Posts Tagged ‘forum shopping’

Marshall, Texas: Patent Central

“In the last several years, patent lawyers have flocked to Marshall, a small northeastern Texas town of 25,000, because of its speedy court process, patent-enthusiastic judges and juries considered ideal for hearing intellectual property cases. This year alone, the court has seen 59 patent cases, more than triple the total in 2003, which saw just 14 patent suits.” Intel made a $150 million payout after adverse rulings by a Marshall judge, and Cisco is currently being sued in what plaintiff’s lawyers hope will be a big-payout case.

Among those who defend the venue against critics is Charles Baker of Houston’s Porter & Hedges, who concedes “that some defense attorneys are afraid to try cases there because of its pro-plaintiff reputation, which he disagrees with. He said that the [court’s] rocket docket also turns off some defense lawyers who feel pressured to produce evidence quickly, leaving little time for preparation.” Curiouser and curiouser: “Baker said that Marshall’s large elderly population also provides a good jury pool for intellectual property cases. ‘There are a lot of old people who don’t have a problem with sitting weeks at a time and listening to complicated issues,’ Baker said.” (Tresa Baldas, “Texas IP Rocket Docket Headed for Burnout?”, National Law Journal, Dec. 28)

For a very different view of the reasons for Marshall’s popularity, check out M. Craig Tyler (Wilson Sonsini), “Patent Pirates Search for Texas Treasure”, Texas Lawyer, Sept. 20 (PDF): “Juries in East Texas, unlike those in Houston, Dallas or Austin, are much less likely to have a member with any technical training or education, which exacerbates the problem from the defense perspective, but makes East Texas federal courts an attractive venue for would-be plaintiffs, who know that the jury will, instead, gravitate toward softer or superficial issues that are difficult to predict.” The result is to facilitate the activities of what Tyler calls “patent pirates”: enterprises that exist to file patent suits rather than to manufacture products, and which benefit from asymmetrical costs of litigation (discovery in a patent case can cost the manufacturer-defendant a million dollars or more, while the plaintiff license-holder may have few or no documents worth discovering).

According to Tyler, a “simple, nonspecific complaint”, which need not identify any infringing products sold by the defendant, “has a nuisance value of a few hundred thousand dollars the minute it is filed and served.” Tyler’s outspoken article in turn drew a response: Michael C. Smith, “”Patent Pirates” Only Exist in Neverland”, Texas Lawyer, Oct. 10 (PDF).

Filed under: Cisco, Eastern District of Texas, forum shopping, legal extortion, patent litigation, patent trolls, problem jurisdictions

More Madison County forum shopping follies

Luke Lindau lives in a Chicago suburb and suffers from mesothelioma. He sued 59 different defendants for his personal injuries in Madison County; many defendants, expecting to be railroaded, don’t even bother to litigate asbestos cases once they’ve been sued in Madison County (Point of Law Oct. 5 and links therein), so he became a millionaire from the settlements–not bad for a retired 78-year-old who has already exceeded average life expectancy. However, Lindau made his way into Madison County by claiming that he was exposed to asbestos during the construction of Southern Illinois University Edwardsville in 1959-1962. Unfortunately for this theory, it was SIU-Carbondale that was being built then; ground wasn’t broken on the Edwardsville campus until 1963. So the two remaining deep pocket defendants actually insisted on protecting their rights and appealed the venue decision. The plaintiff settled–either to get money immediately or to avoid an adverse precedent for future plaintiffs, though his lawyer, Scott Hendler, has the chutzpah to complain about the “abuse of process” of the appeal. It’s not clear whether the two last settling defendants paid more than nuisance sums, as Hendler elides the issue in his discussion with the reporter. (Brian Brueggeman, “Man reaches $4 million deal in asbestos lawsuit”, Belleville News-Democrat, Dec. 8).

Filed under: asbestos, deep pocket, forum shopping, Illinois, Madison County, procedure

Mississippi changes venue and joinder rules

The Mississippi Supreme Court has reformed its joinder and venue rules to make both forum shopping and unfair mass tort litigation more difficult. The changes stem from a recent case where 56 plaintiffs sued 42 doctors and a drug manufacturer in Jones County, where only one of the plaintiffs resided. Mississippi state law has no provision for class actions, and judges had attempted to get around this by broad application of joinder rules. (AP, Feb. 21; Davis Brister, “Ruling Could Have Major Impact on Tort Reform”, WLBT, Feb. 20; Janssen Pharmaceutica v. Armond; rule and comment changes).

