WASHINGTON, D.C., September 22 - The House
of Representatives is expected to pass an important legal reform
Thursday that will end certain abuses in the use of class action
lawsuits. The business community, long stymied in their efforts to
enact broad legal reforms, is strongly supporting the move.
A lobbyist for the American Insurance
Association, a leading supporter of the effort, called the bill a
"common-sense, rifle-shot" approach to a serious problem in the
nation's legal system that has led to interstate class action
lawsuits being heard in state courts instead of federal
courts.
The bill, H.R. 1875, would 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 reform effort is only a small-step approach
to end abuses that have helped send the number of class action
lawsuits skyrocketing," 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 majorloopholes 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.
In a letter to members of Congress on Monday, a
coalition of business organizations supporting the measure wrote,
"At present, some state courts have an "anything goes" attitude
about class actions. They approve settlements that give little or
no compensation to class members and millions to the class
attorneys. They are dictating the laws of other states and
forcibly resolving the claims of people who live outside their
borders."
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.
Shelk noted that the legislation will not limit
the ability 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 bill recognizes the unique nature of class action lawsuits and
would put them in the more appropriate forum.
In the Senate, Judiciary Chairman Orrin Hatch,
R-UT, said he would try to move a similar measure in the Senate
before Congress adjourns for the year in late October or November.
"We expect this bill to pass the House and we'll
then turn our efforts to the Senate," Shelk said. "There's no good
reason not to pass this bill."
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.