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Posts Tagged ‘tort reform’

Tiger Joyce, President of the American Tort Reform Association, authored an impassioned op-ed for the Washington Times yesterday entitled A Class-action Blow to U.S. Manufacturing.  Joyce argues that the entire manufacturing industry is at risk if the United States Supreme Court declines to grant certiorari of the Sixth Circuit’s decision in the case of Whirlpool v. Glazer, No. 12-322, in which the court upheld class certification of claims that washing machines were defectively designed, causing chronic mold problems.  Whether Joyce’s warning is hyperbole or prescience remains to be seen, but the case does raise some interesting issues of note to class action practitioners.  The issues presented for review are as follows:

1. Whether a class may be certified under Rule 23(b)(3) even though most class members have not been harmed and could not sue on their own behalf.

2. Whether a class may be certified without resolving factual disputes that bear directly on the requirements of Rule 23.

3. Whether a class may be certified without determining whether factual dissimilarities among putative class members give rise to individualized issues that predominate over any common issues.

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A recent article by Ann Woolner of Bloomberg offers an interesting profile of class action pioneer William Lerach, who has been traveling the world and relaxing in his seaside mansion since his release from prison last year.  Lerach was convicted in 2007 for his part in a kick-back scheme in which lawyers agreed to split fees with clients in order to convince them to participate as representatives in class actions.   Whatever you might think about Lerach, it’s hard to deny his influence on the development of modern U.S. class actions.  However, the hubristic conduct that led Lerach to prison, his public lack of remorse for his actions, and the idea that he is now left to live happily ever after, will continue to make him a poster child for those who argue that our U.S.  system of class actions is in need of drastic reform.

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According to this February 8, 2011 article from Lee Ann Schultz of the Twin Cities Daily Planet, the Minnesota legislature is considering a bill that, according to its sponsors, would curtail consumer class action litigation in the state.  The bill, HF211, has three key provisions of interest, which would:

  1. limit private actions under three consumer protection statutes to actions filed by “natural persons who purchase or lease goods, services, or real estate for personal, family, or household purposes”;
  2. require proof of personal loss of money in order to support a cause of action for damages under the consumer protection statutes; and
  3. make class certification orders immediately appealable and imposes an automatic stay of proceedings at the trial court while the appeal is pending.

All three measures are similar to class action reform measures passed or at least considered by various states over the past decade or so.  However, there are at least three aspects of the proposed reforms that would make consumer protection actions in Minnesota more restrictive than in other states.

First, this bill appears to limit consumer protection actions to actual consumers.  Some state statutes broadly construe who is a “consumer” for the purposes of enforcing the consumer protection law, so that small businesses and other non-natural “persons” can sometimes qualify. 

Second, while most states have some sort of requirement that there be proof of causation of injury in a consumer protection case, HF211 would require a specific kind of injury:

No award of damages in an action covered by this subdivision may be made without proof that the person or persons seeking damages suffered an actual out-of-pocket loss. The term “out-of-pocket loss” means an amount of money equal to the difference between the amount paid by the consumer for the good or service and the actual market value of the good or service that the consumer actually received.

This language appears to restrict consumer protection claims to only those situations in which the named plaintiff and other would-be class members suffered a loss of value to the product or service purchased.  So, a claim that deceptive marketing or advertising practice caused consumers to suffer financial losses other than loss of value to the product itself would apparently be foreclosed.  The specific language may be intended to avoid the kinds of uncertainty that has plagued litigants in California following the passage of Proposition 64 in 2005, a voter-approved reform that requires proof that the named plaintiff “lost money or other property” in order to pursue a class action under the state’s Unfair Competition Law (UCL).

Curiously, the bill makes reference to a requirement that this injury be proved on an “individual” basis, even in a class action:

Each such person seeking to recover damages for violations of these sections, either in an individual action, a class action, or any other type of action, is required to plead and prove on an individual basis that the deceptive act or practice caused the person to enter into the transaction that resulted in the damages.

It is unclear whether this language, if adopted, would a) effectively prevent any consumer protection claim from being pursued on a class basis because all consumer protection claims would require individual proof of injury, b) be interpreted only as a threshold matter to insure that the class representative (but not absent class members) has standing before the case is allowed to proceed, or c) somehow introduce a new requirement of “individual” proof for all class actions, even while still allowing class actions to be pursued in some form.

