'Class Actions for Non-Class Action Lawyers." That was the name of a seminar advertised by a California lawyer group, and it tells you plenty about the trial lawyer industry's hope for expanding a major profit center in California.
Two years ago a significant federal class action reform passed that sent many national cases into federal courts where judges usually are better able to handle cases that cut across state lines and have thousands of "plaintiffs." But California, with a population of 36 million and a large number of U.S. companies based or substantially operating here, continues to be a hot spot for state-court class action lawsuits.
One example: A hardware materials company last year discovered that lawyers were advertising to solicit clients who "may have" a claim for failing outdoor decking screws all before the lawyers even filed their class action lawsuit.
In a recent Harris Poll, business lawyers around the country ranked California's class action lawsuit system 46th worst in the nation. Even worse, the Los Angeles jurisdiction was ranked as the single least fair and reasonable litigation environment in the country, as volunteered by an alarming 20 percent of the lawyers polled.
So it wasn't a surprise when, in January, Mayor Antonio Villaraigosa said at a City Hall news conference that an executive order he issued was intended to "crack down on exorbitant liability payouts as a result of lawsuits against the city." The city spent $37 million settling lawsuits and claims last year alone.
We've found in talking with likely voters that most have received some kind of notice that they are part of a class action lawsuit. Some don't realize it until they get a complicated form, which if correctly filled out, entitles them to a coupon or discount worth a small amount if they even use it. Most don't bother wrestling with the form.
The lawyers, on the other hand, usually do very well their fees are measured in millions of dollars. By simply threatening to tie up a company's time, employees and resources defending the suit, lawyers can force a company to settle for huge fees and negotiate for little more than coupons for the so-called victims they represent. In California, they can even get fees for the hours they spend arguing for higher fees!
As if the process was not already pro-plaintiffs' lawyer, it appears some lawyers have been greasing the process by buying their clients. Several investigations are under way of law firms who may have solicited and illegally hired people to be the lead plaintiffs in their class action lawsuits.
While consumers and small business people usually don't collect money from dubious class actions, they certainly have to pay for them in higher costs for goods and services. Class action attorney fees contribute to the "litigation tax" that a 2005 Tillinghast-Towers Perrin study found costs a family of four $3,500 every year.
Even though many countries are doing just fine in protecting their citizens without class action lawsuits, this litigation method is not going to go away in America any time soon. Done right, it can be a positive process for business and consumers alike.
A few simple changes in California law would restore some class to class actions.
For starters, judges here need simple, clear rules for deciding whether a lawsuit should be "certified" as a class action. Do the members of the proposed class of plaintiffs have the same kind of loss? Does the evidence that proves the loss apply to all the proposed class members? Are the lawyers bringing the suit fit for the job?
When it comes to the "certification" decision, the deck is stacked against defendants in California. Here, if a judge says a case doesn't qualify as a class action, the plaintiffs' lawyer can immediately appeal to a higher court to get that ruling overturned. But a defendant cannot make the same immediate appeal of a certification ruling; a defendant business has to go all the way through a costly trial on the facts of the case before being able to challenge its being brought in the first place.
Most states don't operate this way certainly not the federal system.
There is no shortage of people in the new California Legislature who recognize the importance of good infrastructure and better health care coverage to the state's economy and the well-being of its citizens.
A fair, predictable legal system in the class action area should be on the improvement list in Sacramento as well.
John H. Sullivan is president of the Civil Justice Association of California, a non-profit coalition in Sacramento that works to reduce unwarranted litigation.
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