to curry favor with a group of generous campaign contributors.
While a handful of states have passed reforms, too little has been done to head off this growing culture of corruption and cronyism. Those reforms go a long way toward preventing the type of sweetheart deals that far too many state AGs have signed with close friends in the bar, but more sweeping changes obviously are needed.
Consider this recent egregious case:
In Rhode Island, AG Patrick Lynch retained the South Carolina firm of Motley Rice to file a public nuisance suit against three leading U.S. paint manufacturers for “contributing” to the state’s higher-than-average rate of lead poisoning in children. Health experts link the higher rate to the presence of lead in paint chips that flake off walls in aging buildings and may find their way into the mouths of infants and youngsters.
None of the three paint companies have sold any leaded paint in Rhode Island or any other state for more than 30 years, and all contend there’s no way for anyone to determine if the paint they sold then has caused any lead poisoning.
Common sense would convince most people that the lead-paint problem can easily be solved by preventive maintenance — such as painting over flaking areas or simply removing the older paint. The prime responsibility for that should rest with landlords or residents of the affected dwellings.
Some of the lawyers who won the $246 billion tobacco settlement in the late 1990s pooled a part of their awards to build cases against other industries — often working with the attorney general of an affected state.
Critics of the practice, like Lisa Rickard of the U.S. Chamber of Commerce’s Institute of Legal Reform, say the sue-happy AGs are going far beyond the bounds of their duties to benefit many of the nation’s wealthiest lawyers. The lawyers, she notes, are only too happy to kickback later with huge campaign contributions that bankroll the AGs’ bid for higher office.
Rickard, whose organization represents 3 million American businesses, says the sweeping new activism by state attorneys general “is putting employees out of work, raising consumer prices, driving down shareholder value and bankrupting companies.” In the meantime, she observes, such lawsuits clog our courts, “denying those most deserving of justice their right to a speedy trial.”
Taxpayers and business owners can help curb such foolishness by joining grass-roots coalitions seeking meaningful reform and mounting campaigns to vote miscreant AGs out of office.
Jack Strayer is an analyst for the National Center for Policy Analysis, a free-market think tank (www.ncpa.org
). Write him at NCPA, 601 Pennsylvania Avenue NW, Suite 900, South Building, Washington, D.C. 20004.
When the Chips Are Down
July 18, 2006; Page A14
The class-action reform bill that Congress passed last year was supposed to take some of the shenanigans out of mass tort litigation. But last week, 34 state Attorneys General showed that where there’s a will, there’s a lawyer.
Those 34 AGs filed civil suits in federal court Friday, seeking to recover damages from seven memory-chip makers from around the world, most of whom have already been through the federal wringer for a price-fixing conspiracy. Four of the seven companies now being sued have pleaded guilty in the criminal case, while a fifth, Micron Technologies, has secured immunity through a cooperation agreement with the Justice Department. Some $730 million in fines have been levied and executives from a number of companies have been handed prison sentences in the case.
Enter the state AGs, who have now ridden in on their taxpayer-funded horses to shoot the wounded. The 2005 Class Action Fairness Act moved certain kinds of class-action suits to federal court, including those involving indirect damages from antitrust violations. So nearly three dozen state Attorneys General have sued the chip makers for damages in federal court in California.
The suit comes in an election year for both Bill Lockyer, California’s AG who’s running for state Treasurer, and Eliot Spitzer, the New York AG currently running for Governor. The legal theory behind the suits is that customers may have overpaid for computer equipment as a result of the conspiracy, so the AGs are allegedly looking out for the taxpayer in suing on behalf of consumers and state agencies that purchased equipment during the conspiracy.
This comes in spite of the fact that a number of private plaintiffs are already suing for damages or trying to negotiate settlements in the price-fixing case. The addition of a coterie of AGs seems designed to grab some headlines and a share of the glory for our politician-lawyers.
It is hard to know how big this particular pot of gold might be, since the damages are mostly indirect (in the form of higher prices passed on by some computer makers). But antitrust law permits persons harmed by a price-fixing conspiracy to sue for treble damages. And adding consumers to the mix also enlarges the kitty, since the AGs are effectively suing on behalf of everyone in their state who bought a piece of electronics with memory inside between 1998 and 2002.
