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Tort reform groups and lawyers representing some of the nation’s largest corporations are working with legislators in several states to draft amendments to consumer protection laws that would seek to curb what they see as a tide of costly class actions. Tort reformers are looking to introduce proposed amendments as early as December in states with a history of large class certifications or high-dollar settlements and verdicts in consumer class actions, such as Massachusetts, Illinois and the District of Columbia. The new momentum represents continuing fallout from California’s Proposition 64, a landmark 2004 ballot initiative that tightened the reins on consumer cases. As part of their efforts, tort reformers are circulating model legislation to state lawmakers that would require consumers to have suffered economic losses or injuries from a company’s alleged misstatements in order to file a class action. The model legislation, which was encouraged last month in a report by the American Tort Reform Foundation, also would require consumers to have relied on a company’s alleged misrepresentations when they bought its product or services. [See Page 23 for an opinion piece on the topic.] “This has been an issue well beyond California,” said Cary Silverman, a lawyer in the Washington office of Kansas City, Mo.-based Shook, Hardy & Bacon who helped write the recent report published by the ATR Foundation, which is part of the American Tort Reform Association (ATRA). “Obviously, California had a situation where there were extreme examples of abuse spurred by plaintiffs’ lawyers who took it to the edge of what was possible,” Silverman said. “They may not be as broad as California’s was in terms of letting anybody sue whether they’re injured or not, but the requirements in a lot of the states are still very flexible as to what a person needs to show in order to sue.” Plaintiffs’ lawyers said that amending consumer protection statutes in ways similar to what happened in California would add significant hurdles in bringing consumer class actions. “It would have a chilling effect on lawsuits that seek to bring to light corporate misconduct,” said Steve Silverman, a partner at Miami-based Kluger, Peretz, Kaplan & Berlin and co-lead counsel in multidistrict litigation filed against E.I. du Pont de Nemours & Co. over the health dangers of Teflon cookware. In California, a handful of lawyers brought a multitude of lawsuits under the state’s unfair competition law seeking quick settlements for seemingly trivial violations against small businesses, such as automobile repair shops and restaurants. In 2004, voters in California approved Proposition 64, which required plaintiffs to prove they were injured by an alleged violation of the state’s consumer law and instituted traditional procedural burdens associated with class actions. “Prop. 64 was sort of the start of dealing with the most abusive of these types of cases,” Cary Silverman said. “From there it caused others to say, ‘Let’s look at what’s happening in other states, too.’ ” To determine where to introduce legislation next year, tort reformers are evaluating which states have legislatures in session next year and which have political momentum building, he said. About 12 states have a “ high potential for abuse” while another 15 have laws for which “legislation would be helpful.” He said that reformers are particularly interested in states where large consumer class actions have popped up, such as Massachusetts, Illinois, Virginia, Maryland, New Jersey, West Virginia and the District of Columbia. The ATRA report highlighted recent consumer suits across the country brought against Philip Morris USA and its parent company, Altria Group Inc., over the allegedly misleading marketing of its “light” cigarettes-particularly a $10.1 billion verdict that was eventually overturned by the Illinois Supreme Court in December 2005. The report also noted consumer suits in Florida, Ohio and Texas against DaimlerChrysler A.G. over allegedly defective seat belts. “Those are the kinds of things that cause people to sit up and take notice,” said Kenneth Parsigian, a partner at Boston-based Goodwin Procter who represented Philip Morris in a “light” cigarettes case in Massachusetts. “If you can start bringing cases for hundreds of thousands of people at one time and don’t have to prove that all of them are misled, this becomes an industry-threatening tool.” Reformers’ model law The American Legislative Exchange Council (ALEC), a Washington-based group of 2,400 conservative state lawmakers, drafted model legislation being pushed by reformers that would provide guidance to legislators looking to reform the private right of action embodied in their state consumer protection acts. Specifically, the legislation would restrict private lawsuits to a consumer who “reasonably relies upon an act or practice declared unlawful” and suffers a monetary or property loss as a result. The legislation also would require a 10-day notice to prospective defendants in a lawsuit and specify certain