Class Actions—Who Wins?

Yesterday President Bush signed legislation which forces class action lawsuits to be filed in federal court rather than in the “magnet” state courts that have been popular for the trial lawyers. Mississippi was such a “magnet” until state laws were changed there in 2004. Today, Madison County, Illinois in southern Illinois is the top choice of the trial lawyers.

Madison County has had a 5200% increase in the number of class actions filed since 1998. Eighty-six percent of the cases filed there involve plaintiffs or defendants from outside of the state.

An example of the abuse of the current system was a class action that was settled last year against a company that sells bottled water. This lawsuit argued that their water didn’t come from a spring and was unsafe to drink. They won, resulting in the class members receiving a coupon for 50 cents off for their next purchase of this water, that they had alleged wasn’t safe to drink. The class action lawyers walked away with a check for $1.35 million.

Something isn’t right. There is clear abuse. I’m hopeful that this new legislation will be beneficial for us in the long term.