Today President George Bush will fly to Scott Air Force Base, Illinois, then drive 15 miles northwest to address a crowd at the Gateway Center in Collinsville, which is right next door to Edwardsville, the epicenter of America’s tort crisis.
Madison County, Illinois, has earned all this attention by becoming the nation’s number-one “judicial hellhole,” as the American Tort Reform Association has coined the phrase. “It’s a place where the judicial system has broken down,” says Sherman “Tiger” Joyce, executive director of the American Tort Reform Association.
Actually, Dickie Scruggs, the Pascagoula, Mississippi attorney who started the original $275 billion Medicaid/tobacco lawsuit (and collected several billion in the process) put it better. Speaking before an asbestos conference sponsored by Prudential Securities in 2002, Scruggs — who at least has a streak of honesty — described what he called “magic jurisdictions” in this way:
Madison County is one of those little rotten boroughs that — with the help of the trial lawyers — has turned lawsuits into a cottage industry. At last count close to 20 percent of the asbestos lawsuits in the nation were being heard before a single Illinois state judge in Madison. Out-of-state corporations as diverse as Prudential, Ford, AIG, Philip Morris, General Motors, and dozens of others have had to troop down to Madison County before judges and juries obviously intent on stripping them of their worldly goods.
In one particularly ironic case, Judge Nicholas Byron decided in 2003, without benefit of jury, that Philip Morris and its parent company, the Altria Group, had tricked the class of Illinois smokers out of $10.1 billion worth of damages by selling them Marlboro Lights, which plaintiff attorneys said fooled smokers into thinking they were less dangerous than Marlboro regulars. Judge Byron demanded that Altria post a $12 billion bond just to appeal the case to the state supreme court. Altria said it would have to declare bankruptcy.
The decision set off fire alarms in the offices of 49 other state attorney generals, who immediately rushed down to Madison to intervene. What’s the problem? Most states have now built their entire budgets around the Master Tobacco Settlement of 1998, which promises the states $275 billion over the next twenty years. Since Philip Morris pays the lion’s share of this settlement, bankrupting the company in Madison County would set off a financial crisis in 49 other states. Judge Byron finally lowered the bond to $6 billion but the case is still under review by the Illinois Supreme Court.
Trial lawyers are able to concentrate their firepower in “magic jurisdictions” like Madison because of loopholes in the federal rules of procedure. The trick is to keep the case from being bounced up to federal court, where class actions are much more difficult to certify and where the judges are less susceptible to persuasion. (Madison County plaintiff attorneys raised $125,000 in campaign money for Judge Byron in the most recent election, in which he ran unopposed.)
The Constitution says that cases involving plaintiffs and defendants from “diverse” states must be tried in the federal courts. But plaintiff attorneys circumvent this by digging up one local plaintiff and defendant to satisfy the requirement. When trial lawyers brought a class action against General Motors over the wording in a warranty plan, they were sure to include Four Flags Motors, a Madison car dealership, as one of the defendants.
Federal procedures also require that any case involving more than $75,000 in damages be bumped up to federal court, but class action attorneys skirt this by making sure that each individual defendant claims no more than $74,999. In many instances, the plaintiffs specifically waive any damages that may exceed $75,000, in order to keep the case in state court.
The result is that a class action involving hundreds of thousands of alleged plaintiffs suing a host of major corporations for billions of dollars will be heard before one backwoods judge specifically chosen by the plaintiff attorneys.
In 2001, for example, a Madison County resident named Nicoloff stayed one night in a Wyndham Hotel in Chicago, then sued the hotel over a $2.87 “energy surcharge” the hotel added to the bill. A trivial matter? Not when hundreds of thousands of other guests are combined into a class action certified by a judge in Madison County. Wyndham — which has no hotels in Madison County — was forced to put its fate in the hands of a notoriously pro-plaintiff judge. The usual outcome in such cases is that plaintiffs are offered coupons or credit on their next purchase while the lawyers walk away with millions in contingency fees.
The Class Action Reform Act — which couldn’t quite make it past Tom Daschle last summer — would change all this by removing to federal court any case where there is true diversity among the major players and by outlawing “coupon settlements,” where plaintiffs get non-cash awards while the lawyers walk away with real money.
As Walter Olson has pointed out, such lawsuits constitute the ancient violation of “champerty” — lawyers suing for their own benefit rather than on behalf of clients. If the Bush Administration is going to rein in this fraud, Madison County is the place to start.
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