Industry Hopeful On Federal Class Action Bill

The Senate, he said, has unanimously agreed to take up class action reform, S. 2062, after finishing work on a defense bill. The bill, Mr. Karr noted, has been hung up for awhile, but now will be considered without any procedural votes. He said he believes the legislation will pass and will eliminate the worst abuses in the system.

Anne Sittmann, a representative of the Property Casualty Insurers Association of America in Des Plaines, Ill., said PCI is pleased that the Senate agreed to take up the bill immediately after the defense bill. "In fact, the timing may be better as this will allow the Senate to focus solely on class action reform," she said, adding that the bill appears to have the support of more than 60 senators and PCI is looking forward to final action.

David Winston, senior vice president of federal affairs for the National Association of Mutual Insurance Companies in Indianapolis, said the delay in the cloture vote which had been scheduled for Tuesday, June 1?was simply a procedural move. (A cloture vote, requiring 60 senators, closes debate and allows an up-or-down vote to proceed.)

It is clear, he said, that Democrats in the Senate wanted to get the defense bill done before moving on to class action. Mr. Winston said he is still hopeful the legislation will pass. If so, he said, it will defy the conventional wisdom that nothing can get done in Congress in an election year.

Senate Majority Leader Bill Frist, R-Tenn., had scheduled a cloture vote on S. 2062, but postponed it after reaching an agreement with Democrats.

The legislation represents a bipartisan compromise, and it is widely believed that 61 members of the Senate a filibuster-proof majority have agreed to support it.

How Would Reform Work?

Under S. 2062, federal courts would, in general, have jurisdiction over class actions in which any member of the plaintiff class is from a different state than any defendant and the plaintiffs are claiming damages of at least $5 million.

However, the legislation also sets standards which allow some cases to remain in state courts.

If between one-third and two-thirds of the plaintiff class and the primary defendants are from the state where the lawsuit was filed, a federal judge may decline to exercise jurisdiction after evaluating several factors, including:

o Whether the claims involve matters of national or interstate interest.

Whether the class action has been pleaded in a manner that seeks to avoid federal jurisdiction.

Which state's laws will govern the action.

A federal district court must decline jurisdiction if more than two-thirds of the plaintiff class and at least one primary defendant are from the state where the action was originally filed. In addition, that defendant must be one from whom the plaintiffs are seeking significant relief and whose alleged conduct forms a significant basis for the claims. Absent those qualifications, a federal court must still decline jurisdiction if more than two-thirds of the plaintiff class and all the primary defendants are from the state where the action was originally filed.

Reproduced from National Underwriter Edition, June 4, 2004. Copyright 2004 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.