House Sends Bush Class Action Bill

Observers at Washington Analysis, a buy-side securities research group, said after passage that the President by signing the bill as early as tomorrow would thwart a rush of class-action filings under the current law.

This was confirmed by staff officials at the American Insurance Association, which played a key role in lobbying for the measure.

Melissa Shelk, vice president of federal affairs for the AIA, said after the vote that "Republican congressional leaders made class action reform a priority, and their successful efforts to gain bipartisan support has quickly made passage of class action reform a reality. The White House has announced President Bush will have a bill signing ceremony tomorrow."

Republicans are expected to use the overwhelmingly vote and prompt passage?the bill was not expected to reach the President's desk before Easter?as a springboard for passage of legislation reforming the asbestos and medical malpractice litigation systems.

Efforts are also underway to pass a bankruptcy bill sought by large credit card banks, but it is unclear what will happen to that legislation.

Under the bill, class-action suits seeking $5 million or more would be heard in state court if the primary defendant and more than one-third of the plaintiffs are from the same state. But if fewer than one-third of the plaintiffs are from the same state as the primary defendant, the case would go to federal court.

The bill also would limit lawyers' fees in so-called coupon settlements – when plaintiffs get discounts on products instead of financial settlements – by linking the fees to the coupon's redemption rate or the actual hours spent working on a case.

The House acted on compromise legislation that first reached the floor of the Senate last year but was tied up by Democrats' demands that non-germane amendments be added. The House acted on the Senate bill out of concern that any amendments to make it stronger would subject it to a Democratic filibuster in the Senate.

The bill passed after a two-hour debate and Democrats' efforts to pass a substitute bill failed. In supporting passage, Republicans said on the floor of the House that restricting most large class action lawsuits to federal court will stop lawyers from reaping huge profits from the system and lead to lower prices for consumers.

House Judiciary Chairman James Sensenbrenner, R-Wis., said during the debate that, "Today marks the culmination of near a decade of legislative efforts to end systematic abuse of our nation's class action system."

Democrats have argued that Republicans' only interest is in hurting trial lawyers who are traditionally big Democratic donors and helping big business escape multimillion-dollar verdicts from state courts.

Rep. John Conyers of Michigan, the top Democrat on the Judiciary Committee forecast that Republicans won't be satisfied with just changing the class-action system.

"Today we will attempt to pre-empt state class action," Mr. Conyers said. "Next month we will take up a bankruptcy bill that massively tilts the playing field in favor of credit card companies and against ordinary consumers and workers alike.

"On deck are equally one-sided medical malpractice bills and asbestos bills that both cap damages and eliminate liability to protect some of the most egregious wrongdoing in America."

Robert Rusbuldt, the Independent Insurance Agents of America chief executive officer, said, "We pushed very hard for this common-sense legislation, which will help end ?venue shopping' by restricting major class-action suits to federal courts. We expect this much-needed legislation will not only do a better job of protecting businesses from frivolous lawsuits, but also helping consumers with legitimate cases gain justice more quickly."

Charles E. Symington, Jr., Big "I" senior vice president of federal government affairs, added that, "This is not only a great day for businesses and consumers, but also an important step forward toward bringing about overarching legal reform."

Property Casualty Insurers Association of America Senior Vice President, Government Affairs, Carl Parks, said that, "Class action abuse is a major contributor to the $246 billion our legal system costs consumers each and every year. Despite the enormity of those costs, very little trickles down to the average consumer. Most class action plaintiffs end up receiving paltry awards while taxpayers are forced to pick up the tab for the huge fees collected by lawyers."

David Winston, senior vice president, federal affairs at the National Association of Mutual Insurance Companies, said "This is the first step toward accomplishing momentous legal reforms in the 109th Congress."