Aside from the forum shopping, such overly permissive joinder is often fundamentally unfair to defendants, who may be forced to try cases where their issues are entirely different from the central issues in the case. Pending before the Mississippi Supreme Court now is the case of 3M Company v. Johnson, where six plaintiffs with a minor lung impairment that did not restrict their activities won a $150 million judgment in rural Holmes County against 3M for allegedly defective face masks in the middle of a much larger proceeding involving many other defendants and asbestos manufacturing–even though 3M’s masks were never designed for asbestos protection, and some of the plaintiffs had no evidence that they had ever used a 3M mask. The plaintiffs did not work together; the defendants were being sued under different theories and different sets of facts, permitting the plaintiffs to introduce large amounts of evidence about manufacturers’ supposed careless marketing of asbestos-containing products that had nothing to do with 3M. (Washington Legal Foundation press release and amicus brief). Update Jan. 22, 2005: Mississippi high court throws out verdict against 3M.

Filed under: asbestos, forum shopping, Mississippi, procedure

The Lawsuits of Madison County

In 2002, Madison County (Dec. 3, Oct. 7, etc.)–where juries and judges are notorious for finding liability where no other courts will–led the nation in class actions per capita when there were 77 filed in the state courts there. In 2003, the number of class actions filed in Madison County rose to 106. The number was three as recently as 1998. (Brian Brueggeman, “Class-action lawsuits set a record”, Belleville News-Democrat, Jan. 2; Sanford J. Schmidt, “Debate renews in wake of record class action filings”, Alton Telegraph, Jan. 4; Michael Bobelian, “Congress Eyeing Major Reforms Of Class Actions”, New York Lawyer, Jan. 5).

One example of the forum shopping is a 2003 asbestos case of Whittington v. U.S. Steel. The plaintiff claimed to have been injured as a result of exposure to asbestos on the job in Gary, Indiana, and sued his former employer, U.S. Steel. A plaintiff-friendly judge let a legally frivolous argument against application of workers compensation laws go to the jury–which appears to be the first time a tort suit against an employer for asbestos exposure was permitted to get to a jury. The jury, on flimsy evidence that the asbestos exposure occurred at U.S. Steel or that U.S. Steel was negligent (helped by a ruling precluding U.S. Steel from showing the safety measures they had employees take), awarded $50 million in damages and $200 million in punitives. “I could hardly write it down,” the jury foreman said. “I’ve never seen numbers that big.” The size of the award, compounding at 9% interest, caused U.S. Steel to decide to settle for a fraction of that amount rather than take their chance with an appeal. (Paul D. Boynton, “$250 Million Asbestos Verdict Awarded Against U.S. Steel”, Lawyers Weekly USA, 2004; Peter Page, “Asbestos Exposure Cases Draw Big Awards”, National Law Journal, Apr. 10, 2003; Brian Brueggemann, “Man awarded $250 million in cancer case”, Belleville News-Democrat, Mar. 29, 2003).

Filed under: asbestos, class actions, forum shopping, Indiana, Madison County

Forum shopping

Two Germans had a contract dispute with their former employer, German media giant Bertelsmann AG, regarding a European joint venture. The contract, written in German, required the application of German law, and (according to the defense) the major dispute was over the meaning of a German term in the contract. So where to sue? California, of course! The jury came through with a verdict of over a quarter-billion dollars, and their verdict form was apparently sufficiently muddled that the plaintiffs are going to argue that they were meant to receive over a billion dollars. The defense argues that part of the problem is a mistranslation of “participation” into “equity.” (Greg Risling, “Calif. Jury Rules Against Bertelsmann”, AP, Dec. 12; Gina Keating, “Jury Faults Bertelsmann in AOL Europe Suit”, Reuters, Dec. 11).

Update, Jan. 6, 2004: The plaintiffs’ attorney confirms that the main dispute was over interpretation of a clause in the German-language contract, but argues that it would have been “prohibitively costly” for the plaintiffs to bring the case in Germany–which, based on my experience in a number of cases where critical documents are not in English, and require expensive translation, strikes me as extraordinarily unlikely that the case would have been more expensive in Germany, much less prohibitively so if plaintiffs had a sincere belief that their case was worth in the billions. But the reporter does not challenge the assertion. (Nora Lockwood Tooher, “Two German Entrepreneurs Win $255 Million”, Lawyers Weekly USA, 2004).

