Tort Reform Issue Splits Senate Democrats

By Steven Brostoff, Washington Editor

NU Online News Service, July 31, 3:15 p.m. EST,Washington?Top Senate Democrats are deeply divided overthe issue of class action legal reform, with both supporters andopponents of reform legislation claiming to represent consumerinterests.

The split was highlighted during a Senate Judiciary Committeehearing today on S. 1712, which would allow defendants in major,national class action lawsuits to have their cases heard in federalcourts.

One of the primary sponsors of the legislation, Sen. Herb Kohl,D-Wis., insisted that no one can argue that the class actionprocess is not in serious need of reform.

"We have a simple story to tell," he said during the hearing."Consumers are getting the short end of the stick in class actioncases, recovering coupons or pocket change, while their lawyersreap millions."

Sen. Kohl said that stories of nightmare class actionsettlements that affect consumers across the country all toofrequent.

He cited one class action lawsuit filed against a video storethat produced dollar-off coupons for future video rentals for theplaintiffs, for which the plaintiffs' attorney collected $9.5million.

In another case, Sen. Kohl said, a member of a class thattechnically won a case ended up owing $75 to her lawyers and thenhad to defend a lawsuit that her lawyers filed against her in statecourt.

"Under our bill, that will never happen again," he said.

But Senate Judiciary Committee Chairman Patrick Leahy, D-Vt.,said he believes some special interest groups have distorted thestate of class action litigation by relying on a few anecdotes.

The availability of class action litigation, Sen. Leahy said,allows ordinary people to band together to take on powerfulcorporations or even their own government.

"I am hesitant to restrict legal rights and remedies in an eraof corporate irresponsibility and executive misconduct," hesaid.

As for payments to lawyers, Sen. Leahy said that defense lawyerstend to be paid by the hour, and well paid.

Plaintiffs' lawyers, on the other hand, tend to work without payfor the possibility of obtaining a portion of the proceeds, ifsuccessful, he said.

"To those who think it is good politics to attack theplaintiffs' lawyers who risk much so that their clients may obtaina measure of justice, I hope they will think again," Sen. Leahysaid.

He did say, however, that he hopes to find common ground onasbestos litigation. Sen. Leahy said he wants to work with allsenators to see if the Senate can devise a better process forfairly compensating those suffering from asbestos-relatedillnesses.

But the Committee's Ranking Republican, Sen. Orrin Hatch,R-Utah, told Sen. Leahy that the asbestos litigation issue is alsoa class action issue.

"The abuses are reaching an epidemic level," Sen. Hatch said."It is essential that we address the abuses."

Too often, he said, judges approve settlements of class actionsthat benefit counsel, but not the class members.

Despite mountains of evidence that that system needs reform,Sen. Hatch said, some people with try to deny that there is aproblem.

But Nothing in S. 1712, he said, prevents individuals frombanding together to press their complaints. Suggestions to thecontrary are red herrings, Sen. Hatch said.

Lawrence H. Mirel, the insurance commissioner for the Districtof Columbia, said that he is concerned about the impact of classaction lawsuits that interfere with his ability to carry out hisstatutory duties as insurance commissioner.

"Large scale nationwide litigation against major insurancecompanies frequently goes around or simply ignores the role ofstate regulators," Mr. Mirel said.

"Class action lawsuits against insurers can, and often do,directly impact our statutory authority to regulate the business ofinsurance in our jurisdictions," he said.

Indeed, Mr. Mirel said, class actions are frequently designed toproduce small, if not negligible, benefits to a large class ofpolicyholders?and huge legal fees to the lawyers who bringthem?without regard to the impact on the insurance market as awhole and the cost to the insurance-buying public.

He cited a suit that is currently pending before the CaliforniaSupreme Court that claims that Bloomington, Ill.-based State Farmkeeps too much money in reserves, thus depriving its policyholdersof the benefits of that money in the form of refunds or reducedpremiums.

"The suit ignores the fact that insurance commissioners, such asmyself, require insurance companies to maintain adequate reservesso that we can assure the public that their covered claims will bepaid," Mr. Mirel said.

Who, he questioned, should decide the adequate level of reservesto protect D.C. policyholders; the statutory commissioner ofinsurance for D.C. or a jury of laymen in California?

Mr. Mirel said that when used properly, class actions lawsuitshave an important role to play in the nation's legal system. But heis concerned, he said, that they do not substitute for, orinterfere with, other lawful methods of protecting the public.