Center for America

Speaker's Resource: 7. Class Actions, p 4

 

 

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Key Reference Citations (KRC)

 

Forum Shopping

  • “Forum Shopping” describes the practice by which plaintiff’s counsel files a class action in a jurisdiction which has little connection to the matter but which is likely to be favorable to the plaintiff’s position. These jurisdictions are often referred to as “Magic Jurisdictions” by plaintiffs’ counsel and “Hellhole Jurisdictions” by the American Tort Reform Association and other tort reform advocates.  (Editor's commentary)

  • “The increase in American tort litigation is further facilitated by what is termed ‘forum shopping’.  This term describes the process by which some plaintiffs’ attorneys attempt to file lawsuits in jurisdictions that are friendly to the interests of plaintiffs and, by reputation, are home to juries that award exorbitant damages.” (KRC: Nicolaides, “U.S. Tort Reform and the Implications…”, July 2004, p.10)

  • “The explosion in the number of class action lawsuits filed in state courts, many of which have resulted in the imposition of disproportionate punitive damages, has created a crisis in the nation's judicial system. Much of it derives from the ability of plaintiffs' attorneys to manipulate class certification rules to place cases in state court systems that are favorable to plaintiffs and to avoid federal jurisdiction of many large interstate cases.” (www.businessroundtable.org Task Forces and Issues, Civil Justice Reform, Issue: Class Action Reform, as accessed on September 21, 2005)

  • Class action plaintiffs also are finding the St. Louis area and Jackson County to be hospitable forums. For instance, when Missouri lawyers filed class actions questioning the cholesterol pill Vytorin’s effectiveness and arguing that their clients paid more for it than they should have, they filed four lawsuits: three in St. Louis area courts and one in Jackson County.  Additionally, Jackson County provided the forum of choice for a dubious class action lawsuit against Coca Cola, alleging the company misled consumers into believing that fountain Diet Coke is the same product as bottled Diet Coke when, in fact, the fountain drink uses an additional sweetener.  (Aaron Bailey, Missouri Joins Flurry of Suits over Vytorin, Daily Rec. (Kansas City, Mo.), Jan. 30, 2008, at 2008 WLNR 1894259)

Hellhole Jurisdictions

  • Another rampant problem, forum shopping occurs when “litigation tourists” are guided by plaintiffs’ attorneys into filing lawsuits in what the American Tort Reform Association has called “Judicial Hellholes,” and others have referred to as “magnet courts” or “magic jurisdictions.” Wealthy personal injury lawyers often file claims in courts that they perceive as providing them with the best odds of winning an extraordinary verdict before a favorable judge. These are courts that consistently show a systematic bias against defendants, particularly those located out of the state. They have become powerful magnets for out-of-state plaintiffs that have absolutely nothing to do with a local jurisdiction: the plaintiff was not injured in the jurisdiction, never lived there, and does not work in there.  (www.centerforamerica.org , Op-Ed, Victor Schwartz and Cary Silverman, “Why The Lawsuit Abuse Reduction Act Needs Your Support”, February 23, 2005)

  • Plaintiffs’ attorney Dickie Scruggs, architect of the ground breaking tobacco litigation and recipient of one of the largest contingent fees ever paid class action litigation, characterizes “magic jurisdictions” as venues “where the judiciary is elected with verdict money” and “[t]he trial lawyers have established relationships with the judges.” In these courts, “it’s almost impossible to get a fair trial if you’re a defendant” and [a]ny lawyer fresh out of law school can walk in there and win the case, so it doesn’t matter what the evidence or the law is.” (KRC: Hantler, “Seven Myths…” p. 13, quoting Richard Scruggs, Asbestos for Lunch, Panel Discussion at the Prudential Securities Financial Research and Regulatory Conference (May 9 2002), in Industry Commentary (Prudential Securities, Inc., N.Y., New York) June 11, 2002, p. 5) 

  • “Consider Madison County, Illinois. This rural county is home to Granite City and Alton, both sleepy towns of about 30,000 souls. Yet more class-action lawsuits have been filed per capita in Madison than any other county in the United States.” (KRC: Hantler, “Seven Myths…”, p. 14, citing John H. Beisner & Jessica Davidson Miller, They’re Making a Federal Case Out of It…In State Court, 3 Civ. Just. Rep. 1, 8 (Manhattan Inst. Center for Legal Policy, 2001)

  • Rulings in Judicial Hellholes often have national or interstate implications because they involve parties from across the country, can result in excessive awards that wrongly bankrupt businesses and destroy jobs, and can leave a local judge to regulate an entire industry.  (KRC: JH, The Making of a Judicial Hellhole, page 1)

     

Coupon Settlements and Other Nonmonetary Awards

  • “Not only do class actions often address specious “injuries”, they often cheat the very clients they purport to serve… Many class-actions result in near-worthless coupons that are redeemable only if applied to a new purchase.” (KRC: Hantler, “Seven Myths…”, p. 13)

  • “The primary problem with coupon settlements is that it [sic] flies in the face of the sound precepts upon which our capitalist economy is based. Rather than punishing a wrongdoer for its wrongful actions, it instead rewards that wrongdoer with additional business from the very persons it caused harm.”  

