Episode 696: Class Action : Planet Money The modern class action was created on a typewriter in the back of a car. (Sort of.) Now, thousands of these lawsuits are filed every year. How did we get here? Is this really a good way to do things?
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Episode 696: Class Action

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Episode 696: Class Action

Episode 696: Class Action

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NICK FOUNTAIN, HOST:

How's it going? We're NPR reporters. We're doing a story on pepper. You got a second?

UNIDENTIFIED WOMAN #1: I can't. Sorry.

FOUNTAIN: Yeah. It's OK.

How's it going? We're NPR reporters. We're doing a story - ah.

UNIDENTIFIED WOMAN #2: Pepper?

JACOB GOLDSTEIN, HOST:

Pepper.

So, Nick, you and I were out on the streets of Manhattan. We're talking to people who are walking by, and we've got with us two tins of pepper.

FOUNTAIN: Tins of pepper that you've seen all your life. It's the standard pepper tin.

GOLDSTEIN: Yeah, the brand is McCormick. And we got two of them because about a year ago, McCormick changed this classic pepper tin that they sell in the grocery store. So what we were doing is we had the old one, and we had the new one. And we asked people to play - to play a game with them. We asked them to spot the difference between the old tin and the new tin.

UNIDENTIFIED MAN #1: Same color - red and white, primarily, little blue in McCormick.

UNIDENTIFIED WOMAN #3: It appears that the M and the C are the same.

GOLDSTEIN: Can you just say what the words say?

UNIDENTIFIED WOMAN #3: Pure ground black pepper.

FOUNTAIN: So that's the old one. What does it say on the new one?

UNIDENTIFIED WOMAN #3: Pure ground black pepper.

FOUNTAIN: OK. Same font?

UNIDENTIFIED WOMAN #3: It appears so...

FOUNTAIN: OK.

UNIDENTIFIED WOMAN #3: Unless it's an illusion.

GOLDSTEIN: Not an illusion - same font. Other people thought the tins were a slightly different size.

UNIDENTIFIED MAN #1: It's probably narrower, right?

FOUNTAIN: So you think it's a little bit thicker?

GOLDSTEIN: Not narrower, not thicker. They are exactly the same size.

FOUNTAIN: The only difference between the tins is written right at the bottom, these small numbers that say how much pepper is in the tin.

UNIDENTIFIED MAN #1: Different - different amount. Different amount.

GOLDSTEIN: The old tin, the one McCormick sold for years and years, has four ounces of pepper in it. The new one has three ounces.

UNIDENTIFIED MAN #1: Significantly less. Same size can, but significantly less - a quarter less.

GOLDSTEIN: It's impressive, right, how identical they are. Like, everything else is the same but this one.

UNIDENTIFIED MAN #1: I think that's a little rip-off - a little misleading, no?

FOUNTAIN: The tins used to be filled with pepper all the way to the top. Now there's some empty space right there where there used to be pepper.

UNIDENTIFIED WOMAN #4: And what is rest of it?

GOLDSTEIN: Air.

UNIDENTIFIED WOMAN #4: Air? Why that? Who's going to take care of this, me?

GOLDSTEIN: In a lot of countries, what would happen here is some government agency like, say, the FDA might fine the company or make them change what they're doing or maybe not. I mean, it does say right there on the front of the tin exactly how much pepper is inside. They're telling the truth.

FOUNTAIN: In America, we do not leave this up to the government. In America, this whole pepper thing is the basis of a lawsuit.

GOLDSTEIN: Actually, lots of lawsuits - in California and Iowa and Pennsylvania - in about a dozen states in all. And lawyers are going to spend countless hours on this - arguing in front of judges; if it gets that far, in front of juries; back and forth over this question of whether McCormick should have put more pepper in the tin.

Hello and welcome to PLANET MONEY. I'm Jacob Goldstein.

FOUNTAIN: And I'm Nick Fountain. The pepper case is a class action. Thousands of these lawsuits grind their way through the court system every year.

GOLDSTEIN: Today on the show, we meet the man who helped create this class action world we live in today. He did it partly in the backseat of a car on a manual typewriter. We ask him how he feels about this thing that he unleashed. Also, we do try to get to the bottom of the pepper thing.

(SOUNDBITE OF FREDERIC AUGER SONG, "FUTURE SATISFACTION")

FOUNTAIN: The man who helped to create the modern class action - his name is Arthur Miller.

