Saturday, February 17, 2007
Article in The Economist -- If you can't beat them, join them: An infamous legal strategy crosses the Atlantic. Here's an excerpt:
THE idea that American-style class actions could soon be coming to Europe makes most European businessmen shudder. They fear the sort of astronomic damages granted to aggrieved consumers and shareholders on the other side of the Atlantic: $145 billion awarded by a Florida jury against five tobacco companies on behalf of all American smokers in 2000 (later overturned); a $1.1 billion settlement against Ahold, a Dutch retailer, in a shareholders' class action in 2005; a $65m settlement last year against IBM in an overtime claim by technical and support staff.
Last week a federal appeals court gave the go-ahead to what could become the biggest class action in history: a gender-discrimination claim against Wal-Mart on behalf of some 2m past and present female employees in America. The claim still has several legal hurdles to cross, but it could end up costing the world's biggest retailer hundreds of millions, if not billions, of dollars, especially if it is extended to include women working for the firm abroad.
But American companies are not the only ones involved. Increasingly, the notoriously long arm of American law is stretching into Europe and beyond. A class action brought by a group of American shareholders of Parmalat, a failed Italian dairy giant, is pending in New York. Earlier this month, a group of investors in BP launched a class action in Alaska against the British petroleum giant over the £70m severance package offered to John Browne, its departing boss. British Airways is also facing a class-action lawsuit in America, and Lufthansa settled one last year.
When class actions were first introduced in America in the mid-1960s, they were seen as means for powerless individuals, whose claims were not worth pursuing separately, to win redress against mighty corporate evil-doers. Sadly, juries took on the task rather too eagerly, awarding not just economic damages, but swingeing punitive ones too. Starting with securities claims, the actions soon spread to mass consumer suits involving tobacco companies, pharmaceutical firms, medical malpractice, employment issues and so on. Nowadays, the winners are not so much the victims of corporate wrongdoing as the lawyers.