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Friday, February 11, 2005

The New York Times > Washington > Senate Approves Measure to Curb Big Class Actions

The New York Times > Washington > Senate Approves Measure to Curb Big Class Actions

February 11, 2005
Senate Approves Measure to Curb Big Class Actions
By STEPHEN LABATON

WASHINGTON, Feb. 10 - Handing President Bush a significant victory, the Senate overwhelmingly approved a measure on Thursday that would sharply limit the ability of people to file class-action lawsuits against companies.

The measure, adopted 72 to 26, now heads to the House of Representatives, where Republican leaders say it will be approved next week and sent to the White House for Mr. Bush's signature.

The measure would prohibit state courts from hearing many kinds of cases they now consider, transferring them to federal courts. Experts say many cases will wind up not being brought because federal judges have been constrained by a series of legal precedents from considering large class actions that involve varying laws of different states.

The legislation also makes it more difficult for class-action lawsuits to be settled by payments of coupons for goods and services instead of cash by the defendants, a practice that has been heavily criticized by Democrats and Republicans.

The measure does not affect pending cases.

Mr. Bush issued a statement praising the vote, his first legislative victory of his second term.

"Our country depends on a fair legal system that protects people who have been harmed without encouraging junk lawsuits that undermine confidence in our courts while hurting our economy, costing jobs and threatening small businesses," the president said. "The class-action bill is a strong step forward in our efforts to reform the litigation system and keep America the best place in the world to do business."

The legislation has long been promoted by large and small businesses, particularly manufacturers and insurance companies, and failed by a single vote in the Senate in 2003. It could have an especially significant effect on cases involving accusations of defective products, like drugs and cars; plaintiffs in such cases have had success in bringing large class actions in state courts. Automakers and drug makers have worked for years with manufacturers and insurers to press Congress to adopt the bill.

The business groups have asserted that the legislation is necessary to curtail frivolous litigation that benefits lawyers more than plaintiffs. They have said it is important to eliminate the unfair practice of lawyers' shopping for state courts that were more favorable to plaintiffs.

"This is a modest bill which will help reform a class-action regime that many times serves no one but the lawyers who bring these class-action lawsuits," said Senator Charles E. Grassley, Republican of Iowa, who was the chief sponsor of the measure and who introduced a version of it eight years ago. "Out-of-control frivolous filings are a real drag on the economy. Many a good business is being hurt by these frivolous claims."

But the measure has been attacked by civil rights organizations, labor groups, consumer organizations, many state prosecutors and environmental groups, who say it would sharply curtail important cases and provide new protections for unscrupulous companies. Many federal and state judges and state lawmakers have also criticized the bill, saying it would strip states of an important role in judging such contests and could add a considerable number of cases to already burdened federal dockets.

"This bill is one of the most unfair, anticonsumer proposals to come before the Senate in years," said Senator Harry Reid of Nevada, the minority leader. "It slams the courthouse doors on a wide range of injured plaintiffs. It turns federalism upside down by preventing state courts from hearing state law claims. And it limits corporate accountability at a time of rampant corporate scandals."

In the vote on Thursday, 18 Democrats joined 53 Republicans and the lone Senate independent, James M. Jeffords of Vermont, in supporting the measure. Democrats cast all 26 dissenting votes. Two Republicans, Rick Santorum of Pennsylvania and John Sununu of New Hampshire, did not vote.

Republicans say they hope the vote will provide momentum for two other major bills overhauling the tort law system, one on asbestos litigation, the other on curbs on medical malpractice lawsuits. Critics of these bills say that part of the effort by the White House is to attack trial lawyers, a vital financial base of support for the Democratic Party. They have also said that like Social Security and the war in Iraq, tort law problems have been exaggerated by the Bush administration, and that proposed solutions go much further than necessary.

The legislation approved by the Senate would prohibit state courts from hearing most of the kinds of class actions that have most troubled corporate America - those in which the class consists of many consumers or employees from around the nation who assert significant injuries of one sort or another. It precludes state courts from considering cases involving claims of more than $5 million and having a member of the class living in a state different from the defendant's.

Critics of the legislation say that since the Supreme Court and several appeals courts have imposed limits on the ability of federal district judges to consider cases involving the varying laws of multiple states, the legislation will deter the filing of meritorious lawsuits.

Some experts in civil procedure and class actions said they believed that the fight would now move to federal courts and that some federal judges might become more receptive to hearing such claims now that they know that their dismissal would mean that no one else would hear them.

"The assumption of business interests was that federal courts will continue to dismiss them blindly, ignorant of the fact that there is nowhere else for these cases to go," said Samuel Issacharoff, an expert on civil procedure at Columbia Law School who is the main author of a coming treatise on different kinds of cases involving many parties, including class actions, for the American Law Institute, an influential organization of lawyers, academics and judges. "I think more highly of federal courts," Mr. Issacharoff said, "that they will realize that they stand between justice and the breach."

Stephen B. Burbank, an expert on class actions and civil procedure at the University of Pennsylvania School of Law, also expects federal judges to try to find ways to hear the cases.

"Don't underestimate the ability of federal judges to find ways around this if they can," Professor Burbank said.

But he said lower federal courts would remain constrained by the precedents set by the Supreme Court and appeals courts that sharply limit their ability to hear cases involving the differing laws of multiple states.

Professor Burbank, who recently completed a study on the sharp decline in the trials of all civil cases, said he feared that one impact of the legislation would be a further reduction in such cases, particularly since federal judges must give priority to criminal cases and already have heavy dockets. Class-action lawsuits rarely make it to trial but require considerable time because judges are called upon by lawyers from both sides to rule on a variety of pretrial motions.

Prof. Arthur R. Miller of Harvard Law School, a longtime critic of the legislation who in previous years worked with organizations that tried to soften the measure, said that the legislation could lead to the balkanization of class-action litigation by encouraging plaintiffs' lawyers to file smaller suits in different courts, rather than a single large nationwide action.

"This will clearly have a dampening effect on class actions," Professor Miller said. "But accomplished law firms will figure out how to work with it."

He also said that the vague language of the new legislation was certain to spawn a significant amount of new litigation over the law's terms.

"This is not neat and crisp like the Ten Commandments," he said.

Lawyers at several firms specializing in class actions said they had not begun to think about what legal maneuvers were possible to get their highly profitable class actions heard. One lawyer at a prominent class-action firm said that part of the reason plaintiffs' lawyers had not prepared a strategy yet was that many lawyers had expected the legislation to take longer to adopt as Senate and House members wrangled over terms.

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