Legislation Would Make System Fairer for Consumers and Businesses
Jul 07 2004
WASHINGTON (July 7, 2004) -- Claiming our civil justice system is broken and in need of reform, Sen. Tom Carper, D-Del., joined aggrieved consumers and a bipartisan group of senators today in Washington, D.C., to throw support behind a measure that would help curb abuses of class action lawsuits. The legislation, known as the Class Action Fairness Act, is currently being debated in the Senate and is expected to pass by the end of the week or early next week. Class action lawsuits were originally designed to benefit consumers by allowing them to seek legal relief from companies for bad business practices, such as selling faulty products or polluting their homes. But in recent years, the class action system has been badly abused by the practice of "venue shopping," or when attorneys file national class actions in a handful of state courts where they think they have the best chance of securing an outcome they want. These "magnet" courts - typically small county courts in remote locations - routinely approve settlements in which attorneys get millions of dollars in fees, while consumers receive little or nothing. Take the following examples: In a recent class action lawsuit in Illinois against bottled water giant Poland Spring, consumers claimed the company's water was not pure and was not from a spring. Under the settlement, consumers received coupons for discounts on Poland Spring water, but their attorneys walked away with $1.35 million. Meanwhile, the company admitted no wrongdoing and isn't changing the way it bottles or markets its water. In a Texas class action settlement with Blockbuster over late fees on movie rentals, class members received coupons on future movie rentals, while their attorneys received $9.25 million. In an Alabama class action lawsuit against the Bank of Boston, the more than 700,000 plaintiffs "won" their case about mortgage escrow accounts but actually lost money. Under the settlement, class members received payments of about $10 each, but they had $90 deducted from their accounts to pay their attorneys' fees of $9.5 million. "Class action lawsuits are an important part of our legal system, but clearly, that system's broken and it needs fixing," said Sen. Carper. "There are too many instances where consumers are getting very little or nothing from their settlements, while companies are not being forced to change the way they do business." The Class Action Fairness Act would authorize federal courts to hear certain interstate class actions -- larger, truly national cases (those involving more than 100 plaintiffs and more than $5 million in damages) that involve plaintiffs and companies from different states. Federal courts will be less vulnerable to the practice of venue shopping, while federal judges are more equipped to deal with cases that have a national scope, Carper said. The bill also protects consumers. The bill preserves the right to sue and would NOT cap damages or attorneys’ fees. In fact, the legislation enhances consumer protections by: guaranteeing that truly local controversies remain exclusively in state courts; ensuring that attorneys' fees in coupon settlements be based on the value of the coupons that are actually redeemed rather than the theoretical value of the coupons that are offered (such as the Blockbuster case); requiring judges to review settlements; prohibiting settlements (like the Bank of Boston case) in which plaintiffs lose money. "The legislation addresses the problem of venue shopping and bad settlements, while protecting consumer rights and preserving state jurisdiction over local cases," said Carper. The legislation has been endorsed by more than 90 editorials across the country.