Jon Christian Ryter

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From The Mailbag

20 years

By Jon Christian Ryter
Copyright 2002 - All Rights Reserved
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     Someone once said that if you put enough liberals together in one room you will always end up with a crisis. How many liberals are enough? Two if one is a class action lawyer and the other is a judge. Put 12 more in the jury box and you will always end up with a crisis of catastrophic proportions in the form of a multi-million verdict against someone who likely did nothing wrong. But since that "someone" will invariably be a large corporation with deep pockets, there is no outcry against the legal blackmailing and robbery. Everyone thinks: "Ah...they can afford it..." not realizing that ultimately they--the consumer--pay for every verdict through higher prices.
     Class action lawsuits are nothing like one-on-one personal injury lawsuits which may sometimes go to the extreme themselves. Take the case of the elderly woman who purchased a cup of hot coffee from the drive-through at McDonalds, and set the cup between her legs as she drove off. Even though you buy hot coffee because it's...well...hot, the woman was awarded an obscene multi-million dollar judgment (later reduced) because a jury felt it was McDonald's fault that the container was not marked with a warning label that said "contents may be hot." Or the man who sued BMW because his brand new showroom BMW had been repainted by the dealer after it was scratched in shipment. His multi-million dollar award went all the way to the U.S. Supreme Court where the verdict was upheld because the dealer failed to advise the buyer that his new car had been repainted.
     Neither of those awards should have been allowed to stand. In both instances, the judges hearing those cases should have set the verdicts aside. But, we have become a litigious society. Filing lawsuits today is like buying lottery tickets. It costs almost nothing to file them, and every now and then a plaintiff hits the jackpot.
     Lawyers as a class are probably less respected than any other profession--including the world's oldest one--since they have no problem prostituting themselves for money. But among attorneys themselves nothing is worse than a class action lawyer--and there is no parasite on Earth (except perhaps a liberal politician--most of whom are lawyers) that is lower. Granted, most class action lawyers are masters of their trade who earn millions of dollars a year from legal actions whose victims--the defendants--are more afraid of bad publicity that will diminish their worth on Wall Street than they are their actual guilt from negligence or wrongdoing. Defendants are generally selected not so much for their "guilt" but for their vulnerability and also their ability to pay large out-of-court settlements to avoid litigation.
     That is not to suggest that all class action lawsuits are frivolous.
     Many are not.
     The asbestos class action lawsuit against Johns-Mansville is one such action. Lawsuits filed against the pharmaceutical industry over a myriad of drugs that either cause birth defects, damage organs in those taking them, or cause death are justified when evidence exists that the pharmaceutical giants either had knowledge of adverse side effects and concealed that knowledge, or used their lobbyists to rush a drug to market because of its profit potential without taking adequate steps to make sure the drug was reasonably safe before putting it in the drug stores of America.
     Greedy merchants should always be held accountable. Yet, I do not believe that class action lawsuits should ever be allowed since they feed only the lawyers that file them.
     If you think otherwise, look at these recent class action settlements:

