Last week, I wrote extensively about a proposed bill that would limit Minnesotans’ ability to bring class action lawsuits against business that commit consumer fraud. Apparently, that bill is not enough for some anti-consumer forces because two other bills have been introduced that will also negatively impact consumer rights here in Minnesota.
The first bill seeks to shorten the statute of limitations for restraint of trade violations, which includes things like price fixing, collusion, market allocation, and discriminatory business practices. The statute of limitations, of course, is the time limit to bring a lawsuit for a violation of the law. Currently, the statute of limitations for restraint of trade violations is four years. The new bill would shorten this time period to two years. The obvious effect of this bill would be to significantly limit the liability of businesses that commit restraint of trade violations.
The bill also proposes to reduce the statute of limitations for other types of cases–such as breach of contract claims–from six years to four years. You could make an argument that this second provision could potentially benefit consumers because most debt collection lawsuits are brought under a breach of contract theory. This may have been true a few years ago when debt buyers often waited five or six years–while interest continued to accrue at outrageous rates–to bring a collection lawsuit. This tactic artificially inflated the balances that consumers were being sued for. But since the recession, creditors have been bringing lawsuits much faster in an effort to get bad debt off of their books. Because of this change in debt buyers’ litigation strategy, any benefit of shortening the statute of limitations for debt collection claims is greatly outweighed by the negative consumer impact that shortening the statute of limitations in restraint of trade cases will have.
The second anti-consumer bill making the rounds at the Capitol seeks to limit attorney fees in cases where the consumer’s damages are relatively small. In other words, it will limit the attorney fees in virtually every individual consumer rights claim. The bill will force judges to consider the amount of the damages award when determining the reasonableness of the attorney fees being sought. Some quick background: most consumer law statutes provide for a very small amount of statutory damages. For example, the Fair Debt Collection Practices Act mandates statutory damages of no more than $1,000, no matter how egregious the violation. No lawyer is going to bring a lawsuit to recover a mere $1,000. The resulting lack of private enforcement would only encourage debt collectors to violate the law. When it enacted the FDCPA–and other similar consumer protection laws–Congress recognized this problem. To fix it, Congress included a provision in the FDCPA that requires a defendant that loses the case to pay for the consumer’s attorney fees. This allows consumer attorneys to be paid a reasonable fee for litigating a complicated case, which encourages more attorneys to handle cases where consumers’ rights have been violated. And remember, only a losing defendant has to pay–the fee-shifting provision kicks in only in cases that the consumer wins.
The new bill changes this dynamic. If the bill is passed, attorney fee awards in consumer law cases would likely be significantly reduced because of the small damage awards provided by most consumer law statutes. Some may argue that this makes sense. After all, why should an attorney make $10,000 in fees if his consumer client only gets $1,000 in damages. But here’s the problem with this argument: both parties control the amount of attorney fees spent in a case. A defendant being sued under a consumer statute with a fee-shifting provision knows at the outset that engaging in scorched-earth litigation could potentially increase its liability. I’ve been involved in cases where the defendant refused to concede even the most obvious issue and ignored my suggestions aimed at keeping everyone’s fees and costs lower. Certainly defendants have the right to mount any defense that they choose, but it’s wrong to blame consumers alone for attorney fee awards that are much greater than the damage awards. And then there’s this: defense attorneys get paid their entire fee, even when they lose the case. Why should consumer attorneys have their fees limited when they win the case?
These two proposals, in addition to the proposal to limit consumer fraud class actions, appear to be part of a concerted effort to eviscerate consumer protections in Minnesota and give businesses free reign to run roughshod over consumers. Taken as a whole, the bills will severely limit dishonest businesses’ financial liability by limiting class action lawsuits. They will shorten the time period to bring certain types of consumer claims, significantly limiting businesses’ exposure to liability. Perhaps most importantly, by tying attorney fee awards to damages, the proposed legislation will give consumer attorneys three choices: (1) bring the lawsuit, but litigate it half-ass in anticipation of a low attorney fee award; (2) take the case, litigate it properly, and get hosed on attorney fees; or (3) not take the case at all.
The proponents of these bills will undoubtedly argue that they’re designed to create a more business-friendly environment in Minnesota and create jobs. Like all Minnesotans, I’m in favor of a business climate that creates jobs. But I refuse to believe that only way for existing Minnesota businesses to increase revenue and add employees is to limit consumer protections so that businesses have a green light to engage in fraudulent business practices. I also have a hard time believing that businesses are leaving Minnesota in droves–or choosing not to set-up here in the first place–because our consumer protection laws are too draconian. So I can’t really imagine how eviscerating consumer protections will create new jobs. Forgive me for being cynical, but I think the point of this anti-consumer crusade is to fatten businesses’ bottom lines, not create jobs for unemployed Minnesotans. I’m assuming that the pro-business Republicans that control the Minnesota legislature will eventually pass these proposed bills in some form. I just hope Governor Dayton will keep Minnesota’s common-sense consumer protection laws strong and veto the anti-consumer bills.