Reforming Class-Action Suits
The Senate Judiciary Committee took an important step last week when it approved a bill to curb abuses in class-action lawsuits.
Class actions are an important tool for protecting citizens' rights. But currently, most class-action suits must be heard in state courts. So companies operating nationwide get haled into local courts that plaintiffs' lawyers have found particularly willing to accept class actions - and to hit out-of-state firms with costly judgments.
This situation allows state judges at the county level to issue rulings that "federalize" their decisions - effectivelywriting rules for the whole country. In recent years, for example, an Illinois court imposed Illinois law on the insurance laws or regulations of New York, Massachusetts, and Hawaii.
Class-action suits have also become an ATM for unscrupulous lawyers, who win millions of dollars for themselves but sometimes leave clients empty-handed. Last year, lawyers suing Blockbuster Video reached a settlement giving their clients coupons for free movie rentals. The lawyers pocketed $9.25 million - and Blockbuster was allowed to continue the late-fee practices that triggered the lawsuit. Plaintiffs suing Columbia House record club got nothing but a discount on future purchases. Their lawyers took home $5 million, plus expenses. Sometimes, plaintiffs lose money while lawyers get fat fees. …