Thanksgiving Post Mortem: Gluttonous Hogs Feasting On Legal Reserves

The Chicago Mercantile Exchange trades a futures contract on lean hogs but this article has absolutely nothing to do with that. This piece focuses on another hog, a fatter hog that feasts from a much bigger trough- the trough of ever-increasing reserves for litigation in the United States of America.

The class action suit

A class action, class suit or representative action is where a group or class sues another party in court for damages. These collective lawsuits are very much an American phenomenon. A class action suit brought before a US federal court must exceed $5 million. Each state has its own set of laws; California provides for four types of class actions, New York places limits on the types of claims and Virginia, as well as some other states, do not provide for any class actions at all.

The theory behind a class action lawsuit is that a group of damaged parties can collectively seek relief through litigation. Taking a large corporation to court is an expensive endeavor. Damaged parties often do not have the financial capacity to fight the legal teams of well-capitalized corporate entities with endless means. This path of litigation certainly has many benefits for injured parties, in theory. It can provide financial compensation to victims, right the wrongs of unscrupulous business activity through the courts and may even serve as a protective legal device making corporations think twice before doing wrong. The advent and prevalence of class action litigation has resulted in companies setting up huge reserves in case of future expensive lawsuits. Consumers are the front line in swallowing these passed on costs. This has cost companies, shareholders and consumers a pretty penny and has increased the cost of doing business in the United States making the country less competitive on the global playing field. Often attorneys who specialize in this area of the law lure ‘injured parties’ or automatically assign such parties to a class that comprises the class action suit.

Modern day Robin Hoods

We see the commercials, billboards and other advertising media:“Have you been injured by…you may be entitled to a significant compensation”. There is a simple reason that we see these advertisements on a daily basis- it has become a big business.

In Shakespeare’s The Merchant of Venice, Portia the heroine quipped with sarcasm dripping in truth ” A pound of that same merchant’s flesh is thine: The Court awards it, and the law doth give it”. Shakespeare had a myriad of references to the legal profession in his writings. Perhaps the most famous and brutal comes from Henry The Sixth where Dick the butcher adds the utopian idea to Jack Cade who envisions a social revolution with himself installed as leader “The first thing we do, let’s kill all the lawyers”. Even in Shakespeare’s day, the disdain for some members of the legal profession and their interpretation of right and wrong in practicing the discipline of law was in question. Not even Shakespeare could have imagined what the future might hold.

Today a breed of class action attorneys view themselves as modern day Robin Hoods, taking from the rich and giving to the poor, or at least to the masses. This altruistic branch of litigation is not only philanthropic- in the practitioners own minds, but mega profitable.

The economics of class action and US business

It is clear that class action litigation has cost US business a boatload. When business does wrong it must correct that wrong, through either actions or compensation to victims. This type of litigation has swept through and touched all sectors of American business- pharmaceutical companies, manufacturing companies, health care, retail and financial services to name but a few. Courts have directed enormous awards to harmed parties. Even I have received benefits from these class actions. At least once every few years I get a check for $14.53, $2.54 or some tiny amount of money from a suit against a company that has done me wrong. In all cases, I never even realized the wrongdoing; thank heavens for those class action attorneys who brought the misdeeds to my attention.

OK, enough with the sarcasm- while the other parties to these awards and I deposited our checks the class action attorneys deposited theirs. The difference being, the amount of these awards paid to the injured, often in the hundreds of millions was net of legal fees. The attorney’s, the Robin Hoods, do not charge by the hour they generally pocket between 25-33% of the gross award- you can do the math. The economics of these suits are damn good for the lawyers that bring them. So good in fact, that it behooves them to find as many as possible to bring to court–the more cases the more cash.

The precedents established in these class action cases have fed this breed of attorney a series of gourmet meals. They have become remora fish, scavengers searching for their next meal. Today class action knows no bounds; it has no limits and every trembling fearful corporation that does business in the USA is a potential target. Even if the court never hears a case, the agile class action attorney is often able to weasel out a juicy settlement with just the threat of an action. Why not? The legal reserves sit there waiting for the hungriest to come take a big bite. Self-fashioned Robin Hoods have never done so well. All the while the cost of doing business in the US rises and the consumer, you and I, pay the bill.

A perverse system- financial terrorism

The rewards for the class action attorney have grown so large that the system encourages and even supports a brand of financial terrorism practiced by some of the less than scrupulous attorneys that choose to pervert this brand of law. The gluttonous pursuits of some of these attorneys, the distribution of the spoils of a system that condones this type of activity has created monsters.

I would argue that some of the attorneys are not Robin Hoods but rather financial Caligulas who are on a feeding frenzy satisfying their gargantuan appetites for more and more. A new wing on the house in the Hamptons, a new closet full of Armani suits, more Chanel handbags at a few thousand a pop and a three thousand dollar bottle of vintage French cabernet to wash it all down. The system has created a group of self-thought Robin Hoods cloaked in the veil of protecting the public who are nothing more than wolves in sheep’s clothing.

Nottingham exposed

It is time to expose the activity of legal Nottingham in the theatre of America’s courts. It is not the process of litigation that I object to but the carved out niche that perverts the process and creates a class of gluttons with law degrees that feast from troughs of cash in American courtrooms.

In the wake of this Thanksgiving and with the spirit of the holidays, let us pause and ask a question. When will US Corporations and the citizenry of this great nation wake up and realize that the actions of these turkeys are simply a function of their fees? Legislators, who are mostly lawyers themselves, protect the vested interest of their profession but an uprising could quickly change their benign neglect under the pressure of those who fund and elect them to office. How altruistic would they be under a stricter much smaller fee schedule or on a pro bono basis?

Robin Hood never took a cut…

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