ACTION ON LAWSUITS

The easiest story to write about class-action lawsuits is the one in which a huge settlement for some minor glitch in a product results in a couple of dollars or perhaps a coupon for each plaintiff and several million dollars for their lawyers. Poland Spring is one such recent target. The stories are easy to write because these cases are often a gross abuse of the law and because there are dozens of them out there.

Congress has been hearing these stories for years and for years has tried to make this outcome less likely – mostly by changing the venue from state courts to less generous federal court and loosening the appeals process – but has been stopped by the obvious problem that most class-action lawsuits are legitimate and making them harder to win is not necessarily in the interest of justice. Many of these suits have been filed because consumers have been harmed directly or through environment hazards or hurt financially for the sake a corporation’s profits, and they are an important and efficient way to resolve the claims of numerous, sometimes thousands, of people in a single, fair verdict.

The current suit against IBM over the use of toxic chemicals in its “clean rooms” may be the latest example – hundreds of workers suffered from cancer and their children had severe birth defects allegedly because of chemicals IBM would or should have known were dangerous. Still, other anecdotes are appalling: huge awards for minor inconveniences that may take a lot of work to litigate but improve life minutely and certainly, from the number of suits being filed, fail to deter corporate misbehavior.

Sen. Dianne Feinstein of California may have found the proper compromise through an amendment to the Class Action Fairness Act of 2003, sponsored by Sens. Charles Grassley of Iowa and Herbert Kohl of Wisconsin. She would keep more of the cases in state court, based on the number of plaintiffs from the same state and whether the plaintiffs are from the same state as the defendant. And she would leave up to the discretion of federal judges in many cases whether the case is primarily a state issue or a national one and assign a venue based on this decision. Her proposal has the relieved support of Republicans.

The tightening of the proposed act through this amendment is important because, clearly, some members of Congress are using the need for reform to allow associates and generous campaign donors to escape or delay punishment for years. The primary such provision is creatively referred to as the Ken Lay loophole, which would allow a defendant retroactively to delay a suit. By applying to federal suits that have yet to be certified, this amendment would give Enron’s former chairman and other corporate defendants a free, if temporary, pass on clear wrongdoing.

The Senate should reject this provision, but should find that Sen. Feinstein’s moderating amendment of the bill is an acceptable compromise. After several years of debate over this issue, it is time for Congress to reach agreement and this amendment is likely the most reasonable around.