Hindsight from The New Gun Week October 20, 1999
Cities' Gun Suit Lawyers Win Anyway
by Joseph P. Tartaro
Executive Editor
Who benefits most from many class-action lawsuits filed in the US these days? Lawyers for the plaintiffs; that's who.This fact is important to bear in mind at all times, but particularly in connection with the suits filed against firearms manufacturers, distributors and trade associations, seeking restitution for damages caused by third parties-usually criminals-over whom the defendants have no control.
Congressional attempts to reform the system made some headway in late September, when the House voted on a measure that would require that many of the class-action suits be moved to federal courts. During the debates, there was also an attempt to limit the kinds of frivolous suits which have been filed by 27 cities and counties against the gun industry.
In recent months and weeks, there have been many articles written in magazines and general newspapers about the perversion of the legal system which these municipal gun suits represent. Almost all of them-including editorials in otherwise anti-gun newspapers-have been critical of the suits.
'Sweetheart' SettlementsAn article written by Mark A. Behrens and syndicated by the Knight Ridder/Tribune News Service in early October attempted to explain the major motivation for many class-action suits. Behrens is a Washington, DC, attorney who serves as co-counsel to the American Tort Reform Association.
"Consumers are being taken for a ride by a renegade legal practice that compensates clients with discount coupons while lawyers receive millions in fees," Behrens began.
"Class-action lawsuits-once considered an efficient means for grouping together large numbers of individuals with common legal claims-have become a cash cow for contingency fee attorneys who find state courts willing to sanction 'sweetheart' settlements that enrich the lawyers, but provide little benefit to actual class members.
"In one recent egregious example," Behrens noted, "20 computer manufacturers were sued for misrepresenting the screen size of their monitors. As a settlement, class members received a $13 rebate on the purchase of a new computer monitor or system costing hundreds of dollars. The attorneys who settled the case took home about $6 million in contingency fees.
"In another outrageous case, a cellular telephone company was sued for hiding the fact that it was overcharging consumers by rounding up calls to the nearest minute. When the case was settled, the class-action members received a voucher for $15, which required them to purchase an additional phone or added service with a minimum value of $75 in order to redeem the voucher. Their attorneys received more than $1 million in contingency fees."
Free CerealBehrens provided further examples of how the system works.
"In a lawsuit against a large cereal maker," he said, "class members received coupons for a free box of cereal; their attorneys received almost $2 million in contingency fees.
"The suit alleged that the company had allowed a pesticide approved for use on other grains, but not oats, to be sprayed on oats used for cereal. One of the plaintiffs' lawyers even conceded in court that there was no evidence that the pesticide had harmed anyone, but that did not stop the lawyers from walking away with a big fee.
"Another celebrated case involved a class-action against a mortgage bank for keeping an excessive amount of its customers' money in escrow accounts. Unbelievably, the mortgage holders wound up paying rather than collecting in the case.
"The settlement provided for a deposit of about $9 to go into each class member's bank account, but also called for up to $100 to be deducted from many of those accounts to pay the class-action lawyers' fees-which were just over $8 million. Although the settlement actually ripped-off many of the class members, it was still approved by a state court.
"Something is wrong with our class-action system if it can allow some lawyers to collect millions of dollars in fees while their clients receive only worthless coupons," Behrens charged.
He noted that Congress is moving to address the class-action monster, and referenced the legislation that was approved by the House of Representatives in September that would allow large, multi-state class-actions to be heard in fair federal forums. Behrens also noted that federal courts are taking steps to reduce the growing abuse of class-actions, demonstrating a reluctance to approve unjust settlements and to grant certification in cases that do not merit class-action status.
Behrens' article claimed that the Senate version of the class-action reform bill goes even further than the House. "It requires attorneys' fees to be based on a reasonable percentage of damages actually paid to class members at settlement," he said. "It also calls for consumers to receive class-action notices in 'plain English' instead of the notices that people receive now, which can only be deciphered by a law professor or attorney."
"Class-action reform is urgently needed and Congress is on the right track. Voters should urge it to deliver the goods," Behrens concluded.
When I read Behrens article, as published in The Buffalo News, I was reminded of other class-action settlements, and an article by pro-gun attorney Karen MacNutt in the November-December 1999 issue of Woman & Guns magazine. MacNutt's article deals specifically with how contingency fee lawyers will be paid in the advent of any settlement between the firearms industry "defendants" and the "plaintiff" city of Boston.
$7 Million SurveyI learned on several occasions that I could be a plaintiff and share in the meager proceeds of several class actions. One required me to buy a new insurance policy in exchange for getting a meager discount fon a new insurance policy from Prudential Insurance, who was the defendant. Another involved a couple of dollars in grocery store coupons as the result of a multi-million dollar suit against Proctor & Gamble. The latest involves a class-action filed in Travis County, TX, against Metromail Corporation, R. R. Donnelly & Sons and Computerized Image & Data Systems Inc.
In the Texas case, I was notified by attorneys for a Beverly J. Dennis, and "all others similarly situated," that I might share in a proposed settlement because I had filled out a survey form sometime in 1993 or 1994. The claim is that the defendants, Metromail, et al, had promised free coupons or free sample products to people who filled out a survey. Without any knowledge of the respondents, the companies provided the "personal information" in the surveys to inmates in the Texas prison system for processing.
The notice of pendency and settlement claimed that I could share in any settlement if I supplied a statement of damages and filled out a federal form W-9 with my Social Security number. (Here the contingency fee lawyers were asking for my SS number, the key to all knowledge about me. Needless to say I was happier with the Texas inmates knowing what kind of toothpaste I used.)
The real kicker was on Page 6 of the eight-page notice, where it disclosed what the plaintiffs' lawyers would be paid. It read:
"Defendants and/or insurer have agreed to pay plaintiffs' settlement counsel seven million dollars ($7,000,000) for the attorneys' fees and expenses of the representative plaintiffs' counsel, plus interest."
Boston ContingencyIf the preceding examples are not enough to show how well the plaintiffs' lawyers fatten their companies and themselves in such class-action suits, consider the structure of the Boston suit again the gun industry as reported by MacNutt.
Her article in Women & Guns notes that when Boston, like the other suer cities, announced its suit, city officials claimed that it was not costing the city anything. But the agreement between the city and the four law firms representing Boston clearly spells out that the contingency lawyers would get 25% of any settlement. Since Boston sued for $100 million, the lawyers would be entitled to be paid $25 million-even if the suit is settled without the gun company defendants paying a dime.
In addition, the mayor's office estimates that the city will pay up to another million in expenses.
Clearly, there is more to contingency fees and class-action suits than meets the eye. It would appear that even large cash settlements may not seriously provide the plaintiffs with any significant monetary compensation for any damages suffered-especially when spread across millions of people. It also appears that non-cash settlement agreements can still pay off big for contingency lawyers.
Curiously, the trial lawyers PACs have been major donors to the Clinton-Gore campaigns, as well as to many Democrats in Congress who oppose reform of the system.
Now you know why.
The New Gun Week is published three times a month by the Second Amendment Foundation (SAF) on the 1st, 10th, and 20th. Hindsight is a commentary written by SAF President and Gun Week Executive Editor Joseph P. Tartaro. This commentary may be reprinted so long as credit is given to the author and the publication. For more information or to subscribe, write Gun Week, PO Box 488, Buffalo, NY 14209, or call 716-885-6408 Monday through Friday 9 a.m. to 5 p.m. EST, or inquire on Compuserve to John Krull, Production manager-JohnSAF@Compuserve.com or gunweeksaf@broadviewnet.netAlso, check out the New Gun Week at http://www.GunWeek.com