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Washington�The U.S. Senate, historically hostile to “tort reform” legislation, may take up new restrictions on class actions this week with a high probability of final passage. The class action legislation�S. 1751�is one of a trio of changes in the tort system sought by President Bush and the nation’s business community. In his State of the Union address last week, the president called for an end to “junk” and “frivolous” lawsuits, many of which are state class actions, according to business and Republican lawmakers. More problematic for the president and businesses are proposed limits on medical malpractice and asbestos liability. Many involved in the malpractice debate see little chance of any action in the Senate this year despite Bush’s renewed call for restrictions. On asbestos proposals, one business lobbyist, speaking of all sides in that long-running debate, said, “The good news is they’re still talking. The bad news is they’re still talking.” If the Senate does approve S. 1751, which, essentially, would move most class actions into federal courts, it will do so in the face of opposition by the Judicial Conference of the United States, the policy arm of the federal judiciary; the Conference of Chief Justices (of state high courts); civil rights groups; and environmental organizations, among others. But Matthew Webb, director of legal reform policy at the U.S. Chamber of Commerce, said, “I think at the end of the day what you’re going to be dealing with is truly meritorious claims still going forward and being dealt with in federal court. At the same time, if you’ve got more frivolous stuff, those will probably fall by the wayside. “I question whether we will have a long-term, massive influx of cases into the federal courts.” Pamela Gilbert of Washington’s Cuneo Waldman & Gilbert, a class action firm lobbying against S. 1751, sees a different result. “What they ignore is the reality that the federal judges don’t think these cases belong in federal court and they say they can’t handle them without additional resources,” she said. “We already have a huge backlog in our federal courts. When a class action has to wait for a year or two even to begin because of the backlog and you have no option to go to state court, you’ve been denied justice.” Compromise? Sell out? The Republican-led House already has passed its version of class action reform. Last fall, the Republican-led Senate was still short of the 60 votes needed to overcome a filibuster of its proposals. The dynamic changed shortly before the holidays when Senate leaders announced a compromise had been reached with three Democratic opponents of the measure: senators Charles Schumer of New York, Christopher Dodd of Connecticut and Mary Landrieu of Louisiana. The compromise would add another exception to federal court removal of state class actions and tighten up procedures involving coupon settlements. The threshold amount for removal is still $5 million. Federal jurisdiction would be affected as follows: If one-third or fewer of the plaintiffs were from the same state, federal court removal jurisdiction would apply. When two-thirds of the plaintiffs and the primary defendants were from the same state, there would be state court jurisdiction. The compromise would permit state court jurisdiction in this category also when at least one defendant was from the same state as plaintiffs, significant relief was sought from the defendant and that defendant contributed significantly to the harm; when the principal injuries occurred in the state where the action was filed; and when no other class action asserting the same or similar allegations against any of the defendants on behalf of the same or other people had been filed for three years. In the third set of cases, in which between one-third and two-thirds of plaintiffs were from the same state as the primary defendant, a federal judge could accept removal or remand the case to state court based on a number of factors. These include whether the case presented an issue with national impact, whether plaintiffs filed in state court as a result of forum shopping and whether the particular action is likely to be the only one filed. The compromise would allow federal courts to consider any distinct nexus between the forum where the action was filed and the class members, defendants and alleged harm. Federal courts could not base jurisdiction on the existence of similar actions filed in other states if those cases were more than 3 years old. The compromise also would reinstate so-called bounties-special relief for plaintiffs who had endured hardships as a result of initiating the litigation. In coupon settlements, attorney fees must be based on the proportionate value of coupons actually redeemed or hours consumed in prosecuting the action. “I would not call it a compromise,” said Jackson Williams, legislative counsel to Public Citizen’s Congress Watch. “Our view is the changes agreed to, supposedly at the insistence of senators Landrieu, Dodd and Schumer, are not that significant.” The prohibition on bounties, he said, was “almost certain” to