Roy Pearson, the Washington D.C. judge who sued his dry cleaners for $54 million over a lost pair of pants, has become the poster child for frivolous litigation. His notoriety is well-deserved, and his case is important.
On June 25, the D.C. trial court tossed out Pearson’s individual consumer fraud case, entering judgment for the defendants, the Chungs. The court had previously rejected Pearson’s attempt to convert the case into a class action on behalf of thousands of other potential plaintiffs.
This is encouraging, but the case isn’t over yet.
On July 11, Pearson asked the court to reconsider its ruling for the defendants, and on July 17, the court denied this motion. Pearson now can appeal to the D.C. Court of Appeals and then the United States Supreme Court. In short, this case could continue for many years.
The Pearson case is emblematic of a disturbing trend. Consumer fraud class action litigation is proliferating all over the country, in an unprecedented and unintended use of consumer fraud statues by “entrepreneurial” plaintiffs’ lawyers who, like Pearson, seek to milk a potential cash cow.
Originally, tort law provided the primary remedy for injured persons. A private cause of action under the District’s consumer fraud statute, however, is possible merely as a result of a misrepresentation–“whether or not any consumer is in fact misled, deceived, or damaged thereby.”
Such claims proliferate under consumer fraud statutes because damages are statutorily provided and have no limits. Pearson claimed damages of $1,500 against each of the three defendants for each day the dry cleaners was open over a period of several years, and for each of the two signs posted (“Satisfaction Guaranteed” and “Same Day Service). That is why the size of Pearson’s claim was so astronomical.
Consumer fraud laws undoubtedly have been good for consumers victimized by deceptive business practices–but they were never designed to be the equivalent of a winning lottery ticket for plaintiffs.
In addition, the judges in this case can be viewed as Pearson’s enablers. Judges have enormous power–both implicit and explicit–to control their cases, but they did little to control this one.
One judge in November expressed “significant concerns that the plaintiff is acting in bad faith.” But the court didn’t order Pearson to show cause why he should not be monetarily penalized for such actions, which the court had the power to do.
The second judge in the case, while appropriately entering judgment for the Chungs, did so only after a two-day bench trial and took 13 days to write a 23-page opinion. All of this in a case that should have been relegated to small claims court in the first place.
The District of Columbia Council could easily head off such cases in the future by amending the District’s consumer fraud law to cap damages. A cap of, say, three times actual damages would mean Pearson could have recovered only about $3,000, making it highly unlikely he would have put in an enormous effort for such a modest payoff.
The D.C. Council ought to enact such an amendment. Consumers with real grievances could still recover meaningful damages. This would deter future violations while avoiding waste of judicial resources, which ultimately costs the taxpayers of the District money.
Perhaps the common-sense amendment won’t be enacted. If it is not, this is something the people of the District should consider when the pols come up for re-election.
Maureen Martin ([email protected]), an attorney, is senior fellow for legal affairs of The Heartland Institute.
Maureen Martin, a former legal fellow at The Heartland Institute, passed away on February 5, 2013.
