In addition, these “opt-in” suits, based on a single (or a few) “representative” plaintiff, are rarely used to resolve serious problems. If the problem is serious enough, a small group will sue.

Actually, the class action allows two different harms:

1. When there is little or no harm, it allows lawyers to still file suit for an easy payday
2. When there is real harm, it allows defendants to pay what amounts to a token amount to settle suits with the entire class and thus avoid real liability litigation on individual cases. (Who would bother to opt out when they think the case doesn’t apply to them. Later, should a problem arise, they already have their settlement, though it proves quite low for actual harm done.)

Class action is one of the engines driving the current explosion of litigation.

One suggestion for positive change is to make CAFA retroactive. Another is to refuse class certification when the plaintiffs’ attorneys are not working in the best interest of consumers.

I agree that the attorneys’ fees look inappropriate and perhaps they are. But, this is not a meritless case. Sears did rip off its’ customers and they should be willing to pay for their wrongdoing.

This should be the job of the State Attorneys’ General to enforce consumer rights. But these offices are overworked and understaffed so the burden of looking out for consumers has fallen to private, plaintiff lawyers. Should they work for free? Should they not be compensated for the risk they take? These are not inexpensive cases to litigate.

What’s forgotten in this article is that without lawsuits like this, Sears and other companies could rip off consumers without paying anything.

I unexpectedly became a member of a class where the settlement was an in-kind service. It turns out that a water heater I bought used defective “dip tubes”, which are plastic tubes about five feet long that allow new cold water to be introduced at the bottom of the tank as hot water is delivered while still leaving the inlet at the top of the tank near the outlet. A good idea, probably, because it’s cheaper to do than it would be to force myriad plumbers to make longer lines. However, the bad dip tubes had a tendency to disintegrate and fill your home plumbing with plastic flecks about 1mm or so.

The settlement company sent a plumber to the house to replace the dip tube and flush out all the plastic that had already contaminated the house’s hot water lines. However, individual consumers differed greatly in the amount of damages they would suffer. Some dip tubes didn’t disintegrate at all, and some people only lost a few showerheads and others may have had to repair dishwashers and clothes washers.

There are detaily problems in how we decide how much the lawyer gets in a case like this. In this case I think the company set up to get the settlement repairs was a separate company — a part of one of those home warrantee companies that does plumbing repairs by subcontracting and that made a winning bid to the water heater company. I’m not unhappy that the company [probably] paid a lot less than I would have paid for the same repair. Economic efficiency was gained by having the company organize the mitigation. Therefore, in this case the obvious reform of paying the lawyers only a percentage of the actual company outlays would have worked well.

Consider, however, the common case where the service the coupon buys has a much lower marginal cost to provide than the retail value of that service, and is hard for an outsider to measure. This obvious reform fails in this common case [unless we believe that company marginal cost can be rationally figured, which I’m not 100% opposed to assuming]. The example that imemdiately comes to mind is the NetFlix settlement, which would cost the company essentially nothing.

If it were up to me, I’d virtually eliminate these coupon settlements, except where they make sense: Like giving free movie rentals to someone ripped off with bogus late fees. But otherwise, I’m a show-me-the-money guy.