Limit on Class Action Suits Will Eviscerate Consumer Rights

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This week’s unanimous U.S. Supreme Court ruling, that an HMO cannot be held accountable in federal court when its financial incentives to doctors for limiting treatment injure a patient, is only the latest blow in the ongoing assault on the rights and options of consumers to challenge repugnant, bedrock corporate practices.

Justice David H. Souter wrote for the court that the HMO industry would collapse without such financial incentives and “The federal judiciary would be acting contrary to the congressional policy … if it were to entertain (a claim) portending wholesale attacks on existing HMOs solely because of their structure.” In other words if HMOs or any other corporation occupies morally questionable ground for long enough the companies can have possession of it.

Such fallacious reasoning, gaining popularity elsewhere, is leading to the evisceration of the rights of individuals to challenge unethical, systemic corporate practices well beyond the HMO arena. This Thursday, for instance, the United States Senate Judiciary Committee will vote to limit the ability of injured consumers to band together to hold any corporation accountable through class action lawsuits. California Senator Feinstein holds a key swing vote on bi-partisan, corporate-backed legislation that would preclude most state court class action cases.

Under S 353, tobacco companies, gun manufacturers, polluters, HMOs and other large corporations could remove cases valued at $75,000 or more to federal court where pleading standards are higher, judges are not likely to extend state laws and the high vacancy rate has already created a staggering judicial backlog and delays. As of April 1, there were 76 judicial vacancies and 20 judicial emergencies, with only 34 judicial nominees confirmed in 1999. In opposing S 353, the U.S. Justice Department notes the bill “would transfer nearly every class action from State to Federal Court,” “expand the already overloaded Federal docket,” and “state residents would effectively be denied access to their own State courts.”

Complex and fact intensive class actions have been handled far more effectively in state courts because of the resources available there. The tactics of the corporate backers of the bill are to close an entire venue to injured consumers, thereby crippling the judicial capacity to hear systemic complaints against corporations and overwhelming the infrastructure available to try the complaints. Toward this end, S.353 also imposes waiting periods and other hurdles to bringing class actions that the Justice Department characterizes as “burdensome and expensive duties’calculated more to deter meritorious class actions than to yield fairer class settlements.”

This legislative assault on individuals’ rights is of particular import for HMO patients. The U.S. Supreme Court ruling this week closed down federal court as an avenue to invalidate systemic HMO cost-cutting practices. The only hope for injured patients seeking to challenge systemic HMO abuses are state courts, where several class action cases are pending against HMOs for unfair business practices. S.353 would pluck these cases out of state court and subject them to far more onerous federal hurdles and delays, dealing potentially deadly blows.

Class actions are a particularly vital resource for California HMO patients because HMOs have already usurped the rights of patients individually to go to any court against the company, forcing individual cases into binding arbitration, a private judiciary where deliberations are secret and abuses frequent. California judges have ruled, however, that when patients come together as a class, particularly one that includes members of the general public and not just HMO members, binding arbitration does not have to apply. If Senator Feinstein votes to restrict the right of individuals to band together in state class action lawsuits, HMO patients will be among the most significantly damaged segments of a general public that will have lost a great deal of its ability to collectively hold renegade corporations accountable.

CALL SENATOR FEINSTEIN by Thursday June 22, 2000 and urge to defeat this anti-consumer legislation (S. 353): Los Angeles (310) 914-7300, Fresno (209) 485-7430, San Francisco (415) 536-6868, San Diego (619) 231-9712

Consumer advocate Jamie Court is co-author of “Making a Killing: HMOs and the Threat to Your Health” (Common Courage Press, 1999). To respond, email [email protected].

Consumer Watchdog
Consumer Watchdog
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