Class action lawsuits a thing of the past?

[Morrigan]

http://www.latimes.com/business/sc-dc-0428-court-class-action-web-20110427,0,1239412.story

The Supreme Court gave corporations a major win Wednesday, ruling in a 5-4 decision that companies can block their disgruntled customers from joining together in a class-action lawsuit. The ruling arose from a California lawsuit involving cellphones, but it will have a nationwide impact.

Unbelievable...

I like this part:

The court itself divided along partisan lines. All five Republican appointes formed the majority, and four Democratic appointees dissented.

Thank you, Republicans, for protecting those poor oppressed corporations from the evil greed of the public?

 

[casebro]

Morrigan, you must have been a benficiary of a class action suit by now. Haven't we all?

Typically, the awards are that the lead plaintiff gets a million dollars, the class's law team gets $40,000,000, and the other 56,000,000 members of the class get $7 in coupons, good only towards products from the producer who made a shoddy product last time.

They just do very little direct good for the consumer who was supposedly cheated. I won't miss them.

But you can be sure the legal eagles will find a way to keeping gorging themselves at the trough of product liability.

 

[BobTheCoward]

This is about arbitration. Any good that does not require a contract is the same as before.

 

[RPG Advocate]

Congress should get on editing the Arbitration Act to ban arbitration clauses in all contracts of adhesion. That would solve the general problem, of which this ruling is only a symptom.

 

[Puppycow]

Typically, the awards are that the lead plaintiff gets a million dollars, the class's law team gets $40,000,000, and the other 56,000,000 members of the class get $7 in coupons, good only towards products from the producer who made a shoddy product last time.

That's interesting. Can you give one or two concrete examples like that?

 

[Brown]

Link to the actual opinion.

As I have said in the past, I am not a fan of class action suits for damages:

What can be done? First, limit punitive damage awards. Second, make class action lawsuits for damages MUCH more difficult to bring. Third, liability based upon scientific or technical grounds beyond the knowledge of lay people should be reviewed by a court-appointed expert. Fourth, allow regulated companies the opportunity to defend themselves based upon compulsory regulation. (The bill pending in Congress, when I last checked, would make this a complete defense, but only for drug companies. Bad approach.) Fifth, scale back indemnity rights in work-related injury cases. Sixth, don't dole out sweetheart protections to big contributors; don't make others pay for their wrongs.

...

As I've said before, class actions for damages tend to benefit everyone except the people that they are supposed to benefit, namely, the members of the class. Class actions for things other than damages (such as an injuction or to force an officer to do his duty) do not suffer from as much abuse as class actions for damages.

 

[DallasDad]

Want to see class action suits for damage disappear overnight? Pass a law limiting lawyer compensation to $10,000 total (both sides, all lawyers, all paralegals, and including all courts costs and filing fees).

 

[bigred]

Thank you, Republicans, for protecting those poor oppressed corporations from the evil greed of the public?

Yeah cuz we don't have enough ******** "gimme free money" lawsuits going on already in sue-happy America. No evil greed there, nossireebob.

Edited by LashL: 

To properly mask profanity. Please see Rule 10.

 

[lionking]

That's interesting. Can you give one or two concrete examples like that?

It was obviously an exaggeration, but I considered being part of a class action on bank fees in Australia, only to see in the fine print that I would only get a proportion of excessive fees if the case succeeded, while agreeing to cover the costs of the law firm if it failed. It's hard to lose if you bet with someone else's money.

 

[Morrigan]

Yeah cuz we don't have enough ******** "gimme free money" lawsuits going on already in sue-happy America. No evil greed there, nossireebob.

And how many of those frivolous lawsuits are class-action lawsuits?

 

[KSskeptic]

That's interesting. Can you give one or two concrete examples like that?

I can. I was included in a class that sued Microsoft about Windows. The result for the class was a $10 coupon good for a future purchase of Microsoft software. So, if you didn't want or need to buy software buy the expiration of the coupon, you basically got nothing. The lawyers got around $14 million (I think).

I was also in a class that sued Sony over the Velvet Revolver CD. It had a copy protection that required you to install software on your computer in order to play or rip the music. The software made you computer vulnerable to hackers. The end result was that Sony agreed to replace the CDs. However they required you to have your original store receipt and send it in with the CD to get the replacement. No receipt (this was years after the CD was released), no restitution. The lawyers were paid cash.

