- As part of his ongoing effort to protect consumers from unscrupulous lawyers, Sen. Chuck Grassley today held a hearing to examine abuse of the class action lawsuit system by attorneys who line their own pockets at the expense of aggrieved consumers. Grassley also has introduced a bipartisan bill to curb such abuse and ensure that plaintiffs stand to benefit in a meaningful way when they choose to be part of a class action.
"The goal of this hearing, and the bill I've introduced with Sen. Kohl, is to work for a process that helps, rather than uses, the people who are meant be protected when a class action lawsuit is filed. The system today benefits lawyers more than average class members," Grassley said.
During today's hearing, Grassley also questioned comments from lawyers who claim the plaintiff class is getting the best value for their case by winning in settlement a bunch of coupons. He pointed to the fact that attorneys negotiate a settlement valued by the court at millions of dollars and the members of the class action get coupons which have very little redeemable value.
Grassley said in order to make use of the coupons, many times consumers are forced to spend more money with the company that ripped them off in the first place. Additionally, the terms under which the coupons can be used are often so restrictive that they're basically useless. In contrast, the lawyers get paid in cash. So, he asked, "If coupons are good enough for the clients, why aren't the lawyers paid in coupons, too?" Witnesses have testified at previous congressional hearings that the coupons allow the class lawyers to claim that a settlement is worth much more than it is to claim higher attorneys fees.
To address this issue and other problems in the process for consumers, earlier this year Grassley and Sen. Herb Kohl of Wisconsin introduced The Class Action Fairness Act of 1999. Their legislation includes the following changes principles:
- The Principle of "Plain English" - requires proposed settlements sent to class members to be written in easily understood terms, and include the amount and source of attorney's fees. This helps class members understand their rights and the terms of the settlement.
- Notice to State Attorneys General - requires notification of state attorneys general of any proposed class settlement that would affect residents or their state, giving them an opportunity to object to an unfair settlement on behalf of the citizens of their state.
- Attorneys' Fees Based on Actual Damages - provides that class action attorneys' fees are to be based on a reasonable percentage of damages actually paid to class members, or based a reasonable hourly rate. This would discourage settlement schemes that enrich class lawyers while leaving class members with little of value.
- Removal of Multistate Class Actions to Federal Court - relaxes removal requirements for class action lawsuits from state court to federal court, to eliminate gaming by class lawyers to keep cases in state courts which permit class actions to proceed with little or no scrutiny.
