Class Action Fairness Act of 2004

CONGRESSIONAL RECORD
SENATE
CLASS ACTION FAIRNESS ACT OF 2004

Mr. GRASSLEY. Mr. President, I am pleased that Majority Leader Frist has called up the Class Action Fairness Act. I have been working on this bill since the 105th Congress, so I think it is about time the Senate completes action on this bill.

My colleagues will recall that in October of last year Senator Frist brought this bill to the floor, but we were not able to proceed to the bill because of filibuster, and we lost the vote on cloture on the motion to proceed by just a one-vote margin. A supermajority of 60 votes was needed. We had 59 votes which, obviously, means that last fall we had enough votes to pass the legislation but could not get around the filibuster.

When you are up against a filibuster, you have to work out issues because nothing in the Senate gets done that is not done in a fairly broad bipartisan way. Since then, I have worked in good faith with Senator Hatch, chairman of the Judiciary Committee, and our lead Democratic cosponsors, Senator Kohl and Senator Carper, to modify the bill to address a number of concerns raised by their colleagues on the Democratic side, Senators DODD, LANDRIEU, and SCHUMER.

These Senators are now satisfied with the changes we made to this bill. We reintroduced the legislation this year as S. 2062. So the bill before us goes even further in terms of compromising on the issues than were brought before the Senate last October-enough action, I hope, that we can get to finality within a few days.

As many colleagues may already know, this bill has gone through many changes and mostly changes to accommodate the minority in the Senate, a few Democratic Senators. I have worked in good faith with my colleagues on the other side of the aisle to bring people together and to address valid concerns to increase support for this bill, especially to get over the hurdle of the supermajority of 60 to get to stop debate and get to finality.

To tell you the truth, Mr. President, I really didn't think we needed to make any changes in this class action bill that we originally introduced this Congress-in other words, last year. I thought then, and I think now, that the original introduction was a pretty good bill. But, of course, being a pretty good bill in my judgment doesn't mean it has enough votes to get that supermajority and get the compromise that is necessary to get to finality. So in order to move the class action bill forward, I did my best to listen to the issues raised and to make modifications to the bill where there was room for compromise.

Yet S. 2062 still retains the goals I wanted to achieve and other cosponsors wanted to achieve; that is, to fix some of the more egregious problems that we are seeing in the class action system, and to provide a more legitimate forum for nationwide class action lawsuits.

The deal we have struck is a very carefully crafted compromise that should not need any further modifications. So I am asking my colleagues to withhold offering amendments to avoid disrupting the balance we have achieved. I also hope we will not see a lot of nongermane amendments offered to this bill-meaning nothing to do with this legislation. Under the rules of the Senate, they can be offered but they are very distracting. We ought to keep our focus upon the class action system reform. Instead, we should focus on the germane amendments, get this bill done, and move on. We should not get all caught up in message amendments that will do nothing but play politics and delay all the hard work that we put into this bipartisan compromise bill. So I hope we can pass this bipartisan class action bill without changes and without any further delay.

The reality is that the class action system is broken and we should do something about it. The current class action system is rife with problems which have undermined the rights of both plaintiffs and defendants. Class members are often in the dark as to what their rights are, with the class lawyers, driving the lawsuits and the settlements, with their interests as much in mind as those of members of the class.

Class members receive court and settlement notices in hard-to-understand legalese. The notices are written in small print and in confusing legal jargon so class members often do not understand their rights or, more importantly, the consequences of their actions with respect to the class action lawsuit of which they are a part.

Furthermore, many class action settlements only benefit lawyers, with little or nothing going to the members who have been harmed. We are all familiar with class action settlements where the members get a coupon of little or no value, and the lawyers get all the money available in the settlement agreement. We know that is not protecting the consumers of America.

In addition, the current class action rules are such that the majority of the large nationwide class action lawsuits can only proceed in State court when they are clearly the kinds of cases that should be decided in our Federal courts because they have nationwide implications.

At least these class action lawsuits should have had an opportunity to be heard in Federal court because usually they are the cases that involve the most amount of money, citizens from all across the country, and issues of nationwide concern.

Why should a State court or a county court be deciding these kinds of class action cases that are going to impact people all across our country? Those cases ought to be decided in a Federal jurisdiction. This present system has never made sense to me.

To further compound the problem, the present rules are easily gamed by unscrupulous lawyers who steer class action cases to certain State-preferred courts where judges are quick to certify a class and approve settlements with little regard to class members' interests and the parties' due process rights.

We have heard of class action lawyers manipulating case pleadings to avoid removal of a class action lawsuit to Federal court, claiming that their clients suffered under $75,000 in damages, in order to avoid the Federal jurisdiction amount threshold in existing law.

We have also heard of class action lawyers crafting lawsuits in such a way to defeat the complete diversity requirements by ensuring that at least one named class member is from the same State as one of the defendants, even if every other class member is from a different State.

