Legislation would force state class actions into federal court.

Legislation pending in both the House and Senate judiciary committees (H.R. 1875 and S. 353) would force most class actions brought under state law into the already overburdened federal court system, raising fears of greater delay and injustice. The Senate version of the legislation would also impose new notice requirements and fee limits and would require sanctions for any violation of Rule 11.

The business groups that have worked tirelessly to promote federal products liability legislation have made these bills the focus of their current lobbying efforts.

Efficiency

Class actions promote judicial efficiency by combining cases concerning the same issues for resolution, rather than litigating the suits one at a time. They are a valuable tool for consumer protection litigators, since they consolidate many claims for small amounts of money that would not be brought individually.

For instance, if a company routinely defrauds its customers of $100 on every sale, figuring that nobody will act on such a small loss, class actions give consumers a chance to stop the practice and receive compensation for the wrongful behavior.

Most class actions are brought in state courts under state law. Defendants very often seek to move these cases to federal court, because this procedure imposes higher costs and more delay on the plaintiffs. But the main method to remove cases governed by state law to federal court--diversity jurisdiction--is difficult to use since it requires that none of the defendants be from the same state as any of the plaintiffs. The House and Senate bills would make it easier to remove cases to federal court and would erect new procedural hurdles that could be a disincentive to bringing class action suits at all.

The bills accomplish this by expanding the original jurisdiction of the federal courts. Cases could be brought in or removed to federal court by any defendant if any plaintiff is from a different state.

Cases could also be removed by any plaintiff in the class, not just named plaintiffs. Removal could be forced on all plaintiffs and defendants if only one decided to move the case to federal court.

The Senate version of the bill would impose burdensome notice requirements, even on cases that remain in state courts. Plaintiffs would have to give notice to every state attorney general of settlements in class actions when the plaintiff class includes anyone from the attorney general's state.

The notice would have to include the complaint and any amended complaints, the proposed settlement, notification sent to class members, either the names of class members or an estimate of the number residing in the state, and any written opinion in the case. The bill would suspend final approval of a proposed settlement for 120 days from the time of notice to allow the attorneys general time to intercede if they choose to do so.

The clear goal of the legislation is to place new barriers before plaintiff lawyers without imposing similar barriers for the defense. For instance, the Senate version of the legislation would put additional limits on attorney fees in class actions. Fees are always subject to review by the courts, but this provision would subject them to a vague new standard that is potentially in conflict with well-developed state standards.

The bill would also impose mandatory sanctions for violations of Rule 11 of the Federal Rules of Civil Procedure concerning frivolous claims. This would reverse the 1993 rules change that gave judges discretion over Rule 11 sanctions.

Nobody wants to allow lawyers to make frivolous claims or raise frivolous defenses. This is against the interest of the legal profession and wastes judicial resources.

But experience has shown that mandatory Rule 11 sanctions chill the willingness of lawyers to bring novel claims--a problem particularly stifling in the area of civil rights. If the provision became law, it could slow the development of case law in areas as diverse as sexual harassment, toxic torts, and tobacco and firearms litigation.

Federal and state judges will likely oppose the bills. A similar provision that would apply only to claims based on Y2K defects brought vocal opposition from the Judicial Conference of the United States and the Conference of Chief Justices.

The Judicial Conference is concerned that the overburdened courts--still suffering from the number of unfilled vacancies caused by the slow pace of Senate confirmations--will be swamped with Y2K cases.

Tidal wave 

If an even broader rule applying to class actions regardless of subject matter went into effect, the tidal wave of class actions could be overwhelming. The state chief justices pointed out that 95 percent of the country's judicial resources are in the states, yet this bill would force some of the most complex cases into the remaining 5 percent of courts.

These bills represent a serious threat to the continuing viability of class actions, an important tool to resolve claims affecting groups of plaintiffs. ATLA is committed to maintaining state authority over state class actions.

Philip Buchan is an associate director of ATLA Public Affairs.