The plaintiffs’ mass-tort bar has a fraud problem. On March 4, a federal judge in New York ruled that a multibillion-dollar pollution judgment against Chevron (CVX) in Ecuador was so tainted by fabricated evidence and coercion it wasn’t worth the paper it was written on. Three days later, a state appellate court in California upheld a trial judge’s finding that what had been billed as a watershed liability verdict against Dole Food over pesticide use in Nicaragua was actually the product of a corrupt conspiracy by plaintiffs’ lawyers. Meanwhile in Texas, a prominent class action injury lawyer is in deep trouble because of allegations that he faked thousands of claims against BP (BP) related to the 2010 Gulf of Mexico oil spill.
When you combine these cases with the criminal convictions several years ago of plaintiffs-bar titans Mel Weiss, Bill Lerach, and Dickie Scruggs—all of whom served time for corrupting the civil justice system—you’ve got the makings of a corporate lobbyist’s fondest dream. More seriously, you’ve got symptoms of deep dysfunction within a powerful portion of the legal profession that claims to fight corporate abuse on behalf of “the little guy.”
A look at the ruling in the Dole case illustrates my point. On March 7, the California Court of Appeal in Los Angeles affirmed dismissal of one of a series of suits filed against Dole, alleging that the company poisoned banana workers in Nicaragua in the late 1970s, leaving workers sterile. In all, these suits resulted in billions of dollars in judgments against Dole.
The case at issue in the latest ruling, known as Tellez, went to trial in 2008 and produced a multimillion-dollar verdict for workers. That verdict was thrown out when Dole’s attorneys proved that many of the plaintiffs never worked for the company and weren’t, in fact, sterile. Witnesses and investigators were intimidated in Nicaragua, and plaintiffs were coached to concoct false stories. One supposed victim testified that he was instructed to memorize and repeat phony evidence “like a parrot.”
The California appellate court said the trial judge correctly sent the Tellez plaintiffs packing. The ruling was another win for the Los Angeles firm of Gibson, Dunn & Crutcher, which has engineered the negation of multiple pesticide verdicts against Dole, an accomplishment that prompted Chevron to hire the firm to fight back against a $19 billion judgment imposed by an Ecuadorian court in 2011.
Mass-tort and class action securities-fraud suits reached their apogee in the 1990s, fueled in part by the energy and ingenuity of an elite fraternity of plaintiffs’ firms and individual lawyers, some of whom became phenomenally wealthy as a result of their success. There’s nothing necessarily wrong, of course, with sharp plaintiffs’ attorneys doing well along the path to doing good, just as there’s nothing necessarily improper with an effective corporate-defense lawyer getting richly paid.
But as the plaintiffs’ bar achieved some of its most lucrative triumphs—in asbestos litigation and the tobacco cases—some of its leaders lost their bearings. Over the past decade, we’ve witnessed the fallout. One consequence has been a spreading skepticism toward mass litigation, exemplified by the U.S. Supreme Court’s rollback of procedures facilitating class actions.
Leaving to another day the important debate about the degree to which litigation can effectively deter or punish corporate misconduct, there’s a simpler point succinctly stated by U.S. District Judge Lewis Kaplan in the Chevron case: “Justice is not served by inflicting injustice.”