Class Action Lawsuits Under Judgement at the Supreme Court

The Supreme Court is scheduled to accept a case decided differently between the Fifth and Sixth Circuit Courts on what qualifies as a class action lawsuit in which law firms can file class action lawsuits against large businesses such as Google or in this case, Behr Dayton Thermal Products, LLC, for negotiating large settlements awarding big dollars (most of which often goes to law firms) and in many cases, pennies to plaintiff clients. When there is a split between circuit appeals courts usually the Supreme Court takes it up and resolves it one way or the other.

“Friends of the court” or “amicus briefs” have contributed valuable information that could affect the Supreme Court’s decision this week including the Chamber of Commerce, The American Tort Reform Association (“ATRA”), and The National Association of Manufacturers (“NAM”) (all primarily on behalf of businesses). In a class action settlement, generally a law firm representing a large number of plaintiffs which could amount to hundreds or thousands of people, will sue a large company for what should be the same violation. At some point it is cheaper to pay a settlement than spending even more dollars in legal defense fees.  In many settlements however, the law firm walks away with a large part of the settlement which could be millions of dollars and the rest gets distributed across all plaintiffs often reducing the size of each plaintiff’s portion to mere pennies. Does this look like extortion or blackmail?

One case on record involving a class action settlement with AT&T resulted in a penny to each plaintiff. Critics of these kinds of class action settlements argue that the legal codes allowing class actions are being abused by some law firms which are the only benefactors financially in these outcomes. The classification of class actions against large companies including manufacturers has been described as blackmail, and the decision of the Supreme Court could result in either more class action filings described as a shakedown or the elimination of law firms’ ability to easily qualify, file, and settle class actions resulting in big fees for private law firms.  The Fifth and Sixth Circuit Courts require different details on the Rule 23 requirements. The legal question is the ease or difficulty in forming a class action. Loosen up the requirements and there will be more class actions mainly benefiting the class action law firms.

Private companies responsible for trillions of dollars in jobs and GDP bogged down with meaningless class actions are hoping to put these matters behind them. “The ripple effects of these lawsuits will be felt throughout the economy” as the “costs would not, however be borne by business and governmental defendants alone,” but “passed along to innocent customers and employees in the form of higher prices and lower wages and benefits.” President Trump’s administration and manufacturers in the US benefiting from the U.S.-Mexico-Canada Agreement known as the new NAFTA agreement and other efforts to bring manufacturing back home could find major setbacks in class action filings.

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