[Congressional Record (Bound Edition), Volume 149 (2003), Part 17]
[Senate]
[Pages 24153-24155]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            MORNING BUSINESS

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                         CLASS ACTION LAWSUITS

  Mr. SESSIONS. Mr. President, I will discuss this morning a very 
important issue of legal reform that is needed in the United States. I 
have been a practicing lawyer for most of my adult life and have 
litigated in quite a number of different forums. I believe in the legal 
system. It is critical for America's vitality. There is no doubt in my 
mind the strength of this American democracy, the power of our economy, 
our ability to maintain freedom and progress is directly dependent on 
the superb legal system of which we are a part.
  We have a magnificent number of lawyers around this country. Some 
have been criticized, and rightly so, but for the most part they are 
good, aggressive attorneys utilizing the laws that are available.
  This Congress passes laws involving litigation in America. It is 
incumbent upon us as the years and centuries go by to periodically 
review what is happening in our courts. We ask ourselves, are the 
results that are occurring effective? Are they furthering our national 
policy, correcting wrongs, punishing wrongdoers, generating 
compensation for those who suffer losses in a fair and objective way?
  Anyone who knows much about the system today knows there are some 
problems. Lawyers are utilizing principles of law that enhance the 
problem. There are court decisions that allow them to go further than 
they have before. As a result, everyone is paying huge amounts of money 
for insurance. Americans buy a homeowner's policy with an umbrella in 
case someone sues them. Americans in business review their insurance 
and liability policies on a regular basis, frequently calling insurance 
companies and asking for more coverage, more protection. Without even 
asking for more coverage and more protection, the rates are going up 
all over America.
  One matter we need to talk about and act on is class action lawsuits. 
A bill to reform class action lawsuits has been considered for a number 
of years in this body. It was considered in the Senate Judiciary 
Committee of which I am a member. After several years of discussion we 
voted it out this year by a 12-7 vote, a bipartisan vote. Several 
Democrats and all Republicans voted for it. It is a bill that is 
responsible. It is restrained. It will do the job in many of the cases 
where abuses are occurring. It is the right thing to do. It can help 
balance the scales a bit in litigation. It will help fulfill the 
responsibility of this Congress to monitor how our laws are working in 
the real world. As a result, we can fix the problems out there.
  What is a class action? A class action is a litigation filed by a 
plaintiff's attorney on behalf of not just one alleged wrong person, 
but on a class or a group. The lawyer files the case in a court against 
a defendant, or maybe more than one defendant, on behalf of a large 
group of plaintiffs who he alleges suffered similar losses and 
therefore the case should be tried in one forum, a verdict rendered, 
and each plaintiff then told what they ought to get as compensation for 
the losses they have incurred.
  A class action is good. Some people have been so upset about class 
action abuses they think we ought to throw the baby out with the bath 
water. That is not true. A good class action is good for everyone. For 
example, if a national company made a defective product and shipped it 
all over America and they were negligent in doing so, they ought to be 
responsible for the damages that product has caused in America. For 
every person, maybe hundreds of thousands, even millions to file a 
lawsuit in every circuit court in America makes no sense. We have a 
vehicle by which it can be brought in a single court, and it can go 
forward from that point.
  Where can you file? You can file, amazingly, in almost any venue in 
America. The plaintiff can search this country over to select the 
single most favorable forum for his lawsuit and the single most 
favorable district in America. That is a lot to choose from. That

