Editor,
In 2001, $5.27 billion was paid to defendants in class-action lawsuits. This is only .06 percent of the U.S. gross domestic product. Wal-Mart's profits alone were $11 billion in 2001, and we are supposed to believe class-action lawsuits are killing American business.
The purpose of corporations is to maximize profits so they put each potentially costly legal decision through cost-benefit analysis to determine if they should alter their practices.
Suppose a truck manufacturer discovers the trucks it is selling are flipping over and killing people because they are equipped with defective tires. We would expect the company to recall the defective trucks to change the tires and save the lives of its customers, but it may or may not do this, based on cost-benefit analysis. It will
calculate the number of crashes that will occur based on the information available. Next, it will calculate the cost of paying claims for lawsuits associated with the problem. Finally, the company will calculate the cost of announcing a recall. If it is cheaper to pay claims than to recall the trucks, the corporation will allow people to be injured and die rather than implement a recall.
Class-action lawsuits increase the potential costs associated with corporate misconduct, reducing the potential of immoral decisions. If class action lawsuits disappear, corporations will expand immoral opportunism and do what a corporation is designed to do - maximize profit at the expense of anything, including human life.
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For years, the tobacco industry claimed smoking was not harmful to the health of users, even after labels were placed on packages. It also claimed the product was not addictive. It was discovered that the tobacco industry hid evidence that smoking was harmful. These companies did research to find the level of nicotine conducive to addiction. They knew their product was harmful, and they manipulated the product to addict more people. If intentionally harming customers is not grounds for a lawsuit, nothing is.
Large-scale litigation is a consequence of market consolidation. In this new economic reality, one company has market power that enables it to sell a product to a large number of consumers. If a multinational corporation's product causes harm after it is sold, the effect is massive, because more consumers are exposed to the harmful effects. As corporations grow, it is reasonable to expect harm from a faulty product to affect more people, because more people are buying from fewer manufacturers. This will logically lead to more class-action lawsuits.
Isaac Padilla
UNM student