BANKSTON DRUG STORE
     Jefferson County, Mississippi has become a Mecca for class action lawsuits even though Mississippi does not have a class action law. But smart lawyers have used Rule 20 of the Mississippi Rules of Civil Procedure to file what in Mississippi is termed "mass action" lawsuits. Lawyers have discovered that Mississippi's unique laws allow them to secure jurisdiction over transnational pharmaceutical companies--and Jefferson County, Mississippi's uneducated, and very poor "jury pool" have shown a propensity to render huge compensatory and punitive damage awards.
     Under Mississippi law, all "mass action" lawsuits must be local. That means, before the lawyers can file their actions in Jefferson County, they have to find "victims" who have purchased those pharmaceutical products at the Bankston Drug Store since it is the only pharmacy in the county. You can pretty much guess that the Bankston Drug Store is not a mega chain with deep pockets. Located on Main Street in Fayette since 1902, the drug store is a remnant of America's past. Antique cabinets line the walls, and ice cream is still hand-dipped at the soda fountain where Fayette's citizens sit and gossip over coffee, Coca Cola, or chocolate malts. Fayette or Jefferson County is not a "profit center" that would attract CVS or Rite Aid, yet this rural farming community has become ground zero for some of the most famous class action lawsuits filed in America. America's best known health supplement lawsuit--Fen-phen--was filed here. So was the lawsuit against Rezulin and Propulsid. A jury in the Propulsid case that went after the deep pockets of Johnson & Johnson, the parent company of Janssen which developed heartburn drug, awarded the plaintiffs in Pickard's court $100 million.
     Pickard is a controversial liberal judge. Plaintiff attorneys love him. Defendant attorneys fear him. Pickard allows emotional testimony to be admitted that most judges would refuse. And, Pickard wants speedy justice in his courtroom. Most cases filed in his courts--even complicated multi-jurisdictional suits that should never be heard in his courtroom because they deal with defendants in other States--are rushed through Pickard's court at breakneck speed. Pickard rigidly enforces a Mississippi rule that allows plaintiffs to go to trial in 90 days from filing, sharply limiting the defense's discovery rights and handicapping the defendants.
     Because of Pickard, "...Jefferson County is a magnet for highly speculative litigation that wouldn't get traction in other courtrooms in the United States," declares Michael C. Hotra, the public relations director of a tort reform group.
     These cases originate in Jefferson County because of the State's unique tort laws. Plaintiff's lawyers are eager to file their lawsuits in Fayette because of the size of the awards granted by Jefferson County's uneducated jury pool. Five years ago pharmacist Traci Swilley bought the pharmacy from the family of its deceased owner. Since that time she has been named in every pharmaceutical lawsuit that has been filed. "My lawyers tell me that we're only sued because they want to stay in Jefferson County because the verdicts are so high," she said. "The people don't realize they're suing me," she added. "They're told by these big-time trial lawyers that '...you're not hurting the pharmacy. This isn't against Traci.' They are told they are suing the huge pharmaceutical corporations..." that can afford to pay. In reality, being sued is bankrupting Swilley because even though she is invariably dropped from the suits after they gain mammoth proportions, she must still hire a lawyer and file an insurance claim. Her insurance rates have skyrocketed and she is obligated to keep a lawyer on retainer. The local newspaper, according to Swilley, is choked with ads from attorneys seeking local plaintiffs from which they can launch massive class action lawsuits.
     In Mississippi, as long as a lawyer has a "local" plaintiff, he can keep the case out of federal court where most class action lawsuits are actually laundered--and most are dismissed as frivolous.

THOMAS v R.J. REYNOLDS
     In 1999 a trial before Pickard combined the synergy claims between tobacco and asbestos and lung cancer. What made this "tobacco" case interesting was that Pickard simultaneously heard cases against six tobacco manufacturers and an asbestos defendant-jointly-with each defendant stigmatizing the other. After the asbestos case was filed, a group of minority plaintiffs argued that R. J. Reynolds and five other cigarette manufacturers targeted blacks by advertising in magazines that were predominantly sold in black communities-which Fayette was. The plaintiffs (many of whom could not read and never bought the magazines in which the ads purportedly appeared) sued for $5 billion in compensatory damages and unspecified punitive damages.
     On November 23, 1999, six tobacco manufacturers agreed to pay the Fayette plaintiffs $160.6 million to settle the first of the two Jefferson County lawsuits. The asbestos defendants settled by agreeing to pay each of the plaintiffs in Jefferson County and the surrounding area $263 thousand. By grouping the asbestos case with the new villain-tobacco-the asbestos victims received settlements 19 times greater than the settlements received by asbestos victims in Indiana, Ohio, and Pennsylvania. Fayette was ripe for another tobacco lawsuit-and Pickard was eager to hear the case.
     The new lawsuit, Thomas v R.J. Reynolds was filed in Pickard's court on June 18, 2000. Reynolds expects to lose the action before they ever walk into the courtroom.
     A Chamber of Commerce sponsored seminar in Jackson, Mississippi dealt with the horror stories of gigantic verdicts for out-of-state law firms against national and transnational corporations that were streaming through Mississippi courtrooms. Alabama trial lawyer Jere L. Beasley acknowledged that many of the 41 lawyers at his Montgomery law firm had recently taken the Mississippi bar exam.