Filed under: California, Europe, forum shopping, Germany, procedure

Welcome Phila., Denver, Okla., Jacksonville readers

We’re named among the weekly “Web Winners” picks of Philadelphia Inquirer columnist Reid Kanaley, who recommends us for “such class-action gems as the one in California demanding discounts for men on ‘ladies night.'” (Aug. 14). Vincent Carroll, writing in Denver’s Rocky Mountain News, predicts that the forthcoming Kobe Bryant trial is unlikely to resemble the atrocious O.J. Simpson trial, and quotes our editor on the question of jury selection and its abuse (“Spectacle of O.J. trial won’t repeat itself here”, Aug. 16).

Read On…

Filed under: about the site, accolades, Denver, forum shopping, jury selection, loser pays, Oklahoma, on TV and radio, Philadelphia

Race, poverty and tort awards

Who says academics are skittish about pursuing potentially explosive research topics? In “Race, Poverty, and American Tort Awards: Evidence from Three Data Sets,” in the Journal of Legal Studies, Eric Helland of Claremont McKenna and Alexander Tabarrok of George Mason University analyze data on jury awards by county. Their conclusion: “An increase in the black county poverty rate of 1 percentage point tends to raise the average personal injury tort award by 3 to 10 percent. An increase in the Hispanic county-poverty rate of 1 percentage point tends to raise awards by as much as 7 percent although this effect is less well estimated. These effects imply that forum shopping for high-poverty minority counties could raise awards by hundreds of thousands of dollars. Average awards fall with increases in white (non-black, non-Hispanic) poverty rates in two of our datasets, thus making these findings even more surprising.” (JLS table of contents; Tyler Cowen at the Volokh Conspiracy got there first).

Filed under: forum shopping, procedure

Archived class action materials, pre-July 2003

Madison County, Ill., 2003: “To tame Madison County, pass the Class Action Fairness Act“, Jun. 12-15; “The intimidation tactics of Madison County“, Jun. 9; “‘Lawyers who won $10 bil. verdict had donated to judge’“, Apr. 30; “A bond too far“, Apr. 4-6; “Appeals bonds, again“, Apr. 2-3; “Mad County pays out again” (“light” cigarette class action), Mar. 24. 2002: “Malpractice-crisis latest: let ’em become CPAs“, Oct. 7-8; “Intel sued in notorious county“, Aug. 30-Sept. 2. 2000: “Update: Publishers’ Clearing House case“, Feb. 29. 1999: “Criticizing lawyers proves hazardous” (columnist Bill McClellan makes fun of class-action attorneys, they sue him for libel), Nov. 4 (& Nov. 30; Feb. 29, 2000)

Securities class actions, 2003: “Prospering despite reform“, May 5; “‘Lawyers find gold mine in Phila. pension cases’“, Mar. 21-23; “NYC challenges class action fees; taxpayers save $200 million“, Feb. 28-Mar. 2 (& Jun. 20, 2000). 2002: “Updates” (Ninth Circuit ruling), Oct. 1-2; “Second Circuit: we mean business about stopping frivolous securities suits“, Aug. 29-Sept. 2; “Financial scandals: legislate in haste“, Jul. 12-14; “‘How to stuff a wild Enron’“, Apr. 22; “Judge compares class action lawyers to ‘squeegee boys’“, Apr. 18. 2001: “Short-sellers had right to a drop in stock price“, Nov. 12; “Third Circuit cuts class action fees” (Cendant, CBS/ Westinghouse), Sept. 25-26 (& on Cendant, June 20, Sept. 4, 2000); “Dotcom wreckage: sue ’em all“, Aug. 7-8; “‘2d Circuit Upholds Sanctions Against Firms for Frivolous Securities Claims’” (Schoengold & Sporn), July 23; “Razorfish, Cisco, IPO suits“, May 22; “Securities law: time for loser-pays“, Mar. 2-4; “3Com prevails in shareholder suit“, Feb. 21-22; “$1,000/hour for shareholder class lawyers” (Aetna case), Feb. 14-15; “What they did for lead-plaintiff status?“, Jan. 18 (& see Feb. 21-22). 2000: “Did securities-law reform fail?“, Nov. 10-12; “Emulex fraud: gotta find a defendant“, Sept. 4; “Fortune on Lerach“, Aug. 16-17; “Lion’s share” (commodity brokerage case), May 5-7; “Fee shrinkage“, May 3; “Celera stockholders vent at Milberg Weiss“, Apr. 25-26. 1999: “Piggyback suit not entitled to piggybank contents” (Second Circuit rejects fees in Texaco action), Oct. 9-10; “Effects of shareholder-suit reform“, Sept. 22.