These are only a couple of the gamesmanship tactics that we hear lawyers like to utilize to bring down an entire class action legal system. The fact is, many of these class action cases are just frivolous lawsuits that are cooked up by lawyers to make a quick buck, with little benefit to class members whom the lawyers are supposed to be representing.

This is a real drag on the economy. Many a good business is being hurt by frivolous litigation costs. Unfortunately, the current class action rules are contributing to the cost of businesses across America and particularly hitting hard small businesses that get caught up in the class action web.

Too many frivolous lawsuits are being filed and too many good companies and consumers are having to pay for lawyer greed. We need to restore some commonsense reform to our legal system, and this legislation does it. It should have been done years ago.

So my colleagues understand, then, why Senator Kohl of Wisconsin and I originally joined forces several Congresses ago-too long ago-to do something about these runaway abuses, and the only thing standing between us and success several years ago was the powerful influence of personal injury lawyers within our political system.

The Class Action Fairness Act will address some of the more egregious problems within our class action system, and it will, at the same time, preserve class action lawsuits as an important tool to bring representation to the unrepresented.

I remind my colleagues of all the time that was spent working on finding a fair solution to the class action problem. For the past four Congresses, Senator Kohl, Senator Hatch, and others have joined me in studying the abuses in the class action system and working to solve these problems. Over the years, both the House and Senate Judiciary Committees have convened numerous hearings on these class action abuses and, more importantly, highlighting the need for reform. The House passed similar versions of class action bills in several Congresses with very strong bipartisan support.

In the Senate, in the 105th Congress, I held a hearing on class action abuse in the Judiciary Committee's Administrative Oversight Subcommittee. In the 106th Congress, my subcommittee held another hearing on class action, and the Judiciary Committee, at that time, marked up and reported out our class action legislation. The Judiciary Committee held a hearing on class action abuse again in the 107th Congress and again in this 108th Congress. The Judiciary Committee marked up the bill which is before the Senate.

Chairman Hatch, Senator Kohl, and I worked closely with Senator Feinstein to make sure that more in-State class actions stayed in State court. That was a compromise to garner a little more bipartisan support at that time.

We also worked closely with Senator Specter, albeit a Republican but a person who had some questions about this legislation, to make sure that his concerns relative to class actions were addressed.

The bill was approved by the Judiciary Committee with solid bipartisan support. Late last year, we worked with Senators SCHUMER, DODD, and LANDRIEU to address concerns they raised and to get them on board. Those Senators joined us in the introduction of the numbered bill before us, S. 2062, in February of this year in a bipartisan show of support for class action reform.

I wanted to elaborate on the history of this bill so my colleagues were aware of the tremendous amount of time, over almost a decade, that Congress has spent studying the problem with our class action system and all the work and compromises that we put into this bipartisan bill to hopefully now get it passed.

I will highlight some of the changes that we made to the bill to increase bipartisan support since Senator Kohl and I introduced the first Class Action Fairness Act several years ago.

The bill, as was originally introduced, did several things. It required that notice of proposed settlements in all class actions, as well as all class notices, be in clear, easily understood English and include all material settlements and the terms of those settlements, including amount and source of attorney's fees. Mr. President, you should not have to be a lawyer to understand what you are suing about and what your cause is and what is going to happen to attorney's fees and other issues in the settlement. Presently, it is pretty complicated to understand that situation.

Because plaintiffs give up their right to sue by joining a class action, they have a right to understand the ramifications of their actions in joining a class.

Then our bill required that State attorneys general, or other responsible State government officials, be notified of any proposed class settlement that would affect the residents of their States.

We included this provision to help protect class members because such notices would provide State officials with an opportunity to object if the settlement terms were unfair to the citizens of their particular State. Somebody at the State level ought to be reviewing that for the populations of their States.

Our bill also requires that courts closely scrutinize class action settlements where the plaintiffs only receive a coupon or some other noncash award while, as I have said before, the lawyers get the bulk of the money.

Our bill required the Judiciary Committee to report back to Congress on the best practices in class action cases and how to best ensure fairness of class action settlements.

Finally, the bill allowed more class action lawsuits to be removed from State court to Federal court. The bill eliminated the complete diversity rule for class action cases but left in State court those class actions with fewer than 100 plaintiffs, class actions that involved less than $5 million, and class actions in which the State government entity, like the attorney general-well, no that is not right-where a State government entity is a primary defendant. Our bill still does many of these things, but we have made a number of modifications to get broader bipartisan support.

In the Judiciary Committee last year, we incorporated the Feinstein amendment, which would leave in State court class action cases brought against a company in its home State where two-thirds or more of the class members are also residents of that State. We also incorporated changes to address issues raised by Senator Specter relative to how mass actions should be treated under the bill.

In our negotiations in late 2003 with Senators SCHUMER, DODD, and LANDRIEU, we made numerous changes. I am only going to mention a few of those important compromises reached. Examples: We made changes to the coupon settlement provisions in the bill, providing that attorneys fees must be based either on the value of the coupons actually redeemed by class members or the hours actually billed in prosecuting the case.

