By Les Blough (Axis of Logic). Rania Khalek (Common Dreams)
Axis of Logic Commentary
Actually, the story below involves not one but two examples of corrupt legislation in the United States. The first is explained by the report, i.e. laws that are written and court and arbitration decisions made in service to corporations. The second, not discussed in the report is about class action suits that may favor lawyers far more than the clients they serve. In this commentary, we take the Common Dreams analysis a step further by looking at the gains and losses of lawyers and their clients in class action lawsuits.
Class action lawyers receive a percent of the amount won in the law suit but that percentage is determined by a complex system that few except lawyers themselves can understand. A report by Public Citizen based on a study of 370 class action lawsuits settled between 1993 and 2002 showed that lawyers fees are different in state and federal courts and also differ on a system of "fee-shifting" and "non-fee shifting cases" and other complexities:
"Attorneys’ fees as a percent of recoveries were higher in federal rather than state court settlements. This is the opposite of the “anything goes” attitude that’s supposed to prevail in state courts, according to the Chamber’s Institute for Legal Reform. Fees were about 20 percent in federal courts and 19 percent in state courts for nonsecurities, non-fee-shifting cases and 38 percent compared to 32 percent in fee-shifting cases"
So a lawyer fee in a class action law suit can range between between 19 and 38 percent of the settlement, depending on the court and other complex issues. If in a class action suit for example where the defendent ends up paying say, $10,000,000, the lawyer at 20% receives $2 million. Hmmm, that leaves an impressive $8 million for the plaintiffs, i.e. sounds impressive until you divide it up among tens or hundreds of thousands of members in a nationwide lawsuit. In the Aaron's Computer Spying Class Action Lawsuit an estimated 50,000 consumers were eligible to join the action. In March, 2011, a sex-bias case being considered by the U.S. Supreme court for approval for class action against Wall Mart, could end up being shared by be as many as a million people - that is if the retail giant were to be defeated in court. Do the math. Public Citizen reports that the median recovery for plaintiffs in a class action was about $13 million in 1993 and about $15 million in 2002. Again, a 20 percent legal fee would amount to $2,600,000 in and $3 million in wins of $13 million and $15 million, respectively.
In the case of Vincent and Liza Concepcion, their claim against AT&T involved a $30.22 sales tax imposed on a "free" telephone they received. The amount won from AT&T would be shared among many other members of their class action - and of course, the lawyers fee.
There are several criticisms of class action lawsuits. The preamble to the Class Action Fairness Act stated that some abusive class actions harmed class members with legitimate claims and defendants that have acted responsibly; adversely affected interstate commerce; and undermined public respect for the country's judicial system.
Class members often receive little or no benefit from class actions. Examples cited for this include large fees for the attorneys, while leaving class members with coupons or other awards of little or no value; unjustified awards are made to certain plaintiffs at the expense of other class members; and confusing notices are published that prevent class members from being able to fully understand and effectively exercise their rights.
For example, in the United States, class lawsuits sometimes bind all class members with a low settlement. These "coupon settlements" (which usually allow the plaintiffs to receive minimal benefit such as a small check or a coupon for future services or products with the defendant company) are a way for a defendant to forestall major liability by precluding a large number of people from litigating their claims separately, to recover reasonable compensation for the damages. However, existing law requires judicial approval of all class action settlements, and in most cases class members are given a chance to opt out of class settlement, though class members, despite opt-out notices, may be unaware of their right to opt-out because they did not receive the notice, did not read it, or did not understand it.
So in some cases, class action members are not even paid their share of the settlement in cash but rather in coupons entitling them to additional legal services or products from the company being sued. Public Citizen also points out that corporations actually prefer coupon settlements because they allow a company to save substantial sums – if the coupon is of little real value to class members or if it will not been redeemed. About 7% of class action plaintiff gains were paid out in coupons and the worst cases were in federal courts.
Class action lawyers attempt to justify their fees based on the risk they take by investing time and other resources into a law suit which they may or may not win. Therefore, a lawyer or law firm is unlikely to pursue a class action suit unless they think there is a high probability of winning in court or settling the case for a handsome sum out of court. When law firms discover an illegality such as fraud on the part of a corporation that may be worthy of a class action suit, they contact potential members who have been wronged like Vincent and Liza Concepcion. On the one hand, ordinary people who have been cheated by a big corporation have little means to sue and win except through a class action suit that a law firm deems worthy to pursue. On top of this, the amount won by a member of a class action suit is typically miniscule compared with the lawyers fee.
The report below shows how this corrupt system goes a step further with the Supreme Court ruling against the plaintiffs in the AT&T case and how cases that went to arbitration (instead of court) robbed the plaintiffs in a whopping 94% of the cases due to corrupted arbitrators who sided with big business. Again, Public Citizen:
When California changed its law to require that arbitration results be publicly recorded, Public Citizen reviewed 34,000 California cases, and the results were stunning. The study found that consumers had lost more than 94 percent of cases in arbitrations plagued by conflicts of interest, with arbitrators benefiting financially from ruling in favor of businesses.
Ultimately, the battle for money in these cases takes place between the law firms and the corporations, the lawyers seeking their own gains and the corporations avoiding or minimizing their losses. Ordinary consumers like you and me are the pawns on their chessboard. From our point of view, when you receive a letter from a law firm telling you that you may be eligible to be part of a multi-million dollar class action suit - think about who the real winners and losers are in these cases and ask yourself who you are serving by digging out receipts for money you've paid to a corporation like AT&T and if participation is really worth your time and energy before you fill out their forms.
Disclaimer: This analysis is not and is not meant to be a legal document or legal opinion. Potential plaintiffs in a class action lawsuit should educate themselves through their own research and consultation with qualified legal counsel.
- Les Blough, Editor
With Liberty and Justice for… Corporations?
by Rania Khalek
May 5, 2011
When California changed its law to require that arbitration results be publicly recorded, Public Citizen reviewed 34,000 California cases, and the results were stunning. The study found that consumers had lost more than 94 percent of cases in an arbitrations plagued by conflicts of interest, with arbitrators benefiting financially from ruling in favor of businesses.
On April 27, 2011, the Supreme Court of the United States once again ruled in favor of big business. In the highly anticipated case of AT&T Mobility v. Concepcion, the Roberts led conservative block of the Supreme Court ruled 5-4 that federal law trumps state law in allowing companies to use arbitration clauses to prohibit consumers from joining class actions against the companies.