Fee review, 2003: “Vitamin class action: some questions for the lawyers“, May 28; “Sauce for the gander dept.“, May 19; “NYC challenges class action fees; taxpayers save $200 million“, Feb. 28-Mar. 2 (& Jun. 20, 2000). 2002: “FTC cracks down on excessive legal fees“, Oct. 1-2; “Smog fee case: ‘unreal world of greed’“, Jul. 24. 2001: “Court’s chutzpah-award nominee” (Wells Fargo), Oct. 17-18; “Third Circuit cuts class action fees” (Cendant, CBS/ Westinghouse), Sept. 25-26 (& on Cendant, June 20, Sept. 4, 2000); “Coupon settlement? Pay the lawyers in coupons“, Mar. 16-18. 2000: “Fee shrinkage“, May 3; “‘Accord tossed: Class members ‘got nothing’” (Equifax, 7th Circuit), Jan. 6. 1999: “Class action fee control: it’s not just a good idea, it’s the law” (Ninth Circuit on “separately negotiated” fees), Nov. 30; “Piggyback suit not entitled to piggybank contents” (2nd Circuit, Texaco), Oct. 9-10.

Milberg Weiss Bershad Hynes & Lerach, 2003: “Prospering despite reform“, May 5; “Milberg copyrights its complaints“, Jan. 3-6. 2002: “Updates” (Ninth Circuit ruling), Oct. 1-2; “Smog fee case: ‘unreal world of greed’“, Jul. 24 (& Dec. 5, 2000, Jun. 22-24, 2001); “Judge compares class action lawyers to ‘squeegee boys’“, Apr. 18; “Milberg faces second probe” (Phila. politics), Feb. 27-28; “‘Probe of Milberg Weiss has bar buzzing’“, Jan. 28-29; “‘In a class of his own’” (Melvyn Weiss profiled in The Economist), Jan. 21-22. 2001: “NFL satellite ticket class action“, June 5 (& update Aug. 20-21: court disallows settlement); “Update: cookie lawsuit crumbles“, May 9; “‘Lawyers to Get $4.7 Million in Suit Against Iomega’” (zip drive defect allegations), May 8; “California electricity linkfest” (representing San Francisco), March 26; “(Another) ‘Monster Fee Award for Tobacco Fighters’” (Calif. cities and counties), March 21-22; “3Com prevails in shareholder suit“, Feb. 21-22; “$1,000/hour for shareholder class lawyers” (Aetna case), Feb. 14-15; “What they did for lead-plaintiff status?“, Jan. 18 (& see Feb. 21-22). 2000: “Fortune on Lerach“, Aug. 16-17; “Fee shrinkage“, May 3; “Celera stockholders vent at Milberg Weiss“, Apr. 25-26; “Class-actioneers’ woes“, Mar. 1; “Pokemon litigation roundup“, Jan. 10 (& Oct. 1-3, Oct. 13, 1999).

Toshiba laptop settlement: see separate page on high-tech law.

Microsoft class actions: “Microsoft case and AG contributions“, Apr. 3-4, 2002; “Columnist-fest” (proposed settlement), Nov. 27, 2001; “Hiring talent from the opposing camp“, Feb. 28, 2000; “In race to sue Microsoft, some trip“, Dec. 23-26; “Microsoft roundup“, Dec. 3-5; “‘Actions without class’“, Dec. 2; “Class actions vs. high-tech“, Nov. 23; “Vice President gets an earful“, Nov. 22; “Microsoft roundup“, Nov. 17; “Fins circle in water“, Nov. 13-14; “Microsoft roundup“, Nov. 11; “Microsoft ruling: guest editorials“, Nov. 8; “Why doesn’t Windows cost more?“, Oct. 27; “Are you sure you want to delete ‘Microsoft’?“, Oct. 11.