    • (KRC: Hensler, “Class Action Dilemmas…”, p. 33, citing Stephen Gardner, Law Offices of Stephen Gardner, quoting Dudley Oldham, Lawyers for Civil Justice, 4 Working Papers of the Advisory Committee, supra note 13, at 505, as follows:  John P. Frank, “Response to 1996 Circulation of Proposed Rule 23 on Class Actions: Memorandum to My Friends on the Civil Rules Committee,” (Dec. 20, 1996), in Administrative Office of the U.S. Courts, 2 Working Papers of the Advisory Committee on Civil Rules on Proposed Amendments to Rule 23 266 (1997) (hereinafter Working Papers of the Advisory Committee). Another member of the 1966 Committee, William T. Coleman, rejects the implication that the 1966 Committee intended to facilitate “private attorneys general” class actions for the purposes of regulatory enforcement: “I respectfully submit that back in 1966, that was not an intended purpose of Rule 23(b)(3). If there is interest in deputizing all attorneys everywhere to enforce our laws, that’s a matter that should be decided by Congress, not through the class action provisions in the Federal Rules of Civil Procedure.” 4 Working Papers of the Advisory Committee, at 456. The use of private class actions for regulatory enforcement is discussed further in Chapter Three.)

  • “[R]edemption rates in class action coupon settlements, without the presence of a strong market maker, mirror the redemption rates of consumer coupons issued as marketing tools by corporations – around 2%.  Yet, attorney awards, paid in cash, all too often rely on grossly inflated projections of coupon redemption, ignoring the overwhelming empirical evidence that shows persistently puny class action coupon redemption rates.” (James Tharin, Comments Prepared for The Federal Trade Commission and The Georgetown Journal of Legal Ethics, Protecting Consumer Interests in Class Actions, September 13-14, 2004) 

  • “The use of settlement coupons is often encumbered with conditions and red tape: The Washington Post  found that of 96,754 coupons issued as part of the settlement of a case against one big financial services company, only two were redeemed.” (KRC:  Olson, The Rule of Lawyers, p. 89, citing Joe Stephen, “Coupons Create Cash for Lawyers,” Washington Post, November 14, 1999)

  • “In another case what was billed as a $10 million settlement fund actually paid out only $60,000.”  (KRC:  Olson, The Rule of Lawyers, p. 89)

 

Examples of Coupon Settlements

  • “Many class-actions result in near-worthless coupons that are redeemable only if applied toward a new purchase. In one case involving ITT Financial Corporation, only 2 coupons out of 96,754 were ever redeemed.” (KRC: Hantler, “Seven Myths….: p.13, See Barry Meier, Math of a Class-Action Suit: “Winning” $2.19 Costs $91.33, N.Y.Times, Nov. 21, 1995, at A1)

  • “Another class action against Carnival Cruise Lines, for the alleged inflation of port charges, awarded former passengers with coupons worth $25 to $55 to be used for a future cruise, or redeemed for cash at 15 to 20 percent of face value. The class action plaintiffs’ counsels were set to receive $5 million in attorney fees as part of the settlement.” (KRC: Hantler, “Seven Myths….: p.13, See Carnival to Give Vouchers Under Settlement,  CNN.com,www.cnn.com2001/TRAVEL/NEWS/03/15/carnivalsettlement.ap/index.html)

  •  “Another class action settlement arose from allegations that Ralph Lauren inflated the suggested retail price on its Polo line at outlet stores. The take? Plaintiffs’ lawyers walked away with $675,000 in fees. Their clients—the actual customers—can apply for 10 percent-off coupons (assuming they still have receipts from purchases made between July 15, 1991, and January 10, 2000).”  (KRC: Hantler, “Seven Myths….: p.13, See Susan Tompor, Polo Has a Deal for Buyers of Overpriced Ralph Lauren Outlet Goods, Detroit Free Press, Feb. 9, 2000)

 

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Please Note:  The material presented in this Speaker's Resource has been collected from a wide variety of sources.  You are welcome to use this material for quotations and factual material in your speeches, presentations and articles.  To the best of our ability, we have provided original citations so that you can document the comments you use.  If you become aware that any of the citations or facts presented in this collection are inaccurate or outdated by newer information, please send an email to Speakers@lawexec.com to tell us so that we can update this material.  The materials cited are generally copyrighted by the original author and when you quote from their material, you should include the original attribution to acknowledge their role as authors.  Original material © 2005 American Justice Partnership.