Class Action Fairness Act

U.S. House of Representatives

Committee on the Judiciary

F. James Sensenbrenner, Jr., Chairman

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News Advisory

For immediate release Contact: Jeff Lungren/Terry Shawn

June 12, 2003

202-225-2492

House Passes Class Action Fairness Act

Bipartisan Bill Establishes Consumer Class Action Bill of Rights and Shifts Some Lawsuits from State Courts to Federal Courts

WASHINGTON, D.C. - The House today by a 253 to 170 vote passed bipartisan legislation cracking down on abuses of the class action lawsuit system and ensuring consumers' interests are protected in class action lawsuits. H.R. 1115, the Class Action Fairness Act, would shift some class action suits from state courts to the proper venue for national cases - the federal court system. In addition, this legislation establishes a “Consumer Class Action Bill of Rights” to address numerous recent class action settlements that produced pennies for victims while generating millions in fees for lawyers.

House Judiciary Committee Chairman F. James Sensenbrenner, Jr. (R-Wis.), an original cosponsor of H.R. 1115, stated, “Today the House seized the opportunity to end the extortion and fix the class action problem. Class actions were originally created to efficiently address a large number of similar claims by people suffering small harms. Today, they are too often used to efficiently transfer large fees to a small number of trial lawyers doing great harm.”

“The costs of class action abuses are not limited to the parties of these settlements - they are shared by the American consumer through higher prices. Abusive class action lawsuits pose a threat to investors and the security of American retirement plans. While class action liability can be enormous, news of these lawsuits on Wall Street can drive down any particular stock - wiping away the value of working Americans' pensions and 401(k)'s,” added Chairman Sensenbrenner.

H.R. 1115 would establish a “Consumer Class Action Bill of Rights,” which would:

(1) require enhanced judicial scrutiny of coupon settlements;
(2) protect against settlements that would result in a net monetary loss to plaintiffs;
(3) prohibit the unjustified payment of bounties to class representatives; and
(4) protect out-of-state class members against settlements that favor certain class members over others based upon where they reside.

The House by voice vote adopted a bipartisan amendment offered by Chairman Sensenbrenner and sponsored by Reps. Rick Boucher (D-Va.), Bob Goodlatte (R-Va.), Jim Moran (D-Va.), Cal Dooley (D-Calif.), Charles Stenholm (D-Tex.), and Lee Terry (R-Neb.). This amendment is similar to one offered by Senator Dianne Feinstein (D-Calif.) during Senate committee consideration of companion legislation which, in two ways, will broaden slightly the category of class action cases to remain in state court. First, this amendment raises the aggregate amount in controversy required for federal jurisdiction from $2 million to $5 million.

Second, it allows federal courts discretion to return intrastate class actions in which local law governs to state courts after weighing five factors to determine if the case is appropriately of a local character. This discretion would come into play when between one-third and two-thirds of the plaintiffs are citizens of the same state as the primary defendants. If less than one-third are citizens of the same state, the case would automatically be eligible for federal court jurisdiction under the new diversity rules in this bill. Likewise, if more than two-thirds are citizens of the same state, the case would not be subject to the new rules in this bill and would remain in state court.

H.R. 1115 now heads to the Senate for consideration. The Senate Judiciary Committee passed similar class action legislation by a 12 to 7 bipartisan vote on April 11, 2003.