Class Action Limitations Hurt Consumers and Employees, Group Tells Congress

A congressional committee held a hearing last week to review the state of class action litigation in the United States, evaluating the impact of the passage of a law 10 years ago that significantly restricted who could file class action lawsuits and when. 

The hearing was held by the House Subcommittee on the Constitution and Civil Justice last Friday. Speakers included industry lobbyists and business representatives who want further restrictions on class action lawsuits. However, legal experts and consumer watchdog groups are warning against further class action lawsuit restrictions, saying that the average citizen is already at a disadvantage when going up against big business in court.

The hearing involved a review of the Class Action Fairness Act (CAFA), which significantly restricted where class action lawsuits could be filed, placed restrictions on the types of settlements that could be made and limited attorney fees, which may discourage may viable claims from being pursued.

Critics suggest that the law has hampered citizens’ abilities to seek restitution from large corporations.

“In the last decade, it has become increasingly difficult for American consumers and employees to access the courts to seek remedies for predatory and illegal business practices, and particularly via class actions,” the consumer watchdog group Public Citizen said in a letter to the subcommittee (PDF). “Meanwhile, reckless business practices and slack corporate accountability caused a national crisis, including a record number of foreclosures, widespread unemployment and the unprecedented failure of longstanding financial institutions.”

Public Citizen urged the subcommittee not to consider any further restrictions on class action lawsuits, and pointed out that more and more companies are forcing consumers into arbitration contracts that leave them severely disadvantaged.

“Class actions are often the only economically feasible way for consumers and employees to seek redress, due to the small size of the individual claims such as illegal fees on monthly cell phone or cable bills; interest rates on loans that violate usury laws; or systemic discriminatory employment practices,” the letter states. “Class actions also boost government enforcement of critical consumer protection laws without burdening the taxpayers. Indeed, the mere prospect of class actions deters unscrupulous and predatory conduct.”

Patricia W. Moore, a law professor at St. Thomas University School of Law, also cautioned against further restrictions on class action lawsuits.

“[M]any believe that there has been a sustained and concerted attack on the legal remedies of workers, consumers, and other injured parties, masked as ‘procedural reform’ or ‘tort reform,’ ” Moore said in a prepared statement (PDF). “Further restrictions on class actions must be seen as part of this campaign.”

However, speakers representing big business hailed CAFA and called for even more restrictions on the ability of citizens to pursue claims against them.

Speakers representing the U.S. Chamber of Commerce and who defended various industries against lawsuits lauded CAFA and said that Congress should focus next on restricting even more claims, particularly those where plaintiffs were not directly injured and called for oversight of class action settlement agreements where class members receive little to no actual benefit.