I have several problems with the way class suits are handled. First, they can get a mailing list of possible class members. Like in the Microsoft case, the lawyers can get a list of people who bought computers from Dell. They send out a mass mailing to those people who may or may not be part of the class. That, I don't mind. What really bothers me is that in order to be excluded usually requires you to sign a document, maybe get it notorized and send it by certified letter. These things cost time and money to be excluded from representation that you never asked for in the first place. If the lawyers want to send out a mailing and say we are starting a class, mail this back if you want our firm to represent you, I don't have a problem with that. The other problem I see is that the class agreements I have seen require the class to accept whatever the lawyers agree to with the defendant. The lawyers have no real interest in getting their clients anything of value. It's really about the money they make as part of the settlement.

 

[bigred]

And how many of those frivolous lawsuits are class-action lawsuits?

I was making a broader point about lawsuits in general, as well as towards the "evil greed of the public" remark. Thought that was obvious.

 

[Morrigan]

In other words, you were saying nothing. Gotcha.

 

[Brown]

I can. I was included in a class that sued Microsoft about Windows. The result for the class was a $10 coupon good for a future purchase of Microsoft software. So, if you didn't want or need to buy software buy the expiration of the coupon, you basically got nothing. The lawyers got around $14 million (I think).

I was also in a class that sued Sony over the Velvet Revolver CD. It had a copy protection that required you to install software on your computer in order to play or rip the music. The software made you computer vulnerable to hackers. The end result was that Sony agreed to replace the CDs. However they required you to have your original store receipt and send it in with the CD to get the replacement. No receipt (this was years after the CD was released), no restitution. The lawyers were paid cash.

I have several problems with the way class suits are handled. First, they can get a mailing list of possible class members. Like in the Microsoft case, the lawyers can get a list of people who bought computers from Dell. They send out a mass mailing to those people who may or may not be part of the class. That, I don't mind. What really bothers me is that in order to be excluded usually requires you to sign a document, maybe get it notorized and send it by certified letter. These things cost time and money to be excluded from representation that you never asked for in the first place. If the lawyers want to send out a mailing and say we are starting a class, mail this back if you want our firm to represent you, I don't have a problem with that. The other problem I see is that the class agreements I have seen require the class to accept whatever the lawyers agree to with the defendant. The lawyers have no real interest in getting their clients anything of value. It's really about the money they make as part of the settlement.

I wish I could say these illustrations are atypical. They are not. In many (if not MOST) class actions for damages, the people who are supposed to benefit--the members of the class--get nothing. The lawyers get exceptionally well paid. It is not an exaggeration to say that lawyers sell out their own clients to get a big payday.

And some defendant wrongdoers get a benefit, too. They get excused from further lawsuits from the members of the class. They pay the greenmail, they get their peace.

Why are class action lawsuits so often dysfunctional? The answer is that the judges who are supposed to provide the oversight are too busy to provide that oversight, and the lawyers know it.

In one case with which I am personally familiar, the lawyers got the entire settlement. The members of the class got nothing. Not a penny. Not a coupon. Nothing. The judge SHOULD have asked: "How much of this settlement money is actually going to the members of the class?" This should have been an obvious question, but it was never asked. And why was it not asked? Because asking it would have fouled up the settlement (the settlement being that the lawyers for the class would get paid and the class--the lawyer's own clients--would get screwed) and would have meant a TON of more work for the judge. To the judge, any settlement was a good thing, as it meant less work for him.

In theory, class actions for damages could serve a valid function. But they require significant judicial oversight, and because in practice that oversight is not there, abuse is a serious problem.

 

[Suddenly]

In theory, class actions for damages could serve a valid function. But they require significant judicial oversight, and because in practice that oversight is not there, abuse is a serious problem.

Abuse is a problem. However, even if we assume that the injured party gets zilch from a settlement...

There is an argument to be made (I don't know if I totally buy it) that, in cases where a corporation harms a lot of people just a little bit (not talking asbestos here... more like the CD case above) a class action suit serves the same purpose as, and is more efficient than, government regulation as to punishing and deterring this behavior.

In these cases it is obvious that the injured can't sue as individuals... it doesn't work. So that is out. We are left with more or less three options.

