Lori Levy
(202) 828-7116
llevy@aiadc.org

BILL ADDRESSES PROBLEMS IN CLASS
ACTION JURISDICTION

Washington, D.C., May 17, 1999 - Legislation is needed to correct a serious flaw in our judicial system that may prevent interstate class action lawsuits from appropriately being heard in Federal courts, according to the American Insurance Association.

A proposed bill sponsored by Congressmen Bob Goodlatte (R-VA), Rick Boucher (D-VA), Ed Bryant (R-TN), and Jim Moran (D-VA) would amend statutes to allow for interstate class action lawsuits to be removed from state to federal court by either plaintiff class members or defendants if certain requirements are met. Current law allows most interstate class actions to be heard at the state level, even though members of the class are often from more than one state.

"In recent years, class actions have become a hotbed for abuse. Class actions are flooding into certain state courts because those courts tend to favor local lawyers in cases against out-of-state companies or because those courts are ill-equipped to handle such cases," explained Melissa Shelk, AIA vice president, federal affairs.

The Constitution specifically authorizes federal jurisdiction for controversies between citizens of different states to protect out-of-state parties from being "hometowned" in local courts. However, under current law, many large interstate class actions are brought in state courts and plaintiff lawyers frequently exploit major loopholes in federal jurisdiction statutes to block the removal of class actions that belong in federal court. As a result, many state courts are deciding out-of-state residents' claims against out-of-state companies under other states' laws.

Shelk said, "Presently, our federal diversity jurisdiction statutes provide that interstate disputes involving significant sums of money may be heard in a federal court. But because class actions-as we now know them-did not exist when those statutes were initially framed, class actions were omitted, leading to these unintentional results."

The legislation sponsored by Goodlatte, Boucher, Bryant, and Moran would allow for an interstate class action suit with minimal diversity to be heard in federal court. The bill would also replace the requirement that each plaintiff's individual claim be worth more than $75,000 with an aggregate one million-dollar amount-in-controversy requirement.

"This bill doesn't limit the ability of anyone to file a class action lawsuit, nor does it change anyone's rights to recovery. It merely allows federal courts to hear big lawsuits involving truly interstate issues, while ensuring that purely local controversies remain in state courts," Shelk said. She added that the changes would conform the law to the unique nature of class action lawsuits and would put them in the more appropriate forum.


The American Insurance Association is a trade association representing more than 300 major insurance companies which provide all lines of property and casualty insurance. AIA's headquarters is located in Washington, D.C. and the association has representatives in every state. All AIA press releases are available at www.aiadc.org.