Employment class actions: see separate page on employment law.

Overlawyered.com commentaries:

“Texas’s giant legal reform“, Jun. 18-19, 2003.

“To tame Madison County, pass the Class Action Fairness Act“, Jun. 12-15, 2003; “‘Reforming class action suits’” (Class Action Fairness Act), Apr. 25-27, 2003.

“Judge kicks class-action lawyers off case” (H&R Block), May 15, 2003.

“Class action lawyer takes $20 million from defendant’s side“, Mar. 15-16, 2003.

“FBI probes Philadelphia’s hiring of class action firm“, Jan. 31-Feb. 2, 2003.

“Ninth Circuit panel sniffs collusion in bias settlement fees“, Dec. 16-17, 2002.

Auctions: “Third Circuit cuts class action fees“, Sept. 25-26, 2001; “Letter to the editor” (competitive bidding for class representation), Jun. 13, 2001 (& Oct. 1-2, 2002).

“7,000 missing colors, many of them crisply green“, Aug. 29, 2002.

“‘Junk-fax’ suit demands $2 trillion“, Aug. 26, 2002; “Junk-fax litigation: blood in the water“, July 24, 2001; “Junk-fax bonanza“, March 27, 2001; “Junk fax litigation, continued“, March 3-5, 2000; “In Houston, expensive menus” (unsolicited faxes), Oct. 22, 1999.

“Penthouse sued on behalf of disappointed Kournikova-oglers“, Jun. 3-4, 2002.

“The mystery of the transgenic corn“, May 14-15, 2002.

“Editorial-fest“, Mar. 11, 2002; “Washington Post on class action reform” (good editorial), Aug. 29-30, 2001; “Actions without class” (Washington Post editorial), Dec. 2, 1999.

“The thrill of it all: plaintiffs win 28 cent coupon“, Feb. 27-28, 2002.

“‘Toyota buyers’ suit yields cash — for lawyers’“, Feb. 18-19, 2002; “Golf ball class action” (Acushnet Co.), Nov. 18-19, 1999; “Class action coupon clippers” (Washington Post on settlement abuses), Nov. 15, 1999.

“‘Congress looks to change class action system’“, Feb. 11-12, 2002; “‘They’re making a federal case out of it … in state court’“, Nov. 7-8, 2001.

“Selling out the class?” (allegations of collusive settlement in H&R Block case), April 5, 2001 (& see Dec. 3).

“Swiss banks vindicated“, Nov. 1, 2001.

Letter to the editor (lawyers’ own incremental billing disclosed?), Oct. 22, 2001 (& see Dec. 3).

“Counterterrorism bill footnote” (forum shopping), Oct. 16, 2001; “Best little forum-shopping in Texas” (class actions make their way to Texarkana), August 27, 1999.

“Employment class actions: EEOC to the rescue“, Sept. 10, 2001.

“220 percent rate of farmer participation” (USDA black farmer settlement), July 25, 2001.

“The rest of Justice O’Connor’s speech“, July 6-8, 2001.

“Blockbuster Video class action“, June 11, 2001 (& see July 3-4 (Vince Carroll column)).

“Letter to the editor” (First USA credit cards), June 13, 2001; “Bank error in your favor” (credit card holders), Sept. 27-28, 2000; & letter to the editor, Sept. 3, 2001.

“Ghost blurber case“, June 12, 2001.

“NFL satellite ticket class action“, June 5, 2001 (& update Aug. 20-21: court disallows settlement).

“Insurance class settlement scuttled“, Feb. 26, 2001.

“Florida lawyers’ day jobs, cont’d” (hotbed of class action filing), Dec. 11-12, 2000; “Florida’s legal talent, before the Chad War” (Florida Marlins ticketholders), Dec. 8-10, 2000.

“Obese soldiers class action“, Nov. 10-12, 2000.

“Sweepstakes, for sure” (American Family Publishers), Oct. 20-22, 2000; “Update: Publishers’ Clearing House case“, Feb. 29, 2000.

“Courtroom crusade on drug prices?“, Oct. 19, 2000.

“Class actions: are we all litigants yet?“, Aug. 23-24, 2000.

