If the plaintiffs' bar were considered an industry, with annual revenue of almost $40 billion, it would be twice the size of Coca-Cola and 50% larger than either Intel or Microsoft. (1) The large revenue has contributed to ever-higher tort litigation costs, especially for corporations. As a whole, costs resulting from tort litigation in the United States exceed $250 billion a year; (2) tort claims against corporations account for $161 billion of those costs. (3) Though many of these cases have merit, many commentators suspect rampant abuse in the system. Specific to consumer fraud claims, Professor Scheuerman has noted that many consumer fraud class actions provide negligible relief to the plaintiff class. (4) For instance, in one case plaintiffs were awarded coupons for free bottled water as a result of a finding that they were deceived in that the water they purchased was not "spring water" as it was advertised. (5) As relief, the plaintiffs received coupons for something they alleged they did not want in the first place. The attorneys, on the other hand, received $1.35 million under the settlement agreement. (6)
Many scholars have argued more generally that the class-action system in the United States is broken and allows rampant abuse. (7) one of the concerns raised in commentary is the belief that "the class action was never designed to serve as a free-standing legal device for the purpose of 'doing justice,' nor is it a mechanism intended to serve as a roving policeman of corporate misdeeds or as a mechanism by which to redistribute wealth." (8) Essentially, critics argue the class action mechanism often results in "[u]nwarranted [l]itigation" and "[j]udicial [b]lackmail," influences litigation outcomes, and allows plaintiffs' counsel to receive extraordinary benefits while the class members receive little. (9) Victor Schwartz has described the leverage created by class actions as "legal extortion" and "legal shakedowns" because he believes that class action attorneys, by bringing large lawsuits regardless of merit, drive down stock prices and force settlements. (10) Judge Richard Posner also has noted the difficult choice facing a corporate defendant--either risk the company on a single jury trial or settle regardless of any legal liability. (11)
These commentators believe that the tort system should be striving to make plaintiffs whole after they have suffered a wrong, not serving as a regulator of the public good. Though the commentators' claims are strong, if not extreme, there is no doubt that waste results when major corporations have to spend millions a year to defend massive class actions based on spurious allegations. (12)
Class actions arising under consumer protection statutes are an area of particular concern. This is due in part to the widespread use of these claims--approximately one-third of class actions against business defendants contain a consumer claim. (13) Many consumer protection statutes also allow for relaxed proof--compared to common law fraud claims--on issues like reliance and intent. Essentially, these statutes often purport to view a violative action or practice as the harm, irrespective of any actual damage to an individual.
That said, a common thread in the judicial application of consumer protection statutes (commonly referred to as consumer fraud statutes) has been for courts to require a plaintiff to show something more than only the presence of a deceptive or unfair act; some courts have required a level of causation to be established between the complained of practice and an injury. Most statutes, however, do not expressly require that the plaintiff prove any reliance, and the courts generally have not required it. Difficulty arises, though, when a class action is brought under a consumer protection statute by plaintiffs who were allegedly injured by a deceptive practice but who either did not rely on the practice or relied on it in different ways. …