Opening Statement of Sen. Herb Kohl
Oct. 30 Class Action Hearing
Mr. Chairman, let me thank you for holding today's hearing. The abuse of class actions has troubled me for some time, and already prompted me to introduce legislation.
It seems that there are two opposing camps on this issue. Some think class actions invite too much abuse and should be curtailed, while others say class actions have accomplished a lot and shouldn't be meddled with. In my view, the truth is somewhere in the middle. Class actions have desegregated schools and compensated victims of toxic spills. But class actions also have been widely abused. Too often lawyers line their pockets with exorbitant fees, while victims get little or nothing.
Let me give you a truly disturbing example. One of our witnesses is Martha Preston of Baraboo, WI. Ms. Preston was a member in a class action lawsuit against her mortgage company. She did not initiate the suit. It was brought instead by lawyers purporting to represent her interests.
The lawyers negotiated a settlement, but that settlement was a bad joke. Initially, Ms. Preston got four dollars and change in compensation. However, a few months later, $80 of her money was taken by the class action lawyers, who pocketed over $8 million for themselves, but never explained to their own clients that the class -- not the mortgage company -- would pay their fees.
Ms. Preston was naturally outraged. So she and others sued the class lawyers. But adding insult to injury, the lawyers turned around and sued her in Alabama -- a state she had never visited -- and demanded an unbelievable $25 million in damages. So not only did she lose $75, she was forced to defend herself from a $25 million lawsuit. Mr. Chairman, this is truly a mockery of justice.
Unfortunately, such abuses are not all that unusual. For this reason, I have introduced the Class Action Fairness Act. First, it requires notice to State Attorneys General about proposed class action settlements that would affect residents of their states. An attorney general can then object if the settlement seems unfair. Second, the legislation requires notice to class members in plain English of the terms of a proposed settlement, including the source of attorneys' fees.
Right now, people across the country can be dragged into lawsuits unaware of their rights and unarmed on the legal battlefield. What our bill does is give regular people back their rights and representation. This measure may not stop all abuses, but it moves us forward. It will help ensure that good people like Martha Preston don't get ripped off by unscrupulous attorneys. And it already has the support of Jim Doyle, who is the President of the National Association of Attorneys General. I request that a letter from Mr. Doyle in support of my proposal be placed in the Record.
Mr. Chairman, I look forward to working with you on this issue, and I hope you will seriously consider my proposal. Thank you.
Mr. Chairman, let me thank you for holding today's hearing. The abuse of class actions has troubled me for some time, and already prompted me to introduce legislation.
It seems that there are two opposing camps on this issue. Some think class actions invite too much abuse and should be curtailed, while others say class actions have accomplished a lot and shouldn't be meddled with. In my view, the truth is somewhere in the middle. Class actions have desegregated schools and compensated victims of toxic spills. But class actions also have been widely abused. Too often lawyers line their pockets with exorbitant fees, while victims get little or nothing.
Let me give you a truly disturbing example. One of our witnesses is Martha Preston of Baraboo, WI. Ms. Preston was a member in a class action lawsuit against her mortgage company. She did not initiate the suit. It was brought instead by lawyers purporting to represent her interests.
The lawyers negotiated a settlement, but that settlement was a bad joke. Initially, Ms. Preston got four dollars and change in compensation. However, a few months later, $80 of her money was taken by the class action lawyers, who pocketed over $8 million for themselves, but never explained to their own clients that the class -- not the mortgage company -- would pay their fees.
Ms. Preston was naturally outraged. So she and others sued the class lawyers. But adding insult to injury, the lawyers turned around and sued her in Alabama -- a state she had never visited -- and demanded an unbelievable $25 million in damages. So not only did she lose $75, she was forced to defend herself from a $25 million lawsuit. Mr. Chairman, this is truly a mockery of justice.
Unfortunately, such abuses are not all that unusual. For this reason, I have introduced the Class Action Fairness Act. First, it requires notice to State Attorneys General about proposed class action settlements that would affect residents of their states. An attorney general can then object if the settlement seems unfair. Second, the legislation requires notice to class members in plain English of the terms of a proposed settlement, including the source of attorneys' fees.
Right now, people across the country can be dragged into lawsuits unaware of their rights and unarmed on the legal battlefield. What our bill does is give regular people back their rights and representation. This measure may not stop all abuses, but it moves us forward. It will help ensure that good people like Martha Preston don't get ripped off by unscrupulous attorneys. And it already has the support of Jim Doyle, who is the President of the National Association of Attorneys General. I request that a letter from Mr. Doyle in support of my proposal be placed in the Record.
Mr. Chairman, I look forward to working with you on this issue, and I hope you will seriously consider my proposal. Thank you.