By: John O'Brien
According to a leading defense attorney in the field, the current class action lawsuit system is clouding a key issue.
“The question that never really gets solved in any class action is ‘Did the company really do anything wrong?’” said Andrew Pincus, of Mayer Brown.
That’s because an assembly line that builds lawsuit also encourages settlements, Pincus told a crowd at the U.S. Chamber Institute for Legal Reform’s annual summit on Oct. 25. The ILR owns Legal Newsline.
Pincus frequently argues before the U.S. Supreme Court, helping to secure wins in two important recent cases:
-In AT&T Mobility v. Concepcion, the court found the Federal Arbitration Act preempts state laws targeting class action waivers; and
-In Spokeo, Inc. v. Robins, the court ruled that a plaintiff needs to show concrete and actualized harm in order to assert standing for the purpose of bringing a lawsuit.
But the vast majority of class actions never reach such detailed decisions. The assembly line, Pincus says, starts with plaintiffs lawyers identifying a cause of action, then recruiting a plaintiff to bring the lawsuit.
“Lawyers find the clients and not vice versa,” he said.
If the lawsuit can survive a motion to dismiss and get its class certified, it puts the defendant in “an awkward position” and leads to a settlement, he says, adding that it becomes impossible to tell which companies are the wrongdoers and which are simply caught up in the process.
The result is settlements that can be seen as both good for plaintiffs lawyers and the companies who quickly resolve all liability issues for relative cheap – while leaving class members with little recovery.
It’s an argument made in a paper Pincus prepared for the ILR that was presented at the ILR Summit. The Supreme Court, lower courts and commentators recognize that defendants will settle even non-meritorious class actions to avoid risking high-dollar jury verdicts, he says.
“An indisputable characteristic of the class action system, however, is that it does not sort cases based on their underlying merits. For that reason, it cannot provide general deterrence,” he wrote.
“The threat of class action litigation instead harms society by deterring lawful, productive conduct.”
For that and other reasons, Pincus is a proponent of the Fairness in Class Action Litigation Act, which was passed by the U.S. House of Representatives earlier this year.
Among the bill’s reforms, it requires that classes consist of members with the same type and scope of injury.
Also under the proposed legislation, uninjured or non-comparably injured parties can still join class actions, but must do so separately from parties that experienced more extensive injury.
The bill contains additional provisions to:
- Prohibit judges from approving class actions in which the lawyer representing the class is a relative of a party in the class action lawsuit;
- Require that class action lawyers should only get paid after the victims get paid; and
- Order any third-party funding agreement be disclosed to the district court.
“Class action lawsuits were created so Americans could have strength in numbers when they took their legitimate disputes to court. These suits were supposed to provide a level playing field for both consumers and businesses, so their issues could be settled in a just and fair system,” House Judiciary Chair Bob Goodlatte, R-Va., said after the House’s passage of the bill.
“Sadly, because of abuses by unscrupulous trial lawyers, many Americans now see class action lawsuits as a television commercial, a hotline, and a cottage industry where lawyers win and victims lose.”
U.S. Rep. Jamie Raskin, D-Md., led the opposition to H.R. 985. He argued the “overriding purpose” of the legislation is to give the class action mechanism “the guillotine.”
“I oppose this misguided legislation because it sends another huge Valentine and wet kiss to large corporate polluters and tortfeasors, but gives the finger to millions of American citizens who suffer injuries from these defendants,” he said.
“This legislation would shield corporate wrongdoers by making it far more difficult for them to get together to obtain justice in a class action lawsuit.”
Raskin, a law professor who teaches constitutional law and legislation at American University in Washington, D.C., also argued the bill would give asbestos defendants “new weapons” to go out and harm their victims.