Senate Votes to Pass Class Action Reform

14 February 2005 00:01  [Source: ICB Americas]

The chemical industry cleared a substantial hurdle toward a long-sought legal reform last Thursday as the US Senate voted 72-26 to pass legislation that would overhaul the class action lawsuit system.

“This is a major victory for litigation fairness,” says Don Evans, deputy general counsel for the American Chemistry Council (ACC). “It also is an historic victory for the chemical industry and the entire business community, which overcame fierce opposition from trial lawyers and their friends, who had blocked the measure for three successive Congresses.”

The bipartisan compromise, which is designed to move most large multi-state class action lawsuits to federal courts, is expected to also pass the House of Representatives next week.

President George W. Bush says he wants a “clean bill” sent to his desk as soon as possible.

Mr. Evans says the legislation would curb “serious abuses” that are occurring in the class action process. “The current system is badly flawed,” he says. “Trial lawyers are exploiting our legal system by engaging in forum shopping.”

Mr. Evans says class actions are frequently filed in carefully selected state courts known to be sympathetic to the plaintiff lawyer’s point of view. “This situation is particularly unfair to an out-of-state corporation,” he notes. “The company is subject to hometown bias, with the judge tilting the scales of justice in favor of in-state residents or local interests.”

Faced with enormous financial risks, the ACC attorney says companies are under tremendous pressure to settle frivolous cases that otherwise would be contested on their merits. The bill addresses the problem by establishing federal jurisdiction over class action lawsuits when the total amount in dispute exceeds $5 million, and when any plaintiff and the defendant live in different states.

“The Class Action Fairness Act will help ensure that all of the litigants receive a fair trial before an impartial judge,” says Mr. Evans.

The legislation also includes provisions that will help protect consumers when real harm can be shown, he adds. “In many of these cases, the plaintiff’s attorneys receive huge fees while the class members frequently receive little benefit,” says Mr. Evans.

Critics of the bill, which include trial lawyers and consumer activists, contend the legislation would make it more difficult to hold corporate wrongdoers accountable, and could overwhelm federal courts with new filings.

Opponents attempted to narrow the scope of the bill, but all of the proposals were voted down by wide margins, with a handful of Democrats siding with the Republican majority.

Lawmakers voted 59-40 to reject an amendment by Senator Edward Kennedy (D-Mass.) that sought to carve-out anti-discrimination cases and wage-and-hour suits from the bill. The chamber also set back by a vote of 60-39 an attempt by Senator Mark Pryor (D-Ark.) to exempt class action lawsuits brought by state attorneys general.

In addition, the Senate voted 61-38 to defeat an amendment offered by Senators Diane Feinstein (D-Calif.) and Jeff Bingaman (D-N.M.) that would give judges guidance on how to manage their court dockets when classes include citizens of more than one state.

Senator Feinstein, who supports the underlying bill, said she was concerned that certain national class action cases “may be caught in a Catch-22 where they would be prohibited from having their cases heard in either state or federal courts—leaving the case to reside in oblivion.”

House Republican leaders have said they would accept the Senate bill, if it were passed without amendment, in order to fast-track the measure to President Bush, who has made legal reform a high priority in his second term agenda.

“Should the Senate pass (the class action bill) as is, we will immediately take it up in the House and pass it without alternation, so we can quickly deliver it to the President for his signature,” House Majority Leader Tom DeLay of Texas and House Judiciary Committee Chairman James Sensenbrenner of Wisconsin, both Republicans, said in a statement on February 4.

The House has passed class action reform bills three times in recent years, but the measures have always been blocked by Senate Democrats. However, supporters believe the compromise legislation now before the Senate will garner at least 62 votes, including 11 Democrats and one independent.

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