Class Action Fairness Act of 2003-Motion to Proceed

CLASS ACTION FAIRNESS ACT OF 2003—MOTION TO PROCEED

Mr. CORNYN. Mr. President, I thank the distinguished chairman of the Judiciary Committee, the Senator from Utah. It is because of his leadership on this issue, that of class action fairness, it has reached this stage in the proceedings. He is a true gentleman in the finest traditions of the Senate. He also happens to be the iron fist and the velvet glove who helps make things happen in the Senate Judiciary Committee, a place where, unfortunately, things do not always happen the way they should, notwithstanding his heroic, Herculean efforts.

Mr. CORNYN. Mr. President, I ask unanimous consent I be added as a cosponsor to the Class Action Fairness Act of 2003.

The PRESIDING OFFICER (Mr. COLEMAN). Without objection, it is so ordered.

Mr. CORNYN. Mr. President, this bill is important for so many reasons. I will generally lay out what I believe to be some of the important reasons the Senate should take up this bill that was voted out of the Senate Judiciary Committee on a bipartisan basis, why the Senate should take this bill up, vote it out, and do everything in our power to see it is enacted into law.

My colleague, the Senator from Iowa, Mr. Grassley, deserves a great deal of credit for his hard work on this issue and for promoting this important legislation. I publicly acknowledge his leadership on the issue as well.

Like a number of the Members of this body, I have been a member of the bar, a lawyer, for a number of years. I have seen the ways in which the law and lawyers have contributed in a tremendous fashion both to the public administration of justice and to that maxim, that saying, that is engraved into the edifice of the U.S. Supreme Court, which is really a national value and ideal: Equal justice under law.

That is indeed one of the fundamental values upon which this Nation was founded. But I do not think it is news to anyone that that aspiration, that value, that we all agree is important, has suffered in the administration when it comes to class action lawsuits.

I wish to make clear, I believe class actions do have an important role in the administration of justice. In other words, the class action was created so that individuals with relatively small claims and who would not be able to bring those claims forward in an economical way—indeed, the economics would discourage them from doing so—would not be denied access to the courts and access to justice simply because their claims were rather small because, indeed, if in fact that were the case and there were no mechanism to bring those small claims forward, there would be those who would abuse individuals and who would know they could continue in that posture because individuals would not be able to economically bring those claims forward.

So the class action mechanism provides a means for aggregating or collecting those claims so that it can be done in an economical fashion, in a way that will not deny those individuals who are aggrieved access to the courts so they may have access to that justice that I mentioned a moment ago.

So the intent of the class action mechanism was to provide consumers with access to the courts. The problem is, today, the reality is that our system has turned into one that now benefits the few at the expense of the many. In other words, the people who benefit from class actions today, too often, are the lawyers who bring those lawsuits rather than the consumers for whose benefit this whole procedure was first conceived.

I think it ought to be our goal in the policy of the U.S. Government and our courts to see that those with valid claims have a means to vindicate those claims, but it should not be a means by which the few can be enriched at the expense of consumers who may not even know they are involved in a class action lawsuit, where they receive token compensation whereas the
class action lawyer receives millions, literally, in attorney's fees.

Modern class action litigation has brought forward what we have now come to recognize as the entrepreneurial lawyer.
That is a lawyer who may not have a client but if they are smart enough to try to figure out a way to create a claim or find somebody who arguably has a claim, then they can go out and seek a class representative; that is, somebody whose claim is representative of perhaps hundreds or thousands or even millions of other people who might be in a similar situation and, thus, seek certification of a class action and settle the case because, frankly, class action lawsuits are almost never tried because the consequences of a trial and the loss are so devastating that the person who has been sued or the company that has been sued does not really want to risk an adversarial proceeding in a court of law.

So class action lawsuits are filed to be settled and to use the economic pressure that is created thereby because the number of claims that are aggregated and the amount of money that is at stake is literally a bet-the-ranch lawsuit or, I should say, bet-the-company or bet-your-life-savings lawsuit.

The problem is, our system of class action litigation is not just broken; it is falling apart. That is not right, and that is not justice, and that cries out for reform. I believe this bill is an important step forward in providing that reform.

Now, the truth is, as great as I believe this bill is that has passed out of the Judiciary Committee, it, frankly, is not all we should strive for when it comes to class action fairness.

For example, many people find out only after they receive a coupon or something in the mail that they were, indeed, a member of a class; in other words, they were a party to a lawsuit, and they did not know it until they received some token compensation, whether it be a coupon or perhaps a few pennies.

