WASHINGTON—After years of effort, U.S. businesses—including the tire, rubber and auto repair industries—have achieved their goal of significant curbs on class action lawsuits.
"It is a bill that will make our country´s legal system better for both businesses and victims," Roy Littlefield, executive vice president of the Tire Industry Association, said on congressional passage of the Class Action Fairness Act, which gives federal courts greater jurisdiction over class action lawsuits.
"The class action system has been broken for years," Donald B. Shea, president of the Rubber Manufacturers Association, said in a statement. "Trial lawyers were reaping millions and millions in legal fees while consumers were often left with nothing but paltry coupons. Enactment of this legislation will end this trial lawyer bonanza."
However, plaintiffs´ attorneys, consumer groups and environmentalists decried congressional passage of the bill as an unconscionable restriction of consumers´ rights to seek redress against corporate criminals.
"(Congress) has given banks, credit card companies, insurers, HMOs, drug manufacturers and other big corporations a green light to defraud and deceive consumers without fear of being held accountable," said Joan Claybrook, president of Public Citizen.
President Bush signed the legislation into law Feb. 18, the day after the House approved it in a 279-149 vote. The Senate previously passed the bill 72-26 on Feb. 10. Shea was one of those invited to the signing ceremony at the White House, according to an RMA spokesman.
Passage of the Class Action Fairness Act represents the biggest win for supporters of tort reform in a quarter-century of advocacy. The bill passed the House in the previous Congress, but failed to make headway in the Senate.
As passed, the bill requires most class actions involving more than $5 million in damages to go to federal court instead of often more plaintiff-friendly state courts.
Only if at least one defendant and more than two-thirds of the plaintiffs are from the same state will such cases automatically stay in that state´s courts. If between one-third and two-thirds of the plaintiffs are from the same state, the courts will consider various factors before determining whether to assign the case to federal or state court.
The bill also limits attorneys´ fees in cases where plaintiffs receive coupons as settlement instead of cash. In coupon settlements, the new law requires that fees for plaintiffs´ attorneys are based on the number of coupons redeemed—not the number of coupons issued or the hours billed.
The original House bill made the new law retroactive to class actions that had been filed but not certified, and also would have allowed an immediate appeal of class certification rulings with all discovery stayed during the appeal. The Senate bill, which is the version that passed both the Senate and House, does not contain these provisions.
While a number of Democrats broke ranks to vote for the class action bill, others fought to defeat or at least modify it. For example, Rep. John Conyers, D-Mich., unsuccessfully sponsored an amendment that among other things would have exempted class actions filed by state attorneys-general; class actions alleging violations of state civil rights or wage-and-hour laws; and "mass tort" suits consolidating the claims of 100 or more plaintiffs.
The Conyers amendment also would have forbidden federal judges from denying class action certification simply because the laws of more than one state applied to the suit.
"This is not a simple procedural fix," Conyers said of the bill as passed. "Moving the cases to federal court will result in many cases never being heard."