WASHINGTON, D.C., July 27, 1999
- A House committee is expected today to approve legislation to
correct a serious flaw in the nation's judicial system that has
led to interstate class action lawsuits being heard in state
courts instead of federal courts, according to the American
Insurance Association.
The House Judiciary Committee is
scheduled to vote on legislation to 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.
"This is a very common sense,
small-step approach to address a serious problem," said Melissa
Shelk, AIA assistant vice president, federal affairs. "The fact is
that the class action system is being abused by some attorneys to
bring cases against out-of-state companies into state courts that
favor local lawyers, or are not equipped to handle such cases.
Federal courts are the proper jurisdiction for many of these
cases."
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 added that federal diversity
jurisdiction statutes provide that interstate disputes involving
significant sums of money may be heard in a federal court. But
because class actions today did not exist when those statutes were
initially framed, class actions were omitted, leading to
unintentional results.
The legislation sponsored by Reps. Bob
Goodlatte, R-VA, Rick Boucher, D-VA, Ed Bryant, R-TN and Jim
Moran, D-VA, 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 measure does not limit the
ability of anyone to file a class action lawsuit, or change
anyone's rights to recovery. It merely allows federal courts to
hear big lawsuits involving truly interstate issues, while leaving
purely local controversies to 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.
Supporters of the legislation
anticipate that the House leadership will try to schedule a floor
vote on the bill later in the year.
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.