Thank you. Thank you. Hello my fellow American citizens.
Some of you may have heard the speech I gave recently on the need for tort reform, and, in particular, about some of the underlying problems with our dysfunctional class action system. I believe that, next to reforming Wall Street and fixing healthcare, we have got to tackle the problem of class action abuse if we are to allow our economy to flourish. And no, I am not overstating the significance of this problem.
The class action system was never intended to be a casino for lawyers to obtain jackpot attorney's fees. The class action system was created with the best of intentions - to protect consumers by allowing individuals with small, similar claims to be joined in one lawsuit. But unfortunately, it has been turned on its head, taking money from those it was meant to protect - consumers and shareholders - and making lawyers filthy rich. Like the Wall Street bankers who made billions in bonuses while their companies' stocks plummeted, the class action lawyers have made out like bandits. All too often in class action settlements class members receive little, next to nothing, nothing, or little pieces of paper - coupons they don't want; extended warranties they will never use. In the case of securities class actions, class members recover mere pennies for each dollar of damage that the lawyers claim their clients have suffered.
That is why I feel so strongly that we need to enact a set of common sense solutions to ensure accountability by the lawyers who bring these lawsuits as well as by the judges who too easily find such settlements acceptable. These problems have been talked about for decades, but nothing has been done. Unfortunately, lawyers with a special interest in perpetuating this failed system have successfully, and disingenuously, frustrated reform efforts by labeling any proposed change as nothing more than attempts to support big, bad corporations at the expense of the "little guy." Don't be fooled. Tort reform is is not about helping big business, it is about helping consumers by preventing class action lawyers from gaming the system to their own financial advantage.
First, we need to give consumers more protection and more power in the class action system. One way to do this would be to change the "opt-out" procedure to an "opt-in" requirement. Currently, lawyers, by finding one person, can sue on behalf of thousands and even millions of consumers who do not even know about the lawsuit. If class members had to "opt-in" it would take away the death grip class action lawyers currently have over defendant companies - threatening them with bankruptcy, and extracting unconscionable attorneys fees in order to avoid ongoing ruinous litigation. Proposing this solution to the Congress will be a top priority.
Another simple solution for the way the class action system could be working for rather than against class members is if the settlements and the attorneys fees were treated as one recovery. That way when exorbitant attorneys fee requests are reduced by the court, it would be class members that benefit. And I will be asking the Attorney General to address this.
We also need to close loopholes in our current federal laws, such as the Class Action Fairness Act (CAFA). CAFA was meant to address abusive coupon settlements by providing that contingency fees must be calculated based on the value of coupons actually redeemed. Remember the Ford Explorer case in California I mentioned in my previous speech? In that case, the lawyers' $25 million fees would be based not on the $500 million in coupons that were made available, but on the $74,000 worth of coupons that were actually claimed by class members. However, the CAFA statute itself appears to allow class action lawyers a way around this rule because it permits the lawyers to choose to be compensated based on their hourly rate plus a bonus instead of a percentage of redeemed coupons - virtually nullifying this attempt at reform.
Yet another step we could take would be to tax excessive law firm profits. After all, the plaintiff's class action lawyers clearly do not need a stimulus package. (Pause for laughter) But every time they sue a financial institution that received government bailout money you the taxpayer are paying their attorney's fees.
By enacting these reforms, we will help to ensure that our legal system - and our economy - continues to be the envy of the world. I urge all of you to join me, to join those who are seeking to pass these commonsense reforms. And for those of you who are lawyers, I especially urge you to join me not only because it is in the interest of the legal system which you represent, but also because it is in the interest of your country.
Yes we can. Thank you. Thank you so much.
Okay, okay, so this is just part two of a speech I would liked to have seen Obama give on tort reform. We all know he's still not quite there yet.