We’ve often criticized the cozy relationship between the trial bar and the state Attorneys General, but in this case the AGs seem to have cut out the middle man, bringing a massive class-action suit all on their own. For our tax dollars, we’re not sure the 50 states need a trial-lawyer-in-chief.Read
Bush Enacts U.S. Law Placing Limits on Class-Action Lawsuits
Feb. 18, 2005
President George W. Bush signed a bill to curb multi-state class-action lawsuits by shifting most of them from state to federal courts, a victory for business that also fulfills one of Bush’s second-term goals.
The new law is “a critical step toward ending the lawsuit culture in our country,” Bush said at a White House signing ceremony. The law “will “begin restoring common sense and balance to America’s legal system,” he said.
The “Class Action Fairness Act” makes it tougher for lawyers to go “forum shopping,” choosing to file cases in state courts such as Madison County, Illinois, that are known for awarding plaintiffs large judgments. Class-action claims of more than $5 million will be shifted to federal courts, where legal precedents are more uniform and judges are appointed for life, compared with many state court judges who are elected.
Claims already filed aren’t affected.
Bush signed the bill just one day after it passed the U.S. House, 279-149. The Senate approved it last week, 72-26.
Stanton Anderson, chief lobbyist for the U.S. Chamber of Commerce, said he expects the lawsuit restrictions will lead to higher profits for corporations and lower costs for consumers.
“The impact is going to be immediate because many of these cases are going to stop being filed in these local county courts,” Anderson said in an interview after the House vote yesterday. “Companies are going to see over the next couple of quarters that they don’t have to settle these cases in these problematic jurisdictions.”
Win for Business, Insurers
A coalition of companies and insurers including Ford Motor Co., Intel Corp., Pfizer Inc., Allstate Corp. and Hartford Financial Services Group Inc. pressed Congress to tighten the law to reduce legal costs and reduce what Bush calls “frivolous lawsuits.”
“Passage of this important legislation means a legal system that is simpler, fairer and faster,” Edward Liddy, chief executive of Allstate, the second-largest U.S. auto and home insurer, said in a statement yesterday. “Lawsuit abuse places a major drag on the U.S. economy and hurts the competitiveness of our businesses.”
The legislation topped Bush’s agenda for curbing what he has called “frivolous lawsuits” that “drive up the cost of doing business.”
Anderson said he hopes Congress and the White House will turn quickly to other steps, such as capping non-economic damages for medical malpractice and compensating asbestos-exposure victims from a $140 billion trust fund aimed at ending lawsuits that have bankrupted more than 70 companies.
Mike Mueller, head of a nationwide class-action team at Akin Gump Strauss Hauer & Feld LLP, predicted that plaintiffs’ lawyers will challenge the new class-action law as an unconstitutional expansion of federal power.
House Joins Senate in Backing Limits on Class-Action Lawsuits
February 17, 2005
By DAVID STOUT
WASHINGTON, Feb. 17 – In a legislative victory for President Bush, the House of Representatives easily passed a bill this afternoon that would sharply limit the ability of people to file sweeping, multistate lawsuits against companies.
The vote to limit class-action lawsuits was 279 to 149. Since the Senate approved the measure last week by 72 to 26, it now goes to President Bush, who is eager to sign it and many do so as early as Friday.
The legislation has long been advocated by businesses, especially manufacturers and insurance companies. Business interests have complained that too many frivolous lawsuits by profit-hungry lawyers have sprung up under the label of class actions, roughly defined as those suits brought by large groups of people who are affected by the same questions of law and fact.
The bill passed today would bar state courts from considering the kind of suits most bothersome to corporate America. It would preclude those courts from considering claims of more than $5 million and those in which many members of the suing “class” live in states different from the defendant’s.
Opponents of the bill include civil rights organizations, labor groups, consumer organizations, environmental groups and many state prosecutors. They have complained that the bill would provide shelter for unscrupulous companies by slamming the courthouse doors on many deserving would-be plaintiffs.
