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Purpose of Class Actions
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“When used correctly, class actions allow courts to
resolve in one action many smaller, similar claims that
might otherwise remain unheard because the cost of any
particular suit would exceed the possible benefit to the
claimant.”
(KRC:
Hantler, “Seven Myths…”, p. 12)
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“When used incorrectly, class actions can provide
incentives that pervert the civil justice system:
injuries need only be perceived, not real; attorneys
hire plaintiffs, they are not hired by plaintiffs;
settlements are driven by cost, not justice; and the
plaintiffs’ attorneys receive money, plaintiffs may
not.”
(KRC:
Hantler, “Coupon Settlements…”, p. 1343)
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“Class actions also allow defendants to focus their
energies on resolving all claims in one lawsuit, and
prevent courts from being flooded with duplicative
claims.”
(KRC:
Hantler, “Seven Myths…”, p. 12)
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“Class action lawsuits were originally intended to
encourage more efficient utilization of the legal system
by joining together similarly aggrieved parties into a
common legal claim. But with the relatively lax
certification standards extant in many states, class
actions have become a tool for litigating cases that
might otherwise lack merit.”
(www.namic.org,
State and Legislative Resources, “Tort Reform: An
Overview of State Legislative Efforts to Improve the
Legal System”; Class Actions; as accessed on September
27, 2002)
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“Class
actions were conceived as an expeditious way for people
with similar grievances to join in a common suit and get
compensated for injuries. But class actions have
evolved into a favored means for Trial Lawyers, Inc. to
launch predatory assaults on businesses and large
institutions, often in the name of clients who don’t
even know they are being represented.” (KRC:
Manhattan Institute, Trial Lawyers, Inc., p.
8)
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Trends
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Of the class action lawsuits filed in 1995-1996, 58 percent were
filed in state courts and 42 percent were filed in federal courts.
(www.instituteforlegalreform.com)
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“It is believed that a key contribution to increasing tort
costs is the rise in class action claims. From 1997 to 2000,
just a three year period, class actions filed against American
companies in federal court increased 300%, and class actions
filed in state court increased 1,000%.”
(KRC:
Nicolaides, “U.S. Tort Reform and the Implications…”, July
2004, p.10, citing Jim Copland, “The Tort Tax”, Wall St.
J., June 11, 2003)
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The 327 securities class action lawsuits filed in 2001
represented a 60 percent increase over the number of filings in
2000, and the companies sued in 2001 lost more than $2 trillion
in market capitalization, a 157 percent increase over losses
suffered by the 204 firms sued in 2000.
(www.instituteforlegalreform.com)
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A 2004 study by two law professors explored the relationship
between attorneys’ fees and recoveries in class action
litigation. The data was based on published opinions in state
and federal class actions from 1993 to 2002 that specifically
discussed the magnitude of the attorneys’ fees. Some of the
study’s findings include:
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The average class action recovery over the ten-year study period
was $138.6 million
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The average recovery of the top 20% of cases was $613 million
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The average recovery of the top 10% of cases equaled $1.08
billion
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Looking at the cases in the study, the aggregate class action
recoveries averaged $5.13 billion per year
(George L. Priest, “What We Know and What We Don’t Know About
Modern Class Actions: A Review of the Eisenberg-Miller Study”,
Manhattan Institute for Policy Research, Civil Justice Report
No. 9, February 2005)
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