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is one of the problems we have with class actions.
  There are a number of other problems. Lawyers are alert to this. Some 
specialize in this kind of litigation. They identify something they 
think is wrong. Maybe no victim has even complained about it. They 
identify the victim and talk them into filing the lawsuit. They pay 
little attention to the plaintiff they name as the lead plaintiff in a 
lawsuit.
  I know of one case in Alabama where the defendant died, and was dead 
for quite some time, and the lawsuit just went right on as if nothing 
had ever happened. There was not even a named plaintiff living as the 
central plaintiff in the lawsuit.
  But that points out to me that the case becomes, after a period of 
time, driven by the plaintiff's lawyer and driven by the interests of 
the defendant. And if it is filed in a smaller rural circuit court, the 
judge could be overwhelmed with a huge amount of litigation and want it 
off his docket.
  So really the abuse occurs like this: The plaintiff is in a situation 
where each victim is only entitled to a little bit of money. I will 
talk about some of those cases in a little bit as to what kind of 
verdicts get rendered. So they get a little bit for 200,000 plaintiffs, 
and then they get their fee--multimillion-dollar fees.
  The judge is happy because this case could have gone on for years and 
clogged up his busy circuit court docket in rural Illinois or Alabama 
or Texas. He is glad to have it gone.
  The defendant wants the case gone. The defendant has no 
responsibility to the individual plaintiffs in the class. The defendant 
wants the case gone. So what does he do? He will agree to pay the 
attorneys very high fees and the plaintiffs themselves small amounts of 
compensation to get rid of the case. And it goes off the docket which 
is completely wiped clean.
  So there are some problems that are out there, and it is not healthy. 
We have had a string of those cases that have occurred around the 
country that have not been becoming of the legal system.
  The lawyers' primary interest should be to their clients. Courts 
should have a primary interest in seeing that justice is done. 
Defendants ought to pay for what they are required to pay and the 
losses that have occurred. But defendants ought not to be intimidated 
or coerced or extorted really by the threat of a major lawsuit going on 
for years in which their company is abused and abused in court for some 
minor wrong they are willing to pay to correct and willing to 
compensate the victims for.
  So they are in court, and they are willing to pay. They want to fix 
it, but, no, no, that is not enough. They want punitive damages and 
more litigation time. And just to get rid of it, defendants agree to 
pay, and they agree to compensate. Oftentimes--and there are quite a 
number of cases that show this--the lawyers are the ones who really get 
the compensation, and not the victims.
  In many of the cases, the liability is very dubious, but the 
companies feel obliged to pay something to get out of the lawsuit, 
anyway. The damages are very speculative. Sometimes damages have never 
even really been proven.
  I want to mention one more thing about the venue. Let's assume a 
major automobile company designed an automobile--and they have had 
cases of this kind--and the seatbelt is defective, and maybe it poses a 
risk or maybe, when you put it on, it bruises your hand and causes a 
blister or otherwise is designed in a way that is not as fine as it 
should have been designed.
  Let's say someone wants to file a lawsuit against one of the major 
manufacturers in Detroit. They do not have to file that lawsuit in 
Detroit. They can go all over America and find somebody who was damaged 
by that seatbelt. And there will be that kind of vehicle in every 
county in America, no doubt about it. They can go to counties in which 
there is only one sitting circuit judge who they happen to know who 
perhaps is favorable to plaintiffs' cases. They can pick the county in 
America they think has the most favorable jury for these kinds of 
cases, and they can then file their suit there and begin this kind of 
action we have seen here. Not only can they do that, they do that.
  There is a county, I believe in southern Illinois, where routinely 
cases of this kind are chosen to be filed out of the whole United 
States because they believe it is favorable. The same has been true--
``60 Minutes,'' I believe, or one of the shows on television has shown 
this to have occurred in Mississippi. They named the county and 
interviewed the people there, and they talked about the verdicts that 
are rendered there. And it is not healthy.
  They have done it in Alabama, my home State. We passed some tort 
reform, and Alabama laws have improved, but there are still cases being 
filed there and in other States. They choose the most favorable forum. 
This is not what our Founders had in mind.
  Let me read from the Constitution, the part of the Constitution that 
is relevant to this issue. It is article III, section 2, dealing with 
the courts. It talks about the power of the Federal courts and what 
their jurisdiction is. It says:

       The judicial Power [of the United States] shall extend to 
     all Cases, in Law and Equity, arising under this 
     Constitution, the Laws of the United States, . . .

  And it goes on to say:

     to Controversies to which the United States shall be a 
     Party;--to Controversies between two or more States;--between 
     a State and Citizens of another State;--between Citizens of 
     different States; . . .

