Cutting Classes

Class-action lawsuits frequently are blamed by TV pundits, corporate interests and others as an example of something gone wrong with the legal system, particularly when the result involves sizeable attorneys’ fees relative to the individual damages.

One current legislative “solution” is being offered in the so-called “VW Bailout Bill,” which would prevent federal courts from certifying class actions for personal injury or economic loss unless each plaintiff suffered the same type and scope of injury as the named class representative. Officially labeled the “Fairness in Class Action Litigation Act of 2015,” the legislation is scheduled to be heard before Congress this week.

Some perspective on the suggestion that class actions are nothing more than get-rich schemes for lawyers: The American Lawyer magazine recently took an in-depth look at a controversial class-action over the price of household batteries. While the stakes certainly aren’t as high as in the VW litigation, the story illustrates why class actions and the lawyers who handle them are so important to our system of justice. 

The lawsuit was based on a deceptive advertising claim filed on behalf of consumers who purchased certain Duracell batteries that were labeled as providing 30 percent more power, which the plaintiffs said was untrue. The case settled in 2013 after a potential class of roughly 7.5 million plaintiffs was identified, and Duracell’s parent company announced the resolution with national print and online advertisements that offered $6 per household in exchange for customers’ filling out an online form.

Not surprisingly, however, less than 1 percent of the eligible plaintiffs filed claims, which meant they would receive a total of approximately $345,000 while their lawyers would earn $5.7 million under the agreed settlement. That disparity was cited in a recent objection filed before the U.S. Supreme Court by the Center for Class Action Fairness, which argues that the plaintiffs lawyers should be paid based on a percentage of the total recovery rather than what was agreed to in the settlement approved by the district court. Based on that logic, the lawyers who prevailed would earn only a total of approximately $111,000 despite having spent more than 6,000 hours of billable time and $270,000 in out-of-pocket expenses to build the case.

And that’s precisely the intent: to remove the financial incentive for lawyers to pursue wrongdoing by large corporations where the damages to any one individual are relatively small. That way, corporations can continue to deceive without being accountable for their wrongdoing. Good for wrongdoers perhaps, but bad for everyone else.

In other words, when you eliminate class actions, you hinder justice.

Posted: 1/6/2016 8:08:26 AM by On the Merits Editor | with 0 comments

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Thanks for stopping by On the Merits, the first blog from the Texas Center for Legal Ethics. On the Merits will take a close look at significant legal stories with an eye toward addressing the legal myths and misconceptions that turn up in news stories, movies, TV programs, websites, anonymous emails and other forms of mass communications. Our goal at On the Merits is to provide readers with a thoughtful examination of what the media and others are saying about the legal profession and to apply the frequently-absent context of how the legal system actually works.

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