be stricken by a floor amendment because civil rights groups had lobbied hard to get it removed. The coupon-settlement language, which Williams called “good,” also was expected to pass as an amendment if the bill went to the floor, he said. The only truly new change achieved was allowing state court jurisdiction in the two-thirds plaintiff category where at least one defendant was from the same state and no similar action had been filed in the last three years, Williams said. “We think that’s not going to affect many cases,” he said. “This was not in fact a compromise. It’s just that three senators changed their minds and were looking for some way to cover it up.” Joan Mulhern, senior legislative counsel at EarthJustice Legal Defense Fund, agreed, calling the compromise “more of a sellout” than a compromise. “I know there are many kinds of cases, including civil rights and consumer cases, affected by this bill, but my organization is concerned with environmental damage, toxic injury suffered by communities,” Mulhern said. “I’ve yet to hear anyone publicly say that those are the kinds of cases where the class action system has been abused and there must be a remedy . . . .Even Chief Justice [William H.] Rehnquist said these cases don’t belong in the bill. But they are still in the bill and they don’t deserve to be.” And that is the core problem with the bill, said Joy Howell, a consultant to the Coalition to Preserve Access to Justice, comprised of about 70 civil rights, consumer and environmental organizations. Business, she said, points to a few “out of hand” state jurisdictions and the need to put similar cases filed around the country into the multidistrict litigation system. “Why deal with a handful of jurisdictions with a sweeping national bill that has the consequence of denying access to justice to consumer fraud, civil rights and environmental pollution violations?” she said. “These cases typically don’t get certified in federal court and won’t be heard in state court under this bill. What will happen to those abuses?” Schumer has defended his switch as tightening up excesses in the system. Landrieu’s spokeswoman, Gina Farrell, said the compromise met the senator’s major concerns: valueless coupon settlements and forum shopping. “I’m feeling good that this compromise can go through,” said Larry Fineran of the National Association of Manufacturers. He said he hasn’t heard any “major complaints” about the compromise on his side of the issue. “We do support the compromise,” said the Chamber of Commerce’s Webb. “It still preserves the core of the bill so large interstate class actions would be heard in federal court. It further refines what exactly is a class action dealing with local matters versus national matters. “With those additional supporters, it definitely puts us over the hump with 60-plus votes.” Left to the bill’s opponents is to press for floor amendments. Some senators, such as Democrats Patrick Leahy of Vermont, Edward Kennedy of Massachusetts and John Breaux of Louisiana, reportedly are working on amendments. “We’re hoping to improve the bill, which isn’t our first choice,” said Gilbert. “Our first choice is that the Senate not pass any version. But once the filibuster is overcome, the numbers are there.” Lawyers and others lobbying against passage say some lawmakers are still unaware of what the bill actually does, so they are continuing to meet with senators. A recently published study reporting that the average cost of settling class actions and the average fee paid to lawyers who bring them have not changed for a decade may have come too late in this debate, they say. “It’s a very significant study,” said Williams. “It really challenges the main premises that have been bought into by the Senate.” Webb, of the Chamber of Commerce, dismissed the study as based on a limited sampling. “We don’t think the study ultimately describes the problem we are trying to address,” he said. Different dynamics Each of the three tort measures in the Senate has its own political dynamics. Gilbert sees money as the reason a “compromise” was reached shortly before the year ended. She noted that the three senators who compromised and Senator Jeff Bingaman, D-N.M., who did not, held all of the leverage on the bill for some time. “We could have been in this situation by last summer,” she said. “There’s a lot of support for the bill. The president wants it. The House and Senate leadership and a group of Democrats want it. “I am absolutely convinced the Republican leadership did not want to do the bill then because they were raising campaign contributions with this bill. “This is a money bill and everybody in Congress knows that. Their constituents as individuals are not clamoring for it. But businesses are and lobbyists who raise money are.” The focus now is on the Senate floor. “I just hope everyone who supported the compromise still supports the bill when the votes are called,” said Fineran. “The question then is: Can the House accept the changes? We’ll have to leave it at that for now.” Coyle’s e-mail address is [email protected].

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