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Comments

Ted

Yeah, when I was a student, I always preferred arguing against a straw man instead of a real critique.

Evan

Ted: We're all students, to some extent, even if we like to pretend otherwise. As for the "real critique" you offer--that's merely a column that was published in the National Law Journal, interesting in parts, but based on anecdotal evidence and betraying a big business bias in its veiled ad hominem attack on Madison County judges (para 8) and disdain for state courts in general. If nothing else, the column demonstrates that even well-respected law professors can find a good use for a straw man; at least mine's out in the open where you can see him clearly, rather than hidden in the background where someone's likely to trip over his straw feet.

gunner

Without reading the alleged critique, I agree that "Experienced Attorney" is nothing but a straw man. Here at least, are some reasonable answers from someone (me) who isn't against class actions but can more clearly see both sides:

Law Student: The law allows class actions.

Not-so-experienced Atty: Sure, in theory, class actions are good. Where many people have been wronged but each has a small claim that might not otherwise be brought, the class can join together to get some sort of relief from a corporation. It's the practice that's the problem. People with tiny claims aren't usually interested in taking the time to get involved in lenghty litigation so that they can get a coupon or some other negligible relief.

Law Student: Do class actions deter corporate wrongdoing?

N-S-E A: I'm not sure what you are implying. Is it that corporations are inherently evil and would otherwise "do wrong," but the spectre of class actions will make them think twice? Let's say that's possible, but it's also possible that corporations will just spend more on insurance, or spend on class action settlements, and then increase prices. It's at least as likely that corporations will do just as much wrong while redistributing some of their profits to a few law firms with imaginative lawyers.

Law Student: You imply that corporations will cheat their customers regardless of the consequences.

NSEA: No, it's you who imply that corporations will cheat unless they have class actions as a deterrent. I should also point out here that you seem to have in mind the kind of minor-claim strike suit (e.g. Blockbuster charged me excessive late fees) that most infuriates people when they read about it in the paper. Class actions have also been used (in my view properly) in actions where serious wrongdoing occured (e.g. A Civil Action).

Law Student: Plaintiffs’ lawyers again. Aren’t there wealthy defense lawyers?

NSEA: Okay, so I'm a little off track of your dialog, but now that you mention it, there do exist lawyers who have professional plaintiffs buying up one share of the entire NYSE so that they can sue the moment the stock drops three points. Do you really think that some individual came up with the theory that McDonalds should pay for making him fat? Isn't it much more likely that some creative plaintiff's attorney thought it up? That actually brings me to the main complaint about class actions: The complaint is not that they exist, but that the process is abused by, you guessed it, unscrupulous lawyers. As for defense attorneys, the problem is not that plaintiff's lawyers are rich, the problem is that when these suits settle, and they inevitably settle, the plaintiffs lawyers are the ones who get most of the proceeds -- that is, they get their fees paid, while the purported plaintiffs get negligible relief, if any at all. The corporation simply raises prices to cover the cost, and it is you and I who wind up paying those lawyers.

Law Student: Is your main objection to class actions the attorneys’ fees?

NSEA: Whoops, looks like I got ahead of myself.

Law Student: Don’t most of those big settlements involve lots and lots of plaintiffs’ firms, who share the fees? And don’t the firms have to risk a lot of their own money with no guarantee of a win?

NSEA: No, not really. Some involve many firms, some don't. Do those with many firms share fees? Sure! Firm 1 gets the fees for all the hours it spends, and Firm 2 gets fees for all the hours it spends. In that way they "share" the total proceeds, but the pot is as big as they care to make it. Do they spend a lot of their own money? Well, sometimes yes (again, see A Civil Action). Other times they have a stock of experts who know they won't really get paid unless the lawyers get paid. Still other times the corporation just figures out how much it would cost to litigate the frivolous lawsuit and decides to settle for an amount that is significantly below the cost of litigation (those defense attorneys you were complaining about).

Law Student: What about judicial oversight? Doesn’t a judge approve every class action settlement and approve the attorneys’ fees?

