Friday, June 13, 2003
Copyright © Las Vegas Review-Journal

EDITORIAL: A real class act

Bill would help rein in lawsuit lottery

On Thursday, the House of Representatives approved a necessary step in the struggle to prevent trial lawyers from bankrupting America: The Class Action Fairness Act.

The bill, which passed 253-170, would slow the practice of jurisdiction-shopping -- which takes place when trial lawyers find some deep-pocketed company or industry to sue, troll for an injured "class," and then pick a state where they're likely to find sympathetic judges or juries to compensate their "victims" ... all the while making sure attorneys pocket the vast majority of any damages that might be awarded.

This measure -- which the Bush administration supports -- would limit future treasure hunts by requiring any suit to be heard in federal rather than state court if fewer than one-third of the members of the "class" resides in the same state as the primary defendant. At least $5 million in damages must be at stake before such lawsuits could bypass state courts.

The bill would also make sure lawyers don't get too rich at the expense of victims, by letting judges review settlements which give defendants "coupons" (good for, say, merchandise from the company that was sued) rather than cash awards, when lawyers in class-action suits are collecting on average $1,000 an hour in legal fees.

In a Wall Street Journal commentary published Wednesday, Manhattan Institute legal scholar Jim Copland noted that the class action reform bill should reduce the massive costs the tort system imposes on the U.S. economy. Studies by independent consulting firms and the president's Council of Economic Advisers conclude that more than 2 percent of the nation's Gross Domestic Product -- more than $200 billion a year -- is lost in the black hole of litigation.

And tort lawsuit costs are increasing by double-digit margins annually. Mr. Copland reported that the volume of class-action lawsuit filings is staggering. Between 1997 and 2000, U.S. corporations reported a 300 percent increase in federal class-action suits and a 1,000 percent jump in state actions filed against them.

Since jurisdiction-shopping makes it feasible that an enterprising attorney can find a jury somewhere to convict just about any "rapacious" corporation, many innocent companies find it makes more sense to pay the lawyers' extortion money and settle.

"These suits are one of the most grossly abused parts of the American system of justice," Rep. Deborah Pryce, R-Ohio, said on Thursday. "We have seen a deluge of frivolous lawsuits designed to coerce quick and often unwarranted settlements, often to enrich only a few."

Amen to that. The Senate should jump on board and pass a similar measure soon.