Class-action plaintiffs’ lawyers, the bullies of the American court system, are finally getting the sand kicked in their own faces. If there’s any justice, they ought to become accustomed to the taste.
For years, big-money, class-action plaintiffs’ lawyers have terrorized businesses and doctors while collectively pocketing literally billions of dollars, often on behalf of “victims,” who individually benefit from their work by amounts that wouldn’t cover a single dinner at a nice restaurant.
Suddenly, though, the plaintiffs’ bar is in well-merited retreat. Indictments, convictions, big losses before the U.S. Supreme Court: One could say they are finally paying for their own malpractice.
The biggest, baddest class-action firm of all, Milberg Weiss, is in disarray. Three of its current or former senior partners already have pleaded guilty to various crimes in a kickback scheme that prosecutors call criminal racketeering, while the firm itself and lead partner Melvyn Weiss are under indictment in the same scandal. At least one trial judge has cited that criminal activity in rejecting the firm’s requested payout in an unrelated case.
Meanwhile, Mississippi class-action king Dickie Scruggs is under indictment for bribery in a Hurricane Katrina-related case with as many twists and turns as a novel by Scruggs’ friend John Grisham.
Next door in Alabama, once known as the nation’s worst “tort hell,” the state Supreme Court late last year threw out all $3.5 billion tentatively awarded in punitive damages in an eight-year-long state lawsuit against oil giant Exxon.
Until that ruling, the attorneys’ fees alone were slated to be $490 million — more than nine times as much as the $52 million originally in dispute in a simple battle about how to interpret an unclearly worded mineral-lease contract.
The Alabama result was case-specific, but the U.S. Supreme Court on Jan. 15 laid down a marker for an entire class of lawsuits on Jan. 15 in a case called Stoneridge Partners v. Scientific-Atlanta Inc.
There, the high court rejected a theory called “scheme liability,” which would have made third-party vendors and investors also liable for securities fraud committed by companies with which they do business. As The New York Times accurately described it, the decision placed a “towering obstacle” in the way of plaintiffs’ lawyers who are intent on expanding their class-action suits far beyond their original scope.
In another Supreme Court case where similar “scheme liability” arguments were at play, the justices refused Jan. 22 even to consider reviving a lawsuit against investment banks that had backed Enron, the now-collapsed Texas energy company.
Milberg Weiss had originated that suit and spent more than $1 million developing the case before flamboyant partner William Lerach took the rights to the suit with him when he left Milberg Weiss to start his own firm in 2004. Lerach is one of the lawyers who have since pleaded guilty for their part in the Milberg Weiss kickback scandal.
The court’s rejection of scheme liability is an important victory for the entire U.S. economy. Otherwise, as the court wrote, liability “would reach the whole marketplace in which the issuing company does business.”
In short, nobody doing business with any publicly traded company would be safe. The resulting flight of capital overseas would devastate stockholders, pensioners, and thousands of mom-and-pop businesses here at home.
Indeed, the situation is much the same in most of these class-action suits: Companies waste millions of man-hours and billions of dollars fending off predatory lawsuits; doctors run up billions of dollars of costs practicing unnecessary “defensive medicine” in order to ward off the threat of malpractice claims; and the lawyers use their loot to build mansions while each individual supposedly represented receives a mere pittance.
Nobody is arguing, by the way, that corrupt or utterly negligent defendants should escape penalty. But the recent series of setbacks for class-action firms show that the legal system is pushing back against fraud and excessive profiteering by those who try to game the court system in pursuit of lucre.
Lawyers, too, are subject to the rule of law. And the proverbial “little guys” benefit more when the rule of law is upheld than they do from all the histrionics of corrupt lawyers fulminating in their name.
Quin Hillyer is associate editorial page editor for The Washington Examiner. He can be reached at [email protected].
