By Correspondent
NBC News
updated 12/12/2003 2:08:43 PM ET 2003-12-12T19:08:43

As part of the NBC News examinination of the civil justice system and growing concerns about how much Americans are suing each other, we looked at class action lawsuits. Is a method for protecting consumers being abused by some lawyers eager to cash in?

Ashley Nordan of Charlotte, North Carolina isn't very grateful for a lawsuit filed on behalf of her and millions of other customers of Blockbuster Video. The class action lawsuit accused the company of charging excessive late fees. But when it was settled, Blockbuster was not required to change those fees.

And while Ms. Nordan was offered dollar-off coupons and free movie rentals, Blockbuster agreed to pay the lawyers filing the lawsuit $9.25 million.

"Don't the lawyers always get the most in all the lawsuits?" she asks. "And the people that are supposed to be entitled to this money, they usually don't see that much of it."

 The lawyers who sued Blockbuster say their share was actually small, amounting to only about two percent of what the settlement was worth in potential coupon benefits. But the case has become Exhibit A in a nationwide debate over class action lawsuits.

Some consumer groups are especially critical of lawsuits that compensate class members only in coupons, arguing that as few as one percent of affected customers ever bother to claim or use them.

The groups cite such cases as a lawsuit against computer drive maker Iomega. Consumers who bought defective computer drives got coupons for rebates on future purchases, but the lawyers filing the case got nearly $5 million.

In another case often listed as a bad bargain, Bank of Boston customers actually lost money when they won a class action lawsuit, because the lawyers' fees were so high.
John Beisner, a Washington, DC lawyer who represents companies sued in class actions, says some lawyers are just looking for big payoffs.

"It's a business to go find these claims to assert, often without regard to whether there's any real consumer interest in bringing the claim in the first place," Beisner says.

The Federal Trade Commission has joined other critics of class actions by challenging some lawsuits in court.

"Class action lawsuits can be effective for remedying consumer injury and deterring corporate wrong doing," the agency says.

"The modern class action, however, often creates incentives for plaintiffs' attorneys and corporate defendants to collude to benefit themselves through a settlement that provides weak relief for consumers and substantial attorneys' fees," the FTC says.

And Congress is considering restricting the scope of such lawsuits and where they can be filed in legislation that has stalled in the Senate but that Congressional leaders predict will pass in some form next year.

But consumer advocates insist that class actions lawsuits are often the only effective remedies for corporate misbehavior.

"When we can get together with hundreds, perhaps thousands, of other people who are similarly harmed, who have been abused, because there is too much corporate power, that's where the class action comes in," says Sally Greenberg of Consumers Union.

Examples cited by the group include a settlement for more than 500 people with a restaurant chain, Jack-in-the-Box, that sold hamburgers tainted with bacteria, and a settlement with a chemical company, Monsanto, that refused to clean up an Alabama town polluted with PCB's and mustard gas.

Still, class actions are likely to remain controversial, as long as some settlements give coupons to the consumers and cash to the lawyers.

Pete Williams covers the justice system for NBC News.

© 2013 NBCNews.com  Reprints

Discuss:

Discussion comments

,

Most active discussions

  1. votes comments
  2. votes comments
  3. votes comments
  4. votes comments