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Consumers Protest Class Action Bill

February 8, 2005
Consumers who have been defrauded or discriminated against by big companies are calling for the defeat of a pro-business bill that would lock the courthouse door to people who are similarly victimized by corporate misdeeds and seek to bring a class action lawsuit in state court.

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Under the measure (S. 5), which the U.S. Senate is scheduled to vote on this week, defendant corporations will be able to force most state-filed class action lawsuits, which are now heard in state courts, into overburdened federal courts.

In federal court, judges generally do not certify cases that are based on state consumer protection laws, which means the cases are blocked and can't be considered on the merits. The result will deny millions of Americans justice for marketplace fraud and deceptive practices.

Class actions are a critical way for consumers to seek redress from companies for fraudulent behavior, defective products and employment discrimination.

Proponents of this bill include the U.S. Chamber of Commerce, America's biggest companies and their 500 lobbyists in Washington, D.C.

"The business lobby wants this bill because it will enable corporations that commit fraud and engage in deceptive practices to skate free," said Joan Claybrook, president of Public Citizen.

"Locking consumers out of court denies them the one recourse they have against corporate fraud. It's reprehensible."

At a press conference held on Capitol Hill, consumers who have been victimized by corporate wrongdoing urged senators to defeat the measure. They included:

• Shaneen Wahl of Florida, who brought a successful state class action against her Wisconsin health insurance company for jacking up premium rates in violation of Florida law. A very similar Florida class action brought against a New York company was removed to federal court by the defendant, where it failed to get certified because the judge narrowly interpreted state law to find that plaintiffs had no right of action.

• David McIntyre, a preacher from rural Alabama, explained how a federal judge in Illinois refused to certify a nationwide class action case against Household Bank for deceiving consumers about the limited benefits and onerous penalties that arose from using its credit card. Conversely, a California state court judge certified a similar class action that provided $40 million in relief to more than 300,000 low-income consumers.

• Shelly Toliver, a firefighter from Connecticut, described how she brought a state class action suit against Credit Acceptance Corporation of Michigan for cheating her and other consumers out of their vehicles in violation of Connecticut law and destroyed their credit ratings in the process. Ultimately, the class members had their purported debt to the company wiped out and their bad debt ratings cleared up.

• Patricia Nefores of Ohio explained how a credit card company, First USA/Bank One, collaborated in a scheme to exploit customers' personal financial information for profit by selling her private account information to a mail order business known for swindling consumers. The defendant tried to have the case removed to federal court, both to delay it and in hopes that an unconscionable arbitration clause would be enforced. The case is now before the Ohio supreme court.

• Georgie Hartwig of Washington state is a former Wal-Mart employee who was cheated out of overtime pay - a common practice at many of the company's stores. Her class action case is being heard in state court. Three federal courts have refused to hear such Wal-Mart cases, whereas five state courts have allowed them.

• Rob Sanders of Maryland explained how his daughter was killed (as were other children) by a deployed air bag in a Chrysler minivan. For years, consumers have pursued class action cases against Chrysler to force the company to replace existing air bags in such vehicles with others that deploy less rapidly and don't pose a safety risk to the car's occupants. A class action was blocked in a Louisiana federal court but another is proceeding in an Oklahoma state court after years of the company using procedural maneuvers to block it.

(Their complete statements are available online.

Public Citizen said claims made by the business community about the need for S. 5 prove false when examined:

• The business lobby claims that class actions involving consumers from multiple states should be presided over by federal judges. However, federal judges rarely grant class certification to these cases on the grounds that they involve different laws of various states - in other words, precisely because a variety of state laws are involved.

• Claims about the country being riddled with "judicial hellholes" and "magnet jurisdictions" are wildly inaccurate. A Public Citizen report examines claims made by the business community that the class action system has run amok. In fact, business groups have provided some recent data about only two counties from one state to justify their claims that there is a "hellhole" problem for class actions. There are 3,139 other county court systems in the country. Further, many states already have amended class action rules to make it more difficult for consumers to pursue class action suits and easier for businesses to defend them.

• The business lobby has made solving the coupon settlement problem a leading rationale for the legislation. But coupon settlements can be stopped simply by passing freestanding legislation that wouldn't dramatically alter the class action system, as S. 5 would do.

Two amendments would improve S. 5.

One, to be offered by Sen. Jeff Bingaman (D-N.M.), is called the "consumer amendment." It won't interfere with the bill's provisions allowing defendants to remove state class actions to federal courts. It simply would give federal judges the ability to certify these state-law classes on a nationwide basis under the law of one state.

The other, to be offered by Sen. Edward Kennedy (D-Mass.), would exempt class actions involving discrimination cases and wage-and-hour disputes from the effects of S. 5.

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