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The Honolulu Advertiser

Posted on: Thursday, February 17, 2005

Class action reform: Will it help Joe and Jane Consumer?

By Jennifer Brooks
Gannett News Service

WASHINGTON — Every year, millions of Americans wind up in court, sometimes without even being aware that they've been named a plaintiff in a class action lawsuit against a company accused of consumer fraud or corporate wrongdoing.

President Bush last week cited Alita Ditkowsky's experience to make the case for class action reform at an event in Washington. She was in a class action suit against RCA that netted her only a $50 coupon.

Bill Clark • Associated Press

Class action lawsuits are a way for the powerless to take on the powerful. Brown v. Board of Education, the case that dismantled racial segregation in American schools, was a class action lawsuit. The 1998 tobacco settlements that pumped billions of dollars into state health programs and anti-smoking campaigns also stemmed from a class action lawsuit.

In some cases, huge damage awards and court rulings serve as punishment for defendants who are forced to change their business practices or compensate victims. But the problem President Bush and other class action reform supporters see is that some cases produce more financial benefits for attorneys and few, if any, for victims.

Bush says greedy trial lawyers have hijacked the class action system, collecting huge fees from what some call frivolous lawsuits. When some of these cases are settled, the attorneys walk away with millions, while the plaintiffs get pennies.

Now, Congress is on the verge of a major overhaul of the class action system. But consumer advocates warn the changes could make it even harder for ordinary citizens to file suit if they find themselves overcharged, shortchanged, defrauded or misled by a corporation.

Caught in the middle of the debate are the consumers themselves.

"Where is the justice in this?" asked Alita Ditkowsky of Commack, N.Y., who joined a class action lawsuit against RCA after the manufacturer refused to fix her television set. The suit alleged the manufacturer sold defective merchandise.

When the suit was settled, the attorneys collected $22 million, while Ditkowsky walked away with a $50 coupon good toward the purchase of another RCA television set.

"This lawyer got $22 million," Ditkowsky said. "I'm still left with a broken TV set."

Last week, the Senate overwhelmingly approved legislation that would sweep most class action lawsuits seeking more than $5 million out of state courts and into federal courts. The House could approve the bill later this week. If so, it would be the first — and least controversial — of the changes the president hopes to make in the legal system.

A key provision in the bill seeks to do away with coupon awards by pegging them to attorneys' fees. Lawyers would be paid a percentage based on the percentage of coupons cashed in, and not based on the number awarded. The measure would do nothing to close the gap between attorneys' fees and the money their clients collect.

Bill sponsors hope the number of lawsuits would be curbed by shifting them to federal courts, where it would take longer for a case to make its way through the system. The bill also would end the practice of shopping a case around from state to state, looking for a friendly judge or state consumer laws that favor their case. That is how Madison County, Ill., attracted so many class action lawsuits.

On average, between 10 percent and 30 percent of the damages in a class action case go to attorney fees. The rest goes to the plaintiffs, but in large-scale suits that name many people as members of a class, the individual pay out may be miniscule.

The idea of shifting consumer class action cases to the federal courts has been criticized by state legislators, state attorneys general and a broad variety of consumer and civil rights groups. The Judicial Conference of the United States, which speaks for the federal court system, has questioned whether its courts could handle an influx of cases from the state courts, although it has taken no position on the bill now pending in Congress.

Supporters of the legislation say that it will have a minimal impact on the courts, and that the majority of cases will remain in the states where consumer protection laws are the strongest.

The bill's opponents say the measure is too sweeping and could have an impact on class action cases that end up helping large numbers of people.