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Last week, the U.S. Senate passed a bill making it easier for large, multistate class actions to be brought in federal rather than state court, the so-called Class Action Fairness Act, S. 5. The House is expected to pass its version shortly. We think the legislation is a bad idea. The federal courts are already underfunded and overcrowded, and to add thousands of cases to their caseload will only cause a delay of justice. Most state courts are perfectly competent to handle these cases; getting more of them removed to federal court will solve nothing, and may preclude some multistate claims from being heard at all. Many states’ attorneys general feel that the legislation would reduce their powers to sue on behalf of consumers in their states. The bill is based more on misperception than truth. Tort reformers claim that state courts are more favorable toward class actions than are federal courts, especially in plaintiff-friendly jurisdictions such as Madison County, Ill., which are often called “judicial hellholes” by reform advocates. But according to a study by the Federal Judicial Center, the research and education arm of the U.S. courts, class actions removed to federal courts and then remanded back to the states are no more likely to be certified as a class than those removed and retained in the federal system. Based on responses from attorneys in 621 cases between 1994 and 2001, the survey reported that 20% of cases remanded to state court for trial or settlement were certified, as opposed to 22% of class actions kept in federal court. The survey, available at www.fjc.gov, also said that the typical (median) recovery per class member in cases retained in federal court is $517, almost 50% higher than the $350 typical recovery in cases remanded to state court. And it said that state courts aren’t statistically more generous in granting awards of fees to plaintiffs’ lawyers. One aspect of the bill that does makes sense, however, is the requirement that when a class action settlement includes coupons to be redeemed by class members, the fees for plaintiffs’ lawyers should be tied to the percentage of coupons redeemed. This would provide a strong incentive for plaintiffs’ attorneys to structure a settlement that brings a high value for class members.

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