Coalition seeks to rein in class action suits

Bill on where they're tried may face close Senate vote

October 22, 2003|By KNIGHT RIDDER/TRIBUNE

WASHINGTON - Faulty products. Deceptive marketing. Excessive fees. Class action lawsuits have served as a way for consumers across the country to join forces in suing companies for allegedly bilking customers.

Class action suits have at times produced big wins for consumers, but critics say trial attorneys can abuse the system to file frivolous class actions, saddling businesses with large risks and costs.

A coalition of big businesses, Republican lawmakers and President Bush is trying to rein in such suits. The Senate is considering a bill that would move most national consumer class actions from state courts to federal courts, which are less sympathetic to such cases. A similar measure passed the House of Representatives this year.

It's likely to be a close vote in the Senate this week, where 60 votes are needed to break an expected Democratic filibuster against it. The bill's backers say they have secured at least 57 supporters, mostly Republicans. The proponents are working on a couple of swing Democratic senators for support. Dianne Feinstein of California is one of a handful of Democratic senators backing the measure.

Critics of class action suits say trial lawyers often run amok with consumer complaints. Plaintiff attorneys advertise nationwide for consumers to join their lawsuits and "shop" for state court jurisdictions that are friendly to consumer complaints, they say. And plaintiffs' lawyers often end up with a generous cut of the settlement, while each individual plaintiff receives just a small cash payment, rebate or coupon.

"The problem here is consumers really don't benefit from these lawsuits. It's driven by the lawyers," said Rick White, president of TechNet, a lobbying group representing technology company executives. TechNet is part of a coalition of businesses organized by the U.S. Chamber of Commerce that has been leading the fight to limit consumer class actions.

Big business finds itself going up against trial lawyers, another powerful, deep-pocketed group. Plaintiffs' attorneys say the Senate measure would kill off most large class actions, one of the few effective tools consumers have to hold big corporations accountable.

"This is a conscious effort to erode the legal rights of the American people," said Carlton Carl, spokesman for the Association of Trial Lawyers.

Class action suits are "a way of keeping giant corporations from screwing the public," said Rex Carr, a trial attorney in southern Illinois, who has successfully prosecuted a number of major class action suits.

Consumer groups are also opposing efforts to limit class actions. Public Citizen concluded in an August study that class action suits have saved consumers money in the form of lower credit card fees, phone bills and other payments.

Class action suits let consumers without deep pockets team up to pursue legal action against corporate behemoths. A key to success for plaintiffs' attorneys is finding a court that agrees to certify the case as a class action. Once plaintiffs - often millions at a time nationwide - are lumped together in a class, the case is usually settled. In large part, that's because the company faces the collective threat of multimillion-dollar penalties.

"The plaintiffs' attorneys can create a threat of a potential verdict which is so large, so enormously threatening, the corporation doesn't have a choice but to try to avoid that possibility," said Bruce Sewell, vice president and deputy general counsel of Intel.

Intel is facing such a threat in Madison County, Ill. A nationwide class action was filed there last year against Intel, Hewlett-Packard and Gateway. The suit charges that the companies misled thousands of consumers into believing that the Pentium 4 chip ran computers faster than older-version chips did.

Madison County, in southwestern Illinois, might seem to be an unlikely place for big technology companies to be battling such a suit. But consumer class action suits are standard fare in this small county, population 250,000. It handles more such cases per capita than any other county in the United States, according to a study by the Manhattan Institute.

Madison County and a handful of other counties across the country have developed a reputation among trial lawyers for being friendly to plaintiffs' claims. (Typically, it takes a single plaintiff residing in the state to land such a case in state court.)

The legislation pending in the Senate seeks to move big class actions out of state courts and into federal court, where they are less likely to be certified.

Critics note that judges in Madison County and other state courts perceived as pro-plaintiff are elected officials who receive the bulk of their campaign contributions from trial lawyers. Defenders say elected judges better reflect the communities they represent.

One reason for the steady increase in class actions over the past few years, business lobbyists say, is the aggressive tactics used by some trial lawyers to drum up support.

Lawyers fish for plaintiffs, notifying consumers of pending suits through inserts tucked into bills, separate mailings or newspaper ads.

Many of the suits are settled out of court, giving hefty fees to plaintiffs' attorneys but minimal rewards to consumers.

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