Public Citizen Press Release
Providing the latest information about Public Citizen activities
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Public Citizen released the following Feb. 7, 2005:
Defrauded Consumers Call for Defeat of Pro-Business Class Action
Legislation in U.S. Senate This Week
Consumers and Workers from Alabama, Connecticut, Florida, Ohio and
Washington Who Brought Class Actions Explain How Legislation Will Lock
People Out of Court
WASHINGTON, D.C. - Consumers who have been defrauded or discriminated
against by big companies called today for the defeat of a pro-business
bill that would lock the courthouse door to people who are similarly
victimized by corporate misdeeds and seek to bring a class action
lawsuit in state court.
Under the measure (S. 5), which the U.S. Senate is scheduled to vote on
this week, defendant corporations will be able to force most state-filed
class action lawsuits, which are now heard in state courts, into
overburdened federal courts. There federal judges generally do not
certify cases that are based on state consumer protection laws, which
means the cases are blocked and can't be considered on the merits. The
result will deny millions of Americans justice for marketplace fraud and
deceptive practices.
Class actions are a critical way for consumers to seek redress from
companies for fraudulent behavior, defective products and employment
discrimination. A strong class action system is especially necessary
given the wave of corporate wrongdoing in recent years. Proponents of
this bill include the U.S. Chamber of Commerce, America's biggest
companies and their 500 lobbyists in Washington, D.C.
"The business lobby wants this bill because it will enable corporations
that commit fraud and engage in deceptive practices to skate free," said
Joan Claybrook, president of Public Citizen. "Locking consumers out of
court denies them the one recourse they have against corporate fraud.
It's reprehensible."
At a press conference held on Capitol Hill, consumers who have been
victimized by corporate wrongdoing urged senators to defeat the measure.
(Their statements are available at
http://www.citizen.org/documents/VictimsPressPack.pdf).
Shaneen Wahl of Florida brought a successful state class action against
her Wisconsin health insurance company for jacking up premium rates in
violation of Florida law. A very similar Florida class action brought
against a New York company was removed to federal court by the
defendant, where it failed to get certified because the judge narrowly
interpreted state law to find that plaintiffs had no right of action.
David McIntyre, a preacher from rural Alabama, explained how a federal
judge in Illinois refused to certify a nationwide class action case
against Household Bank for deceiving consumers about the limited
benefits and onerous penalties that arose from using its credit card.
Conversely, a California state court judge certified a similar class
action that provided $40 million in relief to more than 300,000
low-income consumers.
Shelly Toliver, a firefighter from Connecticut, described how she
brought a state class action suit against Credit Acceptance Corporation
of Michigan for cheating her and other consumers out of their vehicles
in violation of Connecticut law and destroyed their credit ratings in
the process. Ultimately, the class members had their purported debt to
the company wiped out and their bad debt ratings cleared up.
Patricia Nefores of Ohio explained how a credit card company, First
USA/Bank One, collaborated in a scheme to exploit customers' personal
financial information for profit by selling her private account
information to a mail order business known for swindling consumers. The
defendant tried to have the case removed to federal court, both to delay
it and in hopes that an unconscionable arbitration clause would be
enforced. The case is now before the Ohio supreme court.
Georgie Hartwig of Washington state is a former Wal-Mart employee who
was cheated out of overtime pay - a common practice at many of the
company's stores. Her class action case is being heard in state court.
Three federal courts have refused to hear such Wal-Mart cases, whereas
five state courts have allowed them.
Rob Sanders of Maryland explained how his daughter was killed (as were
other children) by a deployed air bag in a Chrysler minivan. For years,
consumers have pursued class action cases against Chrysler to force the
company to replace existing air bags in such vehicles with others that
deploy less rapidly and don't pose a safety risk to the car's occupants.
A class action was blocked in a Louisiana federal court but another is
proceeding in an Oklahoma state court after years of the company using
procedural maneuvers to block it.
Claims made by the business community about the need for S. 5 prove
false when examined:
* The business lobby claims that class actions involving consumers
from multiple states should be presided over by federal judges. However,
federal judges rarely grant class certification to these cases on the
grounds that they involve different laws of various states - in other
words, precisely because a variety of state laws are involved.
* Claims about the country being riddled with "judicial hellholes"
and "magnet jurisdictions" are wildly inaccurate. A Public Citizen
report examines claims made by the business community that the class
action system has run amok. In fact, business groups have provided some
recent data about only two counties from one state to justify their
claims that there is a "hellhole" problem for class actions. There are
3,139 other county court systems in the country. Further, many states
already have amended class action rules to make it more difficult for
consumers to pursue class action suits and easier for businesses to
defend them.
* The business lobby has made solving the coupon settlement
problem a leading rationale for the legislation. But coupon settlements
can be stopped simply by passing freestanding legislation that wouldn't
dramatically alter the class action system, as S. 5 would do.
Two amendments would improve S. 5. One, to be offered by Sen. Jeff
Bingaman (D-N.M.), is called the "consumer amendment." It won't
interfere with the bill's provisions allowing defendants to remove state
class actions to federal courts. It simply would give federal judges the
ability to certify these state-law classes on a nationwide basis under
the law of one state. The other, to be offered by Sen. Edward Kennedy
(D-Mass.), would exempt class actions involving discrimination cases and
wage-and-hour disputes from the effects of S. 5.
###
Public Citizen is a national, nonprofit consumer advocacy organization
based in Washington, D.C. For more information, please visit
www.citizen.org.
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