Tort Reform Issue Splits Senate Democrats

By Steven Brostoff, Washington Editor

NU Online News Service, July 31, 3:15 p.m. EST, Washington?Top Senate Democrats are deeply divided over the issue of class action legal reform, with both supporters and opponents of reform legislation claiming to represent consumer interests.

The split was highlighted during a Senate Judiciary Committee hearing today on S. 1712, which would allow defendants in major, national class action lawsuits to have their cases heard in federal courts.

One of the primary sponsors of the legislation, Sen. Herb Kohl, D-Wis., insisted that no one can argue that the class action process is not in serious need of reform.

"We have a simple story to tell," he said during the hearing. "Consumers are getting the short end of the stick in class action cases, recovering coupons or pocket change, while their lawyers reap millions."

Sen. Kohl said that stories of nightmare class action settlements that affect consumers across the country all too frequent.

He cited one class action lawsuit filed against a video store that produced dollar-off coupons for future video rentals for the plaintiffs, for which the plaintiffs' attorney collected $9.5 million.

In another case, Sen. Kohl said, a member of a class that technically won a case ended up owing $75 to her lawyers and then had to defend a lawsuit that her lawyers filed against her in state court.

"Under our bill, that will never happen again," he said.

But Senate Judiciary Committee Chairman Patrick Leahy, D-Vt., said he believes some special interest groups have distorted the state of class action litigation by relying on a few anecdotes.

The availability of class action litigation, Sen. Leahy said, allows ordinary people to band together to take on powerful corporations or even their own government.

"I am hesitant to restrict legal rights and remedies in an era of corporate irresponsibility and executive misconduct," he said.

As for payments to lawyers, Sen. Leahy said that defense lawyers tend to be paid by the hour, and well paid.

Plaintiffs' lawyers, on the other hand, tend to work without pay for the possibility of obtaining a portion of the proceeds, if successful, he said.

"To those who think it is good politics to attack the plaintiffs' lawyers who risk much so that their clients may obtain a measure of justice, I hope they will think again," Sen. Leahy said.

He did say, however, that he hopes to find common ground on asbestos litigation. Sen. Leahy said he wants to work with all senators to see if the Senate can devise a better process for fairly compensating those suffering from asbestos-related illnesses.

But the Committee's Ranking Republican, Sen. Orrin Hatch, R-Utah, told Sen. Leahy that the asbestos litigation issue is also a class action issue.

"The abuses are reaching an epidemic level," Sen. Hatch said. "It is essential that we address the abuses."

Too often, he said, judges approve settlements of class actions that benefit counsel, but not the class members.

Despite mountains of evidence that that system needs reform, Sen. Hatch said, some people with try to deny that there is a problem.

But Nothing in S. 1712, he said, prevents individuals from banding together to press their complaints. Suggestions to the contrary are red herrings, Sen. Hatch said.

Lawrence H. Mirel, the insurance commissioner for the District of Columbia, said that he is concerned about the impact of class action lawsuits that interfere with his ability to carry out his statutory duties as insurance commissioner.

"Large scale nationwide litigation against major insurance companies frequently goes around or simply ignores the role of state regulators," Mr. Mirel said.

"Class action lawsuits against insurers can, and often do, directly impact our statutory authority to regulate the business of insurance in our jurisdictions," he said.

Indeed, Mr. Mirel said, class actions are frequently designed to produce small, if not negligible, benefits to a large class of policyholders?and huge legal fees to the lawyers who bring them?without regard to the impact on the insurance market as a whole and the cost to the insurance-buying public.

He cited a suit that is currently pending before the California Supreme Court that claims that Bloomington, Ill.-based State Farm keeps too much money in reserves, thus depriving its policyholders of the benefits of that money in the form of refunds or reduced premiums.

"The suit ignores the fact that insurance commissioners, such as myself, require insurance companies to maintain adequate reserves so that we can assure the public that their covered claims will be paid," Mr. Mirel said.

Who, he questioned, should decide the adequate level of reserves to protect D.C. policyholders; the statutory commissioner of insurance for D.C. or a jury of laymen in California?

Mr. Mirel said that when used properly, class actions lawsuits have an important role to play in the nation's legal system. But he is concerned, he said, that they do not substitute for, or interfere with, other lawful methods of protecting the public.

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