Trust the Judicial System to Do Its Job : The record shows that the courts have corrected irrational results in liability cases.
Big-business interests are engaged in a massive lobbying campaign to persuade Congress that our civil-justice system is careening out of control, with irrational and immense jury verdicts crippling American competitiveness and lining the pockets of avaricious plaintiffs’ lawyers. Featured in this campaign is an ad decrying class-action settlements in which lawyers get millions in fees while plaintiffs receive worthless coupons.
But the facts of these cases expose the hollowness of industry’s argument. To be sure, there have been a wave of sweetheart settlements--including the GM pickup truck settlement and the Ford Bronco II case--in which the lawyers, not the clients, stand to gain.
But the business community’s whining is hypocritical and downright deceptive. It is the big companies like GM and Ford that engineer these settlements to drastically reduce enormous potential liabilities. Many of these settlements, especially those involving coupons, also provide what one court called a “marketing bonanza†for the corporation, since the coupons are valid only for the defendant’s products.
Equally insidious is the deceptive nature of the ad, which implies that courts blindly accept these settlements. That isn’t so. Class members have routinely opposed these settlements because they provide too little relief to the class, and far too much money to the lawyers. And in the past two months, the courts have agreed and set aside three major settlements.
Take the Bronco II case. It was a nationwide class action filed on behalf of the 700,000 owners of Broncos to force Ford to correct the vehicles’ propensity to roll over. But under the settlement, all the plaintiffs were to get were information packets warning them of the hazard--information the government already directed Ford to provide them. Counsel were to get a whopping $4 million in fees.
In March, a federal court threw out the Bronco II settlement on the ground that it conferred “effectively zero†benefit on the class members and did nothing to fix the vehicles’ roll-over problem. The court condemned the plaintiffs’ counsel’s outrageous fee request. That Ford agreed to this fee was, in the court’s view, strong evidence of collusion between the parties.
Next to fall was the massive GM pickup truck settlement. GM designed these trucks with the fuel tanks outside of the truck’s protective frame rails, making them prone to fuel-fed fires. Class-action lawyers brought a nationwide claim on behalf of nearly 6 million owners, alleging that the trucks were “rolling firebombs.â€
Instead of getting meaningful relief, the lawyers agreed to a settlement that gave class members coupons while they got a $9.5-million fee. The GM coupons had value only for those plaintiffs interested in using $1,000 coupons to buy trucks costing an average of $20,000 during a 15-month period. Worse, the settlement did nothing to rectify the truck’s safety problems.
In overturning the settlement, the appeals court concluded that it was not fair to the class members. The court was also critical of the absence of any remedy for the trucks’ serious safety problems. And the court castigated the parties--GM especially--for the massive fee award. GM had acquiesced to a substantial “multiplier†for the plaintiffs’ legal fees even though the Supreme Court had said such a fee-enhancing mechanism was impermissible. The court said “the fact that counsel to this large multinational corporation did not object to this clear error raises a smoking gun signaling GM’s awareness of the questionable settlement it made.â€
A month earlier, a Texas appellate court invalidated an identical settlement covering Texas truck owners for the same reasons.
The business community says that these settlements are proof that the judicial system is broken and that Congress must step in to restore order.
But the real message is the opposite. These decisions prove that the courts have the ability to ensure that real justice is done. None of these plaintiffs’ lawyers will walk away with a windfall; none of these plaintiffs will have their legal claims compromised without meaningful relief. And none of these corporations will walk away free from huge potential liabilities.
In a system as large and complex as ours, there are certain to be abuses that go uncorrected. And often it takes the courts time to sort out how to deal with emerging problems. But these cases prove that society ought to have profound respect for the willingness of our judicial system to engage in self-correction and to guard against irrational results. Congress should not try to fix a system that isn’t broken.
