Wicker Supports Class Action Legel Reform

WICKER SUPPORTS CLASS ACTION LEGAL REFORM
By Congressman Roger F. Wicker
February 28, 2005

Congress has scored a major victory for legal reform by approving legislation changing the rules for class action lawsuits. The measure is designed to restore fairness to the system and eliminate abuses that often produce little money for victims and excessive compensation for attorneys.

The bill, which President Bush signed into law February 18, is also expected to benefit the national economy. It would help curb litigation that has increased the cost of doing business for many companies-a cost that is passed to consumers in the form of higher prices for goods and services.

As originally intended, class action lawsuits can be an effective means of resolving legal disputes. The process allows numerous individuals to combine their damage claims into one suit against a common defendant. Such suits may be heard in federal or state courts.

ABUSES IN THE SYSTEM

While the U.S. Constitution provides for cases between citizens of different states to come under federal jurisdiction, a loophole in the law has allowed multi-million dollar class action cases to be heard in state courts. One commonly-used ploy is to sue a local merchant in cases involving a national company in order to put the case into state court. Plaintiff attorneys often seek out jurisdictions in selected counties that have a history of returning large judgments. This practice pressures defendants into settling suits because they fear a single damage award could cause bankruptcy.

The Class Action Fairness Act would close this loophole by creating federal jurisdiction over large multi-state class action cases. The legislation would move class action suits to federal court if they involve more than $5 million and if fewer than one-third of the plaintiffs are from the same state as the primary defendant.

CONSUMER PROTECTION PROVISIONS

Consumers would also gain more protections. A 2002 survey found that the cost of litigation and profits for attorneys have produced a system that returns less than 50 cents on the dollar to those it is designed to help and only 22 cents to compensate for actual economic loss.

One case against Chase Manhattan Bank brought $4 million in attorneys' fees while the consumers received checks for 33 cents. In a suit against the telecommunications company Ameritech, the attorneys collected $16 million, and their clients received phone cards worth only five dollars.

Creation of a Consumer Class Action Bill of Rights is designed to ensure that plaintiffs -not their attorneys-would be the primary beneficiaries of compensation. Federal judges would have authority to limit attorneys' fees if those fees are disproportionate to the settlement amount designated for the plaintiffs.

The Washington Post noted in an editorial, "No portion of the American civil justice system is more of a mess than the world of class action." The House approved the bill 279-149, and the Senate passed it 72-26. The strong bi-partisan vote reflects the feeling that these reforms provide a common-sense solution to the problem.

http://www.house.gov/wicker/Action.htm