- September 19, 2011
- Posted by: Seth Heyman
- Category: Business Law
When multiple plaintiffs parties are injured by the same cause, the American judicial system employs a complicated mechanism; the class action, to streamline the inevitable litigation that arises. More and more frequently, however, defendants find themselves facing a related animal- the mass tort action. This post describes a few of the differences and similarities between the two.
In a class action, a large number of individual claims are aggregated into a single lawsuit, in which the plaintiffs are represented by one or more attorneys, who ask the court for approval to litigate on behalf of a group of similarly situated persons. In many cases, the harm being suffered by each person is minimal (i.e., a $5.00 overcharge on a credit purchase), and the logic behind the class action is that these small economic injuries are aggregated into one large sum, which the plaintiffs’ attorneys then try to wrest from the defendant. This much more likely to get the Defendants’ notice and make them stop the offensive conduct, and also encourages attorneys to take the time to right these wrongs, as a large portion of the amount demanded is usually forked over to them in the form of attorneys’ fees.
As many consumers are aware, members of a class often receive little or no benefit from class actions*. Attorneys are usually awarded the lion’s share of any cash settlement, and if they’re lucky, class members may receive a few dollars. More often than not, they receive coupons to purchase products from the same company that “harmed” them in the first place.
Class actions (along with their less attractive cousins, mass tort actions), are nevertheless fairly common, although it’s not easy to obtain the right to litigate on behalf of thousands- even millions- of people you’ve never met. In order to qualify as a class action, the case must be “certified;” a process that involves having the court determine whether the harm suffered is similar in form and substance as to justify combining the claims of thousands of potential litigants, and which also involves a determination as to whether the attorney with aspirations of representing the class has the wherewithal to do the job effectively.
Mass Tort Litigation
All attorneys not being equal, not every one will obtain (or even bother seeking) court approval to represent an entire class of people who suffered a similar harm. If denied class action status, a plaintiffs’ attorney may be stuck with a case in which the total economic harm suffered by his or her clients is just a few hundred dollars.
As a procedural alternative, an attorney with dreams of class action glory may instead seek out as many people who suffered similar harm at the same hands of the intended defendant as possible, and sign them up as clients. All the clients’ claims are then joined in one complaint, in the hopes of leveraging the same efficiency and economic advantages as if a class had been certified.
A good example of a mass tort action being seen these days are those being brought against large mortgage lenders for the many wrongs perpetrated against homeowners. In some cases, these lenders miscalculated the interest or fees they charged their customers, or failed to follow their own rules when negotiating loan modifications. In many cases, these lenders violated the many laws protecting their customers, which resulted in millions of foreclosures and an economy in tatters.
In most instances of mass tort litigation, plaintiffs suffer different levels of economic harm brought about by the same conduct. Using the mortgage abuse example, some consumers were overcharged a few hundred dollars, while others lost their homes as a result of the banks’ wrongdoing.
Because mass actions operate outside the requirements laid out for class actions, they can pose special difficulties for all parties involved. For starters, attorneys typically charge plaintiffs fairly substantial fees to join a mass tort action (in contrast, class action plaintiffs pay nothing). It is also much more difficult to uniformly settle all of the many claims brought via a mass action, due in large part to the differing levels of damages. There are also serious ethical issues that arise in connection with mass tort actions. Attorneys marketing their services in connection with these cases often make promises they can’t keep, to the detriment of their clients. The cases drag on interminably while plaintiffs continue to pay fees. They also rarely get the results they were promised, as attorneys dealing with hundreds of plaintiffs rarely commit the time necessary to effectively deliver sufficient benefits to all of them.
Despite their differences, there are several elements in common between class actions and mass tort actions.
- In both cases, defendants are more likely to settle, due to a number of factors, such as the expense of litigating such complex matters and the negative media attention they draw. Thus, both forms of mass litigation are effective clubs to wield against defendants.
- Plaintiffs rarely receive any real form of relief. Tiny checks, discounts, or paying substantial legal fees for cases that never seem to end make these cases less than exciting for most consumers.
- Finally, both types of cases have an enormous potential for huge attorneys fees, whether paid from a settlement or directly from clients. If nothing else, this common factor will ensure their continued popularity.
* I once experienced a notable exception to this general rule. Back in 2000, I received a notice that I was a plaintiff in a class action brought against Toshiba in connection with a minor defect in a model of notebook computer that I recently purchased. I never noticed the defect, but the settlement offered me the opportunity to receive a free MP3 player, a product that was newly introduced at the time and retailed for about $250.00. Of course, when I learned that the attorneys that represented me received $30 million, I became somewhat less enthusiastic about the MP3 player.