10 July 2000 00:00 [Source: ICB Americas]By Glenn Hess
Despite a presidential veto threat and strong opposition by most Democrats, an industry-supported legal reform bill that aims to curb abuses within the class action system is headed for a vote on the Senate floor.
The contentious legislation, which would transfer many class action lawsuits from state courts to federal courts, was approved by the Senate Judiciary Committee on June 29 in a narrow 11-7 vote.
The reform measure is being pushed by the chemical industry and other manufacturers. They maintain that class actions are a growing and costly litigation problem for US corporations.
While the legislation would not prevent any person from bringing a class action lawsuit, it would greatly limit the practice of personal injury lawyers shopping for friendly states and jurisdictions.
Don Evans, senior counsel for the American Chemistry Council (formerly CMA), says the proposed Class Action Fairness Act provides a simple solution."When the litigation involves parties from different states, the parties could move the class action from state court to federal court," he notes.
"This would prevent home town decisions and protect the rights of out-of-state parties. Faced with such enormous financial risks, companies will usually pay large settlements on a case that they would otherwise contest on the merits," Mr. Evans comments.
Under the bill, either party in a class action case involving more than $2 million, could seek a transfer to federal court if the defendant and at least one plaintiff live in different states.
"All this bill does is to protect constitutionally mandated diversity jurisdiction--suits between citizens of different states," Sen. Orrin Hatch (R-Utah) remarked during the committee's debate.
Sen. Charles Grassley (R-Iowa), the bill's chief sponsor, agreed that the federal court is meant to function as "an impartial arbitrator" in such situations.
However, most panel Democrats argued the bill would cause massive delays and protect corporations from having to pay settlements. "Why is this being done?" asked Sen. Joseph Biden (D-Del.) "Because there are certain state courts that the business community doesn't like being in?"
The legislation also contains various provisions aimed at preventing settlements in which claimants receive little money and their lawyers receive millions of dollars in fees. But opponents countered that the bill would not solve this problem because the same abuses exist at the federal level.
In a series of 7-10 votes, Republicans defeated Democratic attempts to exempt from the bill certain types of class actions, including those that deal with environmental litigation and consumer protection laws.
Sen. Herb Kohl (D-Wis.), a bill co-sponsor, voted against the carve-outs and insisted they were not necessary. "The bill will not deter a single meritorious lawsuit from proceeding," he said.
However, Sen. Biden and the committee's ranking Democrat Patrick Leahy of Vermont threatened a filibuster when the full Senate takes up the legislation.
Sen. Leahy said he would speak at length about all Democratic floor amendments. "I will then discuss the 225-year history of jurisprudence in the state of Vermont. Then I will move to that of Delaware and the 48 other states."
Despite the uphill battle still ahead, Mr. Evans called the committee's vote "a significant step on the road to reform," noting that this is "an issue of importance to nearly every business in the country."
The protections included in the legislation, he said, ensure that each side in a class action lawsuit "receives not only their day in court, but a fair and impartial proceeding."
Senate Majority Leader Trent Lott (R-Miss.) has indicated that he intends to bring the bill up for a vote in the full Senate soon. Similar legislation passed the House of Representatives last September.
Class action reform is strongly opposed by a key Democratic constituency--the nation's trial lawyers.
"There is no public outcry for this legislation," says a spokesman for the Association of Trial Lawyers of America (ATLA). "It's hard to justify from any standpoint...other than to protect companies from liability."
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