House bill seeks further limits on class-action suits
Many companies already forbid you from joining other disgruntled customers in filing a class-action lawsuit, forcing you instead to take your beef to an arbitrator.
A bill making its way through the Republican-controlled House would diminish your legal options even more.
“The backers of this bill aren’t even trying to hide their intentions,” said Christine Hines, consumer and civil justice counsel at the advocacy group Public Citizen. “The aim is to wipe out class-action lawsuits.”
How? By requiring that everyone in the suit have identical injuries or losses, such as experiencing a broken leg because of a car’s faulty brakes. People with broken arms would have to file a separate lawsuit against the automaker.
The shamelessly titled Fairness in Class Action Litigation Act was approved last week by the House Judiciary Committee. It now heads to a vote by the full chamber.
The legislation is the brainchild of Judiciary Committee Chairman Bob Goodlatte, R-Virginia, and Rep. Trent Franks, R-Arizona, who are passing it off as a much-needed improvement to the U.S. legal system.
“The Fairness in Class Action Litigation Act is a simple, one-page bill that furthers a common-sense principle that should apply to class-action lawsuits in the future,” said Goodlatte.
Said Franks: “Class-action lawsuits should allow those with serious injuries to have their own day in court. The Fairness in Class Action Litigation Act would do just that.”
Actually, it wouldn’t. Just the opposite.
It’s striking that such a far-reaching bill would fit on one side of a napkin. Here it is in its entirety:
“No federal court shall certify any proposed class unless the party seeking to maintain a class action affirmatively demonstrates through admissible evidentiary proof that each proposed class member suffered an injury of the same type and extent as the injury of the named class representative or representatives.”
The key phrase is the requirement for “the same type and extent” of harm. Under the existing system, people can join a class if they share similar grievances against the defendant.
In a securities fraud case, for example, it wouldn’t matter if you lost $200 and the named plaintiff lost $100. Your losses stem from the same alleged fraud.
Class actions are especially useful in situations where losses are relatively small. You might not go to the trouble of filing a lawsuit on your own. But joined with scores of others with similar interests, a class-action lawsuit can be an effective way of seeking redress for all.
Look what would happen if the Fairness in Class Action Litigation Act became law. In that securities fraud example, you’d be eligible to join the class action only if you experienced “the same type and extent” of harm — that is, if you also lost exactly $100.
“If your injury is different by just $1, it would preclude joining a class action,” said Adam Prom, a Chicago lawyer who specializes in consumer cases.
Businesses argue, with some justification, that class actions can be abused by unscrupulous lawyers, who pack on additional plaintiffs in hopes of squeezing a fatter settlement out of the accused company. Certainly that happens.
But for every questionable class-action case, there’s an Anderson v. Pacific Gas and Electric Co., which was made famous by the movie “Erin Brockovich.”
PG&E was required to pay a civil settlement of $333 million after it was found that the utility had contaminated groundwater beneath the California town of Hinkley with a chemical that caused a variety of cancers and birth defects.
Such diversity of harm clearly wouldn’t be tolerated under the Fairness in Class Action Litigation Act.
“The central question in a class action is — and should remain — whether a corporation has engaged in misconduct that harmed consumers,” said Linda Lipsen, chief executive of the American Association for Justice, which represents trial lawyers.
Passage of the Fairness in Class Action Litigation Act, she said, would leave corporations “off the hook if they sell defective products, engage in widespread price-fixing schemes or defraud consumers with deceptive advertising.”
The U.S. Chamber of Commerce sees it differently. The powerful business lobby is a key backer of the bill.
Lisa Rickard, president of the chamber’s Institute for Legal Reform, said after last week’s Judiciary Committee vote that class actions “have become a tool of the plaintiffs’ lawyers to game the system of justice and inflate their compensation.”
In March, the head of the U.S. Chamber of Commerce, Tom Donohue, declared at a business forum that his organization is accustomed to getting its way in court.
“We spend half of our time trying to reduce the number of suits by class-action lawyers and the other half of our time suing the hell out of the government,” he said.
It seems pretty clear who’s gaming the system.