May 24, 2013

Thank the plaintiff$' lawyers: United States has the world's costliest litigation system

By Anastasia P. Boden Attorney

Surprise, Surprise.  According to the Chamber of Commerce’s Institute for Legal Reform, the United States has the world’s most costly litigation system.  As the report notes, litigation costs affect international competitiveness and productivity—not only by influencing the direct costs of doing business, but by inspiring or upsetting investor confidence.  Given the prevalence of class action abuse in this country, the results of the study are not unexpected.  Litigation driven by plaintiffs’ lawyers is rampant, often resulting in coupons for the purportedly injured class, and large sums for the class representatives and lawyers.  In Lane v. Facebook, for example, the Ninth Circuit approved a settlement that dolled out $3 million dollars to plaintiffs’ lawyers, and allocated $6.3 million for the purpose of setting up an organization with the purpose of educating the public on privacy matters.  The members of the class were left with nothing.  And don’t get us started on the Prop 65 litigation machine.

But perhaps the tide is changing.  Some have noted that the Roberts Court has been keen to reign in class action abuse. 

In cases like Walmart v. Dukes and Comcast v. Behrend, the Supreme Court affirmed the limits of Federal Rule of Civil Procedure 23, which narrows the circumstances in which a class can be certified.  In Standard Fire v. Knowles, the Court held that plaintiffs could not avoid the Class Action Fairness Act—which requires some class actions to be litigated in federal courts—by stipulating to damages lower than CAFA’s threshold.  And in AT&T v. Concepcion and Stolt-Nielsen v. AnimalFeeds, the Court has shown a willingness to push back against lower courts’ distaste for arbitration agreements.  In these cases the Court has affirmed that contracts must be enforced according to their terms.

These recent Supreme Court decisions have led some to bring back the familiar refrain that the Court is “pro-business.”  As we’ve noted before, where decisions are correctly made, they do not necessarily indicate the Court is pro-business.  In other words, as an umpire, you call the pitches that are thrown.  A better explanation may be that the lower courts are anti-business.

With several remaining class action suits at the Court this term, perhaps next year the US will no longer be the world’s costliest litigation system.

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