For the German company, it could have been much worse. In no other country in the world are as many lawsuits opened as in the US About 40 million lawsuits are filed each year, according to the Institute for Legal Reform, a subsidiary of the United States Chamber of Commerce. Legal proceedings against companies, in particular, are very popular. Such lawsuits often cost the US economy $ 264 billion annually. $ 100 billion corresponds to small and medium-sized business alone.
The multi-million dollar settlement with the chemical consortium Bayer in the United States shows how in no other country are class action lawsuits so popular. But the big winners are others.
For Werner Baumann, head of the Bayer group, the agreement reached in mid-June of one billion euros in the legal dispute over the controversial Roundup herbicide is a relief. The company must pay more than $ 10 billion in damages to the nearly 100,000 plaintiffs who claim that glyphosate is responsible for their cancer. Fears that legal disputes could cost up to $ 20 billion have been allayed.
But the law firms involved also rub their hands: they typically charge a third of the amount in dispute – in Bayer’s case they would charge about $ 3 billion. A profitable business.
Lawyers in the millionaire versus lawsuits
The Internet, in particular, is used to create anti-corporate sentiment in the United States. “The media bombards us with news of corporate misconduct without real punishment,” says the site ClassAction.com, for example. There are dozens of sites where consumers can learn about current class action lawsuits. The site says 200,000 customers have already benefited from its processes. And that, through lawsuits, they have managed to get 90 million dollars from BMW and 40 million from the American mobile phone provider TracFone. “You can defend yourself against the irresponsibility of companies”, is the motto of the lawyers’ site.
The side behind the Morgan & Morgan law firm boasts that it has already earned more than $ 5 billion in compensation payments for its clients. The law firm has also intervened in the fight against Bayer. “We are on the front line when it comes to holding Monsanto accountable,” the lawyers write.
Kenneth Feinberg knows that the class action lawsuits in the United States have reached enormous proportions. The star attorney, who is one of America’s most famous legal mediators, is often called on to help when companies are brought to court. Corporate crises like Bayer’s are among its specialities. Big companies like Volkswagen and Boeing hire him to settle disputes as favourably as possible.
A business of billions
“In the United States, trials are as normal as apple pie,” says Feinberg, who accompanied Bayer’s trial as a mediator, in an interview with DW. He believes the chemical consortium did well to accept the billion-euro deal. If Bayer had refrained from doing so, the number of plaintiffs would likely have continued to increase in the coming months, along with significantly more damage to its reputation and business. “Although the Bayer verdict costs the German consortium dearly, the certainty that the lawsuits have finally been withdrawn weighs more heavily,” says the 74-year-old jurist.
The fact that the United States has become the country of spectacular lawsuits is mainly due to its liberal legal system. From the foundation of the republic, every citizen, and even more so every legal person, has the right to take anyone to court. Above all, the prospect of bringing companies to justice through collective action is more feasible in the United States. The foundations for this were laid in the 1970s when the dubious machinations of many companies hurt many consumers who never received any compensation. The prospect of holding companies collectively accountable then changed the entire industry.
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What was once conceived for the defence of the consumer citizen of multimillion-dollar companies has turned into a profitable business. The trial industry in the United States is booming and sometimes takes on quite capitalistic characteristics. Law firms are continually looking for new and potential plaintiffs. In the US, the attorney is the one who often searches for the victim, not the other way around. Through aggressive marketing – for example, through television, radio or Internet advertisements or on huge billboards on the roads – lawyers try to maximize the number of plaintiffs. Only then can they increase the amount of money at issue and, ultimately, their fees.
When greed comes into play
All you have to do is turn on the TV, and you will see commercials about Roundup, faulty ignition locks from General Motors or the BP oil spill,” says Feinberg, who knows more about the class action lawsuits than anyone else. Many see him as a “master of disaster. Feinberg often negotiates the sums to be paid to the injured after the verdict. For the relatives of the victims of September 11, for example, he negotiated a compensation fund of six billion dollars.
He has also represented BP plaintiffs after the oil spill in the Gulf of Mexico, victims of the chemical weapon Agent Orange, fumigated by US troops in Vietnam, and VW customers affected by the handling of diesel consumption. Feinberg has managed to earn more than $ 50 billion from consortia in the fight of American consumers against international companies.
However, whoever thinks that this money will flow mainly into the pockets of the victims is wrong. According to Feinberg, 30 to 40 percent of the amount of the damage goes to the lawyers’ pockets.
“The fee in case of success is one of the reasons why class action lawsuits are so popular in the US,” says the attorney. In return, law firms often pre-finance the costs of the lawsuit and, in the event of loss, even bear them in full. Thus, plaintiffs are at little risk, but often receive only a fraction of the damages. In the glyphosate trial, for example, each plaintiff is entitled to a maximum of $ 175,000. On the other hand, the main law firms involved can expect $ 3 billion.
However, sometimes the pursuit of large amounts of money is not always legal. Recently, a lawyer crossed the limits of legality in the glyphosate trial. Timothy Litzenburg, 38, would have threatened a supplier of plant protection products with dragging him to court if he continued to make public statements against the company because those actions could cause a “public relations disaster” and trigger a “fall of 40 per cent in the share price. “
Litzenburg would have claimed at the time that the company could receive $ 200 million if he kept quiet. The latter, in turn, recorded the threats and handed them over to the prosecution. In late June, the lawyer pleaded guilty. Greed now is probably taking this 38-year-old man behind bars.