Class Action Watch executive director Lawrence W. Schonbrun has an opinion piece in yesterday’s Huffington Post entitled The Class Action Mess in a Nutshell. In the article, he questions whether the same “weapons of mass destruction” label that Warren Buffet gave to financial derivatives should apply equally to class action lawsuits. As an example, he offers a recent lawsuit against a mortgage lender that had to settle a lawsuit for millions rather than face billions in potential liability for statutory penalties under the Fair Credit Reporting Act (FCRA). The allegation against the company had been that it had sent out a mass solicitation that failed to give a sufficiently “conspicuous” statutorily-required notice about a consumer’s right to prevent certain uses of his or her credit information.
As noted in this February 14 CAB entry, class actions seeking statutory penalties under FCRA and similar statutes have been a controversial issue over the past few years. Some say that it is unfair to subject a company (and, by implication its employees and shareholders) to potentially “annihilating” liability for acts that have caused no material injury to the vast majoirty of a class of consumers. Others say that if class actions are to be prohibited in cases seeking penalties under these statutes, it is up to Congress to say so.
I will leave it up to the reader to decide whether these types of class actions portend an economic nuclear holocaust.