  Now our Founding Fathers had thought about this issue, and the issue 
is: If you have a lawsuit filed between a person from Alabama and a 
defendant from Massachusetts, maybe at the time of the founding of our 
country and even to this very day, the person in Massachusetts might 
not be comfortable having his case tried in Alabama or vice versa. So 
they say: What do you do if you have a lawsuit between two States? The 
home-State plaintiff, for example, can choose the forum. He can have a 
friendly court. Maybe he knows all the jurors on the jury in the jury 
box. Maybe the judge goes to church with him. Maybe they are best 
friends and play golf together. And he is going to sue a fellow way off 
there, who has a lot of money, and he will just have a little friendly 
help for his local constituents.
  That is what the Founding Fathers thought about. In football we call 
it home cooking, or in baseball, if you get adverse opinions by the 
umpire against a visiting team. So it is home cooking. They prevented 
that. They put it in the Constitution. They would go to Federal court 
where judges are not elected judges but they are lifetime-appointed 
judges. Any appeal from their ruling goes to the U.S. Supreme Court in 
Washington, DC. Why? Because that would be a more objective, fair 
forum.
  Now, good and clever plaintiff lawyers have learned if they sue 
General Motors or Ford or Chrysler, who are headquartered maybe in 
Detroit, on behalf of an Alabama or an Illinois citizen--then that case 
is going to be in Federal court, right? That is what the Constitution 
says--but, no, they will also add the local Ford dealership in Illinois 
or Alabama or Mississippi or Colorado, wherever they file the lawsuit 
that they choose is the best place. They will name one defendant, at 
least, who is in that same State, and it breaks diversity under case 
law, and the case gets tried in the local State.
  So the principle there is important. In a case involving a class 
action, in which you are involving hundreds of thousands of plaintiffs 
all over America in every State in America, and the prime defendant, 
the central, responsible defendant is an out-of-State corporation, our 
Founding Fathers, I have no doubt, believed that should be in Federal 
court.
  So I say to my friends who are concerned about federalizing 
litigation--and they believe States ought to be able to set their own 
rules for litigation--I really, truly say to you, this is not one of 
those cases in which the Federal Government is taking over things they 
should not take over. The Constitution contemplated those kinds of 
cases would be in Federal court, where you have a lifetime-appointed 
Federal judge, whose appeal will be to

