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The U.S. House of Representatives last week passed legislation that would overhaul rules for bringing and settling class actions. Designed to address what sponsors call the explosive growth of class actions filed in far-flung, plaintiff-friendly state courts, the bill would allow almost all class actions to be removed to federal court. Known as the Class Action Fairness Act, the legislation also provides for special judicial review of settlements where class members get coupons but plaintiffs’ lawyers earn millions. “Interstate class actions … involve more money and touch more Americans than virtually any other litigation pending in our legal system,” said Rep. Bob Goodlatte, R-Va., the author of the bill, during a March 13 floor debate. “Class actions of national importance should be heard in federal court by a federal judge, not by a state or county court judge in one region of the country,” he continued. “Why? Because plaintiffs’ attorneys choose from a very select number of courts around the country where the judges are known to be very favorable to class action lawsuits.” Among the forums singled out as class action magnets were Madison County, Ill.; Jefferson County, Texas; and Palm Beach County, Fla. Bill backers estimate class action filings in state courts have increased 1,000 percent in the last 10 years. The legislation, which is strongly backed by the U.S. Chamber of Commerce and supported by the Bush administration, passed in the House by a 233-190 vote, largely along party lines. Its fate in the Senate is uncertain. Sen. Charles Grassley, R-Iowa, introduced a parallel version in November that attracted 11 co-sponsors including Sens. Herb Kohl, D-Wis., and Orrin Hatch, R-Utah. But the bill remains stalled in the Judiciary Committee, and a spokesman for committee Chairman Patrick Leahy, D-Vt., declines comment on if or when the committee will take up the matter. Lining up in opposition are traditional Democratic allies — trial lawyers and consumer groups including the Consumer Federation of America and Public Citizen. Calling the bill “brazen,” House Minority Whip Nancy Pelosi, D-Calif., on March 13 said during a floor speech, “With all the headlines on Enron and Arthur Andersen, instead of helping [unemployed] workers, we are making it harder for consumers to bring class actions.” The chief provision of the bill would amend Title 28 of the U.S. Code dealing with jurisdiction. Under current law, if a class action doesn’t involve a federal question such as civil rights, all plaintiffs and defendants must be residents of different states, and every plaintiff’s claim must be valued at $75,000 or more for a case to be removed to federal court. The bill would create a new class action diversity standard: If any plaintiff and defendant live in different states, and plaintiffs’ claims total at least $2 million, the case can go to federal court. The same remedies are available in either forum. The biggest difference lies in how classes are certified. In some states, such as South Carolina and Pennsylvania, for example, says Jones, Day, Reavis & Pogue partner Edward Bilich, who teaches a course on class actions at Georgetown University Law Center, “as a practical matter, class certifications can roll forward without any evidentiary basis.” Once a class is certified, companies often feel pressured to settle, regardless of the merits of the case, he says. In addition, it has become increasingly common for plaintiffs’ lawyers to file what Los Angeles-based O’Melveny & Myers partner John Beisner calls “copycat class actions.” Plaintiffs’ lawyers may file 50 to 100 nearly identical suits around the country. Unlike in federal court, there is usually no way to consolidate the cases. That’s bad for defendants, because they have to fight a “litigation juggernaut in 100 different places,” Beisner says, and bad for class members because it leads to a “bidding war among plaintiffs’ lawyers” to be first to settle the case and be awarded legal fees. Democrats counter that it is hypocritical for Republicans, who in recent years have so passionately backed states’ rights and federalism, to favor taking cases away from state judges. “Sponsors of this bill regularly come to the well to rail against judicial activism and ‘unelected federal judges,’” said Rep. William Delahunt, D-Mass., in a floor speech. “This is truly Alice in Wonderland, where up is down and down is up. So much for federalism and local control.” Carlton Carl, a spokesman for the Association of Trial Lawyers of America, also notes that cases generally take twice as long to resolve in federal courts — a delay that “costs plaintiffs money.” But bill supporters say class actions are exactly the kind of complex, interstate disputes that the founding fathers intended federal courts to hear. “You’ve got a state court deciding the rights of citizens of all other states. Clearly the founders had a definite concern about that happening,” says Matt Webb, director of legal reform policy for the Chamber of Commerce’s Institute for Legal Reform. “I don’t think you can rationally argue that these cases do not have an impact on interstate commerce.”

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