Congress Looks to Change Class Action System

Mindful of stories about lawyers reaping millions from class action cases while their clients walk away with little more than coupons, legislators are looking at revamping the system in which aggrieved consumers take big companies to court.

In addition to giving judges more leeway over settlements or awards, the Class Action Fairness Act 2001 would move all cases involving people in more than one state seeking $2 million or more in damages into federal court from the state courts.

Proponents of the bill say the reform is necessary because the system allows lawyers to file the same suits in several places in search of friendly judges or juries.

"It will not take away any of the rights of anybody to sue in court," said Rep. Bob Goodlatte, R-Va., who introduced the bill. It will work, he insisted Wednesday, "to end the egregious practice of court-shopping in an environment where there are 4,000 jurisdictions in order to find the best judge."

Opponents of the measure say taking large class action suits out of state courts will only lead to more delays, more expensive trials and fewer rights for plaintiffs. The passage of such a bill, they say, would make it even easier for corporations to take advantage of employees and consumers.

"To me, this is an appropriate time to create more corporate responsibility, not less," said Rep. John Conyers, D-Mich. "Our citizens need greater protection from being swindled, not less."

At a hearing Wednesday, witnesses on both sides of the issue told stories to bolster their arguments.

Hilda Bankston, a former small-town pharmacist who was a defendant in several class action lawsuits against major drug companies that distributed fen-phen and other pharmaceuticals, said lawyers often zeroed in on her late husband's pharmacy as a defendant simply so they could file suit in Jefferson County, Miss., where his shop was located. The county had a reputation among lawyers of generating juries sympathetic to plaintiffs, she said.

"No small business should endure the nightmares I have experienced," she told the House Judiciary Committee. "I'm not a lawyer, but to me, something is wrong with the legal system when innocent bystanders are little more than pawns for layers seeking to strike it rich."

Supporters of the reform effort also say defendants often get the short end of the stick in final settlements.

In one case, class members who had filed suit against a computer monitor manufacturer got $13 rebates on new merchandise, or $6 in cash, while the attorneys got almost $6 million. In another against Bell Atlantic Mobile for deceptive billing practices, class members received $15 coupons for future purchases, while their lawyers split $1.25 million.

But even some who admitted that abuses are a problem under the current system say sending all cases to federal court is not the answer.

"This is anti-investor, anti-consumer protection legislation," said Andrew Friedman, an attorney who is representing class action members in a suit against the collapsed Baptist Foundation of Arizona. Through dubious accounting, the foundation is alleged to have bilked thousands of investors — 80 percent of whom are Arizonans — of nearly $600 million.

The case is proceeding swiftly with the help of the state attorney general, said Friedman. If it had been diverted into the federal court system, he added, "it would result in onerous delays of five to eight years," and hamper the attorneys' ability to obtain evidence and protections for their clients.

The bill was first introduced in the Judiciary Committee and will likely make several stops in other committees before reaching a full House vote.