Lindsey Graham says 'litigation abuse is real,' class action reform should be considered

By John O'Brien | Apr 3, 2019

Sen. Lindsey Graham at Tuesday's hearing  

WASHINGTON (Legal Newsline) – Lindsey Graham, the South Carolina Republican who chairs the Senate Judiciary Committee and receives backing from trial lawyers, said in a Tuesday hearing that lawsuit abuse “is real” and reform in the class action system should be explored.

His comments came during an event discussing clauses that require customers and employees to arbitrate their disputes with companies rather than sue them. The issue has drawn extra attention since the former Democratic regime at the Consumer Financial Protection Board unsuccessfully attempted to push through a rule banning clauses that prevent class actions.

Tuesday’s hearing dealt with all pre-dispute arbitration clauses, not just those banning class actions.

“I understand litigation abuse is real. Class action reform is something we probably should look at; forum-shopping, I get all that,” said Graham, a former trial lawyer.

“It seems to me the remedy is not what we’re talking about. We’re going from one extreme to the other. I get it from the (U.S. Chamber of Commerce’s) point of view there are certain jurisdictions in the country… it’s cooked, set up against you. I get that.

“Class actions can be abused, I get that.

“This bothers me that if you sign up for a product - no matter what – (or) a service, you know you’re giving away all your rights without really knowing what’s going on…”

The comments possibly surprised plaintiffs firms that usually back Democrats but have supported Graham. In 2017, prominent Houston lawyer Mark Lanier hosted a fundraiser for Graham at a time when the futures of several tort reform bills were in doubt, reported Forbes.

From 1993-2018, Graham has received $4.3 million from lawyers and law firms, though obviously that amount isn’t strictly from plaintiffs firms. The corporate defense firm Nelson Mullins is his largest contributor at nearly $300,000.

His third-largest contributor has been the South Carolina personal injury firm Harrison White. Lawyers there have given him $137,000. Motley Rice, one of the most influential plaintiffs firms in the country and also based in South Carolina, has given $106,000.

Also among his top donors is the Thornton Law Firm, a Boston plaintiffs firm that generated headlines in a controversial $300 million settlement with State Street. That firm has given $66,500.

Graham voted in 2005 for the Class Action Fairness Act, which gives federal courts jurisdiction over class actions in which the amount in controversy exceeds $5 million. 

But in late 2017, the Wall Street Journal wrote that Graham “appears to work for the trial bar on political retainer” after preserving a pro-trial lawyer rule that allows them to claim deductions on the costs of pursuing lawsuits on contingency fees.

Should Graham want to explore class action reform, a recent example is the Fairness in Class Action Litigation Act, which passed the House of Representatives in 2017 but not the Senate.

FICALA requires that classes consist of members with the same type and scope of injury.

Class action attorneys would not be able to use relatives as lead plaintiffs, and any agreement in which a third party has agreed to finance the lawsuit in return for a portion of its proceeds would have to be disclosed.

That provision applies to lawyers in the Ninth Circuit, which contains California federal courts.

It was part of the package of tort reform bills referenced in the Forbes article. There, too, was the Lawsuit Abuse Reduction Act, which would make sanctions mandatory against attorneys who file frivolous lawsuits. 

Currently, judges have discretion on whether to impose sanctions.

Plaintiffs also have a 21-day safe harbor in which they can withdraw their claims after a motion for sanctions has been filed.

Tuesday’s hearing can be viewed here. Among the witnesses were Myriam Gilles, a law professor at Benjamin N. Cardozo School of Law supporting pre-dispute arbitration reform, and Ballard Spahr lawyer Alan Kaplinsky, who advocates for the use of arbitration clauses.

Victor Schwartz, a partner at Shook, Hardy & Bacon, testified on behalf of the U.S. Chamber Institute for Legal Reform. The ILR owns Legal Newsline.

During the controversy over the ultimately failed CFPB rule, Kaplinsky cited a study that showed the average recovery for a consumer who prevails in arbitration is more than $5,000, while the average class action settlement provides only $32 per class member. Attorneys pocket an average of $424,000, the study showed.

From Legal Newsline: Reach editor John O’Brien at john.obrien@therecordinc.com.

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Benjamin N. Cardozo School of Law - Yeshiva University Shook, Hardy, & Bacon Llp U.S. Chamber Institute for Legal Reform (ILR) Wall Street Journal

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