Sherman Joyce
American Tort Reform Association
1101 Connecticut Ave NW
Suite 400
Washington DC 20036
202-682-1163
202-682-1022
[email protected]414214 (Admitted to DC Bar)
I am writing on behalf of the American Tort Reform Association (ATRA) to express our opposition to the suggested changes to Rule 23 (g) of the Arizona Rules of Civil Procedure. ATRA, founded in 1986, is a broad-based bipartisan coalition of more than 300 businesses, corporations, municipalities, associations, and professional firms that have pooled their resources to promote reform of the civil justice system with the goal of ensuring fairness, balance, and predictability in civil litigation.
ATRA strongly urges the Commission not to adopt the proposed changes to Rule 23 (g) of the Arizona Rules of Civil Procedure. Class actions are intended to compensate parties that were injured by a common defendant in a specific manner, and they were not intended to provide funding to third parties. The proposed rule change would allow class actions to expand substantially beyond the bounds of what they were intended to accomplish.
The petition argues that directing residual funds from class action lawsuits is a way to make up for lost funding, but litigation should not be used for fundraising. This is an inappropriate use of the legal system and takes unfair advantage of defendants. The Arizona Bar Foundation should be required to go through the legislative process just as any other group would have to do in order to get additional government funding. If this is a vital issue to the Arizona Bar, then perhaps members can make larger voluntary contributions, and if additional funding is still needed, the Foundation should petition the legislature and go through the political process. If the Commission chooses to adopt the proposed change, the judiciary would be making a policy judgment that is better handled by the legislature.
Proposed Rule 23(g) would make Arizona a regional and national outlier. The rule’s mandatory 50% disbursement provision places it among just a handful of states that have similar provisions (North Carolina, South Dakota, Illinois, and Pennsylvania mandate at least 50% disbursement). No neighboring state has any provision approaching a mandatory 50% disbursement. In fact, most states leave the disbursement of the residual funds to agreement by the parties at issue with discretion of the trial court to approve the final, agreed-upon disbursement. If no agreement can be reached, the court then has discretion to disburse the funds in a manner consistent with the underlying causes of action and harms. There are instances of states adding access to justice programs as an additional approved recipient of the funds, but states do not give these programs priority over alleviating the harms that underlie the cause of action. Most all states provide for the parties to agree to disburse residual funds in an agreed-upon manner to avoid a court-mandated disbursement to access to justice programs. The proposed Rule 23(g) does not allow for this freedom between the parties.
As previously stated, class actions are intended to compensate victims who have suffered an injury due to a defendant’s negligence. If all of the victims have been compensated and made whole, and the defendant has made a good faith effort to find all of the victims, then the class action has served its purpose and unspent money should properly revert to the defendant. It is inappropriate to automatically divert funds to a third party not involved in the litigation.
The petition argues that a main premise for class action lawsuits is to make justice available for all persons and that additional funding for the Foundation would accomplish that goal. This argument falls short because it is not the defendant’s responsibility to ensure that funding is in place for future lawsuits. Class action lawsuits are intended only to compensate the victims harmed by defendant’s conduct.
This rule change would explicitly give an outside group a stake in any class action lawsuit filed in an Arizona court from the outset and would create a potential for conflicts of interest with class members. The Arizona Bar Foundation would be invested in the outcome of the litigation and possibly could be tempted to get directly involved a case. Additionally, the rule change would require all class members to be screened to ensure that no one was involved with or receiving aid from the Foundation to prevent any legal conflicts of interest. Murphy’s Law of unintended consequences most certainly could come into play and the judiciary needs to be prepared to handle these situations and the potential conflicts that will arise due to the interest of the third party.
It is for these reasons that ATRA strongly urges the Commission to not adopt the proposed changes and maintain the state’s well-reasoned and balanced system.