Class-Action Conundrum
It is uncertain what our world will look like post-coronavirus, but trial lawyers already know who they plan to sue about it.
Purell and Germ-X, makers of hand sanitizer, as well as retail operations like Target who sell their own brand of such products were hit with class-action lawsuits in March.
These are the first coronavirus-related class action lawsuits, in what is sure to be an onslaught in the coming months and possibly years. Other manufacturers of products intended to protect against or treat COVID-19 will find themselves in the bullseye as well.
Some, like manufacturers of N95 respirator masks, received protection through liability waivers in federal legislation, but many industries did not. And the consumers — the members of the class action lawsuits? They won’t be so fortunate, either.
“The attorneys get money, and a lot of it. The class members get no money whatsoever … How can such a system be regarded as sensible?”
Supreme Court Justice Samuel Alito hit the nail on the head discussing a 2018 class-action settlement involving Google in which trial lawyers walked away with more than $2 million. The individual class members they represented did not receive a single dime of the $8.5 million settlement. The remaining settlement dollars went to six groups, including a program at Harvard University, “for projects closely targeted to the Internet privacy issues.”
Justice Alito’s statement rings true nationwide, as consumers pay the price for class action lawsuit abuse every day, and will certainly bleed into the coming coronavirus litigation.
Of course, certain class actions play an important and legitimate role in our legal system. They originally were designed to assist consumers injured by a business or third party. But, an outdated class action structure coupled with misguided regulations has led to abuse of the system. Trial lawyers often use uninjured consumers to drive lawsuits and leverage large settlements or fee awards.
A recent study reinforces Justice Alito’s statement, noting that, increasingly, millions of settlement dollars are paid for attorneys’ fees. “An Empirical Analysis of Federal Consumer Fraud Class Action Settlements” found individual class members today see a smaller fraction of monetary benefits.
Class actions are under fire, and rightly so, as misleading advertising campaigns bait consumers to join lawsuits. TV and radio ads tout that affected consumers are entitled to financial compensation, yet it rarely comes to fruition. Research shows settlements and court awards disproportionately benefit the lawyers behind the scenes.
St. Louis, the №5-rated “Judicial Hellhole” and trial lawyer gold mine, is home to the largest talcum powder verdict to date. Blasting airwaves with misleading advertisements seems to have paid off nicely.
In 2018, a jury awarded $550 million in actual damages and $4.14 billion in punitive damages to 22 plaintiffs who claimed asbestos in Johnson & Johnson’s baby powder caused their ovarian cancer — against contrary evidence from both the U.S. Food and Drug Administration and the American Cancer Society. Of the 22 plaintiffs, 17 women had no connection to Missouri. Following the startling verdict, trial lawyers filed 700 talc cases in the state, a mere 40 of which involved Missouri residents. Johnson & Johnson is appealing the 2018 verdict.
“Judicial hellholes” like St. Louis incentivize eager trial lawyers to pursue unsubstantiated cases with the potential for an enormous payday. But it’s hard-working Americans who pay the price in the long run. Companies are forced to pay out multi-billion dollar awards, and the costs ultimately are passed along to consumers with increased prices on goods and services.
Coronavirus served a gut punch to the American economy with small businesses bearing the brunt of that hit. While some class-action lawsuits target large corporations, small businesses are not immune. If they escape litigation, class action lawsuits against large companies still affect mom-and-pop shops who sell products made by large companies.
While class actions certainly have an appropriate place in our legal system, we must look to reform and rebalance the system now more than ever. Congress and state legislatures can take action to ensure class action lawsuits return to their intended purpose to help — not hurt — consumers and small businesses. When we address opportunistic abuse and lawyers who “play” the system to leverage large settlements and fee awards, then we will be one step closer toward balancing the scales of justice.
Tiger Joyce is president of the American Tort Reform Association.
