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All legislation attracts competing claims about its real-world impact. But the class action debate is in a class by itself, with each side, it seems, dealing in an alternate reality. Even the bill’s formal title, the Class Action Fairness Act, is either descriptive or ironic, depending on whether one is pro-defendant or pro-plaintiff. Conflicting assertions about the bill have been flying about for weeks now as the legislation, widely expected to pass the Senate this week and reach the president’s desk soon after, nears the end of a seven-year legislative trek. Among the hype, however, are precious few actual facts, and a couple of glaring misconceptions � by both sides. Here’s all we really know: The bill will force more class action claims into already overcrowded federal courts. And, given the glacial pace at which many federal courts move, it will almost certainly slow down the class action process. At the same time, by shunting more cases into federal courts, the bill will clamp down � by how much, nobody knows � on the handful of state “magnet” courts, where plaintiffs’ attorneys have filed dozens, if not hundreds, of class actions each year. The bill will also change how lawyers are paid in contingent fee coupon settlements, the type of cases in which counsel receive huge payments and plaintiffs are left with coupons of questionable value. Under the bill, a counsel’s fee will be based on the value of the coupons redeemed, not the value of the coupons awarded. After that, the facts become mush. Take one of the bill’s most widely foreseen consequences, expounded by both sides � that federal courts are less likely to certify multistate class actions than state courts. “It’s fair to say there may be fewer class actions certified,” notes Stanton Anderson, who lobbies for the bill for the U.S. Chamber of Commerce’s Institute for Legal Reform. Insists Frank Clemente, the chief lobbyist for Public Citizen’s Congress Watch, which opposes the bill: “We know that most nationwide class actions in federal court do not get certified.” But they don’t in state courts either, notes Thomas Willging, a senior researcher at the Federal Judicial Center, the research and education arm of the federal courts. Willging recently co-authored a study, based on responses from 728 attorneys involved in class actions for both plaintiffs and defendants between 1994 and 2001, which looked at certification rates for state and federal courts. According to the report, 20 percent of class actions remanded to state courts were certified for trial and litigation while 22 percent of class actions in federal court were certified for trial and litigation. Says Willging: “The most important part of the study, from my perspective, was that we found that class certification is equally unlikely to occur in state or federal courts.” The study does not detail how many of those class actions were consumer fraud class actions, the sort that opponents of the bill say are less likely to be certified under federal rules of procedure. Nonetheless, the study, a copy of which was obtained by Legal Timesand which will appear on the Federal Judicial Center’s Web site ( www.fjc.gov) this week, is a serious corrective to the widespread belief that federal courts do not certify classes for trial as easily as state courts do. The 48-page study, however, also pours cold water on one of the most important points made by the bill’s proponents: that the half-dozen or so state magnet courts have distorted the certification rate of state courts. In fact, says Willging, magnet courts have had no effect on state courts’ overall certification rate. “The impact of those jurisdictions is subsumed in a larger group of cases that don’t in the aggregate show any effect,” notes Willging, adding: “We didn’t find the kind of problem people were pointing to in supporting the legislation.” ROAD SHOW The magnet courts, or “judicial hellholes,” as they’ve been named by the bill’s supporters, are subject to as many interpretations as any aspect of the class action bill. Bill opponents say their impact on the business community is wildly overstated and that state appellate courts and state legislatures have already reined in the most renegade state judges. But that’s not the point, argues John Beisner, a defense attorney and partner at O’Melveny & Myers, who has played a key role in promoting the class action bill since hearings were first held in October 1997. As soon as one state corrects its class action excesses, another judge in another state pops up instead, he says. “It’s a traveling road show. After Alabama, the road show went to Texas, then to southern Illinois, then West Virginia.” Madison County, Ill., is the county class action reform proponents love to cite. According to published reports, there were only two class