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

By Michael Ha

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

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

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

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

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

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

Proponents of class action reforms said the Senate bill cannot reach a vote until its advocates obtain the 60 votes needed to end a filibuster that is blocking the measure.

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

If the Senate version of the class action reform bill is approved, a House-Senate conference committee would convene to craft a measure that would satisfy both houses and to get final approval from both chambers. Once it clears the Congress, "there is no question that President Bush would sign it," Mr. Wood predicted.

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

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

"If the class action reform bill becomes law, we would rid ourselves of the most egregious example of trial lawyers abusing the judicial system. Currently, many class action suits amount to legalized extortion," said Mr. Wood from the Council of Insurance Agents & Brokers.

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

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

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

"We pretty much have all the Republican votes locked down. Two months ago, I would have said the medical malpractice reform had the greatest chance of being the first civil justice reform to emerge under the Bush administration. Now, I believe class action is at the top of the list," he said.

Special Reports /

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

Related Stories

Recommended For You