The Supreme Court’s Conservatives Had a Chance to Gut Class-Action Lawsuits Forever. Why Didn’t They Take It?

The law, lawyers, and the court.
Feb. 24 2014 11:21 AM

The Case of the Moldy Washing Machines, Again

The Supreme Court’s conservatives had a chance to gut class-action lawsuits forever. Why did they pass it up?

(Continued from Page 1)

Last spring, the Supreme Court vacated that ruling, as well as a similar one in the 6th Circuit, and sent the cases back to the appeals courts to reconsider in light of its decision last term in Comcast v. Behrend, one of the 5–4 rulings that has narrowed the grounds for certifying a class. In this second round, the 7th and 6th Circuits stuck with their original positions, again giving the cases a green light to proceed as class actions including all machine owners. “The basic question presented by the mold claim—are the machines defective in permitting mold to accumulate and generate noxious odors?—is common to the entire mold class, although damages are likely to vary across class members (the owners of the washing machines),” Posner wrote in his second decision. “A class action is the efficient procedure for litigation of a case such as this, a case involving a defect that may have imposed costs on tens of thousands of consumers, yet not a cost to any one of them large enough to justify the expense of an individual suit.”

This pair of rulings has infuriated the pro-business groups and the defense bar because they believe the Comcast decision warrants more curtailing of class actions than the 6th and 7th circuit allowed. To sweepingly discredit the class action, they’re pushing an analysis paid for by the U.S. Chamber of Commerce—the pro-business juggernaut. The law firm Mayer Brown looked at 148 class actions filed in federal court in 2009. Most were dismissed voluntarily by the lead plaintiffs, which could mean the class as a whole received nothing, or thrown out by the judge, or are still pending.  A third settled for the whole class, but Mayer Brown claims in those settlements “there is often little or no benefit for class members,” because only a small percentage of them received awards. That sounds bad. As the trusty Wall Street Journal editorial page put it, “The only beneficiaries of expanding the potential pool of class-action lawsuits are the plaintiffs attorneys—and their yacht builders.”

But wait a second: Mayer Brown’s claim about the lack of benefit turns out to be based on only six cases. In the rest, the settlement terms weren’t disclosed. Also, if only one-third of the cases settled on behalf of the whole class, doesn’t that undercut the argument that businesses are constantly being forced to cave to meritless class actions?

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Other studies show plenty of benefit for class action litigants. Studying 60 class actions in antitrust cases, University of San Francisco law professor Joshua Davis and University of Baltimore law professor Robert Lande found total awards of at least $33.8 billion and “an extremely strong deterrent effect” for anti-competitive practices. In a study it put out last month, the Consumer Financial Protection Bureau looked at eight class-action settlements since 2009, in cases involving financial transactions, and found payments of more than $350 million, not including attorneys’ fees or injunctive relief (promises to stop a particular practice). A couple of examples: A company accused of violating Missouri’s laws on payday loans paid $520,000, as well as allowing between $3.8 million and $9 million in debt forgiveness, to 10,400 people. In another case, in which Citibank was accused of illegally increasing interest rates on outstanding credit card balances retroactively, 12,500 people got more than $225,000.

The class actions that fight back against sharp loaning practices are truly in jeopardy, because of another Supreme Court ruling, AT&T v. Concepcion, which in 2011 found that when customers sign contracts, for everything from a payday loan to a phone plan, companies can bar them from bringing class actions in the fine print, even if state law says otherwise for purposes of consumer protection. One lawyer who brings class actions on behalf of consumers, Paul Bland of Public Justice, says that he’s never had a case settle quickly because of the size of the class “unless we had a company dead to rights.”* He estimates that most of his cases take at least five years. And his concern that the end game, for the companies, is “no class actions at all, forever, in any type of case.” Today, though, the Supreme Court calmed that fear. For how long, we’ll have to see.

Correction, Feb. 24, 2014: This article originally misidentified the organization Paul Bland works for. He is a lawyer at Public Justice, not Public Citizen. (Return.)

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