Class-action attorneys have targeted bad water, poor auditing and a case of mold in an apartment complex.
They have taken on faulty tires, police strip searches and even the beer served at the Portillo's hot-dog chain in Chicago, where a promised "12-ounce" glass held only 10.6.
By enabling the many to sue as one, class-action lawsuits have reshaped the nation's economic and social landscape, upholding civil rights in some cases while delivering dollar-off coupons in others.
A Chicago Tribune analysis of more than 300 state and federal class-action settlements over the past three years shows that nearly one-third prompted reforms of improper practices--from forced overtime to the use of inferior auto parts in repairs.
But the Tribune also found that in nearly one out of 10 cases, victims received awards of little economic value, while their lawyers reaped substantial cash fees.
All too often, plaintiff's attorneys faced strong financial incentives to put their interests ahead of their clients by allowing defendants to dispose of legal problems for a fraction of the actual damages. Victims played little role in a complicated game where insiders were calling the shots.
No one has developed an objective method for separating the good settlements from the bad, and some judges admit they have trouble telling the difference.
"We never know," U.S. District Judge James Zagel remarked during a hotly fought Chicago case involving a top class-action law firm. "When I approve settlements in class actions ... it's just a big black hole."
Now Congress is mulling legislation the Bush administration supports to combat class-action abuses.
The measure pits large corporations that call the system a legal extortion racket against trial lawyers and consumer advocates who equate class action with democracy in action.
Those eager to change the rules have won the upper hand, and momentum is building for one of the biggest shake-ups of the class-action game in almost 40 years.
At the center of the debate lies a critical information gap. No government or private agency tracks these often complex and long-running cases. As a result, no one can say for sure if the number of frivolous class actions has skyrocketed, as their opponents contend.
The Tribune analysis draws on settlements reported by the Association of Trial Lawyers of America and the Class Action Litigation Report as well as court documents. It shows an array of inconsistent results.
Some 46 settlements targeted allegations of civil rights abuse, for instance, while the fraud case against Portillo's was among 18 that ended with customers getting discount coupons or vouchers for a free product or service.
Americans get involved in class actions all the time these days, often without knowing it until a confusing settlement notice arrives in the mail promising a modest amount for those determined enough to respond. In practice, victims can serve merely as a pretext for filing lawsuits.
The franchise players in the class-action game are the companies anxious to limit their exposure to costly legal judgments, and the attorneys willing to take a big gamble in exchange for an even bigger reward.
Like other lawyers who work on a contingent-fee basis, class-action practitioners get paid only when litigation concludes successfully. These large-scale cases often require a steep upfront investment of time and money, with no guarantee of any return.
That has kept the ranks of class-action plaintiff's attorneys relatively small, highly specialized and populated in the main by what David Van Zandt, dean of the Northwestern University School of Law, calls "the best business people" in the legal profession.
"It's a business," Van Zandt said. "It's all a business."
Sophisticated class-action firms treat their cases like a portfolio of carefully selected investments. Chicago law firm Much Shelist, which devotes a dozen of its 90 attorneys to class actions, rejects dozens of prospects for every one it pursues.
Even so, the practice has gotten harder to manage as it has grown over the years, said Much Shelist veteran Michael B. Hyman. Judges have become more wary, and the amount of money a law firm advances to pursue a typical case more burdensome. Beyond that, competition has intensified from attorneys who want to break into the game.
"They think this is a get-rich-quick scheme, but it isn't," Hyman warned. "It's easy to fall on your face."
Chicago class-action attorney Robert A. Holstein can attest to the risks. During the mid-1990s, his Holstein, Mack & Klein poured more than $3 million into a class action attacking the safety of Norplant contraceptives.
Holstein drew down the firm's bank loan to fund the advance work, according to court documents. On shaky financial footing, he convinced another Chicago lawyer to kick in $1 million and take over legal duties in exchange for 30 percent of the prospective fees.
Then a Cook County judge abruptly decertified the case. Holstein's law firm broke up, and its partners eventually went bankrupt. "The whole thing was a disaster," he said.
