Trabulsi: Class action claims should be settled promptly, efficiently

By Richard Trabulsi

Editor's note: This opinion piece first appeared in the Austin American Statesman, Sept. 20, 2013. 

We in Texans for Lawsuit Reform have long suggested that the wisest way for major corporations to handle their mass litigation is to vigorously defend lawsuits in the courthouse when they believe that they did not cause harm to the plaintiffs or when they believe that the plaintiff lawyers are seeking damages in excess of the harm actually caused.

On the other hand, it is also our view that corporations should recognize when their acts or omissions have caused harm and should then move quickly to pay legitimate claims in a full, fair and efficient manner to those parties who were harmed.

We believe the State of Texas should enact legislation to encourage “voluntary compensation plans” in situations where an act or omission has caused harm to multiple parties. The law would establish a structure whereby defendants could create a compensation plan that harmed parties could voluntarily access in order to receive a quick and fair settlement on their claims without the risk, delay and expense of litigation.

This would provide the most efficient way to maximize the actual recovery by a claimant and speed the time in which the claimant receives recovery, while minimizing the wasteful costs of excessive legal fees, court expenses and delay. Both plaintiffs and defendants would benefit from such a plan. The State would also benefit by not having its courts tied up for years or decades in mass tort litigation.

Notably, BP tried to deal with the harm done from its Gulf of Mexico oil spill with a voluntary compensation plan. Immediately after the spill, BP started paying for cleanup costs and also set up a claims process to quickly pay persons or businesses harmed by the spill.

Of the more than $11 billion BP has paid in damage claims so far, more than $6 billion has been paid through this voluntary, no-lawsuit process. BP could have taken an alternative route, which would have been to litigate each and every claim in myriad courts over many years or, more likely, decades. That would have produced great hardship to many people and businesses who suffered demonstrable harm from the oil spill.

In addition to the voluntary claims process, BP also entered into a court-supervised settlement agreement to pay claims, but a feeding frenzy by plaintiffs’ lawyers is apparently hijacking that process. Reportedly, many plaintiff lawyers are filing an overwhelming number of claims on behalf of businesses that suffered no actual harm from the oil spill. It seems clear who is benefiting the most from the filing of these claims.

Lawyers are not only reaping fees for representing clients (many of whom do not show harm caused by the spill), but they also are filing claims for themselves, saying they suffered “economic loss” from the spill, even though many law firms along the Gulf Coast are doing a booming business in filing claims and receiving fees related to the spill itself. Lawyers representing clients under the BP settlement could stand to collect more than $1 billion in fees.

The courts should not force any defendant to pay claimants who were not harmed by an oil spill or any other event. The foundational principle of our tort system is that a defendant should make a plaintiff whole for harm actually suffered by the plaintiff and caused by the defendant. When that core principle is violated, the integrity of our legal system is compromised.

A company that is not denying that it caused harm and agrees to promptly and fairly compensate harmed parties should not be forced to pay “damages” to any claimant who is not, in fact, damaged.

Trabulsi is president of Texans for Lawsuit Reform