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The cutthroat world of class action
law has been exposed as never before by Milberg Weiss, Bill
Lerach and Richard "Dickie" Scruggs' guilty pleas. But these
rich and powerful plaintiffs' lawyers didn't come to grief for
what they did to innocent defendants - no, it was what they did
to get an edge over their fellow plaintiffs' attorneys in the
class action industry.
The Milberg Weiss/Bill Lerach scheme
of secret illegal payments to a stable of Johnny-on-the-spot
plaintiffs was designed to beat fellow plaintiffs' lawyers to
the courthouse. Then the first-in-the-door lawyers could control
the case and eventually carve up the settlement dollars.
Scruggs' plea came after he tried to
bribe an honest judge in a scuffle over settlement dollars with
the coven of plaintiffs' lawyers who piled on Hurricane Katrina
lawsuits against insurers.
Lest you think we are looking at
only a few icons gone bad, note that when it comes to
plaintiff-hiring, San Diego's Lerach claimed that "Everybody was
paying plaintiffs ... it was an industry practice."
With this mix of competitive blood
in their veins, it's not surprising that the plaintiffs' class
action lawyers, once they lock onto their defendant targets, aim
to win every possible procedural advantage over their
adversaries and fight on every front to preserve that edge.
It should be no added surprise that
the class action industry is lining up to smother the latest
legislative attempt to bring fairness and balance to class
action litigation in California. The proposal - in Assembly Bill
1905, authored by Assemblyman Anthony Adams - would allow
defendants as well as plaintiffs to immediately appeal a judge's
decision to certify a class. In California, only the plaintiff
has a right to appeal the denial of class certification. For
plaintiffs' lawyers, this is a wonderful double standard.
Once a class is certified, the rest
of California's pro-plaintiff class action rules kick in.
Prudent defendants often opt to settle rather than pay for a
potentially much more costly trial.
California's class action law ranks
46th in the nation in fairness and reasonableness, according to
an annual ranking of state civil justice systems by the U.S.
Chamber's Institute for Legal Reform. Simply put, California has
the fifth-worst class action law in the country. It's time for
the Legislature to install clarity and balance and make this
part of the civil justice system for all Californians. Until it
does, consumers will continue to pay for these lawsuits through
higher prices of everyday goods and services.
The plaintiff class can come up
short in this state as well. In California, there is little
incentive for a plaintiff's lawyer to ensure the money gets into
the pockets of the class members he purported to be fighting
for. Often, unclaimed class action money ends up in a cy pres
windfall distribution to an organization that claims to be doing
good for the class members, who aren't getting their money.
The New York Times noted last fall
that the practice of steering settlement money to organizations
"only tangentially related to the subject of the lawsuit" is
becoming more popular. According to one former federal judge,
the practice "is not a true judicial function and can lead to
abuses."
The Times article described a case
in which thousands of fashion models received a $22 million
settlement from agencies they said violated laws against
price-fixing. Fewer than 5 percent of the models claimed the
settlement money. The judge, against a federal appeals court's
suggestion, distributed $1 million to an eating disorder program
and $500,000 to a substance abuse program, with the theory that
it would indirectly help the models.
Senate Bill 1202, authored by Sen.
Tom Harman, will help ensure that settlement funds are not
misused. The bill allows judges to withhold part of the
plaintiff's attorney's fees until class members have been
contacted and have received their share of the settlement.
A review of class action lawsuits
filed in California courts over the past three years shows the
state is still a happy hunting ground for class action lawyers,
despite the 2005 federal class action reforms designed to move
many class action cases into federal courts. The 2005 federal
Class Action Fairness Act has begun to shift national class
actions into federal courts, but plaintiffs' lawyers have strong
incentives to avoid the act if there is any way they can file
and keep their case before California judges and juries.
The study of six major California
counties, commissioned by the Civil Justice Association of
California, detected 3,400 class actions filed in superior
courts from July 2004 through June 2007. That's nearly five new
class action suits every day the courthouses are open. Nearly
half of the lawsuits - 47 percent - involve employment laws; 36
percent are in the consumer action category.
California continues to be a hot
spot for state-court class action lawsuits. Our unbalanced rules
are sending a message every day that California is a dangerous
place to hire employees and do business. This is a good time to
eliminate drags on our state's economy. Now is a prime time to
enact these two improvements to California class action law.
John H. Sullivan is president of the
Civil Justice Association of California in Sacramento, a
nonprofit association representing businesses, professionals and
local governments. Information on the association and civil
justice issues is at www.cjac.org.
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