• The Perils of Defending a Consumer Class Action
  • August 10, 2009 | Author: Herbert D. Shellhouse
  • Law Firm: Elarbee, Thompson, Sapp & Wilson, LLP - Atlanta Office
  • Consumer class actions have proliferated over the past several years as the Plaintiffs Bar has discovered new and inventive ways to use class actions as a weapon against corporate America. Consumer class actions are particularly suited to two types of attacks: (1) where the corporate defendant has adopted a uniform practice in conducting its business that would apply to each member of the plaintiff class, and (2) where the defendant has systematically varied from its settled way of conducting business to the detriment of plaintiff class members.

    Though there are a number of statutorily-imposed prerequisites that must be met before a putative class action can be certified (i.e., allowed to proceed), historically the trial judge is granted wide latitude in determining to certify -- or not to certify -- a class action. Moreover, with an “abuse of discretion” standard of review on appeal, trial court certification orders are rarely overturned, and, therefore, many cases are effectively won or lost at the class certification stage.

    Plaintiffs’ lawyers have long known that choosing a friendly forum to file suit on a claim with pro-consumer or populist appeal puts tremendous pressure on company management to settle a putative class action before it reaches the stage where certification is decided. Costs of settlement, however, can border on the extortionate, even where individual class members receive no cash as part of the settlement, and a whole cottage industry of class action settlement administrators has sprung up to tap that lucrative market.

    As a prophylactic matter, there is little you can do to shield your company once a plaintiffs’ class action lawyer has you in his sights. There are things you can do, however, to minimize your chances of becoming a target. First and foremost, take seriously every individual complaint by one of your customers. You need someone in a responsible position with the company to analyze for merit each customer’s complaint and determine whether it appears to be an isolated incident or a potentially wide-spread practice that you need to stop. Companies that just brush off consumer complaints are setting themselves up for a punitive damages award.

    Second, you need to set up (and then publicize) the means by which a customer can lodge a complaint. This not only facilitates the uniform handling of consumer complaints, but it also gives you a ready answer to the charge that you don’t or won’t listen to your customers.

    Third, be open to reexamining (and changing, where appropriate) your challenged business practices. What you might have done over the years and consider to be perfectly acceptable might be viewed by a plaintiffs’ lawyer and jury to be unfair or over-reaching. It is not a defense that your practice might be employed by other companies in your industry: if the practice is found to be actionable, it just means that other companies in your industry are likely to get sued as well.

    Finally, feel free to consult your lawyer with regard to a consumer complaint or a challenged business practice. Consumer class action defense lawyers are trained to spot potential problems and to suggest measures that will lower your company’s profile to the plaintiffs’ bar. Your ultimate goal is to head off a class action lawsuit, and engaging your lawyer at the earliest sign of potential trouble may be the best way to achieve that goal.