Third, this bill would allow appeals of class certification decisions as of right and would create an automatic stay.  By contrast, federal rule 23(f), and the similar rules of many states allow interlocutory appeal of class certification orders only in the discretion of the appellate courts and do not mandate an automatic stay of proceedings at the trial court level while the appeal is pending.

The Bill was introduced in the state House on January 24.  It is not clear what the Bill’s chances of passage are.  Only one of the Bill’s 12 authors is a Democrat (or, for my Minnesota friends who want to be picky, DFL).

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Trial lawyers everywhere are saying a collective “I told you so” to a tort reformer who has filed a would-be class action against the City of Sacramento for its practices in towing cars parked in no-parking zones.  For more details on the story, see this entry in the Los Angeles Times’ L.A. Now Blog.

The plaintiff, Fred Heistand, is general counsel for the Civil Justice Association of California, an organization that, according to its website,

works to reduce the excessive and unwarranted litigation that increases business and government expenses, discourages innovation, and drives up the cost of goods and services for all Californians

Evidently to counterbalance the societal costs generated by his own suit, Mr. Heistand reportedly has pledged to donate any award of attorney’s fees obtained in the suit to the CJAC.

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I’m on the road this week with limited time to blog, but for those of you who are desparate for class-action related news and opinion, here are a pair of interesting op-eds about tort reform issues from The Examiner:

First, this editorial by Quin Hillyer discusses efforts in several states to pass tort reform measures that the author claims have improved state economies by curbing “jackpot justice” in “judicial hellholes.”

http://www.dcexaminer.com/opinion/columns/QuinHillyer/Class-action_lawsuit_reform_progresses_in_states_012709.html

And this staff editorial discusses an AAJ proposal to create what the author thinks will be a “lawsuit czar.”

http://www.dcexaminer.com/opinion/Good_grief_-_now_the_trial_lawyers_want_a_White_House_lawsuit_czar_012609.html

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Legal Blog Watch has a new post from Robert J. Ambrogi up today summarizing the latest edition of the American Tort Reform Association‘s annual “Judicial Hellholes” rankings for 2008-09 (see the link on the executive summary page for the full report).  Class action lawyers won’t be too surprised by the “honorees” on this year’s list.  One item of note was that Madison County, Illinois, once the standardbearer for “judicial hellholes” has stayed off the list for the second year in a row, although it’s still on the organization’s “watch list.”

I found the comments to Ambrogi’s post interesting.  One commenter questioned whether it was appropriate for Law.com to be endorsing the views of such a “radical corporate propaganda machine” as the ATRA (Legal Blog Watch is part of the Law.com Legal Blog Network).  This prompted a response from another reader that the article was appropriate in the spirit of fostering healthy debate and that the American Association for Justice (formerly ATLA) is viewed by some as being just as radical as the ATRA.  I’m not going to weigh in on that dispute, but I will be checking back to see whether Legal Blog Watch ever publishes an AAJ “generous dispensers of recompense” list.

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This evening, I came across an excellent blog article by David J. Sales, a trial lawyer with the Florida personal injury firm, Searcy Denney.  His article discusses Democratic Presidential candidate Barack Obama’s vote in favor of the Class Action Fairness Act of 2005 and the significance of that vote in demonstrating an independent streak, allowing him to counter John McCain’s claim to being the “maverick” candidate willing to break with his party.

Sales makes two insightful observations about CAFA that refute popular myths about the statute.  First, he points out that by passing a statute that shifts jurisdiction over many class action lawsuits from state courts to the federal courts, Congress created a “decidedly anti-federalist” measure, a point that calls into question any perception of the law as a triumph in conservative lawmaking.  Second, he notes that the effects of CAFA have not been been measurably harmful to consumers as many Democrats and trial lawyers warned, a point that discredits any argument that support for CAFA could only have been justified by a pro-big business, anti-consumer agenda.

CAFA has not brought about an end to class actions, as some conservatives hoped and as some liberals had feared.  Maybe for some the law didn’t go far enough in preventing class action abuse, and maybe for others it went too far in restricting access to justice.  But it did add some reasonable procedures that may at least in some cases improve the quality of decision making and prevent abuse in class actions.  Isn’t that exactly the kind of compromise that the vast majority of us who find ourselves closer to the middle of the American political spectrum would like to see happen more often?

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