NSEA: Yes, but what do you expect the judge to do? The lawsuit may be just shy of completely without merit. Enough to get past a motion to dismiss, but maybe not a motion for summary judgment. Should the judge force the corporation to spend all that money on discovery when both parties are willing to settle? The corporation may not like the settlement, but they know it will cost less than discovery, or maybe they think theres a 30% chance that the case will survive summary judgment and is worth millions and millions and doesn't want to risk it? Judges are burdened enough without having to figure out whether two parties who agree to settle their lawsuit should be forced to litigate it.

Law Student: Do you trust the appellate court judges, to whom the district court judges are answerable?

NSEA: Well yes, I trust them, but when both parties agree to settle, even if the settlement isn't really fair to the class, there is nobody to appeal. You do understand that someone has to appeal before an appellate court gets to review a case, right?

Law Student: Do you have an alternative system?

NSEA: No, I don't. Do you think that not having a solution ready at hand means that there is no problem?

Law Student: I suppose you think that all class actions are frivolous?

NSEA: No, and that's part of the problem. Some are frivolous, and the stakes are high, and it is you and I who pay for them.

Evan

Gunner: A good comment! But don't think for a minute that you and Ted are going to scare the Experienced Lawyer away from this blog. He's already urging me to give him another shot (though not on the topic of class actions).

A few points:

1. Despite what you say, I believe most people have a serious problem with Blockbuster charging them "excessive late fees," or with their credit card companies adding on $5 and $10 here or there, or with their phone company becoming "creative" with their billing. Maybe some don't mind if companies wrongfully take a little of their money every so often, in excessive late fees or whatever, but I haven't met too many people like that in real life. Most consider conduct like that much more than a "minor" irritation.

2. I don't think it's true that unmeritorious class actions lead to higher prices--or that meritorious ones lead to higher prices, for that matter. Perhaps in a few cases. But unless the companies have monopoly pricing power, which most don't, they can't simply raise prices to boost their bottom lines. In any case, if given a choice between being cheated or paying higher prices, I'd choose the higher prices, not wanting to be cheated--and then I'd take my business elsewhere.

3. A minor point, but in your discussion of motions to dismiss and motions for summary judgment, you forget the most important motion in a class action--that is, the motion for class certification. That's where the battle's won or lost, generally speaking.

4. As for expert fees being contingent on the outcome--there's hardly a lawyer alive, much less those involved in class actions, who would enter into such an arrangement. "That's right," says the expert, "my opinion is X." "And if you can convince the jury of that," the lawyer responds, "then you'll get paid. But not otherwise?" If the expert's fee arrangement was like this, the bias would be so overwhelming that it would nullify anything the expert said. That's why experts are paid whether or not the case is victorious. (The experts want it that way too.)

5. As for appeal: Obviously, the case doesn't get to an appellate judge unless someone appeals. But in a class action, even when there is a settlement, the settlement agreement always allows either side to appeal if the judge makes any material changes to the settlement. In this way, as well as many others, a class action is completely unlike a personal injury case. Even when neither side appeals, an objector can appeal. That's another example of a situation (very common) in which there's an appeal even though neither the plaintiff nor the defendant asked for one.

Ted

Point by point:

1) There's a difference between "corporate policy that is more than a little irritating" and "consumer fraud", though the latter category seems to be expanding to the point of meaninglessness as the recent Coca-Cola soda fountain litigation shows. Nobody forces you to rent from Blockbuster, and I stopped the first time I got hit with a late fee I was unhappy with. Blockbuster's business model created room for Netflix. Let consumers vote with their feet: the involuntary consulting work of class action litigation and settlement injunctions is an inordinately inefficient way for the free market to operate.

For all you or I or a judge or a jury of twelve of our peers know, the late fees make it possible for Blockbuster to control inventory in such a manner that they can rent out movies much cheaper than they would if they had late fees like at the UChicago libraries, where the fines were so cheap that it was worth it to me to only return books once a quarter. Maybe it's a good business model, maybe it's an evil business model; let there be competition between different business models and consumers choose for themselves bottom-up than consumer advocates choose top-down.

