Reform For Class Action Suits Passes Senate

By Matt Brady

NU Online News Service, Feb.10, 6:31 p.m. EST, Washington?Legislation to reform the class action litigation system finally won passage in the Senate today, after failing in the chamber several times in the past few years.[@@]

The measure, known as S. 5, is expected to move swiftly through the House, and President Bush, who supported the measure, is expected to sign it into law. The measure would give federal courts sole jurisdiction over large multistate class actions and increase judicial oversight of settlement agreements.

House Judiciary Committee Chairman F. James Sensenbrenner, R-Wisc., and Majority Leader Tom Delay, R-Texas, said that the bill passed by the Senate would be brought to the House floor and could be presented to the president by the end of the week.

The Senate approved the bill by a vote of 72 to 26 after two days of debate in which several major amendments were rejected. Among those was a proposal by Sen. Edward Kennedy, D-Mass., to exclude civil rights class actions and cases involving wage laborers from the bill.

Also failing was an amendment by Sen. Russ Feingold, D-Wisc., that would have required federal courts to rule on motions seeking to remand a case to state court within 180 days.

During the debate, opponents protested that the bill would limit the rights of those seeking justice, and noted that a deal between some Democrats and Republicans meant the outcome of the eventual vote for passage was never in doubt.

"Anybody who's been watching the debate can see that, apparently, the fix was in," said Sen. Patrick Leahy, D-Vt. Leahy had said the state court system has been among the few options for regular people, without any political or financial influence, to seek justice, and that, "now we're going to close that door."

Proponents of the bill, however, argued that the bill would simply restore a degree of fairness to the system by denying attorneys from "forum shopping" for plaintiff friendly courts. Proponents said the bill also would prevent abusive settlements, involving cases in which class members were awarded product coupons while attorneys won millions in fees, or in which settlement funds were unevenly divided among class members.

"They may end up in state court rather than federal court," said Majority Leader Bill Frist, R-Tenn., "but no citizen will lose his or her right to bring an action in court."

Sen. Thomas Carper, D-Del., said that the bipartisan process to build support for the bill could be a template for other issues, including energy policy and asbestos litigation reform. This sentiment was shared by the industry.

"The Class Action Fairness Act is a model of legislative compromise," said Carl Parks, Property Casualty Insurers Association of America Senior Vice President of Government Affairs. "It should serve as a framework for future reforms and give hope to businesses and consumers across the country who have been saddled by the extraordinary costs of our American tort system."

The Washington-based American Insurance Association, which has spearheaded industry efforts to win passage of the bill, called Senate passage, "A tremendous, meaningful step forward."

Melissa Shelk, vice president of federal affairs for the AIA said that while the final vote on the bill showed bipartisan support for the legislation, "it also is very important to note that this bipartisan cooperation resulted in proponents' ability to successfully fight off amendments to the bill."

She noted that, "Sending a clean bill to the House is critical for swift action and success on that side of the Hill."

Ms Shelk stated. "We understand that the House is expected to take up the bill next week, and we expect it to pass unchanged, since that chamber has passed class action reform measures on three previous occasions."

Prudential Equity Group LLC analysts Jay Gelb and Charles Gabriel said they viewed passage of the class action measure "as a meaningful positive catalyst for property & casualty insurers." The analysts said that commercial P&C insurers like AIG, St. Paul Travelers, Chubb, ACE Limited, XL Capital, and The Hartford should benefit from better underwriting margins due to slowing loss cost inflation.

Personal lines insurers like Allstate, Progressive, and Safeco should also benefit "because these companies are often targeted by the plaintiffs' bar," the analysts said.

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Reform For Class Action Suits Passes Senate

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