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Curbing class action lawsuits

Published (2/11/2011)
By Lee Ann Schutz
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Our litigious culture combined with zealous attorneys has put businesses at a disadvantage. That is the premise behind HF211, sponsored by Rep. Doug Wardlow (R-Eagan).

He told the House Civil Law Committee Feb. 7 that his bill is not only about tort reform and reining in class action lawsuits, but “it’s about jobs and economic development.”

Many times these cases are without merit, but he said that businesses are left in limbo when a class action suit is filed waiting to know if the courts are even going to take up the case.

“Businesses choose to settle rather than face unknown risks of a trial and perhaps crippling financial loses,” Wardlow said.

The bill, held over for further consideration, would require a consumer to show real out-of-pocket damages, and that actions were deceptive, false or misleading in violation of certain consumer fraud, deceptive trade practice or false advertising laws.

It would also make appealable a court order regarding the future of a class action lawsuit. While an appeal is pending, all previous court actions on the suit would be halted.

Ten states have enacted this type of legislation. “Minnesota should not be left behind and become a haven for lawsuits. This protects Minnesota’s business climate,” Wardlow said.

While the bill is supported by many state business groups, there may be unintended consequences for the consumer, said Prentiss Cox, a professor at the University of Minnesota Law School.

“If you do this, class actions will be severely curtailed and it will be almost impossible to bring a class action under the statutory fraud laws,” he said. As an example, he pointed to the recent mortgage fraud. Had there been an out-of-pocket damage rule, cases against these companies wouldn’t have gone forward because the kind of harm would have been difficult to quantify.

Its companion, SF149, sponsored by Sen. Julianne Ortman (R-Chanhassen), awaits action by the Senate Judiciary and Public Safety Committee.

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