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In Defense Of Class Actions

 December 12, 2012 10:03 AM

In the movie "A Civil Action" John Travolta played a scrappy lawyer who risks his whole practice to bring a class action case against a chemical company that polluted the water and poisoned residents in a small Massachusetts town. The movie ends badly for both the lawyer and the company.

Class actions are a vehicle through which individuals harmed by fraudulent conduct of companies and Wall Street firms can seek redress as a large group, thus sharing the costs and expenses, which they could not do if they all brought their own individual suits. In addition to shareholder class actions, the class action vehicle has been used by groups of employees to redress discrimination by companies and, in the medical area, to seek compensation for defective medical and pharmaceutical products which cause widespread harm. So why is the Supreme Court now trying to impose substantial restrictions on class actions? The conservative Congress over the years has enacted legislation with "catchy" titles such as the "Private Securities Litigation Reform Act" (PSLRA) and the "Class Action Fairness Act" (CAFA) which place broader obstacles in the paths of potential plaintiffs.

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This legislation was driven by lobbyists for the business community seeking to limit its liability when it harmed its customers and citizens. The conservative Supreme Court is now set to weigh in on two additional cases which could have a further adverse impact on investors, consumers, employees and people injured by toxic torts. In those cases,Comcast v. Behrendand Amgen v. Connecticut Retirement Plans, the Court will be asked to weigh in on the "certification" of class actions, namely, allowing cases to proceed as a class action or splitting them up into thousands of individual cases that would likely go nowhere as a result of the high costs of individual litigation and defense counsel's finely honed run-out-the-clock game plan.

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While disguised as mere procedural "tweaks," these cases have the potential to further diminish individuals' rights in favor of corporate interests. As fellow Forbes.com contributor and noted attorney Michael Bobelian has recently pointed out , few class actions ever go to trial. "Instead, they largely depend upon the determinations of a judge in the preliminary stages of litigation. If defendants manage to win dismissal early on, they avoid the heavy costs of defending such cases. If the plaintiffs survive the typical attempts to dismiss the case, however, they possess immense leverage over the litigation." Indeed, as Bobelian reported, Justice Antonin Scalia noted last month that when plaintiffs score a victory, "In most cases, that's the end of the lawsuit. There's…automatically a settlement." The Supreme Court is expected to rule on the two cases next year. Just as Justice Roberts seemed to tack to the center in refusing to strike down the "Obamacare" Affordable Care Act, he will be pivotal again in deciding whether consumers can effectively seek redress or whether the Supreme Court will operate as the judicial arm of the Chamber of Commerce. It is essential he rules for consumers.

Zamansky & Associates are securities attorneys representing investors in federal and state litigation-including class actions-and arbitration against financial institutions.

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