Class Action Fairness Act of 2005--Resumed
Class Action Fairness Act of 2005--Resumed
BREAK IN TRANSCRIPT
Mr. GRASSLEY. Mr. President, we are in our second day of debate on the important Class Action Fairness Act of 2005. Because of my responsibilities as chairman of the Senate Finance Committee, I have not had a chance to participate in the debate of a bill that I have been the sponsor of going back to the 105th Congress. It is a pleasure for me to participate and anticipate the passage of this legislation.
It is about time that the Senate gets this bill done and gets it to the President. Of course, I am very pleased that Majority Leader Frist sees this as an important enough issue to move so early in the 109th Congress. I also thank Chairman Specter, as new chairman of the Senate Judiciary Committee, for getting this class action bill through committee so very quickly. I hope we can move expeditiously with few or no amendments, pass this bill, and have the President sign it, which we are sure he will.
My colleagues will recall that in the 108th Congress, Senator Frist brought the class action fairness bill to the floor in October 2003, but we were not able to proceed to the bill. We lost the vote on cloture on the motion to proceed by just a one-vote margin; in other words, 50 votes as opposed to the 60-vote supermajority that cloture takes.
After that vote, I worked with Senator Hatch, who was then chairman of the Judiciary Committee, and our lead Democratic cosponsors, Senators KOHL and CARPER, to modify the bill to address concerns that were raised by three Senators and maybe others, but I remember specifically Senators DODD, LANDRIEU, and SCHUMER. Then we reintroduced the Class Action Fairness Act in February 2004 as a new bill with a new number, S. 2062.
It contained the compromise language that we worked out with Senators DODD, LANDRIEU, and SCHUMER. Senator Frist then attempted to bring up the bill last July. Unfortunately, we were once again denied the ability to close debate on the bill, and we lost, again, a cloture vote. This was because Senators wanted to offer nongermane amendments--amendments, as you know, Mr. President, that have absolutely nothing to do with the subject matter of the underlying bill. This was particularly disappointing to me after all of the hard work we had done to reach an acceptable compromise with several Democrats. We could have passed the bill in the 108th Congress, but raw politics got in the way.
Now is the time to get this bill done. We have reintroduced the language contained in last year's bill, a compromise worked out with Senators DODD, LANDRIEU, and SCHUMER. That is what is now before us in S. 5, the very same bill. We made no changes to last year's bipartisan compromise. So I hope we can stop having politics interfere with this bill and pass what is a relatively modest bill that will help reform a class action regime that has gotten to be very bad, which ends up most of the time serving no one except the lawyers who bring these class action suits.
I would like to give some background on the need for this very important legislation. Everyone has heard about the abuses going on with the current class action system. These problems undermine the rights of both plaintiffs and defendants. Class members often do not understand what their rights are in a class action suit, while the class action lawyers drive the lawsuits and the settlements. Class members cannot understand what the court and the settlement notices say because they are in very small type and written in hard-to-understand legalese. So class members often do not understand their rights and they don't understand the consequences of their actions with respect to the class action lawsuit in which they are invited to participate.
Moreover, many class action settlements only benefit the lawyers, with little or nothing going to the class members. We are all familiar with the class action settlements where the plaintiffs got coupons of little value, or maybe no value, and the lawyers got all of the money available in the settlement agreement. So what is the point of bringing a lawsuit? I thought it was to find redress for the plaintiffs and not to benefit the lawyers who bring the case. But that is what happens many times now in these class action lawsuits. The lawyers drive those cases, not the individuals who allegedly have been injured. The lawyers are the ones who get the millions and millions of dollars in fees while the people who allegedly have been injured get worthless coupons.
In addition, the current class action rules are such that the majority of large nationwide class actions are allowed to proceed to State court when they are clearly the kinds of cases that should be decided in Federal Court. The U.S. Constitution provides that cases involving citizens of two different States and an amount of controversy of $75,000 can be heard in Federal Court. However, the law has been interpreted in such a way that class action lawsuits; that is, cases involving large sums of money, citizens of many different States, and issues of national concern, have been restricted to State courts even though they have
national consequences. Crafty lawyers game the system. Crafty lawyers file these large class actions in certain courts. They are shopping for magnet State courts, and they are able to keep them there.