2) The effect is at the margins. It's the products that aren't introduced, the companies that go out of (or don't go into) business, the workers that don't get hired. In isolation, if one class action sues one corporation in a competitive market, that corporation can't raise prices. But when all corporations are being sued indiscriminately, that's a wealth transfer from consumers to attorneys. Insurance is a good example.

3) Here's where the magnet jurisdiction problem raises its ugly head. There's an elaborate game where plaintiffs' lawyers are putting the quarters in the slot machines waiting for the one that pays off, and when a loose slot machine, a Madison County, is discovered, where the judges disregard basic issues of class certification law, principles of tort causation, and due process for defendants, the the plaintiffs' lawyers rush in and increase the number of class action filings by 6000%. It's surely not the case that corporate wrongdoing has increased that much.

In response to Gunner, judges should scrutinize class action settlements. The Seventh Circuit has written some good opinions on the subject and upheld objections to collusive settlements. Here, the market works well, too; where judges scrutinize settlements, there exist law firms that find it profitable to challenge the more egregious settlements.

Evan

Ted: Thanks for your comment. As for Madison County, where I work, I have not found the things you say about it to be true. I can think of only one class action in the last ten years that has gone to judgment here; other class actions have settled; others have been thrown out; others have gone away for other reasons or are still being litigated. It's the same as many other jurisdictions in the US--no different than Chicago or Atlanta, for example.

People should think about Madison County as a court system in a large metropolitan area, which it is, rather than a backwoods collection of small-minded know-nothings, which it isn't. The judges follow the law as determined by the legislature and the appellate courts; when the appellate courts disagree, they say so.

As for the increase in class actions, I presume that's been happening a lot around the country, a circumstance that takes place whenever a system-changing "reform" is threatened, as it is with the Class Action "Fairness" Act. The threatened reforms spur lawyers to get cases filed before the co-called "reforms" happen. There's nothing inherently wrong with that.

Ted

When did I say anything about "backwoods"? It's not "the same as in other jurisdictions", for Madison County will certify classes that Minnesota or Florida or Massachusetts (each with a Democrat-heavy court system) will not, forcing settlements. Plus the Madison County judges will approve settlements where the lawyers get 90% of the recovery, and the lawyers know this and demand a level of recovery that they can't get in, say, the Seventh Circuit. And there are judges who don't follow the law, but it's possible to make a good living threatening back-breaking and unappealable judgments and offering extortionate settlements just low enough so that certain outrageous rulings never get challenged. Defendants aren't allowed to defend themselves in Madison County asbestos cases, and too few are large enough to be willing to risk a multiple-year court battle that could affect their stock price when they can pay protection money.

Because the Class Action Fairness Act was created as a response to magnet jurisdictions, you're mixing cause and effect when you attribute the rise of Madison County class action filings to its proposal. When it passes, and another thirty are filed the day before it gets signed, you can attribute the timing of those thirty to the CAFA, but not the venue: the simple fact is that Madison County was handling two class actions a year well into the 1990s until some entrepreneur discovered a gold mine.

Evan

You're painting with awfully broad strokes. Take this statement: "there are judges who don't follow the law." Can you provide specific examples?

Ted

Specific examples? Almost every week on overlawyered.com.

Evan

Ted: That's not a specific example. However, I'll try to be patient and wait for a specific example on overlawyered. I must say that I'm a little skeptical, since the overlawyered writing style is more journalistic (or polemical) than scholarly. (As is mine; that's not a criticism.) To put it another way, I recall lots of complaints about Madison County on your site, but nothing along the lines of "the law of Illinois says X, but the judge said Y." I'll keep watching. In the meantime, since this thread is getting to be so long that it's threatening to become a sub-blog, I'll let others have the last say. I'm done for now.

Ted

I'm fairly confident that all three of these reports were covered on overlawyered, but here's one example in great detail, and here's numerous others, and here are several others.

TomTom Thepipersson

It is BS when you get a class action notice that says I get a "five dollar off" coupon for my next purchase from RipOff Inc. and the lawyers gets 1.5 million. Defend it all you want, your "class action" system sucks.

Is the rest of the legal system as honorable?

Evan

Another satisfied customer!

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