Despite such pitfalls, the lure of class action is obvious. Where corporate defense attorneys might typically bill at discounted hourly rates between $300 and $500, partners at successful class-action firms say they make nearly double that over time.
A few firms take in much greater amounts, none more conspicuously than Milberg Weiss, the securities class-action king that corporate America loves to hate.
In a career spanning four decades, senior partner Melvyn I. Weiss has recovered billions of dollars for everyone from policyholders of Prudential Life Insurance to victims of Michael Milken's junk-bond manipulation--and he has profited handsomely.
Questioned in federal court before Zagel about his firm's tax and financial statements during a trial four years ago over a business dispute, Weiss revealed that he personally earned more than $100 million between 1988 and 1998. Profits for his firm topped $680 million during the same period.
To hear Weiss tell it, the magnitude of corporate wrongdoing in recent years has compelled him to greatly expand operations.
His firm has ramped up to 650 employees and invested in the computer systems, offices and other infrastructure needed to handle an inventory of megacases, including the class action against failed energy giant Enron Corp. Now the firm is splitting in two, with Weiss planning to retain its East Coast operations, while partner William Lerach takes over the West Coast.
Defense practices booming
The growth at Milberg Weiss parallels the similarly fast-growing industry of fending off class-action attacks. Big business spreads lucrative class-action work around most of the nation's top-drawer firms.
For seven years, attorney Don Lough has specialized in handling class actions at Ford Motor Co., along with two other company-employed lawyers and several dozen who work full time for Ford at outside law firms.
The carmaker has lobbied for the class-action legislation before Congress, and Lough recites the relevant figures methodically: As of this fall, Ford faced 180 class actions, up from a mere handful a decade ago.
Of those, the issues at stake overlapped in 155, he said, reflecting the efforts of plaintiff's lawyers to compete with each other, find sympathetic judges by bringing the same matter before different courts or pursue nuanced legal theories for essentially identical facts.
Many of Ford's legal problems stem from the recall of Firestone tires in 2000 after a series of blowouts led to rollover crashes. Those incidents brought on 94 class actions against Ford from 83 law firms, including Milberg Weiss, Lough said.
"We tend to see the same lawyers frequently," he said. "We find ourselves defending the same cases over and over and over again."
Yet Ford settles only rarely, Lough said, to avoid encouraging more suits, a practice other corporations appear to be adopting despite what Lough describes as the astronomical cost of mounting an aggressive defense.
Few corporations advocate eliminating class action altogether, however. In fact, business organizations routinely use the legal device on each other. Pension-fund managers have gone after companies that cheat shareholders, corporate customers have sued suppliers for fixing prices and, in one landmark case under way in Florida, the nation's doctors have accused the biggest health insurers of systematically cheating them.
To hear some of the players tell it, the case against the HMOs shows class action at its best. But the case also illustrates how assessing the outcome of these complex cases is anything but black and white.
This legal drama started to unfold in 1999, after managed care already had attracted a series of lawsuits.
The separate claims from HMO patients were consolidated under celebrity class-action lawyers David Boies of New York and Dickie Scruggs of Mississippi. The stock prices of major health insurers plunged on Wall Street as the flamboyant Scruggs, a big winner in litigation against the tobacco industry, predicted "ruinous" judgments ahead.
A smaller, related case concerning the complaints of doctors against HMOs fell to a team of lawyers co-headed by Archie Lamb Jr., a low-profile class-action specialist from Alabama.
The patients accused the HMOs of cheating them by denying sought-after medical services, while the doctors said the same companies were refusing to pay legitimate bills. In both cases, the health insurers used automated methods to save themselves money, the lawsuits alleged.
Given the commonality of the complaints, and the vast numbers of victims, this was just the type of case that could be handled most fairly and efficiently through class action, the plaintiffs argued.
But unlike other lawsuits, class actions require a judge to formally certify them before they can proceed, and U.S. District Judge Federico Moreno of Miami dealt a stunner.
Moreno refused to approve the class action brought on behalf of the patients, saying the damages were too diverse to be resolved in a single matter. Although the patients were free to pursue individual claims, Scruggs and Boies walked away with nothing after investing millions of dollars in legal time and expenses.
