Opinion: Editorials

Examiner Editorial: Class-action lawsuits produce big payouts --- for the lawyers

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Opinion,Editorial,Chambers of Commerce,Trial Lawyers,Class-action lawsuits,Washington Examiner

Public opinion surveys in recent years have repeatedly shown a large number of Americans believe the system is rigged against the average guy, the middle class, or some variation thereof. With widespread reports of disability, food stamp and Medicare fraud, and with Washington politicians continually passing laws from which they exempt themselves, it's easy to understand why so many people take such a dim view of the federal government.

Lawsuit abuse is not often mentioned among the causes of public cynicism, but it is beginning to get significant critical attention, most recently in a study of 148 class-action lawsuits by the U.S. Chamber of Commerce’s Institute for Legal Reform. The cases were all filed in 2009, and 127 of them, or 86 percent, were concluded by Sept. 1. The study was conducted by the MayerBrown LLP law firm, which represents the chamber.

"The hard evidence shows that class actions do not provide class members with anything close to the benefits claimed by their proponents, although they can (and do) enrich attorneys."

Among the most significant results of the study are these:

– Not one of the 148 cases resulted in a final judgment on the merits of the plaintiff’s case. All but a handful of the cases produced no benefits whatsoever for members of the respective classes represented by the plaintiffs.

– Fourteen percent of the cases were still pending four years after being filed, including many in which there hasn’t even been a determination of whether the cases should go forward.

– More than a third of the cases, 35 percent, were withdrawn by the plaintiffs, many after out-of-court settlements. Based on cases for which payout data is available, it appears likely that the only winners in most of the out-of-court settlements were the class-action lawyers, not the class members represented by the plaintiffs.

– Among the remainder, only a third of the cases were settled, which is roughly half the settlement rate for non-class-action suits at the federal level, according to MayerBrown.

– Only six of those settled by class made settlement terms available for review. Of the six, five included these percentage-of-award payments to class members: 0.000006 percent, 0.33 percent, 1.5 percent, 9.66 percent and 12 percent.

All of that points to what MayerBrown described as its bottom line on the efficacy of class-action litigation for class members: “The hard evidence shows that class actions do not provide class members with anything close to the benefits claimed by their proponents, although they can (and do) enrich attorneys.” Many of those lawyers thus enriched are generous contributors to political candidates, the overwhelming majority of which are Democrats.

The other significant problem here is the ease with which class-action litigation can be used to intimidate otherwise innocent defendants to spend large sums to make the lawyers go away. As Supreme Court Justice Ruth Bader Ginsburg has observed, “[a] court's decision to certify a class ... places pressure on the defendant to settle even unmeritorious claims.” It's been nearly 20 years since Congress last seriously addressed this issue. It's time to change that fact.

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