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Limiting Damage Caused by Abusive Class-Action Lawsuits

Manufacturing is essential to West Virginia’s economy, providing tens of thousands of jobs and more than $4 billion a year in exports. But there’s an import that threatens these West Virginia companies: Class action lawsuits.

This profit-driven litigation frequently sprawls across state lines to ensnare local businesses with claims that are expensive to defend and typically designed to be settled by paying plaintiff attorneys multimillion-dollar fees to go away. They impose unnecessary costs and management distraction on manufacturers without providing much of anything to class members, the supposed clients.

That’s why I support the Fairness in Class Action Litigation Act, a bill now pending in Congress that would provide meaningful reforms to an out-of-control system. First of all, FICALA would stamp out “no-injury” lawsuits where lawyers assemble a class of plaintiffs without showing, up front, that they’ve suffered any tangible injuries.

Second, the law would ensure that class actions serve their intended purpose of compensating injured plaintiffs, not their lawyers. Plaintiff lawyers would only be paid a percentage of what their clients collect, not some imagined number based on unrealistic estimates of what they could collect if everybody participated (in most cases, they don’t, because lawyers have little incentive to make sure they do).

Third, FICALA would crack down on multidistrict litigation, a cousin of the class action in which lawyers assemble hundreds or thousands of individual cases and try to steer them to a friendly jurisdiction. The MDL process can bring efficiency to mass tort litigation, but too often lawyers surround their meritorious cases with hundreds of flimsy or fraudulent ones, counting on the sheer volume of litigation to force a settlement. Under FICALA, judges would have revised rules to determine the proper venue for each case in a MDL and lawyers would have to demonstrate the merit of their cases on the front end, before they can impose the heavy cost of defense lawyers and discovery on their targets. Claimants would also have to receive at least 80 percent of any settlement, instead of the 60-70 percent they frequently receive now after attorney fees and expenses.

West Virginia has long held a well-deserved reputation for its own plaintiff-friendly litigation climate. We’re working on that, with reforms including laws to limit “double dipping” by asbestos claimants, rein in excessive punitive damages and eliminate joint and several liability where marginal defendants could be stuck with the full cost of a jury verdict. But without the protection of FICALA, our manufacturers can still be hit by federal class actions from out of state that cripple businesses and discourage investment.

The last time Congress passed meaningful class action reform was in 2005, with the Class Action Fairness Act. West Virginia Sen. Jay Rockefeller and two of West Virginia’s three representatives voted for CAFA, joining a bipartisan majority that also included Rahm Emmanuel and then-Sen. Barack Obama.

The state’s manufacturers could use federal help again. Small businesses, which make up 77 percent of West Virginia exporters, can ill afford to get tangled up in multistate lawsuits designed mainly to generate a fee. In total, West Virginia manufacturers employ some 48,000 workers and pump more than $7 billion a year into our state’s economy. We’re a resource well worth protecting.

McPhail is executive director of the West Virginia Manufacturers Association.


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