Class Action -- Reform or Emasculation

As some of you surely have noted, I've done an abysmal job of steering this blog away from the politics that threaten to swamp it in due proportion to the degree to which politics threatens to swamp the blog's author. The AP provides an adequate baseline discussion of what the House did today, in decisively approving pending legislation purporting to streamline and centralize the class action process in the federal courts.

The gist of the legislation is that class action lawsuits that used to be subject to the jurisdiction of courts in virtually any state in which an injured party resides, an injury occurs, or a corporate defendant is located, now will have to be brought in already overwhelmed federal courts. Aside from clogging up the system, this will also have the effect of diminishing the frequency and volume of class action rewards, as federal courts have proven far less sympathetic than many state courts to sweeping multi-state litigation.

Needless to say, not everyone's happy, and some people are seeing through the anti-class action attorney rhetoric, which is the same red herring here that it is in most contexts. Speaking of which, this account of what's in store:

"Today we will attempt to pre-empt state class action," said Rep. John Conyers, D-Mich. "Next month we will take up a bankruptcy bill that massively tilts the playing field in favor of credit card companies and against ordinary consumers and workers alike. On deck are equally one-sided medical malpractice bills and asbestos bills that both cap damages and eliminate liability to protect some of the most egregious wrongdoing in America."

Now I could do this at much greater length, could provide any number of sources of discussion on this point, but I don't want to belabor what I see as a couple of simple points I can just gloss over at a common-sense level, each corresponding to a stated rationale for this supposedly ground-breaking reform (italicized descriptions of rationales taken from the same AP article, though they are surely available in any complete article).

1. The president has described class-action suits as often frivolous . . .

Really? How often? Which kinds? And what, precisely, do we consider to be frivolous? How easily we forget Ralph Nader's industry-shaking exposure of the Ford Pinto scandal. How easily we forget the atrocious case highlighted in A Civil Action (which, those familiar with the story will recall, ended with a relatively paltry award). If regulation is insufficient, and the one strong tool consumers have is vitiated or effectively eliminated, how can the people keep corporations in line?

2. [B]usinesses complain that state judges and juries have been too generous to plaintiffs.

Which is to say, if I'm not mistaken, that businesses don't like the jury system. So, when it comes to things like political speech, businesses want to be treated like individuals, but when it comes to being held culpable for misconduct, juries are, what, unqualified? Isn't that the task of corporate defense lawyers -- to make sure juries understand why this egregious suit is being brought against their blameless corporation in violation of all that is good and decent in the world. Oh, wait, what? Your army of $300/hour attorneys can't convince 12 perfectly honorable citizens in Mississippi of that fact? Could that be because it isn't true? Just maybe? Here's my feeling: if a jury can hold a criminal defendant's life in its hands, then I think it can handle doling out an award for a class of people collectively injured by knowing corporate misconduct. Call me crazy . . .

3. Bush: "This bill is an important step forward in our efforts to reform the litigation system and to continue creating jobs and growing our economy . . ."

Reforming the litigation system? In the literal re-forming sense, sure: this is profession-changing stuff. Creating jobs? What, because corporations are going to keep so much more of their money that they'll shower it on new employees? That they'll break ground in entirely new industries? Why has this recovery been mostly jobless? Because corporations are reaping the benefits of enhanced productivity, and because when they don't have to, they choose not to hire more people. Growing our economy? This is zero sum stuff. Either businesses spend that money or lawyers and consumers do. Few corporations are going out of business due to this stuff. Costs may be passed on to consumers, but a few million dollars here and there to attorneys from multi-billion dollar corporations is not breaking the bank. And to the extent serious costs are passed on, it's where corporations have had to change the way they did business. Like, for example, shielding gas tanks to prevent explosions that kill these same consumers. Keeping corporations honest in some industries quite literally saves lives. How's that for the economy?

4. Bush, the GOP and the business community [. . .]have criticized what they see as a litigation crisis that enables lawyers to reap huge profits while businesses and consumers are stuck with the bill.

It stands to reason that our supposedly free-market MBA president would want to redistribute wealth from attorneys to MBA's, doesn't it? Seriously, what they're referring to here is the concern that class action lawyers' clients "get only small sums or coupons giving them discounts for products of the company they just sued," while the attorneys rake in multi-million dollar fees. Indeed, this is often the case.

Many of us have received such coupons over the years, and they are pretty trivial on an individual level. But return to my earlier point regarding corporate culpability. Again the analogy: to an American citizen who lives and breathes, his freedom is his most prized possession. When he commits a crime against an individual or the community, he loses that freedom. Unless he's a corporate executive. Meanwhile, to a corporation qua entity, its bottom line is its most prized possession. All hail the almighty shareholder, right? Well then doesn't it make sense that it is by dipping into its coffers when it steps out of line that we most effectively punish a corporation? Of course. Practically speaking, it's the only way.

That's what class action lawsuits are and have always been about. So yeah, it's relatively unimportant to me that a few years back I received as compensation for years of billing misconduct a coupon good for about $20 of Verizon-sold hardware. But if everyone who received one of those coupons redeemed it, what do you suppose that would cost Verizon? Millions, of course. And yes, the attorneys in that case surely reaped millions. They also probably worked for years and years on that case, like most others. And last I checked, a lawyer's time is pretty expensive. Moreover, if there isn't that financial incentive, lawyers won't take these cases. And if they don't take these cases, consumers have to rely on regulatory bodies to protect them, which these days is pretty cold comfort.

I don't participate in opt-in class actions because I care about what I might get. Rather, I opt in because in so doing, the corporate defendant is forced to justify its conduct. If it has a fair case, and good attorneys, it will convince the jury. And if it doesn't, then it pays. Lawyers make some money, I make virtually nothing, but of crucial importance is the price paid by the corporation. That's what's important. And I guarantee that with a sufficient payout, corporations will wake up and take notice, and change conduct to avoid future liability. And such changes almost invariably favor consumers in the long run.

Lawyers are not the problem here. Neither are juries. It's just another example of corporations doing what they must -- aiming to milk the market for every penny it can get. Corporate political donations to politicians and fees paid to lobbying firms are loss leaders -- and today they have been handsomely rewarded, to the detriment of consumers, who will suffer far more than the lawyers will under the yoke of this corporate-friendly legislation.