ALEC Leads the Legal War Against Consumers
Meet ALEC — the nickname for the American Legislation Exchange Council — that has recently come to light as a cozy meeting place where Big Business is accused of “ghostwriting” its wish list of laws that state legislators introduce across the country.
While recent media attention has focused on ALEC’s role in passing pro-gun laws like Florida’s ‘Stand Your Ground’ law, scant attention has been paid to the group’s anti-consumer agenda. A law written by ALEC just gutted the Ohio consumer protection law, and ALEC legislation is probably pending in your state.
Bills and laws promoted by ALEC threaten a wide range of consumer rights in areas as diverse as:
- Unfair business practices
- Product liability and drug injuries
- Landlord tenant law
- Workers compensation
- Payday lending
- Asbestos exposure.
Some of these laws have passed in one or more states; others are coming up for vote by state legislatures.
In this article, Lawyers.com explains what ALEC is, how it operates, and then examines an ALEC-sponsored law in Ohio passed this month that could virtually eliminate consumer protections that existed for 40 years.
Lawyers who represent injured or wronged consumers say ALEC’s model laws prevent consumers from getting justice and give corporations a free pass for bad conduct.
“They are introducing amendments and changes to state consumer protection statutes that make it much harder for people to get relief when companies take advantage of them,” said Ira Rheingold, a lawyer who represents consumers and is the executive director of the National Association of Consumer Advocates.
ALEC did not respond to several attempts to reach its national office and director of its Civil Justice Task Force which drafts model laws related to legal reforms.
‘Ultimate Smoke-Filled Back Room’
Although ALEC was formed 1973, the way the organization works has only come to light recently.
According to ALEC’s website, the organization is a 501(c)(3) nonprofit and a forum for state legislators and private industry leaders to come up with solutions focused on free markets, small government and federalism.
But a 2010 report by the trial lawyers’ group, American Association for Justice, called ALEC the “ultimate smoke-filled back room.”
According to a 2011 report by People for the American Way, ALEC enlists thousands of state legislators, overwhelmingly Republican, as members who pay a small membership fee of $50 per year. Corporate members like Coca-Cola, PepsiCo, Philip Morris, Pfizer, and McDonalds, pay varying levels of membership fees starting at $7,000 up to $25,000. To sit on one of ALEC’s nine task forces costs an additional $2,500 to $10,000 per year. Each task force writes model laws in that subject area.
In the past year, a trove of model laws drafted by ALEC were uncovered through public records requests.
“We were able to publish the model laws and prove for the first time that they are identical to laws being shopped around the country,” said Justin Greenberg, a spokesperson for People for the American Way.
ALEC’s website says that “state legislators fully control ALEC’s model legislation process. Ideas for model legislation are presented in a task force, which any member can join.”
According to ALEC Exposed, one of the ways ALEC raises money is through “scholarship funds” paid by its corporate members to reimburse lawmakers for travel and other expenses incurred in attending conferences, often with their families, where they are wined and dined by corporate lobbyists.
“This is corporate influence in politics at its worst. The corporations are getting a very unfair advantage by using free trips, junkets, and golf outings. They are literally paying legislators to go to bat for them,” said John Loredo, a former minority leader in the Arizona legislature.
Silent Treatment from ALEC
Lawyers.com made several attempts to reach out to ALEC for comment for this article.
Three voice mail messages were left for Kaitlyn Buss, the media contact at ALEC’s national office in Washington, D.C. but were not returned.
A voice mail left for Amy Kjose Anderson, Director of the Civil Justice Task Force, was not returned. Bryan Weynand, Legislative Analyst for the Civil Justice Task Force, was reached by phone but he declined to comment and referred us back to Buss and Anderson. Victor Schwartz, an attorney, and leader on tort reform, said neither he nor his law firm, Shook, Hardy & Bacon, are members of ALEC and declined to comment further. ALEC’s website lists Schwarz as private sector chair of the Civil Justice Task Force.
In Ohio, state representative Ron Young, who sponsored the “Right to Cure” law, and Rep. Danny Bubp, one of the law’s co-sponsors, were unavailable for comment. A report by People for the American Way lists Young and Bubp as ALEC members. Young’s legislative aide, Rachael Carl, said she believed he was a member of ALEC.
Masquerading as a Charity
Last week, government watchdog group Common Cause filed a complaint with the IRS accusing ALEC of masquerading as a charity and enjoying tax-exempt status while 60 percent of its expenses are for lobbying. Public charities are prohibited from influencing legislation.
ALEC’s website states it does not lobby in any state.
