Senator Reed Addresses US Senate on Class Action Legislation

Senator Reed Addresses US Senate on Class Action Legislation
February 10, 2005

I rise to speak about S. 5, the Class Action Fairness Act.
First and foremost, I want to commend both the Republican and Democratic Leaders for all the work they did to bring this bill before the Senate. In particular, I am pleased that the consent agreement allowed all relevant amendments to be offered and debated.

I believe many of these amendments would have improved the underlying legislation without threatening its reforms. In particular, I think we should have adopted the Feinstein-Bingaman amendment, which would have given federal judges clear guidance about how to apply state consumer laws in multi-state class action lawsuits. This would have permitted more multi-state consumer class actions to be certified in federal court and resolved on their merits.

After S. 5 is enacted into law, I believe we should rapidly revisit this issue and make sure that consumers are actually getting their day in court and not having their class action cases thrown out because Federal courts are deeming them too complex or unmanageable to certify.

That being said, I think this legislation benefited greatly from the negotiations entered into by Senators Dodd, Landrieu and Schumer with the bill's major sponsors, Senators Grassley, Kohl, Hatch and Carper. Although S. 5 is not the bill I would have written, I do think it will address some of the well-documented problems created by overlapping class actions in State and Federal courts. In particular, the Dodd-Landrieu-Schumer language included in S. 5 addressed some of my biggest concerns about moving class actions to Federal court. Many class actions involve only State law issues, are brought by plaintiffs from the same geographical area and have a defendant who is based within that same community. Moving these cases to Federal court is inappropriate, especially if they do not involve issues of national importance. In many cases, it is our State judges who are in the best position to make determinations about State law. The Dodd-Landrieu-Schumer compromise created a new exception for keeping cases like this in State court. Under the bill, if two-thirds of the plaintiffs are from a given State, the injury happened in that State and at least one significant defendant is from that same State, then the class action can remain in State court. As a result, I believe S. 5 ensures that ``nationwide'' class actions are separated from those that should continue to be heard in State courts.

I also believe that any attempt to stop forum shopping by plaintiffs should minimize forum shopping by defendants. The Dodd-Landrieu-Schumer compromise in S. 5 addressed this issue by making it clear that there is a firm 30-day deadline for the removal of nationwide class actions to Federal court once the plaintiffs have filed papers that create conditions for removal.

I also am pleased that the Dodd-Landrieu-Schumer compromise dealt with one of the most serious abuses in class action cases, certain types of collusive coupon settlements. S. 5 clarified that if a settlement provides coupons as a remedy, attorneys' fees will only be paid in proportion to the redemption of the coupons. A provision like this does not prohibit coupon settlements, but practically speaking, attorneys will not agree to such settlements unless the coupons are actually valuable. S. 5 also requires that a judge may not approve a coupon settlement until a hearing is conducted to determine if the settlement terms are fair, reasonable, and adequate for class members.

Finally, I believed that is important to preserve the ability of the Advisory Committee on the Federal Rules, the U.S. Judicial Conference, and the Supreme Court to amend the class action rules or procedures to the extent necessary to accomplish their purposes more effectively or to cure any unanticipated problems. S. 5 also included a provision saying that the Federal courts could make such changes as appropriate.

As a result of all of these improvements, I believe S. 5 is legislation that addresses serious problems in our nation's class action system and will make the system fairer for both plaintiffs and defendants.

http://reed.senate.gov/classaction/