CLASS ACTION FAIRNESS ACT OF 2004
Mr. MCCONNELL. Mr. President, I rise to speak about a case that I think perfectly illustrates some of the problems produced by our current class action system. This case is, unfortunately, not unique. These outrageous decisions happen all too frequently. The bill currently under consideration will help fix some of these problems.
Reproduced on this poster beside me is an actual settlement check from a recently settled class action lawsuit. This check is made payable to a member of my staff who received it in the mail earlier this year. You will notice that on the check's "pay to the order of" line, I have covered the name of my staffer so that she may remain anonymous.
I have also obscured the name of the defendant in this case. Plaintiff's lawyers have soaked them once already. I would hate to see others sue this company just because they heard the company settled one class action suit.
Along with this settlement check, my staffer received a letter, which says in part:
You have been identified as a member of the class of . . . customers who are eligible for a refund under the terms of a settlement agreement reached in a class action lawsuit . . . The enclosed check includes any refunds for which you were eligible.
Now as you know, Senate staffers are certainly not the highest paid people in this town. So this woman on my staff reports she was excited about receiving some unexpected money.
And then she looked at the enclosed check to see just how big her windfall was. It was a whopping 32 cents. That is right, she received a check made out to her in the amount of 32 cents.
I guess it goes without saying that she was a bit disappointed in her newfound riches.
Now, don't misunderstand me. I am not suggesting my staffer deserved a bigger settlement check. In fact, she tells me she had no complaint whatsoever against the defendant. And she never even asked to be part of this lawsuit.
Apparently, she just happened to be a customer of a defendant who was sued, and it was determined that she theoretically could bring a claim against the defendant, and so she became a member of "a class" that was due a settlement.
If this doesn't precisely illustrate the absurdity of the current class action epidemic in this country, I don't know what does.
To demonstrate just how far out of whack the system is, let's start with the letter notifying my staffer that she was a member of a class action lawsuit, and had been awarded a settlement. This letter and check arrived via the U.S. mail. The last I knew, it cost 37 cents to mail an envelope. The settlement check is for 32 cents.
You can probably see where I'm going with this.
It cost the defendant in this class action suit, 37 cents to send a settlement check worth 32 cents. That sure makes you pause and think about the absurdity of our class action system.
Now, I don't claim to have the economic expertise of some-like my good friend, the distinguished former Senator Gramm of Texas-but I can tell you that forcing a defendant to spend 37 cents to send someone a 32-cent check doesn't make much economic sense. And it certainly defies common sense.
But let me point out the most disturbing element about this lawsuit. My staff researched this case and it may interest my colleagues to know that while the unwitting plaintiff received just 32 cents in compensation from this class action lawsuit, her attorneys pocketed in excess of $7 million.
All in all, not a bad settlement-if you happen to be a plaintiff's lawyer rather than a plaintiff.
And in case you think this plaintiff received an unusually low settlement in this litigation, let me quote from the letter accompanying the settlement check:
At the time of the settlement, we estimated that the average [refund] would be less than $1 for each eligible [plaintiff]. That estimate proved correct.
So, you see, even before the settlement, it was clear that each plaintiff would on average receive less than $1. Yet the attorneys still got more than $7 million.
My colleagues may also be interested to know how much the defendant was forced to spend defending this lawsuit.
Knowing the extent of the defendant's defense costs is instructive in demonstrating how unjust these abusive suits can be. So we asked the defendant how much it spent defending this suit that provided a plaintiff with pennies and her lawyers with millions. But perhaps not surprisingly, the defendant was not willing to discuss that matter.
You see, the defendant told us that if it were readily known just how much they spent defending these types of suits, then that information would almost certainly be used against them in the future.
This defendant feared that if their defense costs were known, then another opportunistic plaintiff's lawyer would file another one of these suits. And then that lawyer would offer to settle for just slightly less than the millions he knew it would cost the defendant to defend the action.
That perfectly illustrates how plaintiff's lawyers exploit and abuse defendants under the current system.
Can there be any doubt that the current class action system is in need of repair? When the lawyers get more than $7 million and a plaintiff gets a check for 32 cents, something is terribly wrong. When defendants fear disclosing how much they spend fighting these ridiculous suits because to do so would invite more litigation, something is terribly wrong.
Justice is supposed to be distributed fairly. This is clearly not a fair way to distribute justice.
Let's try to correct some of the abuses in class action litigation by passing this legislation.
We are not going to end every 32-cent award to plaintiffs and multimillion dollar award to attorneys, but surely we can curb some of this nonsense.