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The Center for Justice and Democracy

Class Actions Can Heal

By Joanne Doroshow, Executive Director, Center for Justice & Democracy

Earlier this year, during the same week that the late Enron chief Ken Lay, and his colleague Jeff Skilling, were convicted of conspiracy and fraud, several banks agreed to compensate Enron shareholders to the tune of $6.8 billion. This added to a settlement pool from class action lawsuits that continues to grow. While the Enron criminal convictions were met with exclamations of "justice" and pronouncements that "the system worked," the class action settlement was met with a far more uneven, even cynical response, with some coverage focusing more on fees to attorneys who represented the shareholders (under 10 percent in this case), rather than on the billions recovered for the investors themselves.

In the sensationalized debate over civil litigation, there is typically little discussion of how victims of misconduct, ranging from civil rights abuses to violent street crime to widescale corporate lawbreaking, can experience their greatest sense justice of through civil court victories. Unlike criminal cases, which are prosecuted by the government and provide no direct benefit to victims, civil cases hold perpetrators directly accountable to those whom they have hurt, and provide their victims with compensation to help rebuild their lives.

Class actions allow people who have similar injuries caused by the same wrongdoer to ban together in one lawsuit, avoiding the filing of many different lawsuits where the same kinds of issues are presented. In addition to helping streamline the process, class actions have historically been among the most powerful tools to secure justice in America. This country would be a very different place without them.
Brown vs. Board of Education, which outlawed school segregation and set the stage for the entire civil rights movement, was a class action lawsuit. So was the Exxon Valdez case, filed to compensate tens of thousands of fishermen and others hurt by this horrific environmental disaster. The cases portrayed in both movies "Erin Brockovich,"
involving toxic pollution, and "North Country," dealing with sexual harassment in the workplace, were class actions.

Less well known are cases like the Buffalo Creek class action against mining companies, whose irresponsible conduct caused a flood that killed over a hundred people and left 4,000 homeless in West Virginia. Lawyers in that case donated a portion of their fees back to the community. The President of the United States was a recent beneficiary of a class action lawsuit over defective bullet-proof vests used by the secret service. That case was brought by police departments after the fatal shooting of a California police officer. Clearly, class actions have always been a critical tool for making society safer and obtaining compensation for death and harm caused by product defects, financial fraud, toxic pollution, civil rights violations, and other abuse.

As for lawyers, fees, there are occasional abuses and the courts are right to stop them when they occur. But the fact that abuses sometimes occur is no reason to condemn a device so instrumental to dispensing justice in America. This is especially true when attorneys negotiate fees that provide victims over 90 percent of the settlement they reached, as was done in the Enron case. And Enron was by no means an anomaly. The WorldCom corporate fraud class action was another example.

While Bernie Ebbers, former WorldCom CEO, was sentenced to 25 years in jail after being convicted of fraud in a criminal prosecution, it was the shareholders class action suit that provided any real relief for victims. That case settled for $54 million, much of it coming directly from WorldCom directors. Again, attorneys agreed to fees well below 10 percent, so as in Enron, shareholders again will receive well beyond 90 percent of the total settlement.

The criminal justice system is not equipped to address the impact of these kinds of crimes on victims, their families and society. The civil justice system often can step in and help victims in ways that the criminal justice system cannot, while at the same time forcing changes in dangerous corporate behavior. It should be a source of national pride that the class action system does work, and that now and then, civil justice does indeed prevail in America.

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Posted at 9:16 AM, Sep 14, 2006 in
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