Finance

US: Where lawsuits are as common as apple pie

Werner Baumann was seen heaving a sigh of relief. The chief executive of Leverkusen-based chemicals behemoth Bayer had every reason to do so following a multibillion-dollar legal settlement with plaintiffs in the US over the company’s controversial Roundup weed killer which it inherited from Monsanto.

Bayer will have to pay more than $10 billion (€8.9 billion) in damages to the roughly 100,000 plaintiffs who see a link between Roundup ingredient glyphosate and them developing cancer. Former fears that litigation over this could cost Bayer twice as much are now off the table.

As a matter of fact, Bayer could indeed have ended up with a worse deal. There’s hardly a country with a higher frequency of lawsuits than the US. About 40 million suits are filed there every year, according to the Institute for Legal Reform, which is affiliated to the US Chamber of Commerce.

Number of lawsuits exploding

There’s been a surge in lawsuits against companies costing US firms some $264 billion annually, with small and medium-sized companies having to shoulder $100 billion.

The internet is used by many as a platform to target corporate America. “The media bombards us with news of corporate wrongdoing that results in little more than a slap on the wrist,” a portal called ClassAction.com says on its website.

It’s one of the places in the internet where consumers can get information about pending class action suits. The portal mentioned above says its lawyers have already helped some 200,000 clients, adding that they received $90 million in lawsuits against BMW and $40 million in suits against TracFone. “You can fight back against corporate irresponsibility,” the website says.

The website behind law firm Morgan & Morgan says it’s secured more than $5 billion in damages for its clients. It was also involved in the lawsuit against Bayer. “We’re on the front line of holding Monsanto accountable,” it states.

Weed killer Roundup

Can the use of the weed killer Roundup cause cancer? Many plaintiffs in the US are absolutely certain it can

Companies in a bind

Top lawyer Kenneth Feinberg agrees that class action suits have assumed enormous dimensions in the US. He’s bound to be there when big companies such as Bayer, Volkswagen or Boeing are dragged before court.

“Lawsuits in the US are as common as apple pie,” Feinberg told DW. He believes that Bayer did the right thing in aiming for a multibillion-dollar settlement. Had it not done so, the number of plaintiffs would have risen further in the months ahead, he argues, which in turn would have led to higher costs and more reputational damage.

“I believe that the certainty of getting this settled, even though it’s expensive, is much more worth than the cost,” the 74-year-old said.

The United States’ liberal legal system has proven a breeding ground for class action suits ever since the 1970s. Before that, dubious corporate dealings could easily go unpunished and consumers were left out in the cold. But the opportunity to take part in class action suits changed the whole industry.

A perfect cash cow

What was originally meant to help the little people stand up against big companies has long turned into a lucrative business for law firms. The latter keep actively looking for new clients, and often lawyers approach potential clients rather than waiting for clients to come to them. That’s done via aggressive marketing in the media and elsewhere. At the end of the day, the litigious value goes up and so do lawyers’ fees.

“If you turn on your television, you would see advertising about Roundup and General Motor’s ignition switch failure and about the BP oil spill,” Feinberg said. He’s often involved negotiating the sums that plaintiffs receive after the verdict.

Top US lawyer Kenneth Feinberg

Top US lawyer Kenneth Feinberg says there’s a reason why there’s been a surge of class action suits across the United States

He’s represented plaintiffs in the lawsuit against BP after the oil spill in the Gulf of Mexico and has also represented the interests of people who considered themselves victims of VW’s emissions-cheating scandal. Over the past decades, he’s managed to secure more than $50 billion from international clients facing litigation from his clients.

But far from all of the money ends up with the plaintiffs. Feinberg reckons that between 30% and 40% of the damages is pocketed by the lawyers involved.

“The contingency fees encourage class action lawsuits as well,” he told DW. In return, law firms often prefinance any legal costs and if a court battle cannot be won, they’re often left with them. Plaintiffs thus face only minimum risks, but don’t get the full amount in negotiated damages either.

In the Bayer/Monsanto-related glyphosate lawsuit, plaintiffs are entitled to no more than $175,000 each. But the big law firms involved are to get $3 billion.

Overstepping the mark

The hunt for the big money sometimes triggers unacceptable irregularities. Take one lawyer involved in the glyphosate trial. Timothy Litzenburg was reported to have threatened a supplier to drag it deeply into the current litigation. He said statements that he could make would be “a public relations nightmare” for the firm, resulting in its shares plummeting by 40%.

Litzenburg said that in order to prevent this from happening, the firm should pay him hush money to the tune of $200 million. The company in question had recorded the lawyer’s threats and sent the recording to the prosecutor’s office.

Litzenburg pleaded guilty at the end of June. The 38-year-old’s greed may now get him behind bars.



Tags

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button
Close
Close