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Are class action suits worth the trouble?

I feel like suing somebody.

If you're a female of mascara-wearing age, you've probably heard about the great cosmetic giveaway by L'Oreal, Estée Lauder and seven other cosmetic companies. Starting Tuesday, Jan. 20, "for as long as supplies last'' they were to give away $175 million in free cosmetics to settle a class-action suit alleging they conspired with department stores to fix prices.

Not to accuse anybody of cheating, but it seems an awful lot of women skipped the inauguration of America's first black president and ignored "the one item per customer'' limit in order to scarf up as much free body lotion and moisturizer as they could. By the time I got to Dillard's that Friday, a Lancôme representative merely chuckled when I asked where I should go to get my free product.

"We were all out the first day,'' she said. "I think Macy's is out, too.''

As indeed it was. So while I was a member of the aggrieved "class'' — customers who purchased high-priced department store cosmetics and fragrances between May 29, 1994, and July 16, 2003 — I was slam out of luck. Not so the lawyers who filed this lawsuit. They got $24 million.

In our litigious society, hardly a week goes by without some group of people suing some company, industry or organization over some alleged wrong. To be sure, there are class-action suits that have merit — few would argue that workers sickened by asbestos or maimed by defective products should not be compensated.

But a fair number of these cases seem to do little besides clog up the courts and enrich the legal community.

In the past few weeks, two class-action lawsuits have generated considerable publicity — the cosmetics case (we'll get back to that in a minute) and a suit alleging that between June 1, 2000, and Sept. 30, 2004, the state of Florida violated federal law by selling drivers' personal information to marketing firms.

The state stopped the practice five years ago but recently agreed to settle the case by giving everyone who held a Florida license, ID or car registration during that period a — get this! — $1 credit when they register or renew. At a time when we're closing schools and parks, the settlement will cost taxpayers collectively a total of $10.4 million while individually it's not enough to buy a gallon of gas.

It's the kind of class-action suit that drives Walter Olson nuts.

Olson, a senior fellow at the Manhattan Institute, has a Web site — overlawyered.com — that spotlights what he considers the most egregious class actions. Citizens suing citizens — as in the case of Florida drivers vs. the state of Florida — is one of his main bugaboos.

"One of the weaknesses of class-action suits,'' he says, "comes when everyone is a victim, in which case you face the very real risk of moving money around at considerable expense from everyone's right pocket to everyone's left pocket.''

In recent years, some of the worst abuses have been curtailed. Now when an action involves a national class of plaintiffs, as in the cosmetics case, suits generally must be filed in federal court. That curbs the once-common practice of "shopping'' for friendly state judges who may be swayed by campaign contributions from lawyers.

There are also tighter controls on coupon settlements, as in the notorious American Airlines frequent flier case in which the only thing most frequent flier members got was a coupon for $25 off a future ticket. Coupons often came with so many strings or had so little value that "many people wound up just throwing them away,'' Olson says.

So how do these cases get started? In Florida, the lead plaintiffs were four South Florida motorists, who have been told not to talk. (Each got $3,000; the lawyers got nearly $3 million) But I did reach one of the original plaintiffs in the cosmetics case — a very delightful-sounding 71-year-old Californian named Eunice Fey.

"I play tennis and I'm very active and I'm in great shape," she told me by phone. "And I wear cosmetics.''

But she wasn't happy about the prices in department stores, where she noticed that none of the cosmetic companies ever marked down their products. At a party one night she mentioned her pique to a woman who happened to be a lawyer.

"She said that was against the Sherman Anti-Trust Act,'' Fey recalled, referring to the federal law that bars price-fixing and other anti-competitive moves. "At the end of the season they ship the products back to the company whereas those in drug stores are always put on sale.''

And so Fey became one of 16 lead plaintiffs, none of whom she ever met. "I just went up to San Francisco one day to a law firm for a deposition,'' she said.

Filed in 1999, the suit dragged on for almost a decade because of appeals and arguments over excessive legal fees — one firm reportedly billed $195 an hour for work by paralegals who were paid $30. But the court finally approved the settlement, in which the lawyers got $24 million and the cosmetic makers agreed to give away products on a "first come, first serve basis'' to customers who signed a form stating they were a member of the class.

So how about Fey? Turns out she had to stand in line like everyone else.

"I thought, this isn't right,'' she said. "I'm a plaintiff and this is all I get out of it.''

Like a lot of others, Fey went from store to store in a mall near Stanford University, accumulating "a couple of mascaras, a couple of moisturizers. When I got in line I saw some of the same faces. Everybody took seconds or thirds. I don't blame them — screw the cosmetic companies. They have no business not putting on sales.''

Despite her own modest reward, Fey thinks the suit was worth it, even though neither she nor I have noticed any big cosmetic sales at department stores lately. And there may not be any.

Cosmetic makers can still "do what they want, but they can't do it together,'' says Guido Saveri of San Franciso, one of the lead attorneys in the case. "If they get together with any other manufacturer and say, 'I won't do it if you don't do it' — they can't do that anymore.''

I also asked Saveri if he thought the giveaway program had been rather loosely administered. Customers didn't have to prove they were part of the class, and there was nothing to stop them from getting as many cosmetics as they could. The result: Stores quickly ran out and a lot of people who were members of the class didn't get anything.

"I think it was very well administered,'' Saveri said, a bit huffily. "Each person had to file a piece of paper that they were entitled to one product — whether you want to lie about it I can't control that.''

Before we hung up I asked Saveri if any of his female relatives got free cosmetics. Turns out the giveaway was off limits to attorneys' families.

But with $24 million, they can afford to shop at Neiman-Marcus. As for me, I'll wait until L'Oreal goes on sale at my local CVS.

Susan Taylor Martin can be contacted at susan@sptimes.com.

Are class action suits worth the trouble? 01/31/09 [Last modified: Saturday, January 31, 2009 3:31am]
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