This document provides background information and summarizes the debate over class action reform. The links to the left will lead you to public documents that we have found.
A class action is a means by which a number of plaintiffs can collectively
sue in a single suit. Class actions are especially useful when each individual's
claim is too small to warrant an individual lawsuit. They are also useful when
the class of plaintiffs lacks the resources to hire a lawyer to represent their
individual interests. Most often class action suits are filed on behalf of consumers
who claim they have been victims of some type of fraud or negligence on the
part of a corporation that sold them a particular good or service. Class action
suits have also been used for broad political aims. Brown v. Board of Education
was a class action suit brought on behalf of a "class" of children
who were said to be victims of racial discrimination by the school system in
Topeka, Kansas.
Class action suits are unpopular with business for the simple reason that successful
cases cost them money. Insurance companies, who frequently have to pay judgments
on the policies that they write for business clients, are particularly antagonistic
toward this legal instrument. For years a coalition of various industry groups
and insurance companies have tried to convince the Congress that class action
suits need to be restrained. They cite what they regard as unreasonable judgments
against various companies as evidence that they system for settling class action
suits has gotten out of hand. The primary feature of the bill before the 106th
Congress was to direct interstate class action suits to the federal courts instead
of the state courts. The state courts are seen as much more sympathetic to class
action claimants and more likely to render decisions that require substantial
restitution.
As in previous sessions of Congress, class action reform was vigorously fought
by trial lawyers and consumer groups. Trial lawyers earn substantial fees from
successful cases and any curtailment of class action suits is going to result
in a lower income for them. Lobbyists representing the trial lawyers in Washington
vigorously deny that there is any "reform" behind the proposed legislation.
Said one, "This is a thinly veiled attempt to eliminate citizens' rights
to class action suits." He noted that the federal courts are much less
likely to grant certification to a proposed class action suit, therefore stopping
a suit before it can go to trial.
The bill passed the House of Representatives in a close vote (222-207) and was
also reported out by the Senate Judiciary Committee. Class action reform is
a highly partisan issue, with the Republicans giving almost uniform support
to this kind of legislation. Democrats are no less aggressive in defending what
they see as a consumer rights' issue. Each side accuses the other of being bought:
Republicans get substantial PAC contributions from business and insurance interests
advocating class action reform and the Democrats receive strong financial support
from PACs representing trial lawyers. A very concerted lobbying effort was conducted
by both sides. Even though President Clinton promised to veto the bill if it
could get out of the Congress, supporters of class action reform pressed the
case forward in the summer of 2000, believing that passage in the 106th would
build support for a bill in the next Congress when George Bush, if elected,
would surely sign such legislation. The bill, however, never made it to the
Senate floor. In the 107th the pattern was repeated as the House passed a bill
but no vote was taken in the Senate.