Public Gets Class-Action Reform Lesson

Washington

Saying it is asking only for “a fair day in court,” the National Association of Manufacturers is engaging in a series of public education events aimed at making the case for civil justice reform.

“The litigation system has all the aspects of a lottery–maybe even a fixed one,” said Michael Baroody, executive vice president of the Washington-based NAM, one of the nations largest employer groups. It will take time to educate the public on the need for broad reform, he said, but reform is necessary to promote long-term economic growth and investor confidence.

A recent NAM roundtable, which was the first in a series of discussions involving several aspects of the civil justice system, focused on class-action lawsuits.

Quentin Riegel, NAMs vice president for litigation, cited several problems with the current class-action system.

First, he said, lawyers can bring multiple lawsuits in multiple jurisdictions without consolidation.

Second, there is unfair class certification in some jurisdictions, which Mr. Riegel called “drive-by certifications.” The judges certifying the class actions, he said, do not examine whether the claim has merit.

Finally, the current system allows judges and juries in some jurisdictions to, in effect, establish national policy, sometimes in conflict with local or state laws.

NAM is supporting legislation aimed at resolving these issues, essentially by allowing national class-action lawsuits to be heard in federal courts rather than state courts. One bill (H.R. 2341) has already passed the House. A similar bill (S. 1712) is still pending in the Senate.

John Beisner, a partner in the Washington law firm of OMelveny & Meyers, said the legislation is necessary because the current system is filled with abuses.

In effect, he said, the system is being driven by lawyers, not clients. Indeed, Mr. Beisner termed the class-action system, “clientless litigation,” because too often, the actual plaintiffs dont even know they are part of a class. Thus, he said, there is no informed consent to the attorney regarding the direction of the litigation, and courts rarely monitor the potential for abuse.

This system, he said, gives rise to four effects.

First, certain state courts have become magnets for class-action litigation, often having no real relationship to the controversy. These courts are chosen as venues for the litigation because they are viewed as favorable to plaintiffs, he said.

Second, the system hijacks state law, since a single judge can, in effect, determine national policy. Very often, he said, this is an elected judge who was chosen by only a few thousand people in his or her community.

Third, there are competing class actions. It is not unusual, he said, to see multiple actions filed on the same subject, with different attorneys claiming to represent the same class of people on the same issues. Defendants, he said, are faced with a “litigation juggernaut.”

Fourth, the settlement system is unfair. Too often, Mr. Beisner said, the members of the class get very little, while the lawyers get millions of dollars.

Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 8, 2002. Copyright 2002 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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Public Gets Class-Action Reform Lesson

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