[Weekly Compilation of Presidential Documents Volume 41, Number 6 (Monday, February 14, 2005)]
[Pages 200-206]
[Online from the Government Publishing Office, www.gpo.gov]

<R04>
Remarks in a Discussion on Class-Action Lawsuit Abuse

February 9, 2005

    The President. Carlos, thank you. Thank you all. Not so fast, 
Senator. Carlos, thanks. I appreciate your service, Carlos. Thanks for 
agreeing to be the Cabinet Secretary. Thanks for leaving the private 
sector to come to Washington and bring your family here to serve our 
country. You're going to be--he's going to be a great Secretary. And for 
those of you here who work in the Commerce Department, you're lucky to 
have him as a boss. Welcome.
    I appreciate my friend Orrin Hatch joining us. Senator Hatch, thanks 
for coming. Senator Hatch and Senator Cornyn from the great State of 
Texas are leaders when it comes to legal reform. I want to thank you for 
being here. Congressman Bob Goodlatte from the great State of Virginia 
is with us as well. We're honored three Members took time out to come 
and hear this, what I think is a vital discussion about how to make 
America the best place in the world to do business. Welcome, glad you 
all are here.
    I want to thank the entrepreneurs who are here, the small-business 
owners and the association members, people who care about legal reform. 
I appreciate you coming. I also want to thank our panelists. We're going 
to have an interesting discussion about why we need to do something 
about class-action lawsuits. That's what we're here to discuss.
    I do want to put it in the larger context, though, about why we even 
ought to take on this issue. As Carlos said, lawsuits are--a litigious 
society is one that makes it difficult

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for capital to flow freely. And a capitalist society depends on the 
capacity for people willing to take risk and to say, ``There's a better 
future, and I want to take a risk toward that future.'' I'm deeply 
concerned that too many lawsuits make it too difficult for people to do 
that.
    And so I've called upon Congress to work with the administration on 
legal reform, whether it be to reform the asbestos litigation issue, or 
medical liability reform to make sure medicine is cost-effective to our 
citizens, or whether it be class-action reform. Legal reform is part of 
a larger agenda to make sure this economy of ours continues to grow.
    We're seeing good growth now. As you know, last month, in the month 
of January, this country created 146,000 new jobs. The national 
unemployment rate is down to 5.2 percent. This is all progress. But it's 
important for the Congress to work with the administration to keep this 
progress going. And so legal reform is part of a strategy for economic 
vitality and growth.
    So is a disciplined budget part of that strategy. I submitted a 
budget earlier this week. I'm not surprised some people are yelling 
about it already. But it is a budget that is lean and effective and says 
we'll spend money on programs that work. And I look forward to working 
with Congress to get that budget passed.
    It is time for Congress to pass an energy bill. We've been debating 
it for too long, and now is the time for action. And I'm confident we 
can get it done. I believe that Congress has heard the message from the 
people that, let's work together to encourage conservation and renewable 
sources of energy, and let's spend money wisely on new technologies, why 
don't we promote clean and safe nuclear power--all aimed at not only 
protecting our environment but, at the same time, making us less 
dependent on foreign sources of energy. So my call to Congress again, 
like I did a week ago today, was, let's stop the debate on energy and 
get a bill to my desk to show the American people that we can respond.
    We'll continue to open up markets for goods overseas and, at the 
same time, enforce our trade laws. Carlos is going to be a part of the 
enforcement mechanism of our trade laws. We opened up markets to 12 
countries over the past 4 years through new free trade agreements in 
countries like Australia and Singapore. And over the next 4 years, we'll 
continue to open up markets.
    And the reason I believe that it's important is because when we're 
good at something, we ought to make it easier to sell what we're good at 
overseas and create new customers for U.S. entrepreneurs and farmers and 
ranchers. Given a level playing field, this country can compete with 
anybody, any time, anywhere. And so we're going to continue to work with 
Congress to advance good trade policy.
    We'll work on things like simplifying the Tax Code, reasonable, wise 
immigration reform, good health care policy, as well as taking on the 
tough task of strengthening the Social Security system for younger 
generations to come.
    Now, I understand some have been listening closely to this debate, 
and I want to make two points about Social Security before we get to the 
subject at hand. One is, we have a problem. For those of you in 
Washington who say we don't have a problem, all you've got to do is look 
at the facts. We don't have enough people paying into the system to take 
care of baby boomers like me who are living longer and longer and longer 
and are going to be promised more benefits. We've got more people who 
are going to be receiving benefits over time, with fewer payers into the 
system. And those who are receiving benefits will live longer and will 
receive more money. That says we've got a problem.
    It is a funding problem. In the year 2027, the Federal Government is 
somehow going to have to come up with $200 billion more than the payroll 
tax to make sure we fulfill the promise. And the problem gets worse and 
worse. Starting in 2018, which isn't all that far away, 13 years away 
from now, the system goes into the red. That means more money coming out 
of Social Security than going in.
    Some in our country think that Social Security is a trust fund; in 
other words, there's a pile of money being accumulated. That's just 
simply not true. The money--payroll taxes going into the Social Security 
are spent. They're spent on benefits, and they're spent on Government 
programs. There is no trust. We're on the ultimate pay-as-you-go system.

