Class Action Fairness Act of 2003-Motion to Proceed-Resumed

CLASS ACTION FAIRNESS ACT OF 2003—MOTION TO PROCEED—RESUMED

Mr. GRASSLEY. I am pleased that the Senate is finally reaching the point of moving ahead with this very important legislation. We call this the Class Action Fairness Act of 2003 because, quite frankly, everything dealing with class action lawsuits—maybe I should not say everything because I admit there is a very important role in some instances for class action lawsuits, but the way the regime is working out now is very unfair, particularly in instances where consumers get practically nothing and lawyers representing the class get millions.

That is not an occasional happening. That is happening quite regularly. So the current class action system is rife with problems which undermine the rights of both the plaintiffs and defendants alike; hence, our legislation. Class members are often in the dark about their rights, with class lawyers driving lawsuits and driving the settlement. Class members receive court and settlement notices in hard-to-understand legalese. Many class action settlements only benefit the lawyers, with little or nothing going to the class members. We are all familiar with class action settlements where the plaintiffs received coupons of little value or no value, and the lawyers received all the money available in the settlement agreements.

More and more, we are seeing lawyers bringing frivolous lawsuits which are of no real interest to class members but are just a bonanza of quick and easy legal fees for the class lawyers because companies want to settle those cases rather than expend lots of money in frivolous litigation defense.

I have been invited into class action lawsuits. One gets a notice in the mail, probably because they did business with a particular company. Maybe it is because I am in agriculture and a family farmer that I might get some notices of this, but I can speak to the fact that—and obviously I hope people know I am not a lawyer, but the legalese that comes in these notices informing you why you might possibly be a member of a class, or you might possibly benefit, quite frankly I do not give those notices much consideration. Maybe I should. Maybe there is a jackpot out there that I could get something out of. I do not know.

It really is not very inviting to the people who may have been injured. Even if it is inviting, and they join it and they win, they could get a coupon; whereas the lawyers are going to get millions of dollars.

In addition to current class action rules, the current ones are such that a majority of the large nationwide class actions can
only proceed in our State courts, when these are clearly the kinds of cases that should, in fact, be heard in Federal courts. It makes sense that these class action cases have the opportunity to be heard in Federal courts because these cases involve lots of money, citizens from all across the country, and issues of nationwide interest.

To further compound the problem, the present rules are easily gamed by unscrupulous lawyers who steer class actions to certain preferred State courts where judges are quick to certify a class and approve a settlement with little regard to class member interest and the parties' due process rights. For example, class lawyers manipulate pleadings to avoid removal of the lawsuit to Federal court by claiming that their client suffered under $75,000 in damages in order to avoid meeting a
Federal threshold, even though their client may have suffered greater injury. Class lawyers craft lawsuits to defeat the complete diversity requirements by ensuring that at least one named class member is from the same State as the defendant.

These are just a few of the games that are played and the gamesmanship tactics that we have heard of that lawyers like to utilize to bring down the entire class action legal system.

The Class Action Fairness Act that is before us will address some of the most egregious problems with the class action system; yet preserving class action lawsuits is an important tool which brings representation to the unrepresented.

I will briefly summarize what this bipartisan bill does. First, the act 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 settlements, including amounts and sources of attorney's fees.

When that happens, and I get one of those notices, I am going to read it and maybe I can make a decision that I ought to join that class. But I am not going to mess around with trying to have some lawyer interpret to me whether or not I ought to be in a class action lawsuit when I get those notices.

These notices that most plaintiffs receive are written in small print and in confusing legal jargon. Since plaintiffs are giving up their right to sue, it is important that they understand what they are doing and the ramifications of their actions.

Second, this act requires that State attorneys general, or other responsible State government officials, be notified of any proposed class settlement that would affect the residents of their State. This provision helps protect class members because such notice would provide these State officials with an opportunity to object if the settlement terms are unfair for their citizens.

Third, this act disallows bounty payments to lead plaintiffs so lawyers looking for victims cannot promise them unwarranted payoffs to be their excuse for filing a suit. The bill also prevents class action settlements that discriminate on the basis of geography so that one plaintiff does not receive more money than other class members who have been equally injured just because that plaintiff lives near the courthouse.

