Top Three Misconceptions on Which the Class Action “Fairness” Act is Based

Cyrus Dugger

Top Three Misconceptions on Which the Class Action “Fairness” Act is Based

Have you heard of the Class Action Fairness Act of 2005? This recently enacted bill is affecting our ability to get compensation for large-scale harm done to society by corporations.

Surprisingly, the Class Action Fairness Act of 2005 was passed by Congress in an attempt to make it harder for class action lawsuits to be approved by the nation's courts.

Our recently released Congressional Scorecard reviews this bill. We have also already given you "The Top Seven Bad Things About the Class Action Fairness Act" and "The Single Stupidest Thing About CAFA." I'd like to continue to talk about the bill's pitfalls and shortsightedness by way of an additional "top" list:

1. Lawyers are making more and more money off of class actions. In reality, although the amount of class actions has increased in the last decade, lawyers' fees from these actions have not similarly increased.

2. Large class actions are especially harmful because clients end up being left with pennies and their lawyers reap all the financial rewards. In reality, as the size of the class increases, the percentage of lawyers' fees taken from the reward or settlement decreases. As a result, the very large "high stakes" class action litigation that corporate defendants most fear, are precisely the kind most likely to benefit class members as opposed to their lawyers.

3. Federal Courts are less likely to approve big settlements for plaintiffs. In reality, although state courts generally approve larger absolute settlements, federal courts have been found to approve larger average settlements per person ($517 as opposed to $350). Corporations have pushed to have class actions moved to federal court because overcrowded dockets may allow the case to simply stagnate, but in doing so they may have increased the amount per person that they will have to pay to settle when cases do make it forward in federal court.

For a comprehensive review of the Class Action Fairness Act of 2005 checkout Public Citizen's report.

If you are interested in learning more about CAFA of 2005, or would like to partner with DMI in our support of the civil justice system, email cdugger@drummajorinstitute.org.