Class Action Jurisdiction Act
In 1970, the Democratic-controlled Congress proposed, but failed to pass, legislation that would have broadened the ability of consumers to form a recognized legal class and launch class-action law suits in Federal courts against fraudulent or deceptive acts by manufacturers or merchants. Democratic legislators sponsored a broad class action bill, and the Nixon administration countered with more rigid restrictions. Although the Democrats accepted some of those restrictions, the bill nonetheless failed to progress in the Senate and a similar bill died in committee in the House. Over the next several years, Congress expanded consumers’ access to legal standing. Throughout, business interests opposed the expansion of class-action lawsuits, which were frequently targeted at corporations that ran afoul of consumer protection laws, securities laws, antitrust laws, or fair employment laws. The business argument is that class actions are unfair and undemocratic, that they benefit some (implicitly lawyers and wealthy consumers) and provide false comfort or even harm to others (implicitly racial minorities).
Cry Wolf Quotes
The class-action bill would open a happy hunting preserve to ambitious lawyers with a quick eye for the plump bird. They are not likely to be much concerned with fraud in the ghetto: No money there. But has a major manufacturer gotten a little too exuberant in his advertising? Has he promised a ‘benefit’ that may not be fully deliverable? Well, then, let us find 10 customers ready to say they’ve been damaged, and let us sue in the name of 10,000 more.
[The legislation to permit consumer class actions] “is only nominally an act ‘to extend protection against fraudulent or deceptive practices.’ It is more accurately an act to line the pockets of ingenious attorneys. If this bill passes, the lawyers will be in high cotton; their client consumers will be still hoeing the short row.
The truly attractive targets would be the overwhelming majority of businesses which are honest, ethical, and legitimate—large companies because of their assets and small merchants because of their vulnerabilities.
Class actions constitute a grave economic hazard to business—and the magnitude of the threat is likely to be in inverse relationship to the size of the business. Indeed, the effects on small businesses would be particularly catastrophic if not fatal.
