March 10, 2017
Written on behalf of Brian S. Kabateck
Consumer advocates, plaintiff lawyers and academics are concerned after a new bill aimed at making it harder to launch class action lawsuits is gaining traction in the Republican-controlled House of Representatives. If the bill becomes law, it could mark the death knell for the only tool consumers have to hold corporations accountable for deceptive scams, dangerous products and human rights violations.
Class actions ensure that consumers have a voice in the court to fight back against defective products, harmful prescription drugs and fraudulent business practices. Class actions help streamline the court system by reducing the number of individual cases that would require judges to preside over the same dispute with the same issues, evidence and defense tactics.
Class actions have worked as an effective channel for consumers to pursue legal recourse by consolidating into a large group which levels the playing field in disputes against giant corporations. Over the past few years, corporations began inserting legal language into forced arbitration agreements aimed at shielding big businesses from class action lawsuits by requiring disputes be resolved through binding arbitration.
The Obama administration pushed back with new rules proposed by the Consumer Financial Protection Bureau that intended to limit arbitration clauses in cases involving financial companies and their customers. According to the CFPB, more than 50% of all credit loans have arbitration clauses, which impacts millions of consumers. The Dodd-Frank Act eliminated forced arbitration for mortgages and home equity loans, but now that law’s fate hangs in the balance.
It appears the most serious threat to class actions is the new bill that House Judiciary Chairman Bob Goodlatte recently introduced, called The Fairness in Class Action Litigation Act of 2017, which supporters argue will “keep baseless class action suits away from innocent parties.” Legal scholars have opined that the bill could eliminate all class action lawsuits filed in the United States by squashing enforcement against securities fraud, allow employers to pay women less than men, enable drug companies to price gouge consumers, and turn a blind eye to deceptive advertising.
The bill has cleared the House Judiciary Committee and the U.S. House of Representatives is poised to vote on the bill in the coming days. A recent amendment to the bill offers hope for institutional investors such as states, municipal and private union pension and healthcare funds which pursue fraud class actions intended to recover investors’ money. Initially the bill prohibited judges from certifying class actions if the plaintiff had a previous client relationship with the class attorney. But the amended version doesn’t apply to securities class actions.
However, the sweeping legislation could have a devastating impact on consumer safety, as international companies could flood the U.S. market with potentially dangerous products while having immunity from judicial oversight.
As moderator of a recent class action and mass torts seminar organized by Consumers Attorney of California, a panel of some of the most skilled plaintiff attorneys acknowledges that the stakes are high as we face the pro-business agenda of the Trump administration.
But consumer advocates and civil rights proponents are fighting back. In California, state lawmakers have introduced a bill, SB 33, which would prohibit financial institutions from forcing customers to give up their legal rights when the bank has committed intentional fraud or identity theft. This legislation stems from the Wells Fargo Bank fraud scandal which involved thousands of bank employees who opened 1.5 million fraudulent bank accounts and 565,000 credit cards without the consent of their customers. The bank argued that consumer claims brought over the fraudulent accounts were bound by the secret and private arbitration provisions the customers signed in the underlying account.
Class actions lawsuits are an essential avenue towards achieving justice for consumers, workers and investors who must stand up against corporate wrongdoing.
The attorneys at Kabateck Brown Kellner, LLP have honed its specialized skills in handling class action litigation for several decades. Whether the suit is for an inoperative medical device, a deceptively designed printer cartridge, or an improper accounting at the bank, our attorneys have successfully represented thousands of clients in class action or similar representative actions.