Taking Away "Class Action" Rights

Aug 29, 2005

Shares of Altria, corporate owner of Philip Morris cigarettes, hit a record high of $71.08 per share on August 18.

Philip Morris faces penalties of 10.1 billion dollars damages to lung cancer victims who earlier won a class-action suit. With such an enormous penalty threatening, why would these stocks hit a record?

Because on that same day, the Illinois Supreme Court cancelled a class-action suit that had won $1.06 billion from State Farm Mutual Auto Insurance. Philip Morris just happens to be appealing its case to that same court. Investors were not slow to see the handwriting on the wall!

Class-action suits allow many workers or consumers with small claims to join their resources against large, powerful companies. Even though these class actions aren’t usually successful, the few big ones like Philip Morris’ or State Farm’s have put a sort of brake on some of the worst corporate practices. Of course the companies have complained long and loud–and in the reactionary political atmosphere of today, the courts have no problem helping them out.

It’s of a piece with the campaign by right-wing politicians to protect corporations from legal action–to make it harder for the ordinary person to sue. President Bush signed the "Class Action Fairness Act" (fair only to businessmen!) on February 18. The Act made it easier for corporations to get cases out of state courts, into the generally more corporate-friendly federal courts. That was Strike One.

Strike Two is now the Illinois Supreme Court’s decision, which may now be extended to many other states with similar consumer-protection and class-action laws.

This kind of decision will only encourage the corporations and their politicians to wind up to pitch Strike Three. That is, unless they begin to hear the roar of the angry crowd.