Friday, July 30, 2004

Pay the lawyers in coupons, too
Class-Action Excesses
July 25, 2004 Rocky Mountain News
Hill & Robbins, a well-known member of Denver's plaintiffs' bar, is back in the news with yet another class-action lawsuit, this time on behalf of AT&T Wireless customers who were allegedly overcharged on bills which claimed they had exceeded their monthly allowance of minutes. The proposed settlement is a plaintiff's lawyer's dream, if not representative of much that's gone wrong with the nation's tort system.
Under the settlement proposal, AT&T subscribers would receive a maximum of $20 million in calling cards, air time and discount coupons on telephone accessories. Parceled out among 3 million eligible subscribers, that comes to a paltry $3 to $10.50 worth of benefits.

Hill & Robbins, on the other hand, stands to rake in a cool $3 million in cash, plus $750,000 to cover expenses. The proposal must still be approved by Denver District Judge Herbert Stern.
We wouldn't dream of advising Stern on how he should rule. But we don't mind addressing the larger issue of whether there isn't something terribly wrong with a legal system in which class-action lawyers can win settlements for their clients in the form of coupons while collecting hefty fees for themselves in cash.
We can think of several remedies to this problem. Some of them in fact are included in a class action reform bill that, no thanks to the plaintiffs' bar, is having no luck getting through the lawyer-heavy U.S. Senate.
The first thing we'd do is require the lawyers to be paid in the same specie as their clients. A Florida judge turned these tables in 2002, when he slashed a $1.4 million class-action legal-fee request by the New York law firm Zwerling Schachter & Zwerling to about $294,000 and ordered a quarter of the fees be paid in $10 to $60 travel vouchers - the same vouchers awarded to the 80,000 plaintiffs. The suit had accused Renaissance Cruises Inc. of padding port charges. But in his blistering 27-page ruling, Broward County Circuit Judge Robert Lance Andrews assailed the plaintiffs' attorneys for greediness, saying "Too often, lawyers use class actions as cash cows that ultimately don't yield much for plaintiffs . . ."
Another solution is to peg lawyer rewards to actual plaintiff payouts instead of to some pie-in-the-sky maximum. There's no way AT&T Wireless customers are going to avail themselves of $20 million worth of discounts. Why not wait and see how many sign up before compensating the lawyers?
Another alternative particularly applicable in this case is to prohibit class-action suits altogether against companies in regulated industries such as telecommunications. If customers are billed incorrectly or unfairly, shouldn't the Federal Communications Commission mandate rebates or adjustments, just as the Colorado Public Utilities Commission does for the customers of local telephone, electric and gas services? After the requisite hearings before the regulatory body, why shouldn't AT&T Wireless be able to credit your account in the same way Xcel Energy does?
As state Sen. Mark Hillman, R-Burlington, points out, "Consumers are paying taxes to support the Federal Communications Commission." Having it deal with billing disputes "is a much more efficient way of dealing with the problem than giving attorneys an incentive to always be looking for a big payday."

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