Friday, February 11, 2005

The New York Times : : Senate Passes Overhaul of Rules for Class-Action Lawsuits

The New York Times reports on the administration's recent legislative triumph. Sam Heldman provides a detailed breakdown.

This bill is designed to do much more than solve the so-called "problem" of multi-state class actions. This bill is designed to swamp the federal courts so severely, that the federal judges will look for every conceivable reason to quickly rule for the defendants in every class case so that they can get back to working on other cases.


Blogger Management said...

Senate Passes Overhaul of Rules for Class-Action Lawsuits

WASHINGTON, Feb. 10 - The Senate voted overwhelmingly today to shift many class-action lawsuits from state courts to federal courts, handing President Bush and his supporters in the business world a major legislative triumph.

The 72-to-26 vote sends the bill to the House of Representatives, where it will probably be quickly passed and sped on its way to the desk of the president, who is eager to sign it.

Passage in the House seems assured, since that chamber overwhelmingly endorsed similar legislation last year, before it stalled in the Senate. This time, though, the idea was backed by enough senators, Democrats as well as Republicans, that passage was not in doubt.

The Senate vote this afternoon followed repeated attempts by some Democrats to enact amendments curbing the effects of the measure. They were beaten back in part because some Democrats had also seen problems in the current state of the law.

All 26 votes against the measure were cast by Democrats. But though trial lawyers as a group are often described as a Democratic constituency, and trial lawyers opposed the measure, 18 Democrats joined 53 Republicans and the Senate's independent, James Jeffords of Vermont, in voting yes. (Two Republicans, Rick Santorum of Pennsylvania and John Sununu of New Hampshire, did not vote.)

One Democrat who voted yes, Dianne Feinstein of California, said afterward that the bill was "not perfect" but that it addressed problems in the legal system.

The Senate majority leader, Bill Frist, Republican of Tennessee, said the bill was intended to stop lawsuit abuses, "and it does just that."

But one of the Democrats voting no, Edward M. Kennedy of Massachusetts, disagreed. "The consumers are the big losers in this," he said.

A class-action lawsuit can be defined roughly as one brought by a large group of people who are affected by the same questions of law and fact. The bill passed by the Senate this afternoon would give the federal courts the authority to hear class-action suits in which the money at issue is more than $5 million and at least one member of the "class" is from a state different from the defendant.

Business groups that support the bill contend it will help stamp out suits that enrich lawyers at the expense of businesses and ordinary people. The bill's supporters say many plaintiffs' lawyers in class actions "shop around" among various state courts to find a friendly venue.

Critics of the bill have said it will deprive civil rights groups, consumers and labor organizations of a valuable weapon, and that it will help big companies, like makers of tobacco products, escape financial consequences for their wrongdoing.

President Bush said repeatedly during the 2004 campaign that too many "frivolous lawsuits" were shackling American business and driving good doctors out of their practices. One of his favorite targets was the Democratic vice presidential candidate, Senator John Edwards of North Carolina, who made millions as a trial lawyer.

Mr. Bush sounded a similar message in a discussion on Wednesday at the Commerce Department.

"A litigious society is one that makes it difficult for capital to flow freely," Mr. Bush said. "And a capitalist society depends on the capacity for people willing to take risk and to say there's a better future, and I want to take a risk toward that future. And I'm deeply concerned that too many lawsuits make it too difficult for people to do that."

But critics of the bill have said it may effectively create an impossible situation for many plaintiffs, since federal courts are barred under a 1985 Supreme Court ruling from considering class actions in which there are "material" differences in the laws among the affected states.

Thus, the critics say, the law may create a "Catch-22" in which class-action plaintiffs find both federal and state courthouse doors locked.

"This bill is one of the most unfair, anticonsumer proposals to come before the Senate in years," Senator Harry Reid, Democrat of Nevada, the minority leader, said just before the vote. "It slams the courthouse doors on a wide range of injured plaintiffs." Many deserving cases will be dismissed, he predicted, and those that are not may have to go "to the back of a very long line in the overburdened federal court system."

"Before I came to Congress, I was proud to call myself a trial lawyer," he said. "Lawyers are often the voice of people who cannot otherwise be heard."

The Association of Trial Lawyers of America issued a statement calling the bill "a shameful attack on Americans' legal rights."

"Every American's legal rights are diminished by this anticonsumer legislation which establishes greater procedural hurdles for consumers, workers, homeowners and shareholders," said the group's president, Todd A. Smith.