BLOCKBUSTER VIDEO
The video rental/sales chain recently settled a class action lawsuit filed against them in another Jefferson County-this one in Texas. This class action suit questioned the "fairness" of the video chain's late charges-even though those charges were clearly posted in each Blockbuster outlet and even though the store policy is explained to to consumers who rent their videos. Under the terms of the settlement, Blockbuster customers would receive coupons and gift certificates totally around $20 each. The lawyers who filed the class action lawsuit received $9.25 million. The lawyers claim that the suit netted consumers some $460 million in rebates if they chose to exercise them. Blockbuster estimated that fewer than 10% of their customers would. Further, the settlement did not require Blockbuster to alter their late charge policy. I guess the lawyers wanted to keep their options open to come back to Texas and sue Blockbuster again-after they finished similar lawsuits filed by them against Blockbuster in California, Delaware, Florida, Illinois, Maryland, Massachusetts, New York, New Jersey, Pennsylvania, Tennessee and Washington, DC. When Business Week covered the Blockbuster settlement they concluded that "...the real winners in the settlement are the lawyers who sued the company [and] who [were] paid in cash, not coupons."

TOSHIBA COMPUTERS
     When class action attorneys sue, they don't mind if the plaintiffs are paid off with in-store coupons as long as they are paid in hard cash. And that proved to be the case when class action lawyers filed a lawsuit against Toshiba Computers in Beaumont, Texas. Plaintiffs complained of a theoretical defect (i.e., never quite substantiated) in the floppy disk controllers used in Toshiba laptops. In fact, not a single Toshiba customer had ever reported a tangible loss attributable to this particular "defect." In tests, Toshiba's engineers could only replicate the purported defect (that would cause the user to lose stored data) when they saved a file to floppy as they simultaneously did other memory-intensive tasks-something which the average user would never do. However, apparently two Toshiba users had, in fact, did that very thing and lost some stored data-and sued. Had Toshiba's customer service department worked swiftly and replaced the "defective" computers, Toshiba would have been out-of-pocket by about $10 thousand. Instead, a lawsuit was filed with a sharp attorney who realized the claim of one or two people was negligible and barely worth the lawyer's time. So the lawyer begin running ads to see if anyone else had a Toshiba laptop and was experiencing problems. Over a period of time the lawyers built their lawsuit. When they filed, Toshiba-with two complaints-faced a potential $10 billion liability.
     Toshiba settled the case by paying the lawyers $147.5 million and giving the two initial plaintiffs $25,000.00 each. All of the other plaintiffs who joined the lawsuit but had never experienced any problems received a small cash award and discount coupons on new Toshiba computers.
     The award to the lawyers was 200 thousand times greater that the "recovery" of any individual plaintiff in the class action. Commenting on the success of such a frivolous case, Law professor Lester Brickman said: "The single most important thing these lawyers did was bring the case in Beaumont." As it turned out, Jefferson County, Texas was not much different than Jefferson County, Mississippi. The lawyers receive cash-the plaintiffs get coupons. And the consumers get screwed. The $147.5 million paid to the lawyers eventually came from the pockets of the consumers who bought Toshiba computers in the future.

THE AIRBAG CASE
     Most county prosecutors wanting to be either Attorneys Generals or governors know that all it takes is one good high profile case to get noticed by the media. However, when you live in Coossa County, Alabama (population 11,000 and no crime) you will have to manufacture the opportunity if you want to make headlines. Coossa prosecutor Smith did just that. Coossa County-without a single car dealer in the entire county-decided to file a class action lawsuit to protect 20 million consumers with certain types of airbags in their cars. The suit argued that these "certain types" of airbags supplied by Chrysler, Ford and GM were faulty-although the design of those airbags was approved by the federal government, and the government mandated that they be installed in each and every GM, Ford and Chrysler car manufactured.
     The County asked the court to order the auto industry to pay every car owner in which these airbags were installed a sum of $500. The county also asked the court to to dictate a national airbag safety policy. When Coossa County lost, they appealed and the case ended up in the Alabama Supreme Court. The high court dismissed the case. As far as most people were concerned, an idiot filed an idiotic lawsuit, but no harm was done. Ignored was the millions of dollars-passed on to the consumers in the form of higher prices on their new Ford, Chrysler or GM vehicle-that had to be paid to defend an action that should never have been allowed inside a courtroom.
     Far too often today judges feel they are obligated to hear even the most frivolous actions when they should haul the attorneys into court and fine them for wasting the court's time with meritless actions.

