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Leah Lorber Archives

James Tharin, founder of a company that purchases class action settlement coupons and certificates from class members and resells them on the secondary market, provides an interesting perspective on the need to reform coupon class action settlements in a paper recently posted on the Federal Trade Commission website. See James Tharin, Protecting Consumer Interests in Class Actions, available here. Tharin's paper is posted in advance of a joint FTC-Georgetown Journal of Legal Ethics workshop on improving consumer class actions.

Also available: papers on the pros and cons of coupon and cy pres class action settlements; notice to class members and opt-out issues; regulation of business through multiple and follow-on actions by government agencies, state attorneys general and private class action lawyers; and the need to overcome the lack of available data on class action suits.

Not quite beach reading but still good...

The Washington Legal Foundation has a variety of interesting new articles on its website, including one analyzing the new California law granting the state 75 percent of punitive damages awards. The article (written by three of my Shook Hardy colleagues) addresses problems with so-called "split recovery" laws but ultimately concludes that given the two-year operational window, the California law is unlikely to affect many cases. The issue bears watching, though, because the enactment of a split recovery law in a trend-setting state like California may encourage other states to adopt similar laws. See Victor E. Schwartz, Mark A. Behrens & Cary Silverman, Legal Opinion Letter: New California Law Grants State 75% of Punitive Damage Award, Sept. 3.

Other articles well worth reading include Rep. Lamar Smith's piece on the federal Lawsuit Abuse Reduction Act, H.R. 4571, which seeks to combat rampant nationwide forum shopping and frivolous lawsuits by identifying appropriate forums for the filing of personal injury lawsuits and strengthening sanctions against attorneys who file frivolous claims in federal court, and Jones Day litigator Chuck Moellenberg's piece on the potential for the use of public nuisance standards against obesity lawsuit defendants, in light of their earlier use in regulation through litigation suits against other industries. See Congressman Lamar Smith, Legal Opinion Letter: Stopping Frivolous Litigation and Protecting Small Businesses, Sept. 3; Charles H. Moellenberg, Jr., Legal Backgrounder: Heavyweight Litigation: Will Public Nuisance Theories Tackle the Food Industry?, Sept. 3.

Ten people were arrested in Mississippi on charges related to the $150 million verdict rendered for five plaintiffs in 1999 against the manufacturer of one of the components of the diet-drug combination fen-phen. See 10 arrested in probe of $150M fen-phen verdict, Jackson (Miss.) Clarion-Ledger, Aug. 31; AP, Ten charged with fraud in fen-phen-case in Jefferson County, Biloxi (Miss.) Sun-Herald, Aug. 31. An FBI agent said that the arrests came after an 18-month investigation into large jury awards in the state, focusing on how plaintiffs became involved in the lawsuits and how juries were selected from an area where many people are related or acquaintances.

The Kentucky Supreme Court last week vacated a $15 million punitive damages award against Ford Motor Company and sent the wrongful-death case back for a new trial on the punitive award only. See AP, Kentucky High Court Throws Out $15M Damage Award Vs Ford, via cnnmoney.com, Aug. 27; State Supreme Court orders new trial on damages in Ford suit, Business First, Aug. 27; opinion in Sand Hill Energy, Inc. v. Smith, 1999-SC-1028-DG (Ky., Aug. 26, 2004) available via searchable court website. Ford already has paid $5.6 million in compensatory damages to the family of a Kentucky man who was fatally struck when a parked Ford pickup truck inadvertently went into reverse. The Kentucky Supreme Court's decision, issued on remand from the U.S. Supreme Court, was the most recent decision by a state high court interpreting limits on punitive damages awards set by the U.S. Supreme Court in State Farm v. Campbell.

In a 5-2 decision, the Kentucky court said it was "clear" that the jury was improperly encouraged to "punish Ford for its [alleged] conduct throughout the country." The jury had heard testimony about nationwide sales of vehicles with the allegedly defective transmission, the number of reports nationwide of vehicles slipping from "park" into "reverse," and deaths from those incidents. In closing arguments, plaintiffs' counsel told the jury "we have to make them pay" and discussed the number of "defective" Ford transmissions that were "on the road."

Instead, the court said, the jury should have been instructed not to consider extraterritorial conduct when it determined punitive damages. Just in case the issue of use of evidence of Ford's net worth to set punitive damages arises at the new trial, the majority noted that the United States Supreme Court and the Kentucky Supreme Court have frowned on the practice because it focuses attention on the defendant's financial condition instead of the injury and allows jurors to express bias against big business.

The dissent opined that both "excessive punitive verdicts are a serious problem, but equally serious is the unreasoned fear of the application of such verdicts to well-meaning professionals and organizations. Both conditions contribute significantly to excessive insurance rates for many businesses and professionals. The answer is not to unduly or unconstitutionally limit the right of recovery, but rather for an improvement of the regulation of the insurance industry such as has been accomplished in California."

In its latest move to clean up abuse of Mississippi�s legal system, the Mississippi Supreme Court severed a multi-plaintiff asbestos case yesterday, calling the joinder of the 264 claims �a perversion of the judicial system.� HarrisMartin, Miss. Sup. Ct. Severs Asbestos Claims, Calls Case "A Perversion" of System, Aug. 26 (includes link to opinion).

The court took issue with the plaintiffs� apparent failure to provide core information about the workplace exposure claims against the 137 defendants named in the case, such as �when they were exposed, where they were exposed, by whom they were exposed, or even if they were exposed� -- essentially anything that would suggest they had an actual cause of action. The Mississippi Supreme Court recently has tackled other questionable litigation practices in the state, for example, tightening procedures to stop the unwarranted mass consolidation of personal injury claims that won some Mississippi jurisdictions the dubious title of �Judicial Hellholes� from the American Tort Reform Association. See Janssen Pharmaceutica, Inc. v. Armond, No. 2003-IA-00398-SCT (Miss. Feb. 19, 2004); Court reverses Propulsid Award, bigclassaction.com, May 13 (discussing two additional Mississippi Supreme Court cases that "build on and expand the joinder limitations expressed in Armond"); ATRA, Bringing Justice to Judicial Hellholes 2003.

For more, see Ted Frank's May 18th entry here, cross-posted from overlawyered.com, where it ran Feb. 23.



Rafael Mangual
Project Manager,
Legal Policy

Manhattan Institute


Published by the Manhattan Institute

The Manhattan Insitute's Center for Legal Policy.