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What goes in comes out. And so, starting in 2018, what's going in--
what's coming out is greater than what's going in. It says we've got a 
problem. And we'd better start dealing with it now. The longer we wait, 
the harder it is to fix the problem.
    Secondly, if you're a person who is retired or near retirement, 
nothing will change. There is enough money. You're in good shape. I know 
there are some who have heard talk about Social Security around the 
country here, saying, ``Oops, he's going to take away my check.'' That's 
not going to happen. I don't care what the rhetoric is, what the 
mailings say, what the TV ads say, you're in good shape. It's the 
younger workers who ought to be asking the Members of the Congress and 
the President of the United States, ``What are you going to do to fix 
the problem?''
    And I'm looking forward to working with Congress to fix the problem. 
All ideas are on the table except running up the payroll tax. And I'm 
convinced by setting aside partisan politics and focusing on what's 
right for younger Americans, we can do the job that people expect us to 
do here in Washington, DC.
    We're here to talk about class-action lawsuit abuse. And we've got 
some experts here to help us understand what class-action lawsuits are 
all about and how best to effect good public policy. Look, there is a 
bill working its way through the Senate now, and I want to thank both 
Republicans and Democrat Members of the Senate for working on that bill. 
My call to them is to listen to the experts. And we're about to hear 
from two--actually three--two people who have studied the issue and one 
who has actually lived with it.
    It is important, for the sake of this country and for the sake of 
our economy, to have a fair answer to a problem that is escalating. The 
problem is, people are filing suits all over the country in a State 
courthouse that's affecting people in other States. And oftentimes 
businesses are getting drug into it or people are getting drug into it 
that are unaware they're getting drug into it. And if they are getting 
drug into it, when there's finally a settlement, they don't get much. 
And the people--the lawyers get a lot.
    And so we've worked with Congress to come up with a reasonable 
solution. And they've come up with a reasonable solution that says 
interstate class actions ought to be conducted in the Federal court. And 
my call to the Senate today is to get that bill done as quickly as 
possible so we can get it to the House and get it to my desk. And the 
Senate has got to pass the bill on the floor without amendment. They 
need to pass a clean bill, one that makes sense for the American people.
    I have asked, and Walter Dellinger has kindly agreed to come. He is 
a practicing attorney. He is a professor. He's so good at being an 
attorney, he's teaching others how to be an attorney at Duke University, 
if I'm not mistaken. He was telling me today--I don't know if you know 
this or not; this falls in the ``small world'' category--and if our 
mutual friend is listening on C-SPAN, it will blow his mind we're 
talking about him--but I was raised in Midland, Texas, and the fellow 
who lives across the street from him in North Carolina's father was the 
baby doctor for my three little brothers. [Laughter] Now, how about that 
for small world? Tell Rodin hello.
    Walter Dellinger. I will.
    The President. Walter, why are you interested in the issue? He's 
actually served in Government for the previous administration. He 
represents the spirit needed to have good legal reform, and that is the 
bipartisan spirit. And tell us why you're here, and give us your 
interest in the subject.

