Threat to Class Actions

Some lawyers representing consumers and injured workers in large class actions have taken advantage of their clients. No big shock there. They have paid themselves multimillion-dollar fees and, in doling out settlement funds, overcompensated workers with minimal injuries, often at the expense of those more severely injured. However nasty these excesses, they do not mean that class-action lawsuits should be severely limited, as proposed by Sens. Charles Grassley (R-Iowa) and Herb Kohl (D-Wis.).

Class actions allow people with similar injuries to band together, enabling those of modest means to seek redress for environmental damage, protect the public’s health and improve workplace conditions. As a result of one suit brought by environmentalists in the early 1990s, California public health officials began monitoring blood lead levels in poor children, as required by law. A Pennsylvania case led to substantial settlements to patients who had been referred by their HMO to a fraudulent, unlicensed physician.

A Grassley-Kohl bill working its way through the Senate has some prominent selling points -- it sets fairer rules for distributing damage awards and would curb high legal fees -- but these are window dressing for the bill’s real goal of blocking and delaying class actions.

The measure, S 274, would transfer most class actions filed in state courts to federal court and force these cases through new procedural hoops. State judges and elected officials like California Atty. Gen. Bill Lockyer oppose the bill, saying it undermines the sovereignty of state courts. S 274 faces a vote Thursday in the Senate Judiciary Committee.

It is no surprise that corporations, including HMOs, drug makers and insurers, are prominent supporters of the bill. Anxious to get trial lawyers off their backs, they argue that transferring suits into federal courts would hobble lawyers who “shop” for a state with a lenient negligence standard in which to file their cases, or for a county known for sympathetic judges or generous juries.

Yet if the Grassley-Kohl bill passes, the federal judge in many cases will have to apply the law of the state where the case was filed, so shopping around will not be deterred. Federal judges would have to brush up on unfamiliar state law, along with juggling an increase in their caseloads with no extra resources. That’s why Chief Justice William H. Rehnquist, no strong friend of consumer or environmental groups, opposes the legislation.

A better solution to frivolous suits and lawyer shakedowns is for state judges to impose tighter scrutiny from the start -- on whether the suit qualifies as a class action to begin with, what deals the lawyers have cut for themselves and how the injured or defrauded clients would be paid. State judges already have this authority. They need to use it more effectively.