Fourth, the act requires that courts closely scrutinize settlements where the plaintiffs only receive coupons or noncash awards while the lawyers get the bulk of the money. The bill requires the judge 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 noncash settlement, as in the case of injunctive relief banning some type of bad conduct, is fair and reasonable, but a court would also be able to throw out sham settlements where lawyers get big paychecks while the plaintiffs get nothing or, as I have said before, worthless or almost worthless coupons.

The bill also requires the judicial conference to report back to Congress on best practices in class action cases and how to best ensure fairness of a class action settlement. Finally, the Class Action Fairness Act allows more class action lawsuits to be removed from State court to Federal court, either by a defendant or even by an unnamed class member. However, the bill is drafted to ensure that truly local disputes would continue to be litigated in State court. Current law provides that class lawyers can avoid removal of a class action to Federal court if the individual claims are $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 the defendant.

Our bill would eliminate the "complete diversity" rule but leave in State court class actions with fewer than 100 plaintiffs, class actions that allow less than $5 million, class actions in which a State entity is a primary defendant, and class actions brought against a company in its home State if two-thirds or more of the class members are residents of that State.

We have been working on finding a fair solution to the class action problem for several years. For the past four Congresses, Senator Kohl, Senator Hatch, and others have joined me, as the main sponsor of this bill, in studying the problems with the class action system and working on a way to deal with such egregious abuses of our tort system.

Over the years, the House and Senate Judiciary Committees have convened numerous hearings on these class action abuses, making very obvious the need for reform. The House has passed similar versions of the class action bill in several Congresses, and they have done it with strong bipartisan support, so frankly I don't understand why we are running up against opposition on the other side to even bringing this bill up for discussion.

In the Senate, in the 105th Congress, I held hearings in the Judiciary Committee's Administrative Oversight Subcommittee and then marked up the first Grassley-Kohl class action bill. In the 106th Congress my subcommittee held another hearing on class actions and the Judiciary Committee marked up and reported out class action legislation. The Judiciary Committee held a hearing on class actions in the 107th Congress, and in this Congress the Judiciary Committee marked up the language of the bill we are considering today.

Chairman Hatch, Senator Kohl, and I worked closely with Senator Feinstein of California to make sure that more in-State class actions stayed in State court. We also worked with Senator Specter to make sure his concerns relative to class actions were also addressed.

The bill then was approved by the Judiciary Committee and it was approved on a solid, bipartisan vote. I wanted to elaborate on the history of this bill to show how much time Congress has spent on the problems with our class action system and all the work and all the compromises that have been put into this bipartisan bill.

The Class Action Fairness Act has garnered increasing support over the years and I expect it will receive even greater support now with the significant changes we have made in the Judiciary Committee several months ago. We need class action reform badly. Both plaintiffs and defendants alike are calling for change in the area of tort and class actions. The
Class Action Fairness Act is a good, modest bill that will help curb many problems that have plagued the class action system. The bill will help class members know what their rights are, increase their members' protection, and ensure the approval of fair settlements. It will allow nationwide class actions to be heard in the proper forum, and that is the Federal courts, but keep primarily State class actions where they ought to be, in State court.

It will preserve the process, but put a stop to the more egregious abuses. It will also help to put a stop to the more frivolous lawsuits that are very much a drag on the economy.

I hope we can proceed to this bill. We are very happy to consider amendments. This bill is something that has had so much work on it over the last four Congresses that it should move ahead. The situation has not improved any during that period of time. In fact, TV magazine-type programs are full of stories about continuous abuse of the tort class action system. We have situations where someone, a lowly county judge in some State, is making a decision that is applicable to all 50 States in a way that should not be done by one isolated judge. These are cases that should be decided at the Federal level and have something that is going to be a Federal policy applying to all 50 States done by a Federal court as opposed to a county court system.

There are a lot of things we can say about this bill, but it is about time. I would think there would be some embarrassment on the other side of the aisle, considering the fact of the bipartisan support of this bill in the House of Representatives and how it has come out of our Senate Judiciary Committee with solid, bipartisan support, considering modifications that have been made for Democratic Senators who were not part of the original bipartisan coalition putting this bill together, that the legislative process is working, the Senate is working its will, and now we are up against what could be a stone wall of resistance that is unjustified.

I hope we can move forward. We will find out with votes very shortly.

Mr. President, I suggest the absence of a quorum.