[At this point, Mr. Dellinger, chairman of the appellate practice, 
O'Melveny & Myers LLP, and Douglas B. Maggs Professor of Law, Duke 
University, made brief remarks.]

    The President. Tell people what a class action is.
    Mr. Dellinger. Well, a class action--the idea of class action 
started when we realized that often there were many people that had 
small--the same small injury. If I cheat a million people out of $10 
apiece, I ought not be able to sit back and think, ``Well, they'll never 
be able to sue me because it's $10 apiece.'' So if they're really common 
questions of law and you can resolve the whole dispute in one action, 
it's a very effective way of doing it.

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[Mr. Dellinger made further remarks.]

    The President. So in other words, a class-action lawsuit that is 
tried at a State level means you could be doing business in California 
but be sued in Illinois court.
    Mr. Dellinger. That's right. And one of the problems is that you 
sometimes have, in one of these State class actions, a State court judge 
making law for the whole country, making law for DC or for California, 
for Arizona, sitting right in West Virginia or in Illinois, when he's 
not elected by these other people.

[Mr. Dellinger made further remarks.]

    The President. Let me stop you. Before we get to how it does it, why 
is it more fair to be in the Federal court, in your judgment? I think 
people need to understand why the remedy is going to make the system 
more fair to them. I mean, I agree with you completely that there needs 
to be a judicial system that honors people who have been harmed. We want 
the system to be fair. If you get hurt, you ought to have access. And 
yet, on the other hand, we understand the cost of frivolous lawsuits, 
people just filing lawsuits for the sake of filing lawsuits, forcing 
people to settle even though there's no merit to the lawsuit.
    But explain why going from a State court to a Federal court, in your 
judgment, would be fair. He actually testified on the bill, so, I mean, 
you talk about an expert; we're beyond just somebody who theorizes, 
we're somebody who went in and front--dared go to the Halls of the 
Senate and testified. How did Senator Cornyn treat you?
    Mr. Dellinger. They did very well. [Laughter] And Senator Hatch.

[Mr. Dellinger made further remarks.]

    The President. It sounds fair to me. I mean, it sounds reasonable. I 
think if somebody is out there wondering whether or not this is a 
reasonable proposal, it's reasoned to use the Federal courts for what 
they were intended to be used for, which is adjudicate disputes among 
the States, for example. Anyway, why is this fair, beyond moving to the 
Federal court? I interrupted you before. You were saying this bill is 
particularly fair because----
    Mr. Dellinger. Well, because it still allows these cases to proceed 
under the standards we've developed for where you can try cases 
involving people from different States. You get into Federal court, and 
if some of the harmful amendments that are being suggested are defeated 
so that you get a clean bill sent to you, the Federal courts will do 
what they've always done. They look at a case involving multiple States, 
and they say, ``Can we fairly try this? Are these State laws 
sufficiently alike that we can try this in one lawsuit?'' If they're 
not, then you can bring those suits back in a single State. Everybody in 
Pennsylvania can bring a lawsuit in Pennsylvania courts. But you can't 
do it for multiple States if you just tell judges, ``You can pick the 
law of one State, whether people in other States like that law or not.''
    And you're going to hear this afternoon some very telling examples 
of what's gone wrong when one State makes law for the whole country 
without the rest of the country being able to participate. People in 
Texas and North Carolina don't get to vote for who's the State court 
judge in Illinois, and we don't get to vote on what the law should be in 
those other places. And this is precisely designed for that.

[Mr. Dellinger made further remarks.]

    The President. Great job. Thanks for coming. Appreciate you taking 
time.
    He mentioned--he said they're trying to amend the bill. That's code 
word for they're trying to weaken the bill. They're trying to make the 
bill not effective. That's why I called for a clean bill and Walter 
called for a clean bill as well. And I'm confident that the Senate will 
hear that call and get a good piece of legislation off the floor. Then 
we'll move it to the House, and then it will get to my desk quickly, and 
we'll show progress, working together.
    By the way, I repeat, this is a bill that is cosponsored with 
Republicans and Democrats. It's a good piece of legislation.
    Larry Mirel--what do you do, Larry?
    Lawrence H. Mirel. I'm the commissioner of insurance, securities, 
and banking for the District of Columbia.
    The President. Right around the corner.