circumstances in which damages and attorney fees would be awarded. “We expect it to be introduced in a number of states,” said Kristin Armshaw, director of the Civil Justice Task Force at ALEC. She said legislation could be introduced as early as December. “We’ve been doing an educational campaign for over a year and been to a lot of legislators.” At the top of the list for potential legislative reforms is Massachusetts, where a bill backed by retailer groups this year would have amended the state’s consumer protection act by requiring consumers to have suffered injuries before filing suit. “I would anticipate that bill will be re-introduced,” said Jon Hurst, president of the Retailers Association of Massachusetts, which attempted to push through state Senate Bill No. 919. The bill ended the year pending before a committee. “We’ve become the new California,” Hurst said. “There have been lawsuits filed here that wouldn’t have been filed here had California not passed theirs, but we’re unfortunately the place to go now for some of these frivolous consumer actions.” Brian Leary, a partner in the Boston office of Newark, N.J.-based McCarter & English, said the bill, which was influenced by Proposition 64, sought to alleviate concerns that consumers were not benefiting from a host of settlements against retailers who were accused of not pricing all of the items in their stores. He said those suits were brought by a handful of attorneys but cost retailers thousands of dollars in settlements. “People were recovering large attorney fee awards without demonstrating actual injury to consumers and without delivering a single penny to consumers,” said Leary, who represented BJ’s Wholesale Club Inc. in one of the suits. “Consumers were getting absolutely nothing and lawyers have been the beneficiaries.” Sam Perkins, a partner at Brody Hardoon Perkins & Keston in Boston, who brought suit against several retailers including BJ’s, agreed that legislators are looking for ways to cut back on consumer litigation in the state, where the consumer protection act traditionally has been interpreted inconsistently by the courts. Massachusetts also allows for statutory damages in consumer suits. “There is no question there will be a ton more litigation in Massachusetts,” said Perkins. In addition to Massachusetts, bills focused on the issues of reliance or actual injuries and losses have been proposed or heard this year in Minnesota, Missouri, New Hampshire and Oklahoma, Parsigian said. The Missouri bill sought to restrict consumer suits that involved conduct already approved by a regulatory agency. All those bills either failed or died. But he said support for reform is gaining, pushed not only by ATRA but also by groups such as the U.S. Chamber of Commerce and the pharmaceutical industry. Fred Morgan, chairman of the Judiciary Committee of the Oklahoma House of Representatives and a partner at Oklahoma City-based Reynolds, Ridings, Vogt & Morgan, drafted a comprehensive lawsuit reform bill this year that included elements “based on the California law.” Although that bill didn’t pass, he said those changes “went right to the heart of lawsuit reform.” Plaintiffs’ lawyers said requiring reliance and actual injuries would add major hurdles in bringing consumer class actions. “The idea that a reliance requirement be injected into consumer protection statues is a horrible idea,” said Todd Heyman, a partner at Boston-based Shapiro Haber & Urmy who sued Philip Morris over “light” cigarettes in Massachusetts. He said a reliance requirement would in effect be a “free pass” for companies to make misrepresentations without being held accountable. Using statistics, surveys and expert witnesses to conclude whether each consumer in a class relied on misstatements would be expensive and restrict efforts to bring class actions, he said. ‘Fatal’ to class certification David Dunham, a partner at Austin, Texas-based Taylor Dunham & Burgess, said such a requirement is “fatal to class certification.” Dunham filed a class action of 5,000 dentists against the maker of allegedly defective software. “The problem is: When you have high-volume, low-dollar, common consumer problems, how can you get consumers relief?” said Dunham, whose certified class action was reversed by the Texas Supreme Court on the ground that he had not proven the dentists had relied on the claims of the software maker. “If you can’t bring it as a class action, they’re not going to get relief.” Plaintiffs’ lawyers also said that not all consumer cases can prove actual injuries, yet they present valid claims. John Banzhaf III, professor of public interest law at George Washington University Law School, said there are many examples where consumers should be able to sue before suffering a conventional injury or losing actual dollars from their pocketbooks. For example, in recent cases involving the theft of laptop computers, the individuals who filed consumer claims alleged they were owed compensation for the loss of their privacy but “nobody suffered economic loss,” he said.

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