It isn’t every day that tort reformers and personal injury lawyers find themselves in agreement.  But when the newly renamed American Association for Justice (formerly known as the Association of Trial Lawyers of America) recently joined the American Tort Reform Association and small business owners everywhere in condemning an outrageous and seemingly vengeful lawsuit against a neighborhood dry cleaning store, a rare opportunity for nonpartisan legal reform may have presented itself.

Many news junkies know by now that Washington, D.C., resident Roy Pearson Jr. sued his former dry cleaner – over a supposedly lost pair of pants – for a jaw-dropping sum that initially exceeded $65 million. (In a May 31 court filing, Pearson lowered his demand to $54 million.) No one would be shocked to learn that Pearson is an attorney who has practiced law for 25 years and thus knows well the ins and outs of D.C.’s well-intentioned but easily exploited Consumer Protection Procedures Act (CPPA).  What is astounding, however, is that Pearson has been employed by the D.C. government for the last two years as an administrative law judge. 

By definition, judges are expected to demonstrate a judicial temperament that helps ensure fairness, reasonableness and a thorough respect for the law.  In fact, the 2001 law that established D.C.’s Office of Administrative Hearings requires that its administrative law judges possess such “judicial temperament” and, among other things, be “fair” and “impartial.”

Though an anonymous city official told a Washington Post columnist that those who’ll soon decide if Judge Pearson gets reappointed to his job with a six-figure salary at taxpayer expense can’t very well “retaliate against someone for exercising [his] constitutional . . . right to file a lawsuit,” Pearson’s is no ordinary lawsuit.  Beyond its arguably vindictive nature, Pearson’s contorted claim against Custom Cleaners, recently heard at trial in D.C. Superior Court, also suggested a wanton disrespect for the law in its perversion of the District’s CPPA.

Leaving aside for the moment the question of Roy Pearson’s fitness to serve D.C. residents as a law judge, let’s first consider the consumer protection law – designed to protect against acts of fraud and false advertising – that Pearson manipulated to arrive at his multi-million dollar claim for damages.

“A Certain Class of Lawyers”

The District’s CPPA is like many state consumer protection acts (CPAs) written since the late 1960s in that it was generally modeled on the Federal Trade Commission Act passed by Congress in 1914.  But federal lawmakers vested the power to enforce consumer protection laws in the government, not in private sector plaintiffs as many state laws do.

In fact, when Congress specifically excluded such a “private right of action” from the original federal law early last century, it proved to be more prescient than state and D.C. lawmakers were many decades later.  Sen. William Joel Stone, a Democrat from Missouri, anticipated the likes of Roy Pearson and the industrialization of personal injury litigation when he convincingly warned his colleagues during debate in 1914 that, “[A] certain class of lawyers . . . will arise to ply the vocation of hunting up such . . .  [law]suits,” the number of which “no man can estimate.”

While legislatures are not likely to rescind private rights of action in CPAs at this stage, they can and should work to establish what Cornell law professor James Henderson calls “sufficiently specific rules of litigation within which litigants – defendants as well as plaintiffs – can rationally make their case.”

But there’s nothing rational about a multimillion dollar lawsuit against a mom-and-pop dry cleaning operation.  And there’s certainly nothing rational about letting creative lawyers quietly shake down countless other small business owners outside the media spotlight, yet it happens every day.

A recent survey of small business owners by the National Federation of Independent Business, a national nonprofit organization that represents small and independent businesses, found that about half of them were “very concerned” or “somewhat concerned” about the possibility of being sued.  The average NFIB member has gross annual sales of $350,000, yet, according to the survey, one in 10 incurred legal expenses of $25,000 or more.

Not surprisingly, small businesses such as Custom Cleaners are increasingly targeted with frivolous consumer protection litigation because they don’t have the resources to defend themselves like larger companies do. Also, many CPAs – including D.C.’s – are particularly attractive to plaintiffs’ lawyers because they provide for minimum statutory damages or tripling of actual damages, and for an award of attorneys’ fees.  And many judges have begun interpreting these laws rather loosely, too, wherein plaintiffs don’t even need to claim an injury or loss, much less knowledge of or reliance upon the allegedly “unfair or deceptive” commercial practice.

In Pearson’s case, the District’s law arguably allowed him to seek $1,500 for each day that the dry cleaner displayed window signs stating “Satisfaction Guaranteed” and “Same Day Service,” regardless of whether these signs had anything to do with his lost pants. His lawsuit also asks for a half-million dollars to compensate for the time he’s spent stubbornly pursuing it. His suit even suggests that D.C. law allows him to receive damages for mental suffering and rental car costs now that he needs to drive each weekend to another dry cleaner not within walking distance.  

Simple Reforms and Judge Pearson’s Future

If D.C. Mayor Adrian Fenty, Council Chair Vincent Gray and other council members want to limit the abuse of the city’s consumer protection law and thus make it easier for honest, hardworking small business owners to thrive, they – along with like-minded state lawmakers around the country who face similar problems with abuse of their own CPAs – can make some simple changes that will go a long way in restoring fairness.

By requiring that a plaintiff prove that he or she actually relied on a supposedly fraudulent or deceptive advertisement or representation, lawmakers could drastically reduce CPA lawsuit abuse.  After all, Roy Pearson’s claim against Custom Cleaners alleged that the display of standard signage somehow constituted a willful fraud punishable by a mind-boggling, potentially bankrupting civil damages award.

Policymakers also would do well to limit plaintiffs’ claims for damages to out-of-pocket costs, except in cases when it can be proved that a defendant’s actions were knowingly and willfully fraudulent or deceptive.  In Pearson’s case against his cleaners, for example, his out-of-pocket costs, at most, would include the price of a replacement suit, alterations and any reasonable legal expenses.

As the mayor and council take these suggested reforms under advisement, the D.C. Bar Association and D.C.’s Commission on Tenure and Appointment of Administrative Law Judges (the bodies that will determine whether or not Pearson is reappointed to his law judgeship for a 10-year term) may wish to consider the advice of Melvin Welles, former chief administrative law judge at the National Labor Relations Board.

In part, Welles’ April 30 letter to the editor in the Washington Post read, “I would also direct any bar to which Mr. Pearson belongs to immediately disbar him and the District to remove him from his [law judge] position.”        

Jon Haber, the CEO of the national trial lawyers group, offered a similarly scathing critique of Pearson in his May 8 letter to the D.C. Bar: “Our court system has no place for those who abuse the instruments of justice for personal gain or the intimidation of others.”

Most small business owners in the District agree and, along with other economy-growing, taxpaying entrepreneurs across the country, they want to see consumer protection laws reformed so such laws cannot be as readily abused by “a certain class of lawyers.”