The Wall Street Journal is so often a rigorous source of reporting about anticompetitive business practices that harm small and medium-sized companies -- a good example is today's story about a possible cartel in the packaged ice industry, which potentially harmed hundreds or thousands retail businesses nationwide.
But the WSJ has also shown itself to be willing to publish in its opinion pages just about any mudslinging attack on class actions or the lawyers who specialize in bringing them, no matter how coherent or well written.
Yesterday the Journal published its latest such opinion piece by two Blank Rome lawyers, under the alarmist title: "Our Class-Action System is Unconstitutional."
Of course our "class action system," whatever that means, is hardly unconstitutional, and the Blank Rome piece barely argues the point. Instead it attacks one rather isolated issue that arises in a small subset of class actions - the cy pres distribution.
But that's not before the piece casts assorted aspersions on attorneys who bring class actions. In one of the more curious turns of phrase, the piece claims there is a "hidden tax" imposed on companies in the United States, which "takes the form of certain class-action attorneys who, like a roving shadow, look for an opportunity to claim that a business has done something wrong." I'm unfamiliar with "roving shadows," but I doubt they are things that "look for an opportunity to claim that a business has done something wrong."
In any event, the piece also trots out the old story about how sophisticated businesses, represented by the biggest and baddest law firms in the world, panic merely by seeing a class action, and throw millions of dollars at the proposed class to make the case go away, no matter how frivolous or weak it is. It's a good story to work people up, but it just isn't true. It's been thoroughly debunked by, for example, Professor Charles Silver's piece, "'We're Scared to Death:' Class Certification and Blackmail," 78 NYUL Rev 1357 (2003).
What appears to really motivate the piece is sour grapes over those rare instances when companies settle a class action and agree to pay substantial money and, after the funds are distributed to claimants, some amount is left over. Sometimes when that happens there is a dispute about where the money should go - and sometimes courts (invoking the cy pres principle) decide that it should be distributed to some entity that will benefit the class members, even if indirectly. This is, after all, money that the defendants agreed to pay to resolve the class's claims.
The piece mentions a case (in which CMHT was involved) where USDJ Kollar-Kotelly (DDC), after considering multiple rounds of briefing on the issue, decided that the about $5 million dollars left of the amount the defendants had agreed to pay to settle the case (in which they were charged to have been involved in an international price-fixing conspiracy of sodium monochloroacetate and monochloroacetic acid), could be allocated to fund a Center for Competition Law at George Washington University.
No argument was made that this was unconstitutional -- this was money that the defendants had already agreed to pay. Nor was there any provision in the negotiated settlement agreements providing that left-over money would be returned to the defendants. In fact, the defendants only wanted half of the funds returned to them and (at least originally) did not even oppose a cy pres distribution of the rest at all.
Judge Kollar-Kotelly's thoughtful opinions on the matter are available here: Download may_14_2007.pdf and Download july_10_2007.pdf .
It is one thing to quibble with Judge Kollar-Kotelly's reasoning. It is quite another to launch a tendentious attack on the constitutionality of the "class-action system."
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