Neither President Obama nor Governor Romney are talking about them (and they're not Wall Street financial wizards)
As the candidates make their final push towards the presidential election tomorrow, we have heard each side discuss the problem of the disparity of wealth between Americans generally and the "one-percenters." In addition to politicians, the media lament the widening gap between the haves and have-nots. Pundits point out that the key to a sustainable economic recovery is a more widely shared prosperity. Yet it would be difficult to find a more glaring example of "one-percenterism" then the disparity between what lawyers get and what class members get in class action settlements. In a case that could be the poster child for this abuse, a judge in the Ford Explorer class action settlement awarded $25 million in attorney's fees to lawyers who claimed that class members were receiving a $500 million value. However, what class members received were coupons for $500 towards the purchase of a new SUV. Out of the one million class members, only 148 coupons were redeemed for a total class recovery of $74,000. That's right, class members received $74,000 while their lawyers took home $25 million! Wealth disparity thy name is class action!
The campaigns inform us about the "cruel hoax" of tax reform because the lion's share of the benefits of the Bush tax cuts went to the wealthy. But in the class action lawsuit against Wells Fargo Bank (Smith v. Wells Fargo Bank) the class received $2,000 while their lawyer/lions received over $2 million in fees. Or, in the settlement against Intel Corporation class members won the right to claim for a rebate worth $50. But, only 159 claims out of 450,000 were filed. The entire class received a total of $8,000 while the "lions" received $1.5 million in attorney's fees. Aren't such settlements also a cruel hoax?
In the candidates' campaigns for the presidency, we have heard that the financial sector has turned a significant part of the American economy into a giant casino involving financial institutions making large bets with other people's money. Well, class action litigation has turned a significant part of the American legal system into a huge casino of lawsuits with class action lawyers using consumers' claims to obtain astonishing attorney's fees for themselves. In the historic Enron case, a shareholder complained about her lawyer's request for over $700 million in attorney's fees (including one of the attorney's receiving $3,000 an hour!). She noted that in the settlement she would be receiving $6.79 for each share which she originally purchased for $70. If the lawyers in the Enron case had been paid according to their time and hourly rates, their fee would have been $127 million. However, the lawyers were awarded $688 million, a $561 million bonus. Should class action lawyers really be getting over half a billion dollars bonus when their clients' recoveries so pale by comparison?
When it comes to wealth inequality, riches for the 1% (the lawyers) and peanuts for the 99% (the class members) is justice as usual in our nation's courts.
President Obama, Governor Romney, regardless of how you feel about public sector vs. private sector issues, the class action system is a problem of government policy that government policy can solve. Bringing class action lawyers' fees in line with class members' actual recoveries is a winning issue for your campaigns and for the 99% as well.