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a court of appeals of a whole region, and whose final appeal will be to 
the United States Supreme Court, the Court that sits over the entire 
country.
  So that is why I think we have had so much success in gaining support 
for this reform. I believe we can do that. And for a whole lot of 
reasons, under the Federal laws we are able to pass, and under the 
leadership or jurisdiction of a Federal judge, we will have far fewer 
bad verdicts. We will reduce the ability of the plaintiff to choose the 
most favorable forum in the whole United States in which to file a 
lawsuit.
  Let me mention to you some of the cases. There are a lot of them that 
have been out there that caused difficulties and have caused an uproar 
and a concern.
  The Toshiba case, Shaw versus Toshiba Information Systems, was a 
class action filed in Texas complaining of an entirely theoretical 
defect in the floppy disk controllers of Toshiba laptops. They are sold 
all over America. Why did they choose a county in Texas to file a 
lawsuit? They were able to do that in a State court, even though the 
asserted defect had never resulted in injury to any user of the 
defendant's product. Not a single one of the customers had ever 
reported a problem due to this defect. Facing a potential liability of 
$10 billion, what the plaintiffs claimed, Toshiba felt they needed to 
settle the claim, and they did.
  This was the result: The class members received between $200 and 
$400. In cash? No; $200 and $400 off any future purchases they may make 
from Toshiba. They received no compensation. The two named plaintiffs 
in the lawsuit, individuals who bought this Toshiba laptop, received 
$25,000 each. And the attorneys, what did they receive? One hundred 
forty-seven point five million dollars. Tell me that is legitimate. Not 
so.
  Here is one with Blockbuster. A class action suit was filed in 
Texas--another Texas case--which alleged Blockbuster had unfairly 
charged for overdue movie rentals. They had overcharged people when 
they were late turning in their video rentals. They were faced with 23 
lawsuits in 13 other jurisdictions around the country. This was a class 
action lawsuit. They decided they better settle the case. In the 
settlement, the trial lawyers received $9.25 million in fees and 
expenses. The individual plaintiffs who were alleged to have been 
wronged received two free movie rentals and $1 off coupons for future 
movie rentals. They got nothing, no money paid out of pocket directly 
of the $9.25 million. I suspect some of those plaintiffs didn't even 
know they were being named as a plaintiff in the case. They got a $1 
coupon, threw it in the trash can, just like you throw them in the 
trash can that come out of your newspaper. You don't have time to fool 
with them.
  Here is one with Sony Pictures. Typical of how these things can 
develop. In advertising for their films, Sony wrongfully created a 
fictional film reviewer. This fictional film reviewer fabricated some 
quotes. Despite Sony's numerous apologies and offer to pay $350,000 to 
settle the inquiry by a State attorney, a class action was filed. Sony 
was willing to pay. They knew they had messed up. They were willing to 
pay. That is so often the case in these matters. The lawyers then went 
out and found two moviegoers to head the class of plaintiffs. They 
claimed they were jousted into seeing ``A Knight's Tale,'' the movie, 
by ads quoting this fictional reviewer calling the films lead actor the 
year's hottest new star.
  It was all bogus, which most of us know those ads are bogus anyway. 
The attorney originally sought refunds on the ticket prices but later 
demanded $4.5 million to settle the case.
  There is a host of other cases. I could go on.
  Aetna, a Federal judge awarded $24 million in attorney's fees out of 
an $82 million settlement in a class action against Aetna. There was 
one against Golf Digest, Cell Phones. The Bank of Boston case, which 
involved my State of Alabama, was pretty egregious also. A class action 
was filed by a Chicago attorney against the Bank of Boston, and they 
decided to file it in Mobile County, AL. That is odd, is it not? The 
case alleged that the bank did not promptly post interest to real 
estate escrow accounts. The settlement limited the maximum recovery for 
the class members to $9. After the State approved the settlement, the 
bank disbursed more than $8 million to the class action attorney in 
legal fees, and credited most of the accounts of the victims with 
paltry sums. The legal fees, equal to 5.3 percent of the balance in 
each account, were debited to those accounts. So the attorney's legal 
fees were taken out of the bank accounts of the class victims. A lot of 
these people did not even know a class action had been filed, let alone 
that they owed an attorney a fee for the $9 in recovery he had received 
for them.
  What is even worse is that for a number of accounts, the debit to 
their account exceeded the credit they obtained in the settlement, 
meaning that the attorney's fees that came out of their account 
exceeded the $9 benefit they had received from the class action 
settlement.
  For example, Dexter Kamowitz of Maine, who did not initiate the 
lawsuit against the Bank of Boston and probably knew little about it, 
received a credit of $2.19 under the class action settlement. At the 
same time the class action attorney debited his account for $91.33 for 
legal fees, producing a net loss of $89.14. Such results, as might be 
expected, produced outrage from class members in other States around 
the country. Judge Frank Easterbrook, Circuit Judge of the Seventh 
Circuit, asked this question: What right does Alabama have to instruct 
financial institutions headquartered in Florida to debit the account of 
citizens in Maine and other States?
  That is a good question. How can a circuit court in Alabama order a 
bank headquartered in Florida to debit the account of a victim in 
Maine? That is bizarre. That is the kind of thing we are dealing with.
  This bill has received great scrutiny. It is not going to end class 
actions. It is going to end the abuses of class actions. It will take 
only the biggest, clearly interstate cases of class actions. It will 
allow them to be tried before a more neutral forum of a Federal court. 
It will provide some controls in the way these cases are handled, the 
way attorney's fees are set. It will control the abuses of coupon-type 
settlements. It will do a lot of things that are very healthy and 
proper and appropriate and overdue.
  That is what we need to do in this matter. Class actions will 
continue. They can continue in State court, if it is primarily a State 
class. They can continue in Federal court, if it is primarily a Federal 
class. That is the right thing for us to do.
  We need to bring it up in the Senate before this session is over. If 
we do that, we will have served our constituents well. We will have 
monitored the legal system that we set up, control, and regulate by the 
laws we pass. We will have responded to abuses and created a system 
that is fair and more just for the plaintiffs, the defendants, and the 
particular plan.
  I thank the Chair, and yield the floor.
  The ACTING PRESIDENT pro tempore. The Senator from New Hampshire is 
recognized.
  Mr. GREGG. What is the regular order?
  The ACTING PRESIDENT pro tempore. The regular order would be to lay 
the bill before the Senate.
  Mr. GREGG. I thank the Chair.

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