actions filed in the county in 1998. By 2002, that number had jumped to 77; by 2003, to 106. Last year, there were 71. That may seem excessive. But that’s not the whole story, says Senate Judiciary Committee member Richard Durbin, an Illinois Democrat who was understandably defensive about the county’s reputation during a Feb. 3 committee markup of the bill. Durbin noted that only three of the 77 class actions were actually certified to proceed to trial in 2002; and that only two of the 106 class actions filed in 2003 were certified to proceed. “Perhaps we’re carping on a trifle,” he said, before the committee voted the bill out by a 13-5 margin. (Durbin was one of the five Democrats to vote against the bill, along with Russell Feingold of Wisconsin, Patrick Leahy of Vermont, Joseph Biden of Delaware, and Edward Kennedy of Massachusetts.) According to the Institute for Legal Reform’s Anderson, Durbin’s statistics are not the whole truth, either. It’s not the number of classes certified that counts, he says. It’s the number of cases rejected. “And I’m not aware of any class action filed in Madison County that has been rejected by a judge in Madison County,” Anderson says. The point, he adds, is that settlement negotiations start as soon as a case is filed, not once it is certified. That, of course, is a contention many consumer groups reject. CONSERVATIVE STREAK There are also larger philosophical issues that surround the class action legislation � federalism, the relationship of state courts to federal courts, and the role of the plaintiffs bar in policing rogue activity. Then there are political considerations, and how the class action debate can provide the momentum needed to pass a far more difficult tort reform measure: capping pain and suffering awards in medical malpractice cases. Also at work is a significant subtext: defunding the trial bar, which many Republicans believe is the Democrats’ most potent political ally. The tort reform bills, including class action reform, says Americans for Tax Reform President Grover Norquist, “happen to eliminate a lot of free cash that ends up being handed out willy-nilly in an almost lottery-sense-style to a bunch of billionaire trial lawyers � all of whom are goddamn Democrats.” Others also point to an increasingly conservative federal judiciary and the wave of class actions that federal judges will hear once the class action bill becomes law. “Let’s be honest. That’s why the Chamber of Commerce is pushing this thing,” says Philadelphia class action lawyer Daniel Berger, whose firm, Berger & Montague, has about 100 active class actions, most of them in federal court. “As the federal courts become more hostile, as more conservative business-oriented judges are appointed to federal courts,” he says, “it will become increasingly difficult for consumers and people victimized by corporate abuses to get any type of relief.” University of Houston political scientist Robert Carp, who has spent 35 years studying the behavior of federal judges, says there is some merit to Berger’s concern. “Class actions � environmental, corporate abuse � off the top of my head, based on roughly similar types of cases, I’d say Democratic judges would be 10 to 15 percent more likely to be sympathetic [to plaintiffs], which is enough to be substantively significant,” he says. UNINTENDED CONSEQUENCES The real impact of the bill on class action litigation won’t be clear for years. Meanwhile, much of its inartfully worded language will have to be litigated in court. For example, when the principal defendant and two-thirds or more of the “members of all proposed plaintiff classes in the aggregate” are from the same state, the case may remain in state court. But how are such “members” defined, wonders Pamela Gilbert, a name partner at D.C.’s Cuneo Waldman & Gilbert. “At the point where the court is deciding jurisdiction, nobody knows where the class members live. It’s something you don’t learn until the class members start asserting their claims at the very end of the case,” she says. And there are also the unintended consequences of the bill, some of which could work against corporate defendants. With cases forced into federal court, there will be fewer chances for companies to work the so-called reverse auction, which allows defendants to play one set of plaintiffs off another in order to achieve the lowest settlement price. And if class actions are actually harder to bring in federal court, plaintiffs attorneys may respond by filing more class actions in individual states. “It’s the best fix we can find to the forum-shopping problem,” said Sen. Dianne Feinstein (D-Calif.) at the Feb. 3 markup. Conceded Delaware’s Biden at the same markup: “It’s a bad idea whose time has apparently come.” T.R. Goldman can be contacted at [email protected].

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