Class action reform passes--may dry out local courts

Steve Stanek Feb. 10, 2005, 6:36am

Sen. Obama--Votes "yes"

Sen. Durbin--"No" vote.

In a vote of 72-26, the U.S. Senate passed the Class Action Fairness Act—a bill that limits class action lawsuits by shifting them from state to federal courts—on Thursday afternoon.

The House of Representatives, which approved a similar measure in 2003, is expected to approve the bill next week. And after that, the President—who lobbied hard for its passage—will swiftly sign the measure into law.

Eighteen Democrats and Vermont independent James Jeffords joined Republicans to pass the legislation, which would cover most class actions seeking at least $5 million. First year Democratic Illinois Sen. Barack Obama voted for the bill.

"When multimillion-dollar settlements are handed down and all the victims get are coupons for a free product, justice is not being served," said Obama, stating the legislation provides “a safeguard for the most blatant abuses of the system."

But Illinois Democrat Sen. Dick Durbin, predictably, voted no.
“The business community has worked so long and hard" to move the cases out of state courts, Durbin said. “Businesses know they can win more class-action cases in federal court. That's what this whole debate is about."

The flow of class-action lawsuits filed in Madison County, St. Clair County and other state jurisdictions could slow to a trickle under this legislation that appears headed toward victory.

The Class Action Fairness Act of 2005 made it through the Senate Judiciary Committee Feb. 2 on a 13-5 vote. Democratic Illinois Senator Dick Durbin is a member of the committee and opposed the bill.

The measure seeks to end "venue shopping," the practice of plaintiff lawyers searching across the country to file a case in the most favorable state jurisdiction. To critics of the current system, Madison County has become a national venue shopping haven, attracting cases from around the country that have little connection to the state.

Under the legislation, class actions in which the aggregate amount of damages plaintiffs seek exceeds $5 million would have to be tried in federal court. An exception would be allowed when a company is being sued in its home state and at least two-thirds of the class members are from that state.

The bill also seeks to limit "coupon settlements," in which the plaintiffs receive small awards, such as coupons for free or reduced-price goods or services, while their attorneys walk away with millions of dollars.

The measure now moves to the House of Representatives, where leaders in the Republican-controlled chamber this year have said they will back the bill, if the final Senate version survived without major amdendments.

Democrat Senators Dianne Feinstein of California, Charles Schumer of New York, and Herb Kohl of Wisconsin joined the 10 judiciary committee Republicans in approving the bill.

"Now, only cases that are truly national in scope will be tried primarily in the federal courts," said Kohl in explaining to the committee his reasons for joining Republicans in recommending the bill's approval.

"Cases that primarily involve people from only one state and that interpret state law will remain in state court," Kohl said. "These changes will ensure that class action cases are handled efficiently and in the appropriate venues and that no case that has merit will be turned away. We have a simple story to tell. Consumers are too often getting the short end of the stick in class action cases, recovering coupons or pocket change, while their lawyers reap millions."

Kohl added, "No one can argue with a straight face that the class action process is not in serious need of reform."

Major backers of the legislation include individual businesses and business organizations including the U.S. Chamber of Commerce. Among other things, they argue that many class-action lawsuits involve multi-state claims, making the federal courts the proper venue for the dispute to be heard.

Major opponents include trial lawyers, the NAACP, labor unions and environmental groups including The Sierra Club. They argue the federal courts are already overburdened and less likely to certify class actions, reducing the chances that consumers who may have been harmed by a business practice will be properly compensated.

In voicing his opposition during the judiciary committee hearings, Durbin characterized the bill as "the class-action moratorium act."

Congressman Jerry Costello (D-12th District), whose district extends south from St. Clair County, has not taken a stand on the bill, said David Gillies, Costello's chief of staff.

"We are monitoring the Senate debate to see what version comes to the House side," Gillies said. "The representative is keeping an open mind on the legislation."

Congressman John Shimkus (R-19th Distict), whose district includes Madison County, supported the class-action reform bill in 2003 and is likely to support it again this time, said Shimkus' press secretary, Steve Tomaszewski.

"As long as it gets through the Senate, there shouldn't be a problem," Tomaszewski said.

Attorneys at several Madison and St. Clair County law firms that handle class-action lawsuits did not return calls or declined comment.

However, Evan Schaeffer of the Schaeffer & Lamere, P.C. law firm in Godfrey, has a Weblog called Notes from the (Legal) Underground with his views of the legislation.

"The new law will mean a lot of work for federal trial and appellate courts. As has been reported, almost every class action will become a federal case," he said in a Feb. 10 posting.

He also said "plaintiffs' firms that specialize in federal laws and remedies" will not be affected because "the law only affects class actions based on state law."

Schaeffer also predicted some companies may rue the day the bill becomes law.

"Since defendants are almost always the party that proposes coupon settlements, big business will regret the day it supported the new law's barriers to coupon settlements. Since the law also makes class actions harder to settle, big business will also regret the way the law will mean many more bet-the-company class-action trials."

To read Schaeffer's full analysis, visit his Weblog at

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