Coke: “Class-action lawyers to Coke clients: you’re fired“, July 21-23, 2000; “‘Coke plaintiff eavesdrops on lawyers; case unravels’” (what do lawyers tell each other after they think their clients have hung up on the conference call?), July 19-20; “‘Ad deal links Coke, lawyer in suit’” (Willie Gary, suing Coke, cuts lucrative ad deal with it), May 11, 2000.

“Target Detroit” (lawyers countersue DaimlerChrysler and exec personally), July 19-20, 2000; “Turning the tables” (DaimlerChrysler sues class action lawyers), Nov. 12, 1999.

“Class-action assault on eBay“, July 13, 2000.

“AOL ‘pop-up’ class action” (ads said to be unfair), June 27, 2000.

“Rise, fall, and rise of class actions” (enormous increase in filing rates in past decade), Mar. 10-12, 2000.

“Criticizing lawyers proves hazardous” (columnist Bill McClellan makes fun of class-action attorneys, they sue him for libel), Nov. 4, 1999 (update Nov. 30: he criticizes them again, though suit is still pending); “Update: Publishers’ Clearing House case” (judge approves settlement including legal fee request; agreement reached to end libel suit), Feb. 29, 2000.

“Secrets of class action defense“, Feb. 25, 2000; “Mobile Register probes class action biz” (BancBoston and other mortgage escrow cases), Feb. 7, 2000.

“AOL upgrade’s sharp elbows“, Feb. 12-13, 2000.

“Weekend reading: columnist-fest” (Laura Pulfer on suit against Ralph Lauren outlet stores; Alex Cockburn on Swiss banks), Feb. 5-6, 2000.

“From our mail sack: unclear on the concept“, Jan. 28, 2000.

“Santa came late” (suit against Toys-R-Us for missing Christmas delivery), Jan. 19, 2000.

“Pokemon litigation roundup“, Jan. 10, 2000; “Pokemon cards update“, Oct. 13, 1999; “Pokemon-card class actions“, Oct. 1-3, 1999

“Expert witnesses and their ghostwriters” (life insurance class actions), Jan. 4, 2000.

“Lawyers for famine and wilderness-busting?” (anti-biotech), Jan. 3, 1999.

“Class action toy story” (antitrust), Dec. 29-30, 1999.

“‘In race to sue Microsoft, some trip’” (lawyers inadvertently copy details of pleadings in earlier cases), Dec. 23-26, 1999.

“Rolling the dice, cont’d” (suits over online gambling), Dec. 7, 1999 (earlier report, Aug. 26).

“Beware of market crashes” (class action sought against E*Trade for alleged computer-related trading losses), Nov. 26-28, 1999.

“Are they kidding, or not-kidding?” (proposals for suits against makers of fattening foods, losing sports teams), Nov. 15, 1999.

“Public by 2-1 margin disapproves of tobacco suits” (if class actions are filed on behalf of the public, why don’t they reflect public opinion?), Nov. 5-7, 1999.

“Demolition derby for consumer budgets” (class action against State Farm over generic crash parts), Oct. 8, 1999.

“Power attracts power” (Boies joins anti-HMO effort), Sept. 30, 1999; “Impending assault on HMOs“, Sept. 30.

“$49 million lawyers’ fee okayed in case where clients got nothing” (secondhand smoke action), Sept. 28, 1999; “Personal responsibility takes a vacation in Miami” (tobacco class-action verdict), Jul. 8, 1999.

“Judge throws out four WWII reparations lawsuits“, Sept. 20, 1999.

“Tainted cycle” (Milwaukee taxpayers sue themselves), Sept. 2, 1999.

“Three insurers sued for $100 million” (how the press covers class action announcements), Aug. 20, 1999.

Resources on class actions are found at many different places on Overlawyered.com. For example, most of the massive lawsuits filed against individual industries over personal injury to classes of consumers are covered on pages specific to the subject matter of the cases, such as the pages on firearms litigation, tobacco litigation, managed-care litigation, breast implant litigation, product liability, and so forth.

