Congress Can End The Avalanche of Frivolous Lawsuits - Will They?

by Jack Stewart
Aug. 1, 2003
The U.S. Senate has the opportunity to stop the avalanche of lawsuit abuse that is crippling our courts, stifling investment and economic growth, and denying real compensation for consumers. if they have the courage to do the right thing and vote for the Class Action Fairness Act of 2003 (S. 274).

A Class Action lawsuit is one of a few legal procedures that allow consumers to band together and seek relief from defective products, misleading advertising, and civil rights violations. Unfortunately, a handful of wily lawyers who specialize in driving huge lawsuits through even larger loopholes in current laws, have destroyed the fairness and credibility of this important procedural safeguard. It's no wonder that recent surveys show a majority of Americans have view this important part of the legal system with confusion and distrust.

The biggest violation is a practice called "forum shopping," where most class actions (even those involving plaintiffs from many states) are jammed into the dockets of a few, carefully chosen local courts (such as Madison County, Illinois), called "magnets." "Magnet" courts usually have little (if any) relationship to class action litigants. They're often chosen by plaintiff's attorneys because of the reputations that certain local judges have for allowing questionable cases to go to trial, issuing "plaintiff friendly" judgments, and approving settlements that provide millions in attorneys' fees, yet virtually nothing for the plaintiffs. While providing plenty of fuel for lawyer jokes, the impact of this abuse is no laughing matter.

In fact, this "forum shopping" practice has been likened to a legalized form of extortion since it often used to extract huge settlements from out of state defendants who choose to settle rather than go through costly lengthy litigation. A bi-partisan solution, called "The Class Action Fairness Act of 2003"(S. 274/H.R. 1115), reforms the current law and closes loopholes to ensure that Class Actions are decided in a fair manner that is consistent with the size and scope of each case. It would alleviate forum abuse and state court gridlock by moving many multi-state lawsuits (involving more than $5 million) to federal courts. It also establishes a "Plaintiff's Bill of Rights" that would ensure consumers can easily understand their rights, and are protected from unfair settlements. This provision would require settlement notices to be written in easily understandable language, ensure stricter judicial scrutiny of settlements that provide few actual benefits to plaintiffs (such as coupon settlements), and prevent settlements that distribute awards unequally among class members.

This legislation has already passed the House of Representatives, and was reported out of the Senate Judiciary Committee - thanks in large part to the support of California Democratic Senator Dianne Feinstein. The measure now moves to a vote on the Senate Floor.

Unfortunately, Vermont Senator Patrick Leahy is trying to undermine these reforms by circulating an alternative proposal that creates a series of loopholes that can ultimately be manipulated to keep class actions in the "magnet state courts" and out of federal court jurisdiction. The Leahy plan would make the "Plaintiff's Bill of Rights" meaningless because those protections apply to cases in Federal Courts, and "Lehay's Loopholes" will keep most class action cases in the magnets. The Leahy plan keeps things the way they are--unfair. Lawyers will reap most of the benefits while the legitimate rights of consumers and business are ignored. Class Action abuse has destroyed a valuable legal option for consumers. The full Senate should recognize that the Leahy proposal preserves that status quo and undercuts meaningful reform.

Senators can do the right thing for consumers, businesses, and our court system, by passing S. 274 when Congress reconvenes-but will they? We urge Senator Feinstein to stay strong on this issue and use her leadership to pass real reform when the measure moves to the Senate Floor.

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