Executive Summary

American Tort Reform Association

1101 Connecticut Ave, NW ■ Suite 400 ■ Washington, DC 20036

(202) 682-1163 ■ Fax: (202) 682-1022 ■ www.atra.org

State Consumer Protection Laws Unhinged

It’s Time To Restore Sanity to the Litigation

The Problem

  • Plaintiffs’ lawyers have become the primary beneficiaries of state consumer protection laws. While settlements provide consumers with no more than a few dollars, the lawyers who invent such cases get millions in fees. Such litigation results in needlessly higher prices, less consumer choice, and a drain on the economy.
  • Lawyers bring massive class actions on behalf of individuals who experienced no financial loss or where reasonable consumers were not misled by the advertisement or practice at issue.
  • The laws’ vague prohibition of “unfair” or “deceptive” practices, allows plaintiffs’ lawyers to pursue ridiculous lawsuits, even for conduct that is already closely regulated by government agencies.
  • Consumer protection laws provide for relaxed evidentiary standards, high damages, and recovery of attorneys fees and costs because they were intended to provide a remedy for fraud in day-to-day consumer purchases. Lawyers misuse these statutes as an alternative to personal injury, wrongful death, and other actions where the law already provides an appropriate remedy.

Key Findings

  • Over the past two years, there has been a surge of consumer class action lawsuits, particularly in California courts, against food makers.
  • Plaintiffs’ lawyers are bringing “economic loss” claims in order to avoid the need to find an injured client or prove a product is defective. For example, “no injury” class actions against pharmaceutical and auto makers claim there is a problem with a product that lowered its value, even if it worked fine for those who sue.
  • Some courts have inappropriately allowed plaintiffs’ lawyers to use state consumer protection laws to create a way to bring private lawsuits under state laws for which the legislature provided only for government enforcement.
  • Some advocacy groups are using consumer protection laws to achieve political goals that they cannot achieve through the legitimate legislative process. These lawsuits often attempt to impose an advocacy group’s extreme agenda to limit consumer choices.

Solutions

  • Courts and legislatures each have a role to play in restoring sanity to consumer protection litigation.
  • Courts should require attorneys who bring such lawsuits to show that their clients were reasonably misled into making a purchase and suffered an actual injury as a result.  Courts should interpret the prohibition on “unfair” and “deceptive” practices in a commonsense manner and preclude use of consumer protection laws to bring lawsuits in areas for which they were not intended.
  • Where state laws are written so broadly as to require courts to permit lawsuits that are driven by creative plaintiffs’ lawyers rather than consumers, or where judges fail to rein in this unhinged consumer litigation, state legislators can and should act.