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Brian Anderson is a partner in the Washington, D.C., office of O'Melveny & Myers, LLP, and head of the product liability section of the firm's Class Action, Mass Torts, and Aggregated Litigation practice group. He is also an adjunct professor of law at Georgetown University Law Center.Mel Schwing is a counsel in the Washington, D.C., office of O'Melveny & Myers, LLP, who specializes in the defense of corporations in domestic and international class actions and other complex litigation. He also conducts internal corporate investigations and helps presidential appointees through the Senate confirmation process.
The Washington Legal Foundation is a 30-year-old Washington nonprofit public interest group and think tank that advocates free enterprise principles, responsible government, property rights, a strong national security and defense and a balanced civil and criminal justice system.
Sick of legal actions resulting in giant settlements that brought little benefit to those supposedly wronged but that saw lawyers reap huge fees, Congress cracked down on class action lawsuits in 2005. The Class Action Fairness Act (CAFA) moved most class action suits out of state courts, which often had far more lax rules governing class actions, and put them in the jurisdiction of much stricter federal courts. The act has generally been heralded as a huge success for reducing questionable claims and nuisance suits that were often cheaper for a company to settle than allow to go to trial.
But in an analysis for the Washington Legal Foundation, attorneys Brian Anderson and Mel Schwing argue that CAFA occasionally backfires. CAFA was designed to take special aim at "coupon" settlements -- agreements in which only tiny individual benefits go to members of the class, often in the form of product discounts. Federal judges are expected to give such settlements careful scrutiny and weed out ones that appear to be without merit.
Anderson and Schwing dissect one particular case, an air cleaner by Sharper Image Corp. that supposedly did little to clean air, to illustrate how CAFA can also scuttle low-cost settlements and potentially cost the target of a class action millions of dollars more. Among other things, the judge in that case determined that if the case had enough merit to warrant settling, the class members were receiving too small an award. "If the proposed class claims seem factually and legally plausible, a proposed settlement that gives class members little monetary value should be viewed skeptically," is how Anderson and Schwing summarize the judge's ruling. Although CAFA has succeeded in many cases, "it also makes it more difficult for defendants to settle federal court class actions brought on behalf of persons who suffered no real personal or economic injury by providing low-cost coupon benefits to class members that reflect the negligible value of their claims," the authors conclude.
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