We deleted the bounties provision because of concern that it might harm civil rights plaintiffs.

We deleted provisions in the bill that dealt with specific notice requirements because the Judicial Conference has already approved similar notice requirements to the Federal Rules of Civil Procedure.

To address questions about the merry-go-round issue, we eliminated a provision dealing with the dismissal of cases that failed to meet rule 23 requirements so that existing law continues to apply.

We deleted a provision allowing plaintiff class members to remove class action because of gaming concerns.

We placed reasonable time limitations on appellate review of remand orders in the bill.

We clarified that citizenship of proposed class members is to be determined on the date plaintiffs file the original complaint or when plaintiffs amend that complaint.

We made modifications to the Feinstein compromise that I have already referred to and to the class actions language referred to.

We clarified that nothing in the bill restricts the authority of the Judicial Conference to promulgate rules with respect to class actions.

Finally, we crafted a new local class action exception which would allow class actions to remain in State court if, No. 1, more than two-thirds of the class members are citizens of the forum State; No. 2, there is at least one in-State defendant from whom significant relief is sought by members of the class and whose conduct forms a significant basis of the plaintiffs' claims; No. 3, principal injuries resulting from the alleged conduct or related conduct of each defendant were incurred in the State where the action was originally filed; and lastly, no other class action asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons has been filed during the preceding 3 years. We did this to ensure that truly local class action cases, such as a plant explosion or some other localized event, would be able to stay in the State court where the harm took place.

So we have made significant concessions to get our Democratic colleagues on board the Class Action Fairness Act. They have been telling us they are ready to support the bill and to get it passed. Both sides have been asking the leader to bring up this bill. Now that we have an agreement to proceed to the bill, hopefully no partisan politics will be played and we will get down to business and finally get this job done. It is time to make real progress on the class action bill and get it passed.

Again, I want to remind my colleagues that we crafted a carefully balanced bill that consists of all of these compromises and more that I have mentioned. I believe we have done a pretty good job of addressing legitimate concerns with the bill, and I am hopeful we will not see lots of amendments to disrupt this compromise.

I urge my colleagues to refrain from offering nonrelevant amendments, amendments that have nothing to do with this bill, because this is a bill that should not be bogged down with everyone's pet project, for which the Senate is so famous. All of our hard work of forging a bipartisan compromise bill should not go down the drain.

The bottom line is class action reform is badly needed. Both plaintiffs and defendants alike are calling for change. The Class Action Fairness Act will help curb many problems that have plagued the class action system.

The bill will increase class member protections and ensure the approval of fair settlements. It will allow nationwide class actions to be heard in the proper forum-the Federal courts-but keep primarily State class actions 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 frivolous lawsuits that are a drag on our economy and especially harmful to small business.

Now that we have worked out a delicate compromise, we should be able to get this bipartisan bill done without any changes.

A lot of my colleagues listening will say: Well, the gall of the Senator from Iowa to say that we have such a perfect bill before the Senate that we should not have any amendments. Well, over the course of several years, this has been a bipartisan bill in sponsorship. We developed more broad bipartisan consensus last year to get this bill out of committee. We just about had enough consensus to move the bill, one vote short of a supermajority, last October, of 60 votes, to move this bill.

Then there were further compromises made to get over that hurdle. You can quantify in this body, what it takes, as a measure of bipartisanship. It is whether you get that 60-vote supermajority to stop debate and to get to finality. That is where the power of the minority comes into play in this body. They can say they need further compromise to move this bill to finality. We did that between last October and now.

Some people do not want class action reform and they have a right to vote against it. But it seems when the Senate process has worked to bring about the necessary votes, and those necessary votes are gotten by the proper bipartisan compromises being worked out, then we ought to be able to let the Senate work its will. The rights of the minority have been protected.

Have the rights of every last Senator been protected? No. But if we had to wait for that to happen, no bill would pass. But if it did pass, it would pass by a 100-to-0 margin.

We are there. Hopefully this bill will pass the way it has been worked out and be done in a short period of a few days. We do not have a lot of time to spend on it. Of course, that works to the advantage of those who do not want anything because they represent the interests, they would say, of the consumers, and I don't doubt that is what they are concerned about. But they are also, intended or not, representing the interests of the selfish personal injury lawyers who want to play games with picking this county in this State, or that county in that State-some Podunk county where they can win their case.

It would be OK if that case were only pertinent to the people of that State, but you find this forum shopping with national implications. Something of national implication should not be decided in one Podunk county in one State but should be decided by our Federal courts.

I yield the floor.

Mr. CARPER. Will the Senator yield?

Mr. GRASSLEY. Yes. I yielded the floor, but if you want me to hold the floor-

Mr. CARPER. I would appreciate it. If the Senator will yield, I would like to make a comment.

Mr. GRASSLEY. Yes.