THE BANK OF BOSTON
     In this class action suit the plaintiffs were "victimized" twice-first by the villainous bank and then by the villainous lawyers who brought the action "in their defense." The action began as a handful of homeowners believed their mortgage escrow accounts were being mishandled by the Bank of Boston. Lawyers filed the class action suit in a State court in Alabama utilizing the same type of mass action laws that made it desirable to file class action suits in Fayette, Mississippi and Beaumont, Texas. A settlement was reached between the Bank of Boston and the attorneys that resulted in the bank paying the lawyers $8.5 million in attorney fees and costs. The plaintiffs would each receive a small settlement-from $2 to $100 or so each with a handful receiving slightly larger settlements. However, when the money was distributed to the plaintiffs, the lawyers came up short. To collect their $8.5 million fee, the attorneys assessed each plaintiff $91.33. When Dexter Kamilewicz received the statement from the lawyers detailing his settlement, he discovered his "award" of $2.19 had been assessed $91.33. He owed the lawyers $89.14.
     The only one who is guaranteed payment in a class action lawsuit are the lawyers.
     That is, after all, why lawyers file class action lawsuits.
     It certainly isn't to benefit the plaintiffs.

RENAISSANCE CRUISES
A disgruntled tourist triggered a class action against Renaissance Cruises, Inc. in Broward County Circuit Court under Florida's Deceptive and Unfair Trade Practices Act. The suit alleged that Renaissance passengers who traveled between 1993 and 1996 were assessed "hidden" port charges of between $295 to $395 per person. The case was settled when Renaissance agreed to give each passenger in the class action a $60 rebate voucher to be used on their next cruise-and paid the plaintiff's attorneys $1.35 million plus expenses. Renaissance was just one more example of class action lawyers negotiating token settlements for their clients as they negotiated mega fees for themselves.
Who actually paid? The unfortunate tourists who took a Renaissance cruise over the next five years-many of whom were the same "plaintiffs" whose $60 rebate voucher did not by any stretch of the imagination offset the increased fares necessitated by the $1.35 million paid to their lawyers.

CLASS ACTION REFORM LEGISLATION
     The next time you read in the local newspaper about the multi-million dollar settlement made by this national company or that, just remember: the only people making any money are the lawyers. And worse, YOU end up paying the settlement in the form of higher prices. The consumer always loses-even those not involved in the lawsuit.
     On March 13, 2002, on roll call 62, the House of Representatives passed the Class Action Fairness Act of 2002 by a "yea and nay" vote of 233 to 190. On March 14 the bill was sent to the US Senate where it was read twice and referred to the Committee on the Judiciary. Since this committee is headed by Edward Kennedy [D-MA] who is in the hip pocket of the Trial Lawyers Association it will not "fly" through the Senate. We can expect Kennedy to bottle this legislation up and keep it from the Senate floor.
     The central provision of the Class Action Fairness Act makes it easier to move large, multi-state "mass action" lawsuits from biased State courts into the federal court system and preventing 'venue shopping" by trial lawyers such as those cases you read above. Key elements of the Class Action Fairness Act are those which would require class action settlement proposals to be written in "plain English" so that the plaintiffs-usually average citizens and not lawyers-can understand who is getting what before they sign off and discover the lawyers received all the money and they get movie tickets to the feature film "Lawyer Larry Does Boston." The Class Action Fairness Act would further prohibit settlements in which the class members actually lose money to pay attorneys' fees-and ensure that moneys awarded are adequately distributed to all plaintiffs. And most of all, the Class Action Fairness Act would prevent lawyers from settling for coupons for the plaintiffs while they take all the cash.