How class-action legislation will hurt small business

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The following commentary was broadcast on June 1st, 2004 on the Marketplace radio program on National Public Radio (NPR). You can listen to the broadcast here:
DAVID BROWN, anchor: The basic claim against Dow Corning offered a classic example of a tort case. The plaintiffs charged the company had a duty to protect customers, that Dow Corning breached that duty and that that breach caused memorable damages. The courts are full of tort cases. The cost of litigation, the cost of settling, the cost of jury awards, well, it’s had corporations begging for relief. Today, Senate leaders announced plans to take up tort reform as soon as next week. The bill would shift cases against interstate corporations from state to federal courts. Boosters of the bill argue businesses shouldn’t have to wage battles in 50 separate states, especially those where juries tend to be generous. Consumer activist and commentator Jamie Court claims the momentum behind tort reform speaks volumes about how business is done in Washington.

JAMIE COURT: If you want to muster the Kumbaya spirit to get something done on Capitol Hill, you don’t act in the name of God, country or society. You do it in the name of business. You see, the new gospel in Washington is making business freer. The freer business is, the more jobs, more spending, more stock wealth. That means politicians get re-elected. Kumbaya.

But much of what’s done in the name of business actually comes at the expense of small business. Take consolidation. Mergers among banks, health insurers and oil companies were supposed to create economies of scale and savings for all. Instead, we’ve got bigger corporations gouging small businesses without the leverage to negotiate. But surely limiting
litigation, the holy grail of big business, helps small business, too? Not when it comes to class-action lawsuits. Small businesses depend on them to fight big companies that try to rip them off or shut them down.

Take Louisiana crawfish farmers. They filed a class-action against one out-of-state pesticide manufacturer, whose chemicals wiped out tens of millions of pounds of crawfish and threatened their livelihood. And California small businesses successfully gained up on Microsoft for price gouging via a state class-action lawsuit.

The federal legislation, likely to pass in the name of business, would stop all state class-action lawsuits against big out-of-state corporations. Small businesses would have to refile in overcrowded federal courts, where criminal cases take priority, judges are overworked and short on time and a number of judicial vacancies guarantees big companies can stonewall justice. The whole point is to make it easier for big, interstate corporations to defend themselves. That’s not good for small businesses that sue them. But those small businesses don’t have the campaign cash to do much business in Washington. In an election year, that’s the only business that counts. In Los Angeles, this is Jamie Court for MARKETPLACE.

BROWN: Jamie Court’s book is called “Corporateering: How Corporate Power Steals Your Personal Freedom… And What You Can Do About It.”

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