The Tortellini

California class actions in the cross-hairs again

One of the main targets of the 2005 federal Class Action Fairness Act were lawsuits filed in California on behalf of screwed-over workers and other consumers. The state has fairly strong laws protecting both groups, and people have successfully used class actions to rein in companies like Wal-Mart that have done stuff like force employees to work off the clocks. But the federal act apparently hasn't gone far enough, so corporate groups in California have just launched a ballot initiative to finish the job... 

YouTube good for more than watching John Edwards fix his hair

The consumer group Public Citizen has apparently made history by using a YouTube video to help generate claims in a big class action settlement against the manufacturer of the drug Paxil, which marketed the antidepressant to kids even though it's known to increase suicide risk in young people. There's $48 million in the settlement pot, most of which will revert to the drug company if it's not claimed by August. Check out the video here.

Obama's anti-consumer vote

As Obama-mania sweeps across the land and has Democrats everywhere buzzing, I find myself a bit wary of it all. Not that I'm a single-issue voter, but when it comes to civil justice issues, Illinois senator Barack Obama is a bust. His willingness to buy the corporate line about class action "reform" last year prevents me from joining the hallelujah chorus.

The 2005 Class Action Fairness Act (CAFA), a pet cause of George W. Bush, essentially forced most state consumer class actions into the backlogged and Republican dominated federal courts. Like the bankruptcy bill before it, class action reform was a special interest extravaganza, with the insurance, credit card, banking, pharmaceutical and auto industries hiring so many lobbyists that there was nearly one for every member of Congress. (You can read more about some of the chicanery involved in selling CAFA in my book.)

Obama's state was also the focus of intense media campaigns surrounding the bill sponsored by the U.S. Chamber of Commerce. But when the bill came up for a vote, Obama's fellow Illinois democrat, Sen. Dick Durbin, didn't cave. Potential presidential rival Hillary Clinton voted against the bill. Even John Kerry, who went on national television during the 2004 presidential debates and said, "John Edwards and I support tort reform," voted against this bill.

So what's up with Obama? No surprise here, but maybe it's the $2 million in campaign contributions he got from law and lobbying firms that represent many of the big business interests behind the bill. According to the Center for Responsive Politics, he got $60,000 from Mayer, Brown Rowe & Maw, the heavyweight lobbying firm whose partners reportedly helped write CAFA. Obama also got  $70,000 from Sidley Austin, home of the notorious Dan Troy, the former FDA general counsel who used his government perch to help drug companies win lawsuits filed by injured consumers.   

Obviously the class action vote was just one among many, but I do find it telling. Either Obama didn't fully understand the implications of the bill for consumers (who may be shut out of court when they're ripped off for relatively small amounts of money), or he was voting with an eye on the White House and courting future campaign contributors in the business world. Neither scenario gets me especially excited about the Democratic Party's new rock star.

Bank of America Wins Right to Gouge Seniors

In February 2004, a San Francisco jury hit the financial behemoth Bank of America with an enormous verdict in a class action filed by seniors and disabled people whose public benefit accounts the bank had raided to cover overdraft and other fees, in violation of California law. The verdict threatened to top a billion dollars and promised to change the way banks do business.

Bank of America, like most banks, processes checks so they bounce more often and generate overdraft fees, and then automatically takes the fees out of customers' accounts. When collecting these fees, banks don't have to abide by any of the debt-collection laws that apply to other businesses. Because they've already got your money, they just take it. The California class action threatened to put the brakes on some of these practices.

But nickel and diming customers like this is a $55 billion a year business for the nation's banks, which is why the industry has fought the California verdict tooth and nail. Even the Bush administration got involved in the appeal, arguing that California state law was preempted by the federal bank regulations enforced by the useless Office of the Comptroller of the Currency, which does nothing to protect consumers.

Alas, yesterday a California appeals court overturned the verdict entirely. The plaintiffs will naturally appeal, but the future doesn't look good for bank consumers, for whom the case promised a small beacon of hope for relief from abusive bank practices.

Illinois Takes Another Beating

Today the conservative Manhattan Institute released the latest in its line of "Trial Lawyers, Inc." reports, this time focusing on the state of Illinois. The study is full of the usual scary--and dubious--numbers from compromised sources about the ever-increasing size of the "litigation industry" and all those itinerant doctors fleeing the state in search of happier legal climates.

The MI report will no doubt be effectively deployed by the big companies that helped make the Illinois  2004 judicial races the most expensive in American history (read more about that election here) and which are gearing up for another round in November.  No surprise, but some of the Manhattan Institute's biggest funders are the same companies that occasionally get whacked in Illinois courts, including Philip Morris, the victim of a recently overturned $10 billion verdict in Madison County.

The Doctors Aren't Disappearing, but the Lawsuits Might Be...

One interesting item from the MI study: Since George W. Bush signed the Class Action Fairness Act in 2005, the number of class actions filed in the famous Madison County "judicial hellhole" has plummeted. After seeing more than 100 in 2003, this year, according to the MI, Madison County has had but one. This news does beg the question: If all the lawsuits are disappearing, how can "Trial Lawyers, Inc." be growing exponentially, as the researchers claim?