Class Action Reform Dies in Senate

Senate Republicans watched their efforts for class-action lawsuit reform crash and burn Thursday over a set of unrelated amendments that Democrats refused to drop from the debate.

In the Senate, Democrats held up the Class Action Fairness Act (search) on procedural grounds meant to cut off debate. That procedural vote, called cloture, needed 60 senators in order to move the bill to final passage. Republicans earned 44 votes, falling short of the number needed to prevent the roadblock.

Senate Majority Leader Bill Frist (search), R-Tenn., indicated before the vote that if it failed, the bill would be dead for the year.

The Senate legislation had attempted to move class action suits from state to federal courts to avoid "jury shopping." New laws would have required all class action lawsuits (search) involving more than 100 plaintiffs and more than $5 million in expected damages to go to a federal court. The House passed the bill earlier this year.

Prior to the vote, proponents of reform had sought to pound home a number of outrageous settlements to illustrate why, they say, changes are urgently needed in the way the country handles litigation against corporations.

The examples highlight many arguments recycled by proponents over the years to emphasize that class action lawsuits only enrich trial attorneys and do nothing to help the class of people injured. The Class Action Fairness Coalition (search), which came up with its best examples in advance of this week's Senate debate, said the cases highlight the lunacy, as well as the growing disparity, between what the victims and their lawyers receive in these settlements.

"These are examples where lawyers have gotten significant payments and the victims have gotten very little," charged Matt Webb, spokesman for the U.S. Chamber of Commerce, which joins other business interests in the pro-reform coalition. "These are some of the worst cases out there."

Among the favorites cited by the coalition is the 2001 case against Blockbuster (search), in which the plaintiffs received $1 coupons for future movie rentals while their lawyers walked away with $9.25 million in fees and expenses.

Some of the other examples include:

— Illinois, 2003: Lawyers earned $16 million in fees and expenses after suing on behalf of hundreds of Ameritech customers who were wrongly charged for warranties they hadn't requested. Plaintiffs received $5 phone cards, which could be used only at certain pay phones owned by Ameritech's parent company, SBC. Plaintiffs donated the cards to a local battered women's shelter.

— Florida, 2003: Customers who paid higher port charges than necessary sued the now-defunct Premier Cruise Lines (search) and won $30 to $40 rebates on future travel on another cruise line. Their lawyers got $887,000 in fees.

— Illinois, 2001: Lawyers earned $22 million after a lawsuit against Thomson Electronics (search) over faulty TV sets netted customers anywhere from $25 to $50 in rebates for future purchases.

— California, 1997: Fifty computer manufacturers were sued for falsely advertising the size of their computer monitors. Plaintiffs won $13 rebates on future purchases or $6 in cash. Their lawyers got almost $6 million.

— Alabama, 1996: 700,000 plaintiffs sued Bank of Boston (search) over mortgage escrow accounts. Plaintiffs' attorneys deducted anywhere from $90 to $140 from the customers' accounts to pay for the $8.9 million in attorneys' fees.

— Illinois, 1995: General Mills (search) reached a settlement with plaintiffs over the use of a food additive in Cheerios cereal. Plaintiffs' attorneys earned $1.75 million. The defendant put coupons for free boxes of Cheerios cereal in the newspaper.

Just recently, Former Rep. Bob Barr, R-Ga., lodged a formal complaint against Kentucky attorney John O. Morgan for extracting  $1.3 million in fees in six successful cases against a rogue check-cashing company. According to the complaint, 49 of the 52 plaintiffs in the cases received nothing. Morgan did not return phone calls to his office.

"I think more complaints against people like John Morgan and legislative remedies are going to help," said Phil Kent, who, like Barr, is a former president of the pro-tort reform Southeastern Legal Foundation (search) in Georgia.

But Jackson Williams, chief lobbyist for Public Citizen (search), said so-called reformers are really deceiving the public with the few ugly cases they promote while at the same time protecting greedy and selfish corporations.

"There are always going to be a few bad apples, but you cannot throw out an institution based on that," said Williams, whose group has acted on behalf of plaintiffs in hundreds of class action lawsuits over the years. Williams said Public Citizen had actually argued against what they agreed was an unfair settlement in the California computer manufacturers case, but the solution lies in better settlement guidelines for judges, not moving the cases to federal courts.

Changes made to the legislation late last year by Democrats easing the requirements made the measure more palatable to some who had opposed the measure. But the changes have done nothing to ease the fears of opponents who see a scheme by corporate bullies to wiggle out of liability and force all class actions into federal courts, which they say are insensitive and unprepared for the caseload.

"I have consistently opposed efforts to federalize our states' tort systems or restrict the rights of citizens to pursue legal action in the appropriate court of their choosing," said Sen. Richard Shelby, R-Ala., at the start of the debate.

"I believe we have a fundamental right to have our grievances addressed by our nation's court system and Congress should not seek to undermine this tenet of democracy," he said.