GOLDSTEIN: Not Arthur Miller the playwright, Arthur Miller the lawyer.

GOLDSTEIN: And he says the key work here happened in the 1960s.

ARTHUR MILLER: I must check out. I may be the last person alive who was in that room.

GOLDSTEIN: Well, I'm glad we got you today then.

MILLER: (Laughter) Yes - tomorrow, who knows.

GOLDSTEIN: Miller is a professor at NYU. He looks like my grandfather. They both have these amazing out-of-control eyebrows, but Miller is better dressed.

MILLER: I have never taught a class other than in a suit - the three-piece suit. They don't really even make three-piece suits any longer. I wear them with a red tie and a red pocket square. That's a uniform.

FOUNTAIN: We went and visited Miller at his office on spring break. And there was nobody in building, but he was wearing that three-piece suit.

GOLDSTEIN: Class actions were not always about things like - is there enough pepper in the tin? The roots of the modern class action, I'm going to say, they were nobler. They go back to the civil rights movement. They go back to this time when you had huge groups of people who were just being denied their basic legal rights.

MILLER: A class action is when you have a lot of people. You can't all fit them into the courtroom, but you want to give them access. So one, two, five, 10 people come forward and say we will sue on behalf of everybody.

FOUNTAIN: Class actions have been around forever, but they weren't being used very much for this really interesting reason.

GOLDSTEIN: Yet the reason was a problem with the rules. And I hadn't really thought about this before. But, you know, there's, like, these two sort of parallel systems, right. There's the laws that you think of - the laws that Congress passes. But then there's this other thing that is really important, and that is the rules for what happens in the courtroom, the rules for who can bring a case and when and what the judge can and can't do. They're called the federal rules of procedure. And Miller says, in the '60s, the rule for federal class actions was this total mess.

MILLER: You couldn't figure out what it was saying. The words were a sort of ambiguous. They were vague. They were amorphous.

GOLDSTEIN: So Miller is working with this secret committee. And by secret, I mean it's not at all secret. I just personally had never heard of it before. The committee's appointed by the chief justice of the Supreme Court, and their job was to update the rules. Specifically, they were trying to change the rule for class actions to make them more effective, to give them teeth. In particular, what they want to do is they want to make it clear that if even just one person files a class action and wins, the judgment applies to everyone who is in the same situation - everyone who could have filed that lawsuit.

FOUNTAIN: One weekend, Miller and a senior lawyer, they're driving out to the country trying to figure out exactly how to fix this rule.

MILLER: I'm in the back seat with a typewriter you would consider to be something out of the Stone Age.

GOLDSTEIN: So it's, like, on your lap? Or how does it...

MILLER: On my lamp - on my lap in the back seat. And we're playing with words.

FOUNTAIN: So they're looking at the rule, and they're trying to figure out how to make it right. They're saying put this word over here or put this semicolon over there.

GOLDSTEIN: Yeah. And then they drive their car onto a ferry. They're going out to an island for the weekend. So they're on the ferry with all these other cars. Miller is still sitting there in the backseat clacking away on this manual typewriter.

MILLER: A woman in the car next to us rolls down her window and reaches out and taps our window. And the woman says - don't you hear the clack? - she said. Are we sinking?

GOLDSTEIN: And did you say civil rights? This is the civil rights revolution.

MILLER: This will change your life, lady.

GOLDSTEIN: He was right. This rule was huge. It made it so anyone could go to court, argue that their civil rights were violated, and if they won, it changed things for everybody who was in their, you know, in their same situation.

MILLER: Certainly, every voter rights case you can think of came after this rule came in.

FOUNTAIN: Not just voting rights.

MILLER: Dozens and dozens and dozens of communities were desegregated because of the class action. You even see desegregation decisions in my old town of Boston where they desegregated the school system. That was because of a class action.

GOLDSTEIN: That was the beginning of modern class actions. But after a while, some lawyers looked at this and said, you know, we can file all kinds of class actions. Like, what about those late fees on my cable bill?

FOUNTAIN: Yeah, that was one of the first big ones. Deborah Hensler is a political scientist at Stanford. And she says in that case, the plaintiffs won a big settlement.

DEBORAH HENSLER: So other lawyers think - oh, fees - monthly fees, late fees. Who else, you know - what other businesses are there where this might be an issue? And so you then see a line of cases like that.

