Fixing Class Action Lawsuits

from the objecting-to-settlements dept

For a long time, we've noted that while class action lawsuits do serve a useful purpose, it seems like all too often they're abused. Quite frequently, we see the only "class" that really benefits from such lawsuits are the lawyers who file the lawsuit, who end up taking the bulk of any "settlement." In some cases, it's even worse -- where not only do lawyers get the bulk of the settlement, the rest of the class actually gets pushed into buying more products from the company that was sued. Such class action lawsuits not only make the lawyers richer, they actually act as marketing for the company that was sued. One of the worst such cases we can remember involved Netflix, which "settled" a class action lawsuit by giving current customers a "free" one-month upgrade -- but if you didn't manually downgrade your account, they started charging you the higher price the following month. That's not a "settlement" so much as a way to get a bunch of customers to upgrade. If I remember correctly, that settlement was actually thrown out.

Eric Goldman points us to an interesting profile of Ted Frank, a lawyer who is focusing on trying to stop such bad class action lawsuits and settlements by objecting to the settlements when they seem so far over the line. While, as the article notes, there have been a bunch of "professional settlment objectors" in the past, most have been doing it for money (getting some of the attorney's fees). Frank, however, hasn't taken attorney fees (though he says it's a possibility in the future), and is funded by a charity:
"The whole reason I started this is because there is a high probability of district courts rubber-stamping settlements," Frank says. "I think these are very bad settlements that the [9th U.S. Circuit Court of Appeals] will ... provide guidance for when judges should or shouldn't approve settlements."
Again, the concept of a class action lawsuit isn't bad, but it's definitely been widely abused -- so it's nice to see someone pushing back from within to try to stop the worst abuses.
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Filed Under: class action lawsuits, settlements, ted frank


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  1. icon
    Steve R. (profile), 27 Mar 2010 @ 8:56am

    Sprint Bad

    Sprint, a few years ago, settled a class action lawsuit for "improper billing". Under the settlement we would have been entitled to a $15.00 refund. We never saw the money.

    The catch, you had to be a Sprint customer. By that time, we had dropped Sprint. Sure, we could have "received" our $15.00 had we signed up for a new two year plan (even though we still had the old phone)!

    Moreover, even if you were still a Sprint customer; you never actually saw the "refund" since it would appear as a deduction on your future bills.

    Settlements such as these demonstrate how ridiculous class action lawsuits are. If the injured party only receives "coupons" that force them to buy from the company that hurt them - that is exactly how the lawyers should be paid; in coupons!

    Another issue with class action lawsuits, to my knowledge, their is no commitment on the part of the company in stopping their abusive practices.

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