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    Mr. Mirel. Right around the corner--right across the street.
    The President. Right across the street. Well, that's good. So that 
seems like an unusual connection. Here you are, sitting next to the 
President talking about class-action lawsuit, and it seems like you're 
really not involved with the law, but are you?
    Mr. Mirel. Yes, indeed. And let me explain and add to what Walter 
said before. My job--I'm actually a State official, and my job is to 
protect the people of my jurisdiction, the District of Columbia, and in 
particular those who buy insurance. And I worry about that, and I take 
that seriously. I implement the laws of the District of Columbia, as 
passed by the Council and approved by the Congress.

[Mr. Mirel made further remarks.]

    The President. They settled because--not necessarily because of the 
merits of the lawsuit; they settled for threat of loss. In other words, 
it's kind of like a lottery sometimes when the system isn't balanced 
right.
    Mr. Mirel. Right. I'll give you some examples of it. The first one 
settled $7.5 million to the attorneys who brought the suit, nothing for 
the class members. Those class members are all over the United States, 
including people in the District of Columbia, everybody who bought a 
policy from that company. The second one settled for $10 million to the 
lawyers, nothing to the plaintiff class----
    The President. I'm beginning to get the picture of why there was 34 
filed. Slowly but surely, the settlements are getting bigger. Anyway----
    Mr. Mirel. Even the Association of Trial Attorneys objected to that 
one. So they went back, and they gave something now to the members of 
the class. What is it? A hundred dollars off your next life insurance 
policy that you buy from that company.
    The President. If it's still around.
    Mr. Mirel. That's right. And the lawyers walk off with $10 million. 
Seven cases were settled. The total payout so far is $40 million. And 
nothing has gone to trial, and that's the real evil.

[Mr. Mirel made further remarks.]

    The President. See, it's interesting. What he's saying is, is that 
he has said--he's doing his job in the District, and yet, a lawsuit that 
affects people in the District begins to redefine what you've laid out 
as what is fair.
    Mr. Mirel. That's exactly right. I'll give you another simple 
example. There's a case in Los Angeles Superior Court claiming that one 
of our very largest companies, State Farm, which is a mutual company, 
has too much in reserves and should give that reserves back to its 
members. Well, what I do for a living is make sure the companies that 
sell insurance in this jurisdiction, including State Farm, have enough 
reserves.
    The President. ----enough reserves. [Laughter]
    Mr. Mirel. Right. And the notion that a jury of laypersons in the 
Los Angeles County Court can overturn my decision----
    The President. Do your job better than you can--yes.
    Mr. Mirel. That's the part that I have problems with.
    The President. It's an interesting situation, isn't it, and it's one 
that really goes back to what Walter was talking about as far as the 
Framers' view of how a fair system ought to work. If I were someone who 
was out there wondering whether or not we were making the right 
decision, I would go back and harken back to the papers of the Founding 
Fathers, when they talked about adjudicating disputes like this, so that 
in this case, a jury doesn't make the decisions for the good folks in 
Washington, DC--a jury afar.
    We've also got with us Alita. Are you ready to go? All right, how 
many kids do you got?
    Alita Ditkowsky. I have two children.
    The President. They don't happen to be here--are they?
    Ms. Ditkowsky. Yes, they are.
    The President. I can see them. How old are they?
    Ms. Ditkowsky. Marissa is 10, and Jessica is going to be 9 in 2 
weeks----
    The President. Going to be 9.
    Ms. Ditkowsky. ----3 weeks.
    The President. Fabulous. Well, happy birthday-to-be. Got Mom up here 
on stage. Pretty cool, huh? [Laughter] Where do you live?

