Wall Street Journal
June 26, 2000
High Flyers
If you are a long-time American Airlines' frequent flier and
you've been reading the papers, you might think you've fallen
into a bit of money. Approximately five million AAdvantage
members stand to benefit from American's decision to settle a
decade-long lawsuit that accused the company of having reduced
the value of its frequent flier miles by changing the rules of
the program.
So how much do all you poor, deceived American passengers stand
to gain here? One hint: Not nearly as much as the trial lawyers
who cooked up the lawsuit.
Under the terms of the proposed settlement, the estimated five
million affected AAdvantage members eligible will receive
certificates entitling them to dollar discounts of $25 to $75 (or
about 1,000 to 5,000 in free miles). Which brings us to the
perverse economics at play here. Even a settlement in the tens
of millions doesn't amount to much for the alleged "victims" once
you divvy it up among the millions who can claim it. But the $25
million negotiated in legal fees that will be split among just
three law firms -- Marks, Marks and Kaplan; Much, Shelist, Freed,
Denenberg, Ament & Rubenstein, P.C.; and Chimicles & Tikellis --
is more than enough incentive to explain how a lawsuit such as
this could be kept going for 12 years.
The lion's share to the lawyers also explains other lawsuits
against the airline industry in recent years. Delta settled a
frequent flier dispute last year, again with scant benefit to
consumers. United and US Air have successfully fought off a
number of such suits.
Clearly the system is broken when lawyers troll the high seas of
commerce like pirates searching out the next hapless ship to be
attacked and looted. For what is happening to American and the
other airlines is what is happening to any large U.S. company
fool enough to make money.
Though no government agency keeps figures on it, a 1999
Federalist Society report based on a survey of Fortune 500
companies reckoned that the number of such suits rose by
approximately 338% in federal courts -- and by more than 1,000%
in state courts -- in the decade between 1988 and 1998.
In recent years trial lawyers have made game of industries
ranging from paint manufacturers to the makers of Pokemon cards
(the charge there: collecting the cards is equivalent to
gambling).
But if the economic incentives are all too clear here, so are the
political ones. Trial lawyers represent one of the most powerful
constituencies in today's Washington. Unlike most industries,
however, they do not play both sides of the field. Theirs is an
almost exclusively Democratic enterprise. Though the total
amount of campaign money represented by the trial lawyer industry
is difficult to estimate simply because many do not list their
occupation when making contributions, the American Tort Reform
Foundation has tracked millions of dollars flowing from trial
lawyers to the Democratic party -- with plenty now going to the
Vice President.
There's a logic here as well.
In his own campaign Gov. George Bush advocates tougher sanctions
for meritless lawsuits, curbs on forum shopping and limits to the
fees private lawyers can charge when representing governments.
They are some of the same reforms he helped put through in his
own state, and the trial lawyers who fought him every step of the
way in Texas are now fighting hard against his campaign for the
presidency. They know that this is a prospect that just might
send the class-action cash cow to the slaughterhouse. Thus far
Mr. Gore has not claimed credit for inventing the class-action
lawsuit. But clearly the class-action crowd that brought us suits
like the one against American Airlines are betting they'll need a
President Gore in the White House lest they get their wings
clipped.
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Kadosh, Kadosh, Kadosh, YHVH, TZEVAOT
FROM THE DESK OF: <[EMAIL PROTECTED]>
*Mike Spitzer* <[EMAIL PROTECTED]>
~~~~~~~~ <[EMAIL PROTECTED]>
The Best Way To Destroy Enemies Is To Change Them To Friends
Shalom, A Salaam Aleikum, and to all, A Good Day.
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