GOLDSTEIN: And here is where something that began with big civil rights issues - with voting rights and desegregation and went on to gender discrimination. Here is where it edged toward things like - shouldn't there be more pepper in this can of pepper?

FOUNTAIN: Arthur Miller, the guy who helped make all this happen, he was watching as the number of class actions exploded.

MILLER: When do you realize the genie is out of the bottle and that we've created a monster?

GOLDSTEIN: You can hear in his voice that he's, like, half-kidding - but only half.

MILLER: That there are bad class actions - of course there are bad class actions. There are silly class actions.

FOUNTAIN: Do remember the first one that you were like this is just silly?

MILLER: Yes, two of them.

FOUNTAIN: Both happened in the '90s.

GOLDSTEIN: OK, Fountain, honestly, when were you born?

FOUNTAIN: I was born in 1989.

GOLDSTEIN: OK. I'm going to be your '90s guide here, OK? The first case, Miller says, you can describe in two words.

MILLER: Milli Vanilli

GOLDSTEIN: Do you remember Milli Vanilli?

FOUNTAIN: No (laughter).

GOLDSTEIN: OK. Honestly, I barely remember Milli Vanilli. But I do remember the scandal.

Here's what happened. There were two singers. They had this big debut album what was a hit. I think there was this song - what was it? - "Girl You Know It's True."

(SOUNDBITE OF SONG, "GIRL YOU KNOW IT'S TRUE")

MILLI VANILLI: (Singing) Girl, you know it's true.

FOUNTAIN: Yeah. I've heard this.

(SOUNDBITE OF SONG, "GIRL YOU KNOW IT'S TRUE")

VANILLI: (Singing) I love you.

GOLDSTEIN: Yeah? I'm going to tell you something - not Milli Vanilli.

FOUNTAIN: (Laughter) What?

GOLDSTEIN: There was this scandal. They were lip-syncing. Came out they didn't actually sing on the album. And you know what comes next?

FOUNTAIN: Class action?

GOLDSTEIN: Class action. A settlement - people who bought the CD got $3 back. If you bought the cassette, you got $2 back.

FOUNTAIN: Amazing.

GOLDSTEIN: A few years later, there was another case that made Miller crazy. And this time, he got to see it unfold in real time.

FOUNTAIN: Miller was watching this boxing match on pay-per-view. Even I've heard of this one - Mike Tyson versus Evander Holyfield.

MILLER: And lo and behold, in the third round...

(SOUNDBITE OF ARCHIVED RECORDING)

IAN DARKE: Oh, and some nasty stuff in there. It looked to be a bite almost.

MILLER: Tyson bites off a piece of Holyfield's ear.

(SOUNDBITE OF ARCHIVED RECORDING)

DARKE: Holyfield is very unhappy. Look at this.

GOLDSTEIN: They stop the fight. Tyson's disqualified. And right away, Miller picks up the phone and calls a friend of his who is also a lawyer.

MILLER: I say Mel (ph), are you watching the fight? He says yeah. I said there's a class action here. There's a class - this is a consumer fraud. People have paid to watch - a boxing match. They paid $90, whatever it was - this is a class - it was a joke. You know, the two of us are laughing. The following morning, three class actions are filed.

(LAUGHTER)

FOUNTAIN: And what were you thinking right then when you saw them in the newspaper?

MILLER: What did we create? I mean, why do people push the envelope beyond rationality? This really soils it for everybody.

GOLDSTEIN: Did you - I mean, did you feel embarrassed?

MILLER: Slightly, yeah. I'm embarrassed for the profession. Come on. Come on. You paid. You saw. Forget about it. There are certain things in life you should just forget about.

FOUNTAIN: That's kind of what the judge said. It got thrown out of court.

GOLDSTEIN: So now we're to today. Now we're to the world of class actions that we live in now. And you can kind of weight this, you know. On the one hand, now you have this solution. If there are a lot of people who have been harmed in some really small way that would never be worth bringing a lawsuit on its own, now a class action means they can band together and fight back.

FOUNTAIN: On the other hand, come on.

(LAUGHTER)

FOUNTAIN: I mean, like, when we've been talking to our friends about this story that we're doing, what they keep saying to us is, like, yeah, of course, class actions - I get a check for two bucks and the lawyers get rich.

