Statements on Introduced Bills and Joint Resolutions S274

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

By Mr. GRASSLEY (for himself, Mr. KOHL, Mr. HATCH, Mr. CARPER, Mr. SPECTER, Mr. MILLER, Mr. CHAFEE, and Mr. LUGAR):

S. 274. A bill to amend the procedures that apply to consideration of interstate class actions to assure fairer outcomes for class members and defendants, and for other purposes; to the Committee on the Judiciary.

Mr. GRASSLEY. Mr. President, I rise today to introduce The Class Action Fairness Act of 2003, a bill that will help curb class action lawsuit abuse. For the last several Congresses, Senators KOHL, HATCH and others have joined me in introducing this important measure. Over the years, we have held several hearings on the numerous abuses of the class action system and the urgent need for reform. The Senate Judiciary Committee marked up and reported a similar class action bill in the 106th Congress, and in the 107th Congress the Judiciary Committee held a hearing on class action abuse. This bi-partisan bill has garnered increasing support over the years, and I look forward to even greater support in this Congress.
Abuses of the class action system abound. Specifically, class action cases have proven to be an easy way for attorneys to make millions of dollars while the plaintiff class members receive little or nothing of value. We all are familiar with the many class action lawsuits where plaintiffs were awarded nothing or coupons of limited value, while the lawyers got all the money in attorney's fees. Everyone of us has found ourselves to have been a potential member of a plaintiff class in a class action lawsuit, and for those of us who are not lawyers, it has been impossible to know what our rights are or whether we are being served the attorneys we never hired in the first place.

In addition, most class action lawsuits are being filed in state courts, even though these are usually the cases that involve the most money, have nationwide implications, and implicate citizens from all 50 States. Lawyers often game the system so they can bring lawsuits in State courts, which are more likely to certify class actions without adequately considering whether a class action would be fair to all class members. In some instances, class lawyers manipulate pleadings to avoid removal of the lawsuit to the federal courts. To do this, lawyers may claim that their clients suffered under $75,000 in damages so that the Federal threshold isn't triggered, even though their clients may have suffered an even greater injury.

Class lawyers also sometimes defeat the complete diversity requirement by ensuring that at least one named class member is from the same state as a defendant, even if every other class member is from a different state.

The Class Action Fairness Act of 2003 will go a long way toward ending some of these abuses. This modest bill carefully fixes the more egregious problems with the class action system, while preserving class action lawsuits as an important tool which brings representation to the unrepresented.

First, our bill requires that notice of proposed settlements in all class actions, as well as all class notices, must be in clear, easily understood English and must include all material settlement terms, including amount and source of attorneys' fees. The notices most plaintiffs receive are written in small print and confusing legal jargon. In fact, a lawyer testified before my Subcommittee that even he could not understand the notice he received as a plaintiff in a class action lawsuit. Since plaintiffs are giving up their right to sue, it is imperative that they understand what they are doing and the ramifications of their actions.

Second, our bill requires that State attorneys general be notified of any proposed class settlement that would affect residents of their States. The notice would give a State attorney general the opportunity to object if the settlement terms are unfair to consumers.

Third, our bill disallows bounty payments to lead plaintiffs so lawyers looking for victims can't promise them unwarranted payoffs to be their excuse for filing suit. It also prevents settlements that discriminate based on geography, so that one plaintiff doesn't receive more money just because he lives near the courthouse.

Fourth, our bill requires that courts scrutinize settlements where the plaintiffs get only coupons or non-cash awards, and the lawyers get money. The courts are required to make a written finding that the settlement is fair and reasonable for class members. A court will still be able to find that a non-cash settlement, like in the case of injunctive relief banning some type of bad conduct, is fair and reasonable. But courts would be able to throw out sham settlements where the lawyers get big paychecks but the plaintiffs get nothing but coupons.

Finally, our bill allows more class action lawsuits to be removed from state court to federal court, either by a defendant or an unnamed class member. A class action would qualify for federal jurisdiction if the total damages exceed $2,000,000 and parties include citizens from multiple States. Currently, class lawyers can avoid removal if individual claims are for $75,000 or less, even if hundreds of millions of dollars in total are at stake, or if just one class member is from the same State as a defendant. But if a case really belongs in state court because it's a State-law question or the substantial majority of class members and defendants are in-State, the case will stay in state court.

We need class action reform badly. Both plaintiffs and defendants are calling for change in this area. The Class Action Fairness Act of 2003 is a good, modest bill that will help curb the many problems that have plagued the class action system.
This bill will remove the conflict of interest that lawyers face in class action lawsuits, and will ensure the fair settlement of these cases. This bill will preserve the process, but put a stop to the more egregious abuses. I urge all my colleagues to join Senators KOHL, HATCH, CARPER, SPECTER, CHAFEE, LUGAR, MILLER and I in supporting this important legislation.