The bill would transfer many class-action suits to the federal courts. But some legal experts say the federal courts would not be able to hear them, since they are constrained by precedents from considering large class actions that involve varying laws of different states.
But some experts have said that it is too soon to predict the full effect of the legislation, and that federal judges will indeed find ways to take class actions that they consider worthy.
Senate Bill To Limit Class-Action Lawsuits Reintroduced
January 25, 2005
A “landmark bill” that would transfer many class-action lawsuits seeking more than $5 million in damages from state to federal courts in an effort to limit damage awards “is likely to pass soon,” according to congressional leaders from both parties, the Wall Street Journal reports (Rogers, Wall Street Journal, 1/25). Senate Majority Leader Bill Frist (R-Tenn.) said the bill — which was reintroduced on Monday and mirrors a bipartisan compromise measure that stalled in Senate committee last year — is one of the GOP’s 10 highest legislative priorities and would be the first Senate bill considered following action on President Bush’s Cabinet nominations (Peterson, CongressDaily, 1/25).
The measure is part of Bush’s campaign to implement medical malpractice reform and reduce litigation costs. The House last year passed class-action reform legislation sponsored by Republican legislators. The legislation was amended in the Senate but defeated in part because lawmakers could not agree on certain unrelated amendments. The new bill would move more class-action lawsuits from state courts to federal courts, which are governed by more stringent rules. Awards in federal court also typically are smaller (California Healthline, 1/7).
Frist agreed to allow the Senate Judiciary Committee to debate amendments on the bill, which was first proposed in the mid-1990s, and said he expected to bring the bill to the floor the week of Feb. 7.
Compromises reached in the bill that could help speed the legislation’s passage include measures that would exempt “genuine home-grown cases and local controversies” from being moved to federal courts, the Journal reports. That move would cause the bill to affect less than half of pending class-action lawsuits in state courts, according to a business-funded study of litigation in six Northeast states. According to the Journal, Senate Democrats “show little desire to delay the legislation any longer,” in part because they are “[m]indful” of “fights ahead” on broader tort reforms that could include bills on asbestos claims and medical malpractice.
Certain procedural aspects of the class-action bill are still under consideration, but House Republicans say they will accept whatever proposal is passed by the Senate, and Bush is expected to sign the measure. While supporters of tort reform said they believe the class-action bill’s passage would provide momentum for other malpractice legislation, Senate Minority Leader Harry Reid (D-Nev.) noted that there are “major distinctions” between the class-action measure and other proposed tort reform legislation, the Journal reports.
Additionally, business attorneys acknowledged that the Senate bill is the result of a “series of compromises over time [that] have built bipartisan support,” the Journal reports. Stan Anderson, executive vice president of the U.S. Chamber of Commerce, said he thinks “passage of class action bodes well for other legal reforms. If you can be successful here and build momentum, you may be able to move more quickly on others.” Anderson added that he hoped to see a breakthrough on asbestos legislation as early as May.
Opposition a ‘Waste of Time’
Reid said that while he does not like the bill, he is not going to “waste a lot of time on the floor on something that is a waste of time,” adding, “I don’t know how many votes that bill has (in the Senate), but it is approaching 70 now” (Wall Street Journal, 1/25).
While the bill previously stalled because of disputes over unrelated amendments, a Frist spokesperson said leaders from both parties are “working towards an understanding that if the bill goes through the committee, then floor action will be limited to germane amendments” (CongressDaily, 1/25).
Civil rights advocates say the bill would have unintended consequences that could limit civil rights cases. In addition, consumer groups say the bill would establish a “federal dead end for multistate class-action suits,” according to the Journal. Richard Seymour, who has raised numerous class-action suits, said federal judges are more likely to decline multistate cases to keep their dockets clear, adding, “A state-law case is the lowest animal on a federal judge’s totem pole. It will hurt consumers by moving consumer cases to federal court, where they will not be certified” (Wall Street Journal, 1/25).