Moreno made the opposite decision in the case involving doctors, saying the class action could proceed because each company used similar computer programs to carry out the alleged fraud.
In one common maneuver known as "downcoding," for example, the insurance companies automatically changed billing codes to reflect lower-priced services than those actually provided, according to the lawsuit. A variation known as "bundling" involved combining the codes for two services, then paying the doctors for one.
The HMOs disputed the allegations. They are appealing Moreno's decision to certify the case, which a spokesman calls "an inappropriate and improper use of class action."
Nevertheless, Moreno's decision put enormous pressure on the companies to settle.
Aetna breaks ranks
The turning point came in May, when Aetna Insurance Co. broke ranks with the other HMOs to craft a sweeping deal covering at least 800,000 practitioners nationally.
Aetna agreed to pay the doctors $100 million--much less than they say they lost--and give another $20 million to a new foundation for improving health care.
Other benefits come in the form of clearer rules, quicker payments and less red tape, which should save doctors hundreds of millions of dollars in the future, their attorneys say.
Billing systems become subject to standardized pricing, strict deadlines and independent reviews. Doctors obtain the right to decide what services are medically necessary, with cost considerations only influencing the decision if a cheaper alternative is at least as likely to produce equivalent results.
Not everyone applauded.
Some of Aetna's alleged victims complained that the deal provided too little money for doctors and too much for the lawyers.
The judge conceded that $50 million in fees for Lamb and his team "may appear on its face as exorbitant." But three years of work by 152 attorneys from 26 law firms justified it, he ruled.
Another defendant, Cigna, settled the case along similar lines and agreed to pay $55 million to the plaintiff's attorneys. Eight other large insurers in the case, meantime, are preparing for a September trial.
By that time, the battle over class action brewing on Capitol Hill could well be over.
Senate bill falls short
In late October, class-action legislation failed by one vote in the U.S. Senate, the outcome decided as the final moments ticked away for lawmakers to cast their ballots on a procedural motion.
Sen. Mary Landrieu, a Louisiana Democrat, deliberately voted last to emphasize that her swing vote against the bill could be obtained with some relatively minor changes aimed at preserving victim's rights, she said afterwards. "My vote was not that hard to get."
Within a couple of months, Republican supporters of the measure had won over Landrieu and several other key Democrats.
As in its earlier incarnation, the compromise they hammered out would push many cases from state court into federal courts, where corporations expect more favorable treatment.
Some legal scholars predict it merely will shift the playing field, further dragging out class-action proceedings and clogging the federal dockets. At best, they say, it provides only modest new safeguards against some of the most visible practices, such as settlements that yield nothing but coupons for the victims while their lawyers get cash.
The legislation remains no sure thing. Opponents threaten to load it with unrelated amendments. On Tuesday, germane amendments led to the scuttling of a GOP-sponsored bill that would have given gunmakers liability protection against lawsuits.
But the so-called Class Action Fairness Act has wider public support, its advocates say, propelled primarily by examples of lawsuits gone wrong. And those keep coming.
Barely a month ago, the federal Appeals Court in Chicago overturned the settlement of a class action alleging that Fleet Mortgage Corp. gave telemarketers confidential information about its customers.
The deal would have provided some victims with cash, but most only with "emotional satisfaction," while awarding the plaintiff's lawyers $750,000, influential Judge Richard Posner noted in an 11-page ruling.
"Would it be too cynical to speculate that what may be going on here is that class counsel wanted a settlement that would give them a generous fee, and Fleet wanted a settlement that would extinguish 1.4 million claims against it at no cost to itself?" Posner wrote.
The ruling came as another case that has attracted even more criticism continues making news in an unlikely stretch of Illinois.
When it came under scrutiny two years ago, this case helped establish rural Madison County as Exhibit A in the political effort to push nationwide class actions before federal judges.
Playing out in the courtrooms of Granite City, Edwardsville and downtown Chicago, it has cast doubt on the fairness of state courts and the motivations of plaintiff's attorneys in the class-action game.Copyright © 2014, Los Angeles Times