The Class Action "Fairness" Act (S. 353): Fairness for Whom?
Legislation has been introduced in the Senate (S. 353) that would make it more difficult for consumers to succeed in class action lawsuits against corporations that commit fraud and other violations of consumer health, safety, and environmental laws. The bill, called the Class Action "Fairness" Act of 1999, would make most state class action lawsuits removable to federal court by defendant corporations. Although this bill is portrayed as a modest effort to end "abusive" class actions brought in state court, it is actually an unprecedented attempt to shift cases that have historically been heard in state court to the federal courts.
Class actions are an important tool that protect citizens by offering a valuable mechanism for aggregating small claims that otherwise might not warrant individual litigation. Consequently, plaintiffs often use class actions in order to gain access to the courts in cases where a defendant may have gained a substantial benefit through small injuries to a large number of persons.
The bill would allow corporate defendants to remove the vast majority of state class actions to federal court. The only exceptions are when:
- the "substantial majority" of plaintiffs are citizens of the state where the case was filed, as are all of the "primary" defendants, and the claims will be governed primarily by the laws of that state; or
- the "primary" defendants are states, state officials, or other governmental entities.
There are six main problems with the Class Action "Fairness" Act:
- Most state-based class actions are likely to become federal actions, providing an advantage to defendant corporations. Current research by the Rand Institute for Civil Justice suggests that class actions are increasing in number and importance, particularly at the state level. Should the Class Action "Fairness" Act become law, a significant majority of state court class actions will either have to be filed in federal court or will be removable by defendants to federal court, should defendants decide that it is to their advantage to do so. Tobacco companies, HMOs, auto makers, insurance companies, and drug companies that injure the public should not have the power to choose the legal forum they believe will benefit them most.
- Justice will be considerably delayed -- if not denied -- for injured consumers. The current high vacancy rate and backlog of pending cases in the federal judiciary leads to delay of justice in the federal courts. Congress increasingly assigns the federal courts jurisdiction over matters that traditionally have been handled by the states, creating even further delays. For example, there were over 25,000 civil cases pending in the federal courts for more than three years as of September 1998 -- an increase of over 13% from 1997. Class actions are often complex and resource-intensive cases that require enormous amounts of time to litigate. Forcing them to be heard in federal court will result not only in extended delays for class action plaintiffs, but also for individual plaintiffs with civil cases in the clogged federal courts.
- The bill would slow the continued interpretation of state law. This bill affects class actions which involve solely issues of state law. State judges are more familiar and expert in interpreting state law. State court judges regularly interpret state law to apply it as new factual situations arise and community standards of responsible behavior change. Federal judges, however, are less apt to extend state law in new areas, believing it is the province of state, not federal courts. Moving class actions based on state law to federal court could have a direct negative impact on evolving legal areas like tobacco and HMO litigation.
- The bill would trample on the rights of states to manage their legal systems. This legislation represents a substantial and inappropriate transfer of judicial power to federal courts from the states. All of these class actions involve alleged violations of state law, in which by definition there is no federal interest. Although some limited number of state class actions, such as some mass tort actions, may more appropriately be brought in federal court, there is no compelling evidence for the significant usurpation of authority by the federal government that will result from S. 353. Moreover, if there are class action abuses at the state level they should be corrected in the state courts. The federal Constitution still assumes that the states are capable of interpreting their own laws and impartially meting out justice.
- Mandatory Rule 11 sanctions would act as a filing disincentive to innovative claims. The legislation would make Rule 11 sanctions for "frivolous" filings mandatory instead of discretionary. Judges already have significant power to assess penalties against frivolous claims. Making this power mandatory could have a chilling effect on the future filing of new and innovative claims. History shows that mandatory sanctions are used disproportionately against plaintiffs' (particularly civil rights) attorneys and those attempting to extend the law in a way favorable to unpopular causes, often through class action cases. It seems highly likely that a return to mandatory sanctions will mean a return to the higher sanction rate on plaintiffs and their attorneys; this, in turn, will discourage the number of attorneys and plaintiffs willing to file new and innovative claims. Moreover, if sanctions are made mandatory, Rule 11 litigation will enormously expand. In times of heavy dockets, we should be seeking ways to lessen, not increase, satellite litigation.
- A federal statute to regulate attorney's fees is unwise and unnecessary. Congressionally mandated attorney's fees provisions are a significant and inappropriate federal intrusion on the state courts' ability to determine their own rules and procedures. Individual judges reviewing these settlement agreements, not politicians in Washington, are in the best position to determine what is appropriate compensation.
For more information, contact Jackson Williams,
Legislative Representative,
at (202) 454-5135 or
by email: Jwilliams@citizen.org
Back to Class Action Fact Sheets