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Business groups lobbying for legislation to shift more state class actions into federal courts claim they are roughly five votes away from victory in the narrowly divided U.S. Senate. Class action legislation is one of a trio of so-called legal reforms in play in the Senate this spring. Its path there, like the paths of its companions, medical malpractice and asbestos, has been neither swift nor sure. But unlike asbestos and medical malpractice bills, class action legislation has been approved by a Senate committee and may be called up for a full vote in the next week or two. The Senate historically has been fatal for major tort changes. “All three legal reforms have their own unique challenges,” said Matthew Webb, director of legal reform policy at the U.S. Chamber of Commerce. “Asbestos legislation could move at any point, but it’s really contingent on the business community rallying around a single solution. “Medical liability obviously enjoys the strong support of the White House, but it remains to be seen where the ultimate vote count is on that one.” But class action legislation, approved by a divided Senate Judiciary Committee in early April, is “primed for floor action,” Webb said. “We’re definitely within striking distance of getting the 60 votes needed for cloture,” ending debate and calling for a vote, said Larry Fineran of the National Association of Manufacturers. “It would be better if we could get 62.” Opponents of S. 274, the Class Action Fairness Act of 2003, include consumer and environmental groups and the Association of Trial Lawyers of America. “Under the guise of addressing specific problems, the bill gives a blank check to corporate defendants to remove all kinds of cases that haven’t been identified as problems,” said Joan Mulhern, senior legislative counsel of Earthjustice Legal Defense Fund. “It allows them to rig the system in their direction whenever they want.” Last week, Senator Patrick Leahy, D-Vt., ranking minority member of the Senate Judiciary Committee, proposed an alternative. It tracks more closely recommendations made by the Judicial Conference of the United States. That group and the Conference of Chief Justices (of state supreme courts) have opposed transferring more state class actions to federal jurisdiction. For now, S. 274 is the ball game. It was introduced with sponsorship by Republicans Orrin Hatch of Utah and Charles Grassley of Iowa and Democrat Herb Kohl of Wisconsin. In the Judiciary Committee, Dianne Feinstein, D-Calif., supported it with amendments by her and moderate Republican Arlen Specter of Pennsylvania. The threshold amount in controversy for removal to federal court would be $5 million. The bill would structure federal jurisdiction in the following ways: � If more than two-thirds of the plaintiffs were from the same state as the primary defendant, the case would stay in state court. � If fewer than one-third of the plaintiffs were from the state of the primary defendant, the case would be removed to federal court at one side’s request. � 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. They include whether the case presents 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. Judges would have to hold hearings and find that settlements were fair before approving one to give noncash benefits to class members. Notices of proposed settlements would have to be in plain English. Notice would have to be given to state attorneys general if appropriate. Leahy’s bill would deal with noncash settlements — the coupon problem — by tying the part of the fee paid to class counsel to the value of the coupon settlements actually redeemed. It would expand federal jurisdiction to include any class action in which the class members were from at least three states, in which the matter in controversy exceeded $15 million and in which any member of the plaintiff class was a citizen of a different state from any defendant. It would not include an action in which substantially all of the members of the plaintiff class were from the same state; in which the claims arose from any death, personal injury or property damage occurring in the same state; or in which the defendants, in the aggregate, had a substantial relationship with the state in which the action is filed. Leahy’s bill is backed by consumer groups because it addresses the two major problems in class actions: worthless coupon settlements and multistate class actions, said Jackson Williams, legislative counsel to Public Citizen’s Congress Watch. “If the coupon is worthless and no one uses it, the attorney gets no compensation,” he said. “It will force attorneys to fight the meritorious cases harder, which is good for consumers and good for business. Honestly, there are some class actions for trivial harms and they’re only brought because of the possibility of a worthless coupon settlement.” The manufacturers association’s Fineran countered, “As much as we’ve derided them, sometimes it makes good business sense for our members to operate those coupons. It would be cheaper than litigating and being in front of a Mississippi or Beaumont, Texas, jury.” He said Leahy’s bill doesn’t solve the basic problem of local judges making national and often conflicting policies in cases better suited for federal courts. Webb of the U.S. Chamber said that consumer groups are “trying to carve out specific types of actions” to move to federal courts. “There’s no good reason to carve out any particular lawsuit,” he said. “A class action is a class action. We think federal courts will fairly treat all of these actions.” But all class actions are not the same, said Earthjustice’s Mulhern. People injured by chemical pollution bring complaints in state court against the company, she said. S. 274 would sweep those cases into federal court even where the injury occurred in one state if plaintiffs were from several. “They’re not the kind of cases that people concerned about class action abuse generally talk about,” she said. “The Judicial Conference, in a letter to the Senate Judiciary Committee, mentions environmental cases as one type of case that is not properly removed to federal court.” Whether Leahy’s bill will change the Senate dynamic remains to be seen, both sides say. “Class action legislation has been around for five years,” said Webb. “That’s about the life cycle of tort reform. If it doesn’t pass this year, it probably never will.”

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