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Lawrence W. Schonbrun

Lawrence W. Schonbrun

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Supreme Court Ruling Is Not Bad News For Consumers, the Class Action System Is the Real Culprit

Posted: 05/19/11 02:42 PM ET

Our local newspaper, the San Francisco Chronicle, published an editorial headlined, "Supreme Court Ruling Is Bad News For Consumers," which reflects the vast majority of the media's corporations-bad, class-actions-good, reporting. For consumers, and for the cause of justice, the Supreme Court's ruling on class action arbitration is good news. (Not great news, mind you, but good news.)

Unfortunately, the media has been drinking too much of the plaintiff's class-action-lawyer Kool-Aid. The noble idea that consumers could band together to challenge unlawful business practices and get something for their efforts has been turned upside down by the plaintiff's class action bar. Although packaged to the media and the general public as justice for consumers, class action lawyers have transformed the class action itself into yet another unfair business practice. We need look no further than California's most recent poster child for class action abuse. Plaintiffs' lawyers in the Ford Explorer SUV class action settlement were awarded $25 million in attorneys' fees by claiming that the class members were receiving a benefit of $500 million.

However, what class members actually received were $500 coupons towards the purchase of a new Ford vehicle, and only 148 were redeemed for a total value of $74,000. That's right. $25 million for the lawyers, although the class members actually received $74,000. And believe me, the Ford Explorer settlement is not an isolated example, there are thousands of class actions with equally disturbing results.

Contrary to The Chronicle's allegation, it is our nation's media, not the Supreme Court, who is simplistic and naïve about class actions. The unfortunate reality is far from the plaintiffs' lawyers' in the happy-talk notions of consumers joining together to fight for their rights. A plaintiff's class action lawyer finds one customer willing to lend their name to a class action lawsuit and then negotiates a multi-million dollar settlement in the name of thousands or even millions of unwitting consumers wherein, like the Ford Explorer class action, the lawyers get millions (or tens of millions) while the consumers get coupons. (One is reminded of Marie Antoinette's famous ripost, "Then let them eat coupons!")

Consumers need real protection from nefarious corporate behavior, not the class action runaround that only benefits the lawyers. We need a legal system that does not allow any member of the bar to sue under a claim of "unfair treatment" for consumers, while treating their own client class members as an excuse to shakedown corporations for millions of dollars in attorney's fees. We need to find a solution that actually protects consumers, because the class action mechanism has become nothing more than another shady business practice in which consumers are the ultimate victims.