This page assembles resources on class actions as a procedural device and as an institution. Among topics covered are the unique role in this area of an “entrepreneurial” plaintiff’s bar that decides on its own behalf who and how to sue and lines up clients as needed; the history of the device and the reasons why it is either sharply limited or virtually unknown in the courts of other industrial democracies; the distinctive ethical problems that arise because of the extreme difficulty of policing lawyers’ faithfulness to the interests of the absent class; and the operations of the class action “industry” in the areas in which it has been a familiar part of the American legal landscape for decades, namely shareholder litigation and class actions over consumer and antitrust grievances aggregating large numbers of (usually smallish) claims.

Background — procedural history, ethical issues:

Overlawyered.com‘s editor wrote about class actions (as well as “champerty and maintenance”, the “invisible-fist theory”, and other topics) in Chapter 3 of his book The Litigation Explosion; an excerpt is online.

Chapter 5 (“The New Town Meeting”) of Peter Huber’s book Liability: The Legal Revolution and Its Consequences contains a valuable discussion of the class action format, particularly as it applies to the so-called toxic tort; it is unfortunately not online.

Lawrence Schonbrun, a Northern California attorney who has developed a specialty in filing challenges to excessive class action attorneys’ fee requests, wrote a prescient article in 1996 on “coupon deals”, “separately negotiated” fees from defendants, and other innovative ways the class action bar was finding to escape scrutiny of its remuneration. (“Class Actions: The New Ethical Frontier“)

Shareholder litigation:

A starting point for research on this topic is Stanford Law School’s comprehensive Securities Class Action Clearinghouse. See also the commentaries on this site.

In Felzen v. Andreas (1998), Judge Frank Easterbrook of the Seventh Circuit wrote that “Many thoughtful students of the subject conclude, with empirical support, that derivative actions do little to promote sound management and often hurt the firm by diverting the managers’ time from running the business while diverting the firm’s resources to the plaintiffs’ lawyers without providing a corresponding benefit.” He cited a long list of scholarly articles including Janet Cooper Alexander, Do the Merits Matter? A Study of Settlements in Securities Class Actions, 43 Stanford L. Rev. 497 (1991), which found that the “structural characteristics common to securities class actions . . . combine to produce outcomes that are not a function of the substantive merits of the case.” and Roberta Romano, The Shareholder Suit: Litigation without Foundation?, 7 J. L. Econ. & Organization 55 (1991), which examined 39 shareholder suits filed between the late 1960s and 1987 and concluded that “shareholder litigation is a weak, if not ineffective, instrument of corporate governance.”

In 1995 Congress passed the Private Securities Litigation Reform Act, which aimed to rectify some of the worst abuses in the field. This client memo from Fried, Frank describes the wider powers institutional investors obtained under the act to influence litigation going on purportedly in the name of investors such as themselves.

In Polar International Brokerage v. Reeve, a New York federal judge rejected a proposed class action settlement and request for $200,000 in attorneys’ fees, saying it offered shareholders “nothing of real value”. (Deborah Pines, National Law Journal, May 24, 1999).

Although the securities bar frequently alleges that well-known companies in Silicon Valley and elsewhere are run by crooked managements that fleece their shareholders, they ironically turn out to keep a lot of their (very substantial) stock holdings invested in the very same companies. (Paul Elias, San Francisco Recorder, June 8, 1999). Among the reasons is that in many cases they have accepted stock as payment for dropping earlier legal actions.

Other class action resources:

The Federalist Society publishes a Class Action Watch newsletter. The first issue is in conventional web-page format. The second issue is a PDF document (Adobe Acrobat needed to view; get it here).

Among the better-known law firms representing class action plaintiffs are Milberg Weiss Bershad Hynes & Lerach LLP, Lieff, Cabraser, Heimann & Bernstein LLP, Cohen Milstein, Hausfeld & Toll, Krause & Kalfayan, and Barrack, Rodos & Bacine.

Actuary Jack Patterson has written an account for a plaintiff’s lawyer readership of class actions against life insurance companies, one of the big practice areas of the 1990s.

The class action bar also files many antitrust suits on behalf of large groups of consumers or business purchasers. The Antitrust Policy web site collects many worthwhile resources on antitrust law.

Filed under: antitrust, Bill Lerach, Bill McClellan, champerty, Chrysler, class actions, copyright, Detroit, forum shopping, Houston, libel slander and defamation, Madison County, Melvyn Weiss, Milberg Weiss, Philadelphia, reparations, State Farm, Switzerland, The Litigation Explosion, tobacco, Toyota, Willie Gary