House Bill Would Limit Class-Actions
Washington
Bipartisan legislation that would allow large class-action lawsuits to be heard in federal, rather than state courts was introduced last week in the U.S. House of Representatives with strong support from insurance and business groups.
The bill is sponsored by Reps. Bob Goodlatte, R-Va., and Rick Boucher, D-VA., and has numerous other co-sponsors among both Republicans and Democrats.
Called the Class Action Fairness Act of 2001, the legislation would establish federal court jurisdiction over any class action in which the aggregate amount at issue exceeds $2 million and any member of the plaintiff class is a citizen of a different state than any defendant.
By contrast, current law establishes federal jurisdiction only when every member of the plaintiff class is a citizen of a different state from every defendant and each member of the class is seeking damages of more than $75,000.
However, the new rules established by the legislation would not apply to certain limited situations. These include:
Where the substantial majority of members of the plaintiff class and the primary defendants are citizens of the same state in which the action was originally filed and the claims will be governed primarily by the laws of that state.
The primary defendants are states, state officials or other government entities against whom a federal court may not be able to order relief.
Where there are fewer than 100 members of the plaintiff class.
In addition, the bill contains new protections for plaintiff class members. First, members must receive plain English notices that they are members of the class, providing essential information in an easily understandable tabular format.
Second, coupon settlements, in which members receive only coupons as relief for their injuries, must be approved by the judge. Third, settlements in which the class members suffer a net loss are barred. In addition, the bill bars schemes in which some class members receive more money than other members based on geography or other factors.
Melissa Shelk, vice president of federal affairs for the Washington-based American Insurance Association, said the bill is urgently needed to restore fairness to the legal system. "The bill will allow for multistate, truly national class-action lawsuits to be heard in federal court–the court where they belong," she said.
Lawrence Fineran, assistant vice president for regulatory policy with the National Association of Manufacturers in Washington, said the bill will go a long way toward stopping lawyers from gaming the system to generate fees.
The legislation had not been assigned a formal bill number at press time.
Reproduced from National Underwriter Property & Casualty/Risk & Benefits Management Edition, July 6, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.
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