Class Action Litigation Reform Tops Working Group's List

Plaintiff attorneys often are awarded large fees whereas class members often receive little or no benefit from class actions, according to chamber legal committee members. In some cases, it could be a check for $1 or a coupon.

The legal committee, comprising 12 attorneys with diverse backgrounds and areas of expertise, formed in March to study legal issues potentially having negative impacts on local and regional businesses. The committee formed a working group in June to specifically study class action litigation abuse and reform.

"One reason we believe the class action vehicle is subject to abuse is because plaintiff attorneys view the class action lawsuit as a vehicle for securing inordinate amounts of attorney's fees for the amount of work to be done," said Lee Burdick Austin, chair of the chamber's legal committee and an attorney with Ferris & Britton APC.

San Diego County Citizens Against Lawsuit Abuse, a watchdog group, also is tracking the issue.

"The civil justice system is here to make legitimate victims whole, not rich," said San Diego CALA President Andy Kotner, defining "whole" as restoring economic losses. "The awards on class action lawsuits reap tremendous financial benefits for the attorneys while the so-called plaintiffs receive peanuts or pennies on the dollar."

Not everyone agrees capping plaintiff attorney's fees is the cure. "The counter economic theory of life is that you're not going to get qualified, dedicated and motivated attorneys to represent these cases," said Kirk Hulett, of Hulett Harper Stewart. "So capping fees will have the consequence of having fewer and fewer cases filed, even meritorious ones." Hulett said he represents exclusively plaintiffs in securities and consumer fraud.

"As a general matter, it's interesting they would cap plaintiff attorney's fees but no one ever suggests capping defendant attorney's fees," Hulett said. Abuse of class action suits is no more common than any other abuses of other kinds of law, he said.

The chamber's subcommittee studying class action litigation reform also is reviewing the progress of federal legislation, Senate Bill 274, a proposed amendment to the Class Action Fairness Act.

Class action lawsuits are an important and valuable part of the legal system when they permit the fair and efficient resolution of legitimate claims of numerous parties by allowing the claims to be aggregated into a single action against a defendant that has allegedly caused harm, according to SB274 posted on the Web.

Over the past decade, there have been abuses of the class action device that harmed class members with legitimate claims and defendants that have acted responsibly, adversely affected interstate commerce, and undermined public respect for the judicial system, according to the bill.

Among purposes of the act is to ensure fair and prompt recoveries for class members with legitimate claims.

"The bill was originally proposed to allow more class actions that were brought in state court to be removed by defendants to federal court," Burdick Austin said. "The idea being that a lot of plaintiffs abuse the class action process by forum shopping. If you have a number of plaintiffs in a number of states and a number of defendants in a number of states, you can pretty much shop where you're going to get the best venue for the best result. It may not be a fair or convenient venue for the defendant and therefore makes it difficult to litigate in that venue."

The American Tort Reform Association's Web site calls the most notorious of these forums "judicial hellholes."

Federal courts are much better prepared to handle complex litigation as many of these cases are, according to Burdick Austin. "You tend to get more consistent, enforceable results in federal court," she said. "In other words, federal courts are much more inclined to enforce each other's decision. State courts typically don't give a hoot about ruling in a manner that is consistent with a ruling with a state court in another state. So a forum-shopping plaintiff who got a bad ruling in Louisiana might file the same case in another state."

The chamber's working group, which could bring recommendations to the legal committee next month, also is considering whether state and federal court rules should be required that class certification motions should be brought early in litigation. "When you file a class action lawsuit you don't actually know who the plaintiffs are," Burdick Austin said. This could give the defendant the impression it's being sued by a large number of people. It allows some plaintiffs to receive a big, quick settlement.

The U.S. District Court, Central Division, has a local rule requiring plaintiffs in most circumstances to file a motion for certification that the action is maintainable as a class action within 90 days of filing the suit.

The state and federal courts in San Diego have no such deadline but require the motion to be filed as soon as practicable. It could take a couple years, Burdick Austin said. "All the state and federal courts try to move these cases," she said. "The Superior Court has fast track rules for all of their cases. They try to have all civil cases tried within 18 months of filing." That could allow the plaintiff to file the motion for case certification in the 17th month.

"The working group is looking at whether setting unified rules be brought early in litigation would create a more fair system," she said. Attorney Hulett said he didn't think setting a deadline for filing the motion would be troublesome but takes away the court's ability to monitor its own case.

There are myriad reasons to delay filing the motion. "Pretrial motions need to be ruled upon and should be ruled upon before the scope of the class is certified," he said.

The chamber's working group also is reviewing whether notices to class members should have uniform opt in or opt out language. There are constitutional issues that rise above any of these issues, Hulett said. "The class action rules of opting in and opting out basically arise from concepts of due process."

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(Reprinted with the Permission of the San Diego Daily Transcript)