The recent negative publicity prompted several corporate members including Pepsi, Coca-Cola, and Kraft Foods to pull out of ALEC. After taking heat for supporting extreme prison privatization and pro-gun measures, ALEC announced it will stop its Public Safety Task Force and focus instead on economic issues.
But this may not bode well for consumers.
According to Michelle Widmann, spokesperson for American Association for Justice, many of ALEC’s measures infringing on consumers’ rights to hold corporations accountable for negligence and wrongdoing are “falsely being marketed as job creation measures.”
“Accountability protects consumers and without that, consumers are going to be left out in the cold,” said Widmann.
In Arizona, the state with the highest concentration of ALEC members and a hotbed for ALEC-inspired legislation, an emergency meeting was called late last week to deal with ALEC’s bruised public image. The closed-door meeting was arranged by house majority whip Debbie Lesko and Russell Smoldon, a lobbyist for one of the state’s largest utility companies — both members of ALEC.
“The reality is the exposure damages them hugely,” said Loredo, who now works with Arizona Working Families, a group that is fighting ALEC model bills he says will hurt workers in his state.
Ohio’s Example: Consumer Protection ‘Eviscerated’
If you’ve ever gotten cheated by a car dealer, hired a contractor who did shoddy home repairs, got harassed by a debt collector, or had to sue a business over a dispute, then you’ve probably brushed up against consumer protection laws.
Consumer protection laws make it illegal for businesses to engage in unfair or deceptive practices and allow wronged consumers to sue in court for damages.
That was true in Ohio for 40 years. Now changes passed earlier this month will make it much more risky for consumers to sue.
ALEC’s website lists Victor Schwartz, an attorney and longtime leader on tort reform, of the law firm Shook, Hardy & Bacon, as the task force’s private sector chair.
Schwartz said neither he nor his law firm are members of ALEC but declined to comment further.
Ohio lawyers like Amy Wells, who represents consumers, fear the new Ohio law leaves consumers without a way to fight back and get fully compensated if they are cheated by a business.
“Our consumer protection law has just been eviscerated…. It’s going to be a very, very bad thing for the rights of consumers,” Wells said of the law, HB 275, that takes effect in early July.
The change is called “Right to Cure” and says that a business that is sued by a customer and wants to settle out of court only has to offer to pay the customer’s economic damages. Then if the customer rejects the offer and goes to trial, he or she must win more in economic damages from a judge or jury than the offer amount, otherwise the consumer is not entitled to other damages the law allows, such as treble damages, attorneys fees and noneconomic damages for things like fear, loss of sleep, and inconvenience.
State representative Ron Young, who sponsored the bill, said in a house floor speech that the measure “is designed to bring the consumer and supplier to a reasonable settlement” and “can make a consumer whole without the costly and lengthy rigors of going through what can all too often become a long and contentious court battle.”
But Wells said consumers cannot be made whole because a settlement offer will only cover economic damages. She said the law encourages businesses to make low-ball offers because the new law makes going to trial a “huge risk” for consumers.
In cases where noneconomic damages are high — such as where a consumer loses sleep over a badly-repaired roof, or suffers fear from abusive debt collection tactics — but a judge or jury awards economic damages that are equal or one penny less than the offer, the consumer will not collect any of the noneconomic damages or other damages allowed under the law, Wells said.
“Let’s say you were sold a rebuilt wreck and you keep taking it back to get repaired and try to get them to take the vehicle back. The kids are missing school, you’re late for work, you almost lose your job. Let’s say it goes to a jury after the dealer offers to settle for $1,000. The jury gives $999 in economic damages and awards $5,000 in noneconomic damages because the dealer acted egregiously. Under the [new law] you don’t get those [noneconomic] damages, because you didn’t beat the offer [on economic damages],” said Wells.
Another section of the new law says a settlement offer can cover $2,500 maximum in a consumer’s legal bills related to filing the lawsuit.
This type of restriction can make it tougher for consumers to get legal representation, lawyers say.
“If the meter gets shut off half way or a third of the way through [a case], the attorney can no longer afford to do it…. It’s cutting off at the knees the ability of consumers to get attorneys to take these cases,” said DeVonna Joy, a lawyer who runs the Consumer Justice Law Center in Wisconsin, a state that recently passed its own law capping the amount a consumer can collect to pay his or her legal bill at three times the amount of a consumer’s damages.
Expect to see more anti-consumer laws cropping up around the country, attorneys warn.
“It’s like a virus that’s spreading,” said Joy.
Do you think ALEC’s model laws are infringing on consumers’ rights? Share your thoughts by leaving a comment below.