GOLDSTEIN: And, you know, you do have lots of lawyers and federal judges dealing with these cases and warehouses full of documents.

Actually, I don't know. Are there still - in my mind, there are still warehouses full of - in any case, there is a lot of cost here.

FOUNTAIN: It's an expensive way to figure out how much pepper should be in the tin.

GOLDSTEIN: You've been spending a lot of time with pepper lately?

ELIZABETH FEGAN: We have been spending a lot of time with pepper.

FOUNTAIN: Elizabeth Fegan is one of the lead lawyers for the plaintiffs in the pepper case.

GOLDSTEIN: Like, are you entering the tins into evidence?

(LAUGHTER)

FEGAN: We are.

GOLDSTEIN: May I direct your attention?

(LAUGHTER)

GOLDSTEIN: You are.

FEGAN: We're making sure they preserve them.

GOLDSTEIN: Here's the story Fegan tells about pepper. She says McCormick started putting less pepper in its tins about a year ago, just leaving empty space at the top. This may be because on global markets, the price of raw pepper or commodity pepper, whatever you call it - the price was going through the roof.

McCormick wouldn't talk to us for this story - we asked - but they have argued in court filings - hey, look, we put the correct amount of pepper right there on the label. It's right there on the front of the tin for everyone to see. We're not hiding anything.

FOUNTAIN: But, Fegan says, they still broke the law.

FEGAN: There's a law that prohibits what's called nonfunctional slack-fill, which means making a large package, but only filling it with a small amount of product.

GOLDSTEIN: OK. I just want to, like, delight in that phrase a little more. Just say the phrase.

FEGAN: Nonfunctional slack-fill.

GOLDSTEIN: OK. So nonfunctional - I get that. Slack-fill - what is slack-fill?

FEGAN: Slack-fill is air. It's a portion of a package that a manufacturer fills with nothing but air.

GOLDSTEIN: Side note - there is such a thing as functional slack-fill, air that's in the package for a reason. That is allowed. In fact, there's an FDA regulation that actually lists six specific reasons why slack-fill might be OK. Like, if the product settles during shipping - I'm pretty sure I've seen that on the side of the cereal box - right? - product may have settled during shipping.

FOUNTAIN: And yes, Fegan says, there is the potato chip rule.

FEGAN: If you need a certain amount of air in a package to protect the product, for example, potato chips...

GOLDSTEIN: So air to protect potato chips from getting crushed - that is functional slack-fill?

FEGAN: Correct.

GOLDSTEIN: Air because you don't want to put as much pepper in the can...

FEGAN: Is not OK.

FOUNTAIN: Before Fegan was arguing about pepper in court, she was handling other class actions. Some of them had much higher stakes.

GOLDSTEIN: Yeah. One of those cases was over sexual harassment at a big real estate company.

FEGAN: Men were allowed to view pornography, were allowed to touch women in way that women would not want to be touched in the workplace. You know, it was a very frat-house-type environment.

FOUNTAIN: Company settled the case, agreed to change its practices and paid thousands of women thousands of dollars each.

GOLDSTEIN: I don't know. I don't quite know what to ask you. Like, I get why you - why the pepper in the tin thing is meaningful. It doesn't seem that meaningful. It seems kind of silly on a certain level - certainly relative to this case where women were being systemically harassed at this great big company. And maybe that's an unfair comparison, but I don't know. What do you think? Just - can you sort of put that together for me?

FEGAN: I think that there are cases that have more societal value than others. And there are cases with - where people have more personal injuries than others. So there's a spectrum of cases that can be brought as class actions, but consumers have a right to recover their dollars.

GOLDSTEIN: Do the math, she says. If you bought one of these tins, according to her argument, the company should give you, you know, a couple bucks, which seems small.

FOUNTAIN: But millions of people have bought these pepper tins. And that adds up to a lot of money.

GOLDSTEIN: There is an FDA regulation about this, and so we called the FDA. They have not acted on this McCormick thing. And Fegan says that's sort of the point of class actions. They're like this backup for when government regulators don't act.

FOUNTAIN: Now, there is this big backlash against this wave of class action.

GOLDSTEIN: Yeah, you hear it all the time, right? Like, so many cases clogging up the court system.

FOUNTAIN: And businesses have started including these clauses in contracts that make it harder for people to sue.