Besides Senators Reid and Kennedy, the Democrats who voted no were Senators Hillary Rodham Clinton of New York, Barbara Boxer of California, Russell D. Feingold of Wisconsin, Debbie Stabenow of Michigan, Patty Murray of Washington, Max Baucus of Montana, Robert C. Byrd of West Virginia, Mark Dayton of Minnesota, Mark Pryor of Arkansas, Patrick J. Leahy of Vermont, Byron Dorgan of North Dakota, Joseph R. Biden Jr. of Delaware, Tom Harkin of Iowa, Carl Levin of Michigan, Frank Lautenberg and Jon Corzine, both of New Jersey, Richard Durbin of Illinois, John Kerry of Massachusetts, Daniel Inouye and Daniel Akaka, both of Hawaii, Paul Sarbanes and Barbara Mikulski, both of Maryland, Ron Wyden of Oregon and Bill Nelson of Florida.

3:50 AM  
Blogger Management said...

The class action bill is crazy.

The Senate will, today, be debating the class action "reform" bill. And the more times I read the bill, the more clear it is to me that it is a monstrosity, and that many of the people who speak in support of it are spouting falsehoods.

The bill, as I mentioned before, is largely about whether class actions will be litigated in state court (where plaintiffs' lawyers tend to prefer to file some types of class actions) or federal court (where defendants tend to prefer to litigate them). Some people on each side argue that this is some grand philosophical issue of the proper balance of federalism. Not me. I'm candid about the fact that my view of this issue is based purely on a practical assessment of the likely impact on the real world of litigation. I am quite sure that industry's support for this bill is similarly based on practical reality rather than some reading of the Federalist Papers. And I guarantee you that if the bill passes, defendants will remove class actions to federal court not based on a philosophical principle as to the proper scope of federal authority, but based on the perception that they will be more likely to win in federal court. Duh.

So why do I oppose putting more class actions in federal courts? In part, it's because in some places these days, federal judges are in general less favorably disposed towards class actions than are state court judges. So, if more class actions go to federal court, fewer of the cases will be allowed to proceed as a class action, and so there will be more unremedied corporate misconduct, and so there will be more corporate misconduct. And second, it's because if more class actions go to federal court, the federal courts will be swamped. They're already swamped, frankly, with criminal cases that could perfectly well be prosecuted in state courts. But this bill will make them swamped swamped swamped. The federal judiciary's own assessment is that class actions take about five times as much judicial work as regular civil cases. Pretty soon, the federal courts won't have time to do anything but put people in jail and hear class actions. All other cases will sit on the back burner. Too bad for everybody else, like employees who have been discriminated against, etc.

Now, some people who support this bill will tell you that it is more limited than I am making it out to be -- that it is meant to allow "removal" to federal court only of a limited set of class actions. They want you to think that it is only for those class actions in which the class is nationwide or at least multi-state; they want you to think that it's crazy for one state's court to be able to rule on matters involving plaintiffs all around the country, and they want you to think that it's very hard for a court to apply the laws of various different states. And that's what you see being argued about in the Washington Post article linked above and again here. The Post even falls for it: "The bill would send cases with plaintiffs in multiple states into the federal system."

But that's not what the bill says. The bill's Section 4 allows for federal court jurisdiction of a class action even if the class is defined to include only residents of the state in which it is filed, so long as at least one defendant is headquartered in (and incorporated in) another state. The bill goes on to say that a federal court should decline to exercise jurisdiction over a class action where more than 2/3 of the plaintiff class live in the state where the case was filed, but only if (among other things) "no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons." (The rule is a little different if the class lives in the same state as the "primary defendants," but that will be relatively more rare). So, even if you file a Texas-only class action against Ford, you'll get removed to the over-burdened and therefore grumpy federal court -- because I guarantee you that somebody will have filed a similar class action, on a state-only basis, in some other state too. [UPDATE: This is my best guess as to what the legislation means, but there is the additional problem that it is written so poorly. If you read the provision I'm talking about, you'll see what I mean. It doesn't make grammatical sense in crucial ways.]

This bill is designed to do much more than solve the so-called "problem" of multi-state class actions. This bill is designed to swamp the federal courts so severely, that the federal judges will look for every conceivable reason to quickly rule for the defendants in every class case so that they can get back to working on other cases.

3:52 AM  

Post a Comment

<< Home