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May 13 2019

DOJ: Don’t Abuse Class Actions

by Staff

On Friday, the Department of Justice filed a Statement of Interest in a class action lawsuit against Dial Soap due to the extraordinary attorney fee arrangement in the case. Most people think of class action lawsuits as a democratic tool for justice, but this case may be an example of the potential for abuse.

In the Class Action Fairness Act of 2005, Congress found that class action lawsuits “are an important and valuable part of the legal system”—but only “when they permit the fair and efficient resolution of legitimate claims.” Class actions aggregate hundreds or thousands of claims into one case and are designed to allow for the recovery of small claims where the cost of individual litigation otherwise would be prohibitive. In CAFA, Congress also found that the class action devise had been abused and this abuse had “undermined public respect for our judicial system.” One such abuse identified by Congress was where class counsel are awarded massive fees but class members “receive little or no benefit.” Because of this potential for abuse, Congress allows the Attorney General to review class settlements and file Statement of Interests in the case.

In the Dial case, plaintiffs allege (and Dial disputes) that Dial falsely advertised that its hand soaps containing triclosan were more effective at killing germs than were other soaps. Under the proposed settlement agreement, the attorneys would be awarded a whopping $3.825 million, including nearly two million tied to the award of injunctive relief. The United States argues that the injunction “provide[s] no benefit to consumers,” given that the FDA has banned the use of triclosan, and Dial has already voluntarily made the changes required by the injunctive relief. The United States thus opposes the proposed class action settlement because it “would afford little value to consumers while handsomely compensating attorneys.”

Too often the potential for abuse is exploited, but it looks like the DOJ is paying attention this time. Costly class actions that don’t result in any benefit to “the little guy” only ultimately add to the costs that consumers face as litigation costs are passed along to us. Our justice system should be about righting wrongs, not enriching trial lawyers.

 


Independent Women's Forum is an educational 501(c)(3) dedicated to developing and advancing policies that aren’t just well intended, but actually enhance people’s freedom, choices, and opportunities. IWF is the sister organization of the Independent Women’s Voice.​
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