Public Citizen President Joan Claybrook said that the Judiciary Committee should hold hearings on the measure before clearing it. “They haven’t had any hearings on (class-action legislation) in a couple of years,” Claybrook said, adding, “It’s very complicated, and there are a lot of new members of Congress who haven’t had any exposure to this bill. Consumers haven’t had a chance to speak to it in a long, long time” (CongressDaily, 1/25).
Blunt criticizes $20 million award in tobacco lawsuit
By David A. Lieb
Feb. 03 2005
JEFFERSON CITY, Mo. (AP) — Gov. Matt Blunt on Thursday criticized a $20
million judgment against a tobacco company as an “egregious” example of a court
system in need of reform.
Tort reform chances seen rising in new US Congress
Wed 3 November, 2004 20:44
By Susan Cornwell
WASHINGTON, Nov 3 (Reuters) – Businesses facing litigation, including suits over asbestos exposure, smoking-related diseases and medical malpractice, should benefit from the Republican election victory, industry groups said on Wednesday.
The re-election of President Bush and Republican gains in both houses of Congress were seen boosting attempts to curb lawsuits against U.S. business.
A bill to stop what proponents call “runaway litigation” — a cherished goal of corporate America, and favored by President Bush — has passed the House of Representatives repeatedly but was blocked twice by Senate procedural wrangling in 13 months.
“This was a big win for advocates of legal reform,” said Julie Rochman, spokeswoman for the American Insurance Association.
“The fact that the Republicans not only maintained their majority but picked up a few seats makes it significantly more likely that it (class action reform) will gain the votes needed to get out of the Senate,” Rochman said.
Republicans said on Wednesday they will have at least 54 seats in the 100-seat Senate, for a gain of three, and 231 seats in the 435-seat House, a gain of four.
One of the most powerful opponents of class action reform, Senate Democratic Leader Tom Daschle, was defeated in his bid for re-election in South Dakota.
Daschle’s election loss was also interpreted as encouraging by some supporters of a bill to replace asbestos suits with a $140 billion national compensation fund. Senate Majority Leader Bill Frist and Daschle had agreed on the overall size of the fund but were far apart on other details.
Stock prices reflected the optimism. Shares of USG Corp. USG.N , a construction materials company in bankruptcy protection since June 2001 because of asbestos claims, were up 23.4 percent at $27.42 a share in late afternoon trading on the New York Stock Exchange.
Bankrupt chemicals company W.R. Grace and Co. GRA.N saw its stock rise 15 percent, to $12.18 and packaging maker Owens-Illinois Inc. OI.N was up 7.3 percent, at $19.28.
Patrick Hanlon, a lawyer who represents the Asbestos Alliance lobbying group, cautioned against overconfidence, noting it still takes 60 votes to overcome procedural hurdles in the Senate.
“I’m not about to count any chickens before they hatch,” he said, noting new Republican senators will not be familiar with the complicated asbestos issue and have not had the chance to indicate what they think about it.
Another area where business lobbyists hope to make gains is medical malpractice reform, a pet cause of Frist, a physician.
“We’re fairly optimistic that the stars are all aligned, and that the prospects look significantly better than they did this year,” said Katie Orrico, director of the American Association of Neurological Surgeons’ Washington office.
The Morgan Stanley healthcare provider index .RXH was up 2.04 percent at 358.6.
Tobacco companies, already appealing a $145 billion judgment and a $10 billion decision in state courts, also saw their stocks get a lift from the Republican victory.
Anti-smoking groups fear Bush’s win could be the catalyst for the Justice Department to settle its $280 billion racketeering suit against cigarette makers.
“We believe there’s a danger that the tobacco companies will see this election as an opportunity to seek a weak settlement of the tobacco lawsuit and to continue opposing important federal tobacco control legislation,” said Bill Corr, executive director of the Campaign for Tobacco Free Kids.
But one industry analyst said talk of a settlement was premature. The outcome of the racketeering case would be determined more by events in the court, he said.
The S&P; tobacco index .GSPTOBA was up 2.71 percent at 246.64. (Additional reporting by Kevin Drawbaugh, Peter Kaplan and Susan Heavey) http://reuters.co.uk