THE EDITORIALS Lawsuit reform
Trial lawyers are up in arms over a Republican proposal to reign in class-action lawsuit abuses. But their objections stem more from concern over their own bank statements than the well being of their clients.
Class-action suits allow a plaintiff to bring legal action on behalf of a large group of individuals. But the process has long been prone to abuse, with unscrupulous attorneys using such litigation to shake down businesses and pocket millions in legal fees while members of the class get table scraps.
As Daniel Fisher reported in Forbes, researchers at the global law firm Mayer Brown went over every consumer class action in federal court in 2009. “They found that in five of six cases where settlement data was available,” Mr. Fisher writes, “the percentage of class members who actually got money ranged from a high of 12 percent down to a low of 0.000006 percent.”
The primary beneficiaries of the actions? “Counsel for plaintiffs (and for defendants),” the authors conclude.
Or consider that last year Anheuser-Busch faced a class action from a group of attorneys hounding brewers over labeling. Bottles filled with the company’s Beck’s beer included the language “German Quality” and “Originated in Bremen, Germany.” The allegation was that this misled drinkers into thinking the product had been brewed abroad when, in fact, it had been made in St. Louis since 2012.
Rather than fight, Anheuser-Busch settled for $20 million. Those who could prove they had purchased Becks in the past four years were eligible for up to $50. Meanwhile, “the creative trial lawyers who cooked up and filed this ridiculous lawsuit could build a castle out of the six-packs with the $3.5 million in fees they won for helping no one and doing nothing constructive,” the Washington Examiner opined last week.
To combat this kind of nonsense, Rep. Bob Goodlatte, the Virginia Republican who chairs the House Judiciary Committee, has introduced the Fairness in Class Action Litigation Act of 2017. It would, among other things, demand that all class members demonstrate that they suffered similar injuries; require that members of a winning class be paid before the lawyers take their cut; and set up a system to more closely monitor the disbursement of proceeds. These are all worthwhile reforms. Yes, it would be preferable if judges more closely monitored abuses in class-action litigation. Unfortunately, though, sanctions for lawyers who file frivolous claims or charge excessive fees are rare.
Critics charge that Rep. Goodlatte’s proposal will burden those with legitimate grievances and shield corporations that harm consumers. In fact, those bringing meritorious claims will be able to clear a higher bar. The measure instead targets the type of shameless legal extortion that drives up costs for consumers and sucks billions out of the private economy each year.