Tobacco lawsuit not ‘junk’
By David Lazarus
Published 4:00 am, Wednesday, September 27, 2006
One of the few issues on which this column and President Bush see eye to eye is the abuse of class-action lawsuits — the practice, as the president said last year, of “people just filing lawsuits for the sake of filing lawsuits.”
But every so often a case comes along that serves as a potent reminder of why class-action suits are a vital tool for consumer protection, and why politicians and judges should be wary of moves that tip the legal balance too much in favor of corporate defendants.
Such a case surfaced this week when a federal judge in New York granted class-action status to potentially tens of millions of plaintiffs suing the tobacco industry for allegedly misleading people with marketing campaigns that claim “light” cigarettes are safer than regular cigarettes.
The lawsuit seeks as much as $600 billion from the country’s biggest tobacco companies, including Philip Morris, R.J. Reynolds, Brown & Williamson and Lorrilard. It could end up as one of the largest class-action suits ever.
That is, if the class-action status holds up. The tobacco companies immediately said they’d appeal.
“The company believes that the appellate court will find that today’s certification decision runs counter to the overwhelming weight of federal and state case law regarding class actions in smokers’ litigation and must be reversed,” William Ohlemeyer, Philip Morris USA’s associate general counsel, said in a statement.
Good case for class action
But Steve Sidener, a San Francisco attorney who specializes in class-action lawsuits, said that whatever one might think about class actions in general, tobacco-related suits such as this one are precisely the sorts of cases in which ordinary consumers need to band together.
“This is the type of situation that class actions were meant to address,” he said. “Class actions are most effective when they allow people to aggregate resources and engage in cost sharing.”
The idea behind class actions is simple: Individually, most people lack either the means or the incentive to sue a large corporation. They’re typically unable to cover legal costs and get relatively little in compensation for their trouble.
But collectively, people can engage high-power legal talent and can press for mass settlements that run in the millions or even billions of dollars — the sorts of settlements that can cause a corporation to change its ways and treat customers more respectfully.
The problem, of course, is that some class-action lawyers, who usually get a third of the settlement action, will file suit even in cases with questionable merit, hoping the corporate defendant will cough up some cash just to make the headache go away.
The lawyers can make millions. Their clients, meanwhile, are frequently left with settlements that run just a few bucks or consist of nothing more than coupons for the corporate defendant’s service.
“There’s a sense that class actions have experienced a lot of abuse,” Sidener said. “But you don’t want to throw the baby out with the bathwater.”
He’s referring to a continuing erosion of plaintiffs’ rights in the name of class-action reform. The upshot is that it’s now harder than ever before to file a class-action suit, and the balance of power increasingly favors well-heeled corporate defendants.
For example, Bush last year signed into law the so-called Class Action Fairness Act, which shifts most class-action lawsuits to federal courts from state courts.
Federal courts are seen as being already overburdened and generally less friendly to such cases.
State courts, for their part, often side with consumers and are where many multimillion-dollar verdicts against tobacco companies, for example, have originated.
Many ‘junk’ suits
The reform legislation was spearheaded by the U.S. Chamber of Commerce and backed by a broad coalition of consumer-oriented businesses, including automobile, drug and insurance companies.
To be sure, there have been plenty of what Bush calls “junk lawsuits.” On Monday, for instance, a small coffee retailer in Washington state sued Starbucks, the world’s largest coffee-shop chain.
The suit, which seeks class-action status, charges that Starbucks’ “insatiable and unchecked ambition” has resulted in the company wielding monopoly power in the coffee business.
But monopolistic mochas are a good deal more whimsical than this week’s class-action certification against the tobacco industry for allegedly duping millions of smokers into thinking that light cigarettes are safer than regular nicotine sticks.
Michael Hausfeld, an attorney representing plaintiffs in the case, argued in court that internal documents show tobacco companies knew for many years that the health risks of light cigarettes were about the same as for regular ones.
“They understood that they were selling death,” he said. The only question for the companies, Hausfeld added, was “how to disguise it.”
In his ruling this week, U.S. District Judge Jack Weinstein acknowledged that class-action status is “critical to plaintiffs’ case.”
“No other method of aggregation of tens of millions of smokers’ claims is practicable,” he said. “The small amount of possible recovery for each smoker could not justify the expensive and time-consuming pretrial and trial procedures required.”
And in an ominous sign for tobacco companies, the judge also said he’d “entertain a motion to extend the class … to encompass smokers of all ‘low tar’ brands rather than ‘lights’ alone.”
The class-action system isn’t perfect, and a very real need exists to shake things up. But there’s a reason many large businesses are fighting so aggressively to change the rules — because class-action lawsuits are one of the few means at consumers’ disposal to stick up for themselves.
You don’t want that going up in smoke.