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    Ms. Ditkowsky. I live in Commack--Commack, Long Island.
    The President. State? New York?
    Ms. Ditkowsky. New York.
    The President. Not everybody knows where Commack is. Of course, I 
did. [Laughter] So why are you here? No----
    Ms. Ditkowsky. Well, Mr. President----
    The President. Give us your story. This is a very interesting tale.
    Ms. Ditkowsky. Okay. Well, first, I would never believe in a million 
years I'd be talking to you face to face, and I would never believe that 
I'd be talking to you about my TV set. [Laughter] But here goes.
    The President. This is being recorded on film, so you can play it 
back just to prove it actually happened. [Laughter]

[Ms. Ditkowsky, class-action member, Thomson Consumer Electronics 
lawsuit, made further remarks.]

    The President. I'm going to stop you there. So you open up the 
mail----
    Ms. Ditkowsky. Right.
    The President. ----and somebody sends you a coupon.
    Ms. Ditkowsky. Correct.
    The President. ----meaning that you were a party to a lawsuit.
    Ms. Ditkowsky. Exactly.
    The President. ----but you didn't know you were the party to the 
lawsuit.
    Ms. Ditkowsky. Had no clue.
    The President. Interesting isn't it? Whew. [Laughter] First, I'm 
glad I wasn't the Thomson salesman, you know? [Laughter] So you get 
the--what, you get a $50----
    Ms. Ditkowsky. A $50 rebate if you make a purchase of $100 or more.

[Ms. Ditkowsky made further remarks.]

    The President. So, therefore, there should have been a recourse. I 
mean, a just society is one in which she buys the TV that is a lousy 
product, and there's a warranty, and there's some protections for a 
consumer. They ought to reward her those protections.
    Ms. Ditkowsky. And as a consumer of this product, we sent out a 
warranty card that said if there's a problem with the TV, the company is 
supposed to notify us.
    The President. Right. And so the TV company was wrong, and the 
verdict was guilty, and you got $25.
    Ms. Ditkowsky. I got a $50 rebate----
    The President. Fifty dollars.
    Ms. Ditkowsky. ----to go buy a new TV from them.
    The President. Yes, I know. So it made you even hotter.
    Mr. Dellinger. Why did you get such a bad deal?
    Ms. Ditkowsky. Well, as I was going to tell the President, that I 
just found out that the lawyer in this case, who took this case to a 
very small court in Madison County, Illinois----
    The President. Oh, yes, I've been there. [Laughter]
    Ms. Ditkowsky. Madison County. I am going to----
    The President. It is the most--there are more lawsuits filed in 
Madison County, Illinois, than anywhere in the country, I think. I mean, 
I went there to talk about legal reform in Madison County, Illinois. 
There are--people are filing lawsuits there all the time. You had your 
case heard in Madison County. I cannot believe it. Anyway, keep going.
    Ms. Ditkowsky. Well, apparently this lawyer--and nowhere is it in 
the fine print of this little $50 coupon that this lawyer got $22 
million.
    The President. We've got a problem.
    Ms. Ditkowsky. Twenty-two million dollars. I'm still left with a 
broken TV. He got $22 million. Where is the justice in this?
    The President. Yes, and that's exactly why--thank you. We're all 
here because we want the system to be fair. The economy depends upon a 
fair legal system. People's faith in the system, our country depends 
upon a fair legal system. And what we're highlighting here is the system 
isn't fair. And the positive news is, in this town, people have come up 
with a fair solution that will treat people with respect and give them 
justice when they need it and, at the same time, hold people to account 
when they need to be held to account, without affecting our capacity to 
grow our economy. Fairness is all we ask for.
    The scales of justice need to be balanced, and they're not balanced 
today. And so good

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people from around the country, including Walter and Larry, have come to 
the Halls of Congress to help balance those scales. And fortunately, 
there are good Senators and fair Congressmen who understand that all we 
seek is balance. And now is the time for the United States Congress to 
balance the scales when it comes to class-action lawsuits, to do their 
duty to make this country as good a country as it can possibly be.
    I want to thank our panelists for coming. I hope you've enjoyed this 
as much as I have. I'm honored that you would take time and stay over 
from getting back home to help explain the need for this country to act 
on this important issue.
    Thank you for coming. God bless.

Note: The President spoke at 1:31 p.m. at the Department of Commerce.