Exploiting for Profit
Podium; Consumer Protection Laws; Risks of private litigation
When investors discuss “the next big thing,” they’re generally speculating about innovations that might spur major economic growth. When personal injury lawyers and certain interest group executives talk about the next big thing these days, however, it’s quite possible they’re referring to vague and broadly worded state consumer protection acts (CPAs), ripe for exploitation. After all, several plaintiffs’ attorneys and their physician allies are now under criminal investigation for allegedly fraudulent asbestosis and silicosis claims. Recent court rulings suggest the tobacco gravy train is running out of steam. The “I’m—fat—and—fast—food—companies—are—to—blame” lawsuits haven’t achieved much traction. And the U.S. Supreme Court is poised to amplify its 2003 State Farm v. Campbell decision against excessive punitive damages.
So what’s a plaintiffs’ lawyer to do? Well, since many state CPAs include statutory attorney fees and treble damages, they have become the latest target for lawsuit abuse. Adding to the allure of these well—intentioned laws—written in the 1960s and 1970s, before the industrialization of personal injury litigation—many state judges have begun interpreting them rather loosely. In some states, plaintiffs don’t even need to claim an injury or loss, much less knowledge of, or reliance upon, the allegedly “unfair or deceptive” commercial practice.
“Ask your cab driver if he thinks someone should get money from a lawsuit about a supposedly deceptive advertisement they never saw,” began renowned tort law expert Victor Schwartz as he delivered keynote remarks at a recent New York conference focusing on this problem, sponsored by the Manhattan Institute and the American Tort Reform Foundation. “He’ll laugh at you and say, ’Absolutely not!’ ” Schwartz continued. “But the plaintiffs’ bar is nonetheless poised for a big push to further blur the once—bright line between a public cause of action, which seeks an injunction to stop a particular behavior before someone gets hurt, and a private cause of action, which seeks simply to extract money from a defendant after the fact.”
During a panel discussion within that same conference, Manhattan Institute Center for Legal Policy Senior Fellow Walter Olson supported Schwartz’s point about the danger in effectively replacing government regulation with private litigation. Olson spoke of Vermont legislators who in the mid—1800s were convinced they faced a crisis of porcupine overpopulation. Rather than send state—employed hunters and trappers into the woods, lawmakers decided to pay a set fee for every pair of porcupine ears any self—made bounty hunter could deliver to designated state offices. “Though rumored, porcupine breeding facilities were never uncovered,” Olson deadpanned, “but word in the woods was that any trapper worth his hunting knife could expertly carve up to 12 pair of ears from one good—sized varmint.” Needless to say, Vermont never made much progress with its purported porcupine problem, he concluded, and states today won’t advance the cause of consumer protection if private rights of action within their CPAs are increasingly abused.
Though state legislatures generally modeled their CPAs after the Federal Trade Commission Act of 1914, Congress proved more prescient in its bipartisan rejection of a private right of action. Senator William Joel Stone, D—Mo., argued convincingly that, “[A] certain class of lawyers...will arise to ply the vocation of hunting up such...[law]suits,” the number of which “no man can estimate.”
Stone had it right then, and it’s not too late for state legislators and judges to get it right now. The American Tort Reform Association has just released a report, “Private Consumer Protection Lawsuit Abuse,” at www.atra.org , detailing the origins, recent history and abuse of state CPAs. The report also outlines a reform proposal from the American Legislative Exchange Council (ALEC), the nation’s largest nonpartisan organization of state legislators. ALEC doesn’t propose rescinding private rights of action in state CPAs, but it hopes to guide state lawmakers toward what Cornell Law Professor James Henderson calls “sufficiently specific rules of litigation within which litigants—defendants as well as plaintiffs—can rationally make their case.”
There’s nothing rational about letting shameless lawyers shake down nail salon owners with inflated claims of unsanitary conditions when the same bottle of nail polish was used for multiple customers, and there’s nothing rational about a multimillion—dollar class action filed against the maker of Listerine for making assertions about its effectiveness as compared to flossing when not a single plaintiff suffered a demonstrable injury. Yet these and thousands of economy�sapping cases like them could become routine if state legislatures and courts don’t act decisively to keep such litigation from becoming the next big thing for “a certain class of lawyers.”