Plaintiffs Find Loopholes In Class Action Fairness Act

When President Bush signed the Class Action Fairness Act into law Feb. 18, saying it "marks a critical step toward ending the lawsuit culture in our country," Republicans and Democrats alike applauded after three years of intense debate in Congress about the rights of businesses and consumers. It remains to be seen, however, whether that temporary bipartisan bonhomie was premature.

Some legal experts believe the legislation will end the plethora of multi-state class action lawsuits in so-called "judicial hellholes," such as Madison County, Ill., and Barbara County, Ala., where juries return huge verdicts and judges approve settlements that are favorable to the plaintiffs' lawyers but don't leave much for class members.

Finding Loopholes

Plaintiffs' attorneys can get around the Act by breaking up larger class actions into smaller ones. If a class has 99 people, instead of 100, theoretically plaintiffs could file two class actions and stay in state court, according to Stanley Parzen, partner at Mayer Brown Rowe and Maw, who deals with financial class actions and mass actions both in state and federal courts. But McHugh doesn't see this as a problem.

Federal cases, however, are much more costly to both plaintiffs and defendants because expert depositions aren't normally necessary in state court.

"Corporate America ordinarily hires top experts in their field, and I'm sure that the cost of having them deposed, preparing them before trial is not going to be inexpensive," McHugh says. "It's triple the cost associated both with regard to lawyers fees and expert fees."

staff Writer

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