State lawmakers voted last week to give businesses a chance to escape from class-action lawsuits before the legal bills -- and potential verdict against them -- gets too large.
On a voice vote, with Republicans in favor, the House approved SB 1346 which permits a party to a lawsuit to file an appeal the moment a trial judge decides whether a lawsuit can be maintained as a class action. Now, whichever side loses must wait until the end of the case to argue that the trial judge was wrong.
Rep. Justin Pierce, R-Mesa, said that difference is significant. More to the point, he said it could decide whether a company decides to fight the case or simply settles to avoid future costs.
Most lawsuits are brought by individuals or companies who say they have been damaged by the acts of others.
In a class-action lawsuit, one or more people seek to represent the interests of everyone else who has been similarly affected by a defendant's conduct, especially when everyone cannot be individually identified at the time the suit is filed. That might, for example, include everyone who bought a particular product.
The advantage is not just in avoiding multiple trials. It also means that individuals whose own claims may be too small to be worth fighting in court -- perhaps just $50 -- can unite their efforts.
Pierce said, though, there is a flip side to the issue.
"Class-action litigation is exorbitant in its expense,'' he said.
"Where the expense comes in is in discovery,'' Pierce explained, the pretrial activities where each side does its own investigation as well as takes sworn depositions and seeks documents from those on the other side of the case. And the costs of that, he said can reach into the millions.
"That is usually what drives a settlement in a case, not based on the merits, but because the defendant ... is faced with the potential of millions and millions of (legal) fees,'' Pierce said. "And so they may be driven to settle the case unfairly.''
Allowing someone -- presumably a defendant -- to immediately appeal a judge's certification of a class-action claim gives that party a chance to escape those costs if the appellate court overturns the order. Otherwise, the case goes along as a class-action matter, with the issue of whether the trial judge was wrong decided only at the end.
That's exactly what happened two years ago when the U.S. Supreme Court, on a 5-4 vote, threw out what had been certified by a lower court judge as a class-action lawsuit against retail giant Wal-Mart. The lawsuit had sought billions of dollars on behalf of about 1.5 million female employees, charging they were the victims of system-wide discriminatory practices and pay.
Justice Antonin Scalia said federal rules require class-action lawsuits to have "questions of law or fact common to the class.'' In this case, he said, the allegations failed to provide "convincing proof of a companywide discriminatory pay and promotion policy,'' meaning the trial judge should never have granted class-action status in the first place.
Rep. Debbie McCune Davis, D-Phoenix, said she fears the legislation will undermine the ability to pursue class-action lawsuits. She said there are legitimate reasons for combining all affected plaintiffs under a single legal umbrella.
As an example she cited the fertilizer explosion earlier this month in West, Tex.
"If you look at this bill in the context of the damage done to a single community by a single entity, you really can see the importance of being able to proceed forward to hold the party responsible through a class action,'' she said. McCune Davis said 180 people were hospitalized and a "substantial'' part of housing was wiped out.
"People are going to want to know what caused the explosion, who was responsible, was their negligence,'' she said. "And if, in fact, there is, it's really better for the community to proceed as a class action to seek that remedy than to have individuals pursue it individually.''
But Rep. Eddie Farnsworth, R-Gilbert, said nothing in the legislation alters the standards a trial judge will use to determine whether a claim merits class-action status. The only difference, he said, is it permits whoever does not agree with the judge's ruling to seek immediate appeal rather than have to wait until the trial is over -- or to settle beforehand.
The merits of the change aside, Rep. Martin Quezada, D-Phoenix, said lawmakers may be treading where they are not allowed. He said the rules of when a judge's decision can be appealed are set by the Arizona Supreme Court and beyond the authority of the Legislature.
Farnsworth disagreed, saying lawmakers have "some purview'' over how cases are handled.
A final roll-call vote is needed to send the measure to the Senate which has never considered the language now in the bill.