Lawyers, not consumers, are today the main beneficiaries of class actions – a lawsuit structure that was intended to make it easier for injured consumers sharing smaller claims to seek recourse as a group.
Entrepreneurial plaintiffs’ lawyers have made the class action device so dysfunctional, the amount paid to lawyers in these case settlements is often many times the amount paid to all of the thousands (and sometimes millions) of class members combined. In some cases, lawyers receive seven-figure fees, while class members receive no money at all.
Consider a class action lawsuit against a beverage company for allegedly implying, through advertising, that a product called “vitaminwater” was healthy. The case settled. The lawyers got $1.2 million in fees. That is $1.2 million more than all of the class members received. (They were paid zero dollars.)
Congress is trying to fix this through The Fairness in Class Action Litigation Act (HR 985 or FICALA), which passed out of the U.S. House Judiciary Committee this week. This bill will ensure that the core purpose of class actions is to compensate allegedly injured consumers, not to make lawyers rich. The bill will:
- Halt the current practice of courts paying lawyers their fees before the allegedly injured consumers are compensated.
- Limit those attorneys’ fees to a reasonable percentage of the money that actually reaches class members’ pockets.
- Require lawyers to demonstrate they can identify class members and actually deliver to them whatever money may be awarded in the litigation before cases are allowed to proceed as class actions.
- Bring into the sunshine the increasingly frequent practice of lawyers secretly selling investments in class actions.
- Stem abuses in mass tort multidistrict litigation (MDL) proceedings in which thousands of individual personal injury claims are generated by pervasive television/radio/internet advertising campaigns, then placed before a single federal judge for coordinated pre-trial activities.
- Stop the tricks that some plaintiffs’ lawyers are using to steer national cases to a few “magnet” state courts that have no relationship to the parties and allow for “junk science” that leads to unjustified jackpot verdicts.
Abuses of class actions and mass tort proceedings are a huge problem for our federal court system, for consumers, and for businesses. ILR applauds the House Judiciary Committee for passing FICALA and encourages the full House of Representatives to take a huge step toward fairness in class actions by passing FICALA.