Commentary: Class Actions: Fine Tune The Law, Don't Trash It

After a decade of controversy, science has rendered its verdict on the dangers of breast implants: On June 21, the Institute of Medicine of the National Academy of Sciences declared that silicone implants don't cause serious disease. That means the $7 billion that Dow Chemical Corp., 3M, and others shelled out in settlement ransom was apparently for nothing.

Would-be tort reformers have embraced the IOM report as an indictment of plaintiffs' lawyers everywhere. Just as the implant cases were bogus, they argue, so are most of the other suits brought by contingency-fee attorneys. Now, they're renewing calls for major changes in the American legal system, such as the adoption of rules forcing losers of lawsuits to pay winners' expenses.

NEEDED TOOL. No question, the breast-implant debacle raises serious questions about the U.S. justice system. And nobody argues that lawyers should be able to use questionable science to launch a class action on behalf of thousands of plaintiffs just to threaten companies with the possibility of multibillion-dollar verdicts. But the way to fix this problem is by fine-tuning the rules for mass litigation, not by reinventing tort law.

Harsh reforms like "loser pays" would render impossible much of the good work plaintiffs' attorneys do. Remember: Tort suits have led manufacturers to recall dangerous or defective birth-control devices, car parts, and children's pajamas. They also play a role in spurring companies to make better products. And by going after companies that mislead investors, plaintiffs' lawyers act as an important adjunct to the understaffed Securities & Exchange Commission.

A 1998 seminar sponsored by the Defense Research Institute on how to create a "litigation-resistant product" was a graphic illustration of the power of the plaintiffs' bar. Speaker James J. Seifert, an in-house counsel at lawn mower manufacturer Toro Co., warned listeners that if rivals instituted a safety improvement, they needed to convince a jury that they had followed suit within one year. "It pays to be a safety leader," Seifert said. Other speakers discussed how manufacturers can do a "human factors" analysis of the unforeseeable ways people may misuse a new product and the latest research on what language to use in warning labels.

If only a fraction of the lawyers at the New Orleans seminar get their companies to heed this advice, the long-term savings in injuries, and perhaps even lives, will be enormous. While no definitive studies have been done, it's easy to see that a marginal increase in the safety of all consumer products could dwarf the money wasted on implant cases.

As for securities-fraud suits, the huge settlements extracted from Waste Management Inc., Prudential Insurance Co., and others play a key role in deterring companies from questionable practices. With the number of people investing directly in stocks increasing--and the staff of the Securities & Exchange Commission decreasing--the plaintiffs' bar "has a very important place in the scheme of things," says University of Texas Law School securities expert Henry Hu. "One of the reasons the U.S. market is so much cleaner than anybody else's is because of these private actions."

Certainly, tort lawyers are hardly the selfless advocates of helpless victims they often pretend to be. Many are motivated mostly by money. But their pursuit of economic self-interest may not be an entirely bad thing--any more than it is for execs.

NEW RULINGS. The breast-implant mess happened for two reasons: It's too easy to take advantage of junk science and too easy to certify huge class actions. Slowly but surely, these issues are being addressed. In March, the Supreme Court gave judges new power to block questionable scientific testimony in Kumho Tire Co. vs. Carmichael. And in June, it capped a series of federal decisions clamping down on class-action abuses with Ortiz vs. Fibreboard Corp., which makes it harder to win approval for class-action settlements. These rulings might have halted the breast-implant suits in the first place. Let's give them a chance to work before we perform radical surgery on the tort system.

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