1) Let them get away with it.

2) Beef up government regulation and enforcement to deter this.

3) Class action suit.

The third is like hiring a private swarm of enforcers that act out of self interest rather than a bunch of salaried public servants that get paid the same either way. Sure, the lawyers seem to get a lot of money, but how much would it cost us to have the government provide the service?

 

[Aepervius]

Abuse is a problem. However, even if we assume that the injured party gets zilch from a settlement...

There is an argument to be made (I don't know if I totally buy it) that, in cases where a corporation harms a lot of people just a little bit (not talking asbestos here... more like the CD case above) a class action suit serves the same purpose as, and is more efficient than, government regulation as to punishing and deterring this behavior.

In these cases it is obvious that the injured can't sue as individuals... it doesn't work. So that is out. We are left with more or less three options.

1) Let them get away with it.

2) Beef up government regulation and enforcement to deter this.

3) Class action suit.

The third is like hiring a private swarm of enforcers that act out of self interest rather than a bunch of salaried public servants that get paid the same either way. Sure, the lawyers seem to get a lot of money, but how much would it cost us to have the government provide the service?

There is a fourth alternative

4) class action suit, limit the reward to lawyer to be reasonable (at msot 5% of the settlement) and beef up the reward for the classe belonging people to be *at least* 95% of the total reward, and be at least equal to 100 time the cost of the initial product per person.

And before somebody start and say me that would ruin the corporation, well copyright infringement can be 10000 time the cost of the product as damage, so what#s good for the goose is good for the gander too.

 

[Suddenly]

There is a fourth alternative

4) class action suit, limit the reward to lawyer to be reasonable (at msot 5% of the settlement) and beef up the reward for the classe belonging people to be *at least* 95% of the total reward, and be at least equal to 100 time the cost of the initial product per person.

And before somebody start and say me that would ruin the corporation, well copyright infringement can be 10000 time the cost of the product as damage, so what#s good for the goose is good for the gander too.

Obviously the wronged should be compensated, but the numbers strike me as a bit unrealistic.

At 5% you might as well ban the suits. It isn't cheap to try one of these things, and the plaintiff's lawyer gets nothing if the case goes south. That is why it is hard to value these things, they involve significant risk. The standard cut in other tort cases is 1/3 of the award plus out of pocket expenses. That is probably workable.

100 times the product cost is a bit steep given often these cases are a result of negligence...

 

[Aepervius]

100 times the product cost is a bit steep given often these cases are a result of negligence...

And 10000 time the price of a product for copyright infringement is also steep and ruin a person. just saying.

 

[casebro]

But the lawyers fees is based on prospective pay outs. As in 1/3 of $45m is $15m. Based on a prospective payout of $5 each to 9m customers. But only 20,000 will ever cash in the coupons. So, with this math, lawyers fees are 15,000% of the actual payout.

 

[Beerina]

That's interesting. Can you give one or two concrete examples like that?

I can. I was included in a class that sued Microsoft about Windows. The result for the class was a $10 coupon good for a future purchase of Microsoft software. So, if you didn't want or need to buy software buy the expiration of the coupon, you basically got nothing. The lawyers got around $14 million (I think).

I was also in a class that sued Sony over the Velvet Revolver CD. It had a copy protection that required you to install software on your computer in order to play or rip the music. The software made you computer vulnerable to hackers. The end result was that Sony agreed to replace the CDs. However they required you to have your original store receipt and send it in with the CD to get the replacement. No receipt (this was years after the CD was released), no restitution. The lawyers were paid cash.

I have several problems with the way class suits are handled. First, they can get a mailing list of possible class members. Like in the Microsoft case, the lawyers can get a list of people who bought computers from Dell. They send out a mass mailing to those people who may or may not be part of the class. That, I don't mind. What really bothers me is that in order to be excluded usually requires you to sign a document, maybe get it notorized and send it by certified letter. These things cost time and money to be excluded from representation that you never asked for in the first place. If the lawyers want to send out a mailing and say we are starting a class, mail this back if you want our firm to represent you, I don't have a problem with that. The other problem I see is that the class agreements I have seen require the class to accept whatever the lawyers agree to with the defendant. The lawyers have no real interest in getting their clients anything of value. It's really about the money they make as part of the settlement.

I can't believe he challenged you on that!