A recently published white paper, An Empirical Analysis of Federal Consumer Fraud Class Action Settlements, on class-action settlements by the Jones Day law firm confirms what we have known for a while: some of these lawsuits deliver big jackpots for some personal injury lawyers, often at the expense of consumers. The study’s main findings:
- Only a fraction of consumers or “class members” receive monetary benefit from class action settlements.
- Some settlements failed to address consumers’ alleged economic harm in a meaningful way – but awarded hundreds of thousands or millions of dollars in fees to the lawyers.
- Where courts award cash settlements, consumers as a whole receive a relatively small share, with the bulk going to pay legal fees and expenses.
For far too long, many class action lawsuits have been abused at the expense of consumers. In some cases, consumers are “awarded” coupons, while personal injury lawyers “cash in” in the name of consumer rights. Worst of all, the litigation costs are then passed on to consumers through increased prices, fewer innovations, and lower product quality.
Class action lawsuits were intended to speed the handling of multiple cases by allowing individuals with the same grievance to file a single claim. They were supposed to be the consumer’s best shot at justice. Any system that pays millions of dollars to personal injury lawyers for drumming up lawsuits, but leaves complainants with measly coupons, is in dire need of reform.
While Texas lawmakers already have enacted class-action reform, the need for other states and the federal government to follow our lead is clear. Others should take their cue from the Texas Legislature and pass real and lasting reform so that class action lawsuits can serve their intended purpose: to deliver justice for consumers who have been wronged, not serve as a course for jackpots by some personal injury lawyers.
Read the full study here: https://www.jonesday.com/en/insights/2020/04/empirical-analysis-consumer-fraud-class-action
