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Policy: Law

Examiner Editorial: Federal judge slams class-action lawyers in Nissan case

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Editorial,Judicial Branch,Class-action lawsuits,Law

Alex Kozinski is chief judge for the U.S. Circuit Court of Appeals for the Ninth Circuit in San Francisco. He is also among the technology “early adopters” who bought one of the 35,000 or so Nissan Leafs sold by the Japanese automaker here in America since its introduction in 2010. These otherwise innocuous facts proved to be rather unfortunate for the class action lawyers who represented Humberto Daniel Klee, David Wallak and all other class members in their suit against Nissan North America.

The case was heard in the California court, but Klee-Wallack is not unique simply because it involved the most popular electric vehicle in America. Nor is it significant because the plaintiffs won a proposed settlement in which Nissan agreed to pay class members $5,000 each. It’s not even particularly significant because the class action lawyers got $1.9 million, much less than many other class action settlements.

What makes Klee-Wallack especially notable is what Kozinski, a plaintiff in the case against Nissan, said in an official objection to the proposed settlement in a court filing. Kozinski appeared in person before the court Nov. 18 to explain his objection further.

“The proposed settlement is a sham, benefitting only class counsel, named plaintiffs and Nissan,” Kozinski said in his objection. He called it a sham because, he said, the plaintiffs’ lawyers “sat down to the negotiating table and cut a deal without knowing a single thing about what cards their opponents held. For all counsel knew — for all they know even today — there are memoranda and reports in Nissan’s internal files disclosing that the Leaf’s Lithium-ion battery suffers from a variety of defects and that Nissan nevertheless decided to go to market with it.”

Understand that the judge’s objection is not simply due to the fact his Leaf doesn’t go as far as Nissan claimed in its advertising it would go between recharges, and it isn’t because he thinks the $5,000 Nissan agreed to pay to the affected individuals was insufficient. Kozinski’s point is that the class action lawyers were most interested in securing as generous a settlement payment for themselves as possible.

Otherwise, why didn’t they — before talking to Nissan about a settlement — exhaust the discovery process to determine what Nissan knew about its product prior to putting it on sale to the public? As soon as discussion began on a settlement, the search for the truth about the Leaf ended. Indeed, Kozinski said, “finding a smoking gun was the last thing counsel wanted as it would call into question their judgment in having settled the case without having discovery.”

This case is no isolated example. Class action lawsuits to intimidate defendants into settlements with lucrative fees for plaintiffs lawyers are among the chief drivers increasing legal costs in this country in recent decades. As Institute for Legal Reform President Lisa Rickard said, “America is known as the land of the free, but it is also the land of unnecessary lawsuits. ... [E]xcessive litigation creates enormous costs for businesses, workers, consumers, and the overall economy.”

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