The Beneficial Effects of Class-Action Suits

Point of View, Robert Mills
San Francisco Chronicle

It is a lot easier to steal one dollar each from a million people than to steal a million dollars from one person. That simple truth provides the rationale for class actions - legal procedures whereby a single victim is allowed to file suit on behalf of "all others similarly situated".

Class actions provide a remedy - often the only remedy - for the victims of mass fraud. Few such victims on their own have sufficient resources or motivation to represent even themselves, let alone all the other victims.

Class actions work. Billions of dollars are recovered for the public each year by class-action lawyers. Law-enforcement agencies generally seek fines and penalties on behalf of the government, but class actions are brought on behalf of injured citizens, and recoveries are paid directly to the victims.

Robert Mills is a class-action lawyer based in San Rafael, California

The beneficial effect of class actions is clear. After decades of class-action litigation, the American securities markets are far and away the most honest and trustworthy in the world. In Japan, where class actions are unknown, insider trading and stock manipulation are pervasive. Middle-class Japanese investors swindled out of billions of yen have no effective remedy.

By making sleazy business practices unprofitable, class actions have profoundly influenced the way Big Business treats the American consumer. By aggregating the power of thousands of isolated consumers, class actions have leveled the playing field between mighty corporations and their many, otherwise powerless victims.

Powerful political forces want to do away with class actions. Understandably so. Toxic-waste polluters, makers of dangerous, defective products, unscrupulous banks and securities firms and other businesses that cheat and defraud their customers - along with the insurance companies for all of the above - would love to carry on with impunity. If there were no class actions, they could.

Class action's Big Business enemies have begun their attack on several fronts. They focus especially on what they deem "excessive" fees awarded to class-action lawyers. But attorney fees awarded to lawyers for the plaintiffs in class actions average only 20 percent to 30 percent of the total recovery.

This is less than the typical contingency fee of 33 percent to 50 percent that personal-injury victims pay their lawyers. Decades of fierce competition among personal-injury lawyers in an open market have established the fairness of their fees. Class-action lawyers typically pursue more difficult cases, requiring years to litigate, risking huge amounts of their own money.

It's not "excessive" fees that trouble these enemies of class actions. The targets of class actions know that their frauds and wrongdoing will go unpunished if they can block the victims' access to counsel.

Class actions are frequently attacked by reference to some mythical case where "the lawyers got all the money and the class got nothing." Invariably, such allegations prove flatly untrue. Class settlements and attorney fees are approved by judges only after a public hearing, with all class members invited to attend or express their views in writing. In the vast majority of cases, class members are pleased with their settlements. It is common for a settlement involving tens of thousands of class members to be approved without a single objection by a class member.

No system of justice administered by humans can be perfect. The class-action remedy should be judged by how it performs in the great majority of cases - not the inevitable, isolated instances of malfunction. Before we strip consumers of their only viable remedy against mass fraud, we had better decide whether we want a legal system in which crooks can steal a dollar - or a lot more - from a million citizens, with impunity.