GOLDSTEIN: There have been challenges in court, several of which have gone all the way to the Supreme Court. The results there have been mixed.

FOUNTAIN: So Jacob, we brought all this up with the man responsible, Arthur Miller.

You have this long arc now - 50 years-ish (ph) of the life of this rule you created. We're here where we are now. How do you - how do you weigh what you've done?

MILLER: It's an impossible question because you are weighing or trying to weigh things that are unquantifiable.

GOLDSTEIN: That is a very clever answer and true, as far as it goes. But you must have some - how do you feel about it? How do you feel about what class actions are?

MILLER: I believe that in the 50 years we have had this rule, that there are certain class actions that never should have been brought, admitted; that we have burdened our judiciary, yes. But we've had a lot of good stuff done. We really have.

GOLDSTEIN: Miller says 20, 30 years ago, lawyers from around the world used to point at the U.S. and laugh and mock us. You know, oh, you sue over everything. There's so many class actions clogging up your system. Today, he says, that has changed a lot. Dozens of countries around the world now have their own class actions. Big countries - France, Australia, Taiwan, Brazil - they have all decided, like we have, they don't want to leave regulation to the regulators. They want a backup. They want class actions, too.

(SOUNDBITE OF SONG, "FUTURE SATISFACTION")

FREDERIC AUGER: (Singing) I never get away from this nice place, keep them making jokes with their girlfriends. Ever think you're loved - you know it's not true. Never see your ghost because your life is go...

FOUNTAIN: You can email us planetmoney@npr.org. I can attest people actually check it. I actually check it (laughter).

GOLDSTEIN: We all appreciate that. Nick, you're on Twitter @...

FOUNTAIN: Nickfountain.

GOLDSTEIN: I'm on Twitter @jacobgoldstein. We all are on Twitter @planetmoney. Our episode today was produced by you, Nick Fountain.

FOUNTAIN: With help from our awesome intern Sally Helm.

GOLDSTEIN: If you want to see pictures of the pepper tins, you can see them on our website at npr.org/money on our Facebook page.

And if you're looking for something else to listen to, check out Embedded. It's the newest podcast from NPR. It's hosted by Kelly McEvers, who is super talented, who you may know as the host of All Things Considered.

On each episode, she gets inside some world and reports from there. One I particularly like so far - she goes down to Texas and gets inside the world of biker gangs down there to find out what's really going on in this violent fight.

FOUNTAIN: You can find it wherever you get your podcasts or on the terrific NPR One app. I'm Nick Fountain.

GOLDSTEIN: And I'm Jacob Goldstein. Thanks for listening.

(SOUNDBITE OF FREDERIC AUGER SONG, "FUTURE SATISFACTION")

FOUNTAIN: How's it going? We're NPR reporters. We're doing a story on McCormick black pepper. You ever bought one of those?

UNIDENTIFIED WOMAN #5: No.

UNIDENTIFIED MAN #2: No.

FOUNTAIN: OK. You ready? This is, like, the classic pepper tin. Are you guys from - you guys...

UNIDENTIFIED WOMAN #5: No, from Scotland.

UNIDENTIFIED MAN #2: No.

FOUNTAIN: You got to go?

UNIDENTIFIED WOMAN #5: Yeah.

FOUNTAIN: I'll let you go if you got to go.

One more. All right. How's it going? We work at National Public Radio. We're doing a story about pepper. You ever bought one of these?

UNIDENTIFIED MAN #3: No English, Espanol.

FOUNTAIN: (Speaking Spanish).

UNIDENTIFIED MAN #3: (Speaking Spanish).

FOUNTAIN: (Speaking Spanish).

UNIDENTIFIED MAN #3: (Speaking Spanish).

FOUNTAIN: (Speaking Spanish).

UNIDENTIFIED MAN #3: (Speaking Spanish).

FOUNTAIN: (Speaking Spanish).

UNIDENTIFIED MAN #3: (Speaking Spanish).

FOUNTAIN: (Speaking Spanish).

UNIDENTIFIED MAN #3: (Speaking Spanish).

FOUNTAIN: (Speaking Spanish).

UNIDENTIFIED MAN #3: (Speaking Spanish).

FOUNTAIN: (Speaking Spanish).

UNIDENTIFIED MAN #3: (Speaking Spanish).

FOUNTAIN: (Laughter).

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