Report from Governmental Affairs

First Up: Class Action Bill

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President Bush told a White House economic summit in December that changing the U.S. tort system will be a priority of his second term.

The president said he expects the Senate and the House of Representatives to “pass meaningful liability reform on asbestos, class action and medical liability.”

The House passed class action and medical liability bills during the last Congress, but the measures stalled in the Senate. The new Congress has larger Republican majorities of 55-44-1 in the Senate and 232-202-1 in the House, improving the chances that Congress will pass tort bills this time around.

Class action legislation is expected to be first up.

Supporters of the legislation want to make it easier to shift certain class action lawsuits from state to federal courts. They say the legislation would curb the practice of venue shopping, by which lawyers bring cases in jurisdictions that might be more sympathetic to plaintiffs.

Opponents, however, fear that the proposals would clog the federal courts and infringe on the rights of individuals to pursue class action remedies in their own state courts even though suits are based on state law.

Current federal law provides that class actions may be removed from state courts only if there is complete diversity–that is: The amount in controversy exceeds $75,000, and the named plaintiff is a citizen of a different state from all the defendants.

The strict requirements of complete diversity are a particular concern to the business community, which objects to the possibility of a corporation being sued in a state primarily because the courts there are considered favorable to plaintiffs.

The measure passed by the House during the 108th Congress would have allowed a class action to be filed in or removed to a federal court if the amount in controversy were $5 million or more and there was only “minimal diversity”–that is, if any plaintiff class member and any defendant were citizens of different states. An “in state” exception would apply to class actions where at least two-thirds of the class members and the “primary defendants” are citizens of the state where the suit is brought.

Applying minimal diversity would result in significantly more class actions being removed to federal court, proponents of the legislation say.

A Matter of Principles

The ABA has not taken a position on specific bills in Congress relating to class actions. In 2003, however, the ABA’s policy-making House of Delegates adopted principles that legislators should consider in drafting class action bills to “preserve a balance between legitimate state court interests and federal court jurisdictional benefits.”

The principles, which were drafted by the ABA Task Force on Class Action Legislation, address various elements in the class action process, including considerations in balancing legitimate state court interests and federal court jurisdictional benefits.

“Although it appears that there are more than 60 votes in the Senate to invoke cloture in this session of Congress, some contentious issues remain,” says Edward F. Sherman, a law professor at Tulane University in New Orleans who chaired the ABA task force.

Sherman notes that some senators who support class action legislation objected to some provisions in the House bill, including retroactive application to pending suits not yet certified as class actions, automatic appeal of class certification and stays of discovery, and treating as class actions any private attorney general and “mass action” suits that could then be removed to federal court.

Rhonda McMillion is editor of Washington Letter, an ABA Governmental Affairs Office publication.

This column is written by the ABA Governmental Affairs Office and discusses advocacy efforts by the ABA relating to issues being addressed by Congress and the executive branch of the federal government.

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