U.S. Class Action Reform An Even Money Bet?

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By Michael Ha

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NU Online News Service, June 13, 3:03 p.m.EDT?A House-approved measure aimed at reforming classaction litigation by moving many large, multistate class-actionlawsuits from state to federal courts has an even-money chance ofpassage, an insurance trade group representative said today.

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That assessment came from Joel Wood, senior vice president ofgovernment affairs for the Council of Insurance Agents &Brokers in Washington, D.C., following House passage of the measureyesterday by a vote of 253 to 170.

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The centerpiece of the bill, titled "Class Action Fairness Act"(H.R. 1115), is a provision to allow more multistate class actionsuits filed in state courts to be moved to federal courts.

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Under the transfer provision, if less than one-third ofplaintiffs in a class action suit are from a single state and ifthe aggregate amount at stake is at least $5 million, the matterwould move to federal court if the defendant requested it. But ifmore than two-thirds of the plaintiffs were from the same state,the suit would remain in the state court.

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Currently, the bar for transferring class action suits to thefederal level is much higher. For the federal court to assumejurisdiction, a suit needs to demonstrate a "total diversity." Ifany of the plaintiffs and the defendants are from the same state,the suit would not qualify as having sufficient diversity under thecurrent law, according to the Alliance of American Insurers.

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In the U.S. Senate, companion reform legislation is also in theworks. The Senate bill (S. 274) has already been approved by theSenate Judiciary Committee last April and is now awaiting action bythe full Senate.

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Proponents of class action reforms said the Senate bill cannotreach a vote until its advocates obtain the 60 votes needed to enda filibuster that is blocking the measure.

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Mr. Wood said there are currently "around 57 votes" in theSenate, and just 2 or 3 more votes from the Democratic side areneeded to vote on the measure. Passing the bill, once it moves fora vote, would not be a concern, since only 50 votes are needed forapproval, he said.

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If the Senate version of the class action reform bill isapproved, a House-Senate conference committee would convene tocraft a measure that would satisfy both houses and to get finalapproval from both chambers. Once it clears the Congress, "there isno question that President Bush would sign it," Mr. Woodpredicted.

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Joe Manero, spokesperson for the Alliance of American Insurersin Washington, D.C., also noted that President Bush has identifiedclass action reform as a "key priority" of his administration."What we heard is that the President is strongly backing this," Mr.Manero said.

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If the Congressional reform bills do become law, it could go along way in reducing the number of frivolous class action suits inthe country, proponents of the class action reform said.

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"If the class action reform bill becomes law, we would ridourselves of the most egregious example of trial lawyers abusingthe judicial system. Currently, many class action suits amount tolegalized extortion," said Mr. Wood from the Council of InsuranceAgents & Brokers.

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Under the current judicial system, Mr. Wood said, trial lawyersseek out "magic jurisdictions" for forum shopping, looking forsympathetic juries with elected judges who are more attuned to thedemands of their largest constituent group, the trial lawyers.

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"In state courts, lawyers extort multi-million-dollarsettlements from corporations. But the standard of proof is higherin federal courts, and federal judges are not elected," Mr. Woodsaid. "In federal courts, jurisdiction hunting and forum shoppingare far less of an issue. You can't take advantage of the federalcourt as you can the state court. That's just the reality," Mr.Wood said.

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He also added that there is now a "50-50 chance" thatCongressional reform bills would become law.

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"We pretty much have all the Republican votes locked down. Twomonths ago, I would have said the medical malpractice reform hadthe greatest chance of being the first civil justice reform toemerge under the Bush administration. Now, I believe class actionis at the top of the list," he said.

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