I think if we were to engage in the sort of class action reform that I think would genuinely address part of the problem, we would have a system not where people are asked to opt out of a class but literally where consumers are given an opportunity to opt in; that is, I do not think we ought to presume somebody wants to be a party to a lawsuit unless they say: Count me in.

I do not think that is too much to ask. But that is not what this bill does yet. But that is where I think we need to go ultimately.

What this bill does is provide a means of access to a court and the kind of careful review of a legal claim that I think is important in order to preserve the goal of class action litigation; that is, to serve the interests of consumers and not the interests of entrepreneurial class lawyers.

I want to give just one or two examples from my own experience. As I said, like many in this body, I have been a practicing lawyer. I also happen to have been a judge in my earlier life and exposed to some of the abuses of class action litigation.
And of one I will never forget, I want to just mention a few of those details.

Well, it seems that General Motors created a sidesaddle gasoline tank pickup truck, one that was the subject of or involved in a rather spectacular explosion and terrible injury and death in Georgia, which was obviously a personal injury and a wrongful death claim.

What happened in Texas, and elsewhere, was we saw that some lawyers realized this was perhaps a product design over which consumers may have a potential claim. So they brought a lawsuit, not for personal injury or death but for the economic loss incurred by consumers who owned sidesaddle gasoline tank pickup trucks.

Of course, they had a couple of problems. One, they had the problem of being able to establish a true measure of loss as a result of merely owning them because, in fact, the evidence seemed to be that there was no actual loss in value just by driving a truck that had a sidesaddle gasoline tank. But, moreover, what ultimately happened in this case was that the consumers got a coupon, redeemable upon the purchase of a new General Motors pickup truck, and the lawyers who filed the lawsuit got nearly $10 million in cash.

As it turned out, the court on which I served, the Texas Supreme Court, unanimously reversed that decision—that settlement really, the approval of that settlement, saying: Look, we have gotten this exactly backward. Class action
lawsuits are brought for the benefit of consumers, not for the benefit of the lawyers who file them.

So in order to correct this abuse represented by the settlement, we said: Look, the consumers have to get something of value, and it has to be more than a coupon redeemable upon the purchase of a new General Motors pickup truck.

Now, frankly, what happened was, it looked as though the class lawyers, the class counsel, cut a deal that was good for them, and General Motors agreed to a deal that was pretty good for them under the circumstances, although I am sure they would have rather not been there. But they were able to basically effectuate a marketing scheme for the sale of more GM pickup trucks; in other words, make lemonade out of this lemon. The problem was, consumers in the process got nothing.

Indeed, many consumers, because they were constrained by bidding requirements—for example, trucks owned in a motor pool by a municipality or otherwise constrained by those requirements—could not even take advantage of the coupon. Of course, others didn't have the money to buy a new pickup truck and so they couldn't use the coupon which gave them some money as against the purchase of another truck.

We can all testify, based on our own experience, how we have perhaps received a notice in the mail. I remember not too long ago when my wife and I went to a Blockbuster video rental store. We got an extra long tape when we rented our video that had a notification of a class action settlement attached to it. Of course, after reading the fine print, we found out that we had, unbeknownst to us, been involved in a lawsuit and had some nominal claim we could make to a few pennies, while the lawyers in the case received $9 million in cash. The consumers got a coupon for about a buck, and the lawyers got $9 million in cash.

I don't want to take long today because the chairman of the committee has graciously allowed me to say a few words now. I know we will be continuing to talk about this issue for some time this week, as well we should. But there is another part of class actions that we need to be careful about. It is not just the entrepreneurial lawyers who settle for cash while consumers get a coupon. Class actions can also be used by defendants—that is, people being sued for various claims—to preempt or to stop future claims by those who have them because there is what we lawyers call res judicata. That is, no one else can bring another claim if, in fact, they were notified they had a potential claim and failed to object and thus were included in the class. So some defendants will potentially go out and collude with an entrepreneurial lawyer in order to get a final class action settlement which meets their bottom line but which basically precludes future claims by others who genuinely are aggrieved and harmed and whose rights are totally cut off.

This is not lawyer bashing, I assure you, as a lawyer myself. People need to have access to the courts. Consumers need to have a means to vindicate their just claims. But it cannot be through a method which rewards entrepreneurial lawyers with millions in cash and consumers with a coupon. It cries out for reform. I believe the class action liability reform bill Chairman Hatch has navigated through the Judiciary Committee, which enjoys bipartisan support in that committee, is a big step in the direction of reform.

With that, I thank the Senator from Utah for allowing me to say a few words. I will relinquish the floor from whence it came.