The Corporate Campaign Against Consumer Class Actions
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Unfairness Incorporated: The Corporate Campaign Against Consumer Class Actions Congress Watch June 2003 Acknowledgments Principal authors of “Unfairness Incorporated: The Corporate Campaign Against Consumer Class Actions,” are Public Citizen’s Congress Watch Legislative Counsel Jackson Williams, Research Director Neal Pattison, Civil Justice Fellow Gretchen Denk and Senior Researcher Taylor Lincoln. The report is based on extensive research provided by Senior Researcher Andrew Benore, Special Counsel Barry Boughton, Legislative Assistant Rebecca Romo and Research Consultant Luke Warren. Congress Watch Director Frank Clemente provided significant editorial direction. About Public Citizen Public Citizen is a 125,000 member non-profit organization based in Washington, D.C., representing consumer interests through lobbying, litigation, research and public education. Since its founding by Ralph Nader in 1971, Public Citizen has fought for consumer rights in the marketplace, safe and affordable health care, campaign finance reform, fair trade, clean and safe energy sources, and corporate and government accountability. Public Citizen has five divisions and is active in every public forum: Congress, the courts, governmental agencies and the media. Congress Watch is one of the five divisions. Public Citizen’s Congress Watch 215 Pennsylvania Ave S.E. Washington, D.C. 20003 P: 202-546-4996 F: 202-547-7392 www.citizen.org ©2003 Public Citizen. All rights reserved. Call Public Citizen’s Publication Office, 1-800-289-3787 for additional orders and pricing information, or consult our web site at www.citizen.org. Major credit cards accepted. Or write to: Members Services Public Citizen 1600 20th Street, N.W. Washington, D.C. 20009 Unfairness Incorporated: The Corporate Campaign Against Consumer Class Actions Table of Contents Executive Summary.....................................................................................................................1 Introduction: Corporations Seek Unfair Advantage Through Federal Class-Action Legislation..................................................................................................9 Section I: Corporate Campaign for Class-Action Legislation Recruits a Large Force of Lobbyists...............................................................................................15 Figure 1: Number of Lobbyists from Industries and Business Associations Working on Federal Class-Action Legislation, 2000 – 2002....................................21 Figure 2: Political Donations by Corporations and Groups Most Active in Class-Action Lobbying, 1998-2002 Election Cycles.................................................25 Figure 3: Lobbying Firms Paid the Most by Clients Supporting Federal Class-Action Legislation, 2000-2002...........................................................................27 Figure 4: Number of Lobbyists from Corporations and Business Associations Lobbying on Federal Class-Action Legislation, 2000 – 2002..................................28 Section II: Insurance Industry..............................................................................................31 Section III: Banks and Consumer Credit Companies.......................................................39 Section IV: Automotive Industry............................................................................................44 Section V: Retailers...............................................................................................................48 Section VI: Pharmaceuticals .................................................................................................52 Section VII: Gas and Oil Corporations..................................................................................58 Section VIII: Tobacco Companies..........................................................................................66 Appendix A: Lobbyists Who Worked on Federal Class-Action Legislation, 2000 – 2002...............................................................................................69 Appendix B: Comparison of State v. Federal Certification of Life Insurance Class-Action Lawsuits, 1996 - 2003............................................................................83 Unfairness Incorporated: The Corporate Campaign Against Consumer Class Actions Executive Summary Any doubt that big business expects to benefit greatly from a federal takeover of most state class- action laws is dispelled by the overwhelming amount of money and manpower that major companies and industries have spent on legislation that is now before Congress. This Public Citizen investigation into lobbying on class-action legislation – and into the corporate interests financing that lobbying – reveals several cogent points: 1) At least 100 major corporations and pro-business associations have banded together to spend millions of dollars and to employ at least 475 lobbyists to make sure that class- action legislation is tilted in their favor. 2) Many corporations that portray themselves as victims of unjustified class actions have, in fact, engaged in unfair and harmful practices that would not have been corrected if consumers had not been represented in class-action lawsuits. 3) Legislation now under consideration in the U.S. House (H.R. 1115) and Senate (S. 274), the so called Class Action Fairness Act, contains a number of changes that will enable corporations to injure or defraud average Americans while hiding behind legal loopholes or procedural technicalities. Findings of this Public Citizen report include: Class-Action Campaign Attracts a Swarm of Lobbyists · At least 100 major companies and pro-business associations have unleashed at least 475 lobbyists to Capitol Hill since 2000 to promote their class-action agenda. This is nearly five lobbyists for every U.S. senator. Public Citizen’s analysis of lobbying disclosure records from 2000-2002 reveals that industries active in the class-action effort have included: insurance (with 193 lobbyists), including life insurance companies (79), property and casualty insurers (60) and health maintenance organizations (59); banks and consumer credit companies (36 lobbyists); automotive manufacturers (32 lobbyists); retailers (31 lobbyists); pharmaceuticals (21 lobbyists); gas and oil corporations (21 lobbyists); and tobacco companies (17 lobbyists). [See Figure 1 and Appendix A] · Chamber of Commerce orchestrates business lobbying for federal class- action legislation. The U.S. Chamber of Commerce and the Chamber’s Institute for Legal Reform have employed 45 lobbyists in the class-action campaign. In 2001, the Business Roundtable agreed to coordinate its class-action efforts with the Chamber and its Institute for Legal Reform, which subsequently spent more than $22 million lobbying on tort issues in 2002. According to published reports, the Institute plans to increase that figure to $40 million this year. And the Institute for Legal Reform has spent between $5 million and $15 million on an advertising campaign that targets class-action lawsuits. · Many class-action lobbyists have “revolving door” connections to top government offices. At least 131 of the 475 lobbyists (28 percent) who registered to work on class-action legislation have some kind of “revolving door” connection. This list includes at least 10 former members of Congress. At least 10 other lobbyists have connections to the House and Senate Judiciary committees, which have jurisdiction over the class-action bills. · Influence of special interests also is reflected in political contributions. The 29 corporations and business groups that have lobbied most actively for class-action legislation – those that have employed seven or more lobbyists to work the issue –gave a combined $49 million in PAC and soft money political contributions over the past three election cycles. According to data gathered from the Center for Responsive Politics, 82 percent of that money supported Republicans and 18 percent supported Democrats. [See Figure 2] Proposed Legislation Would Give Corporate Defendants Advantages Class-action bills in the U.S. House and Senate, H.R. 1115 and S. 274, would not change the underlying laws under which class-action lawsuits are brought – but the legislation would give corporate defendants subtle, but substantial, procedural advantages. Most significantly, the legislation would divert most class-action lawsuits from state courts to federal courts. · Class certification rules are applied more stringently in federal courts. While most states’ rules for class actions are copied from the federal rules, there are significant differences in the way the rules are applied. The question of whether common issues – such as companywide fraudulent practices – “predominate” over individual issues is more often answered “no” by federal judges. The result is the dismissal of many more class actions in federal courts. · Federal judges feel constrained to apply state laws conservatively. Even though H.R. 1115 and S. 274 would place most class actions into federal court, they would still be tried on the basis of state law. This would provide an advantage to businesses because of the reluctance of federal judges to extend state law to embrace new theories of compensation. For example, medical monitoring is a newly accepted common law remedy that provides medical testing for persons exposed to toxic substances. Federal judges in Virginia and New Jersey have refused to certify class actions for medical monitoring, saying state