For example, in Madison County, IL, the most notorious class action magnet State court, which has been called a ``judicial hellhole,'' class action filings have jumped from 77 in 2002 to 106 in 2003. I understand that Madison County has had an increase of over 5,000 percent in the number of class action filings since 1998. That surely says something. Clearly, the judges there are playing somewhat fast and loose with the class action rules when they are deciding whether to certify a class action lawsuit. So unscrupulous lawyers are gaming the present rules to steer their class action cases to these certain preferred State courts, such as Madison County, IL, where judges are quick to certify classes, quick to approve settlements, with little regard to the class members' interests or the parties' due process rights. Of course, that is the reason for this legislation. We need to do something about this kind of abuse of the judicial process.
Class action lawsuits at least should have the 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 county court be deciding these kinds of class action cases that impact people all across the country? Of course, that just doesn't make sense to me; hence, the authorship of this legislation. I hope it doesn't make sense to at least a majority of my colleagues.
Both the House and Senate held numerous hearings on this legislation and on other kinds of class action abuse. We heard about class lawyers manipulating case pleadings to avoid removal of a class action lawsuit to Federal court, where it should be, claiming that their clients suffered under $75,000 in damages in order to avoid the Federal jurisdictional amount threshold.
We heard about class lawyers crafting lawsuits in such a way to defeat the complete diversity requirement by ensuring that at least one named class member was from the same State as one of the defendants even if every other class member was from one of the other 49 States.
We heard about attorneys who filed the same class action lawsuit in dozens of State courts all across the country in a race to see which judge would certify the fastest and the broadest of class.
We heard about class action lawyers entering into collusive settlements with defendant attorneys which were not in the best interest of class members.
These are only a few of the gamesmanship tactics lawyers like to utilize to bring down the entire class action legal system. The bottom line is that many of these class actions are just plain frivolous lawsuits that are cooked up by the lawyers to make a quick buck, with little or no benefit to the class members who the lawyers are supposed to be representing.
Out-of-control frivolous filings are a real drag on the economy. Many a good business is being hurt by this frivolous litigation cost. Unfortunately, the current class action rules are contributing to the cost of business all across America, and it particularly hits small business because it is the small business that gets caught up in the class action web without the resources to fight.
Too many frivolous lawsuits are being filed. Too many good companies and consumers are having to pay for this lawyer greed. Make no mistake about it, there is a real impact on the bottom line for many of these companies and, to some extent, on the economy as a whole. They have to eat this increased litigation cost or else it is farmed out to consumers, such as you and me, and this is all in the form of higher prices for goods and services we buy.
This is unacceptable, and we need to do something about this. We need to restore some commonsense reform to our legal system. We need to restore common sense to the class action system. We should pass this bill.
I now wish to say something about class action lawsuits. They can be a very good tool for many plaintiffs with the same claims to band together to seek redress from a company that has wronged them. I am not against the use of class action lawsuits, and neither are other supporters of this bill. We are not here to put a stop to the class action tool.
I certainly know my friend and original cosponsor of this bill, Senator Kohl, feels the same as I do. People who have been injured should be able to sue companies that do not follow the law. Our problem is many class actions are not proceeding in the way they were originally intended.
Our problem is many of these lawsuits are not fair and violate the due process rights of both plaintiffs as well as defendants.
Our problem is many times these lawsuits are not helping the class members at all. They are an effective tool for lawyers to make a big, easy buck.
Our problem is these kinds of suits should have an opportunity to be heard in Federal court, not stuck in a magnet court in a county that has no connection whatsoever to the case. That is why Senator Kohl and I joined forces several Congresses ago--this is the fifth Congress this bill has been around for us to try to do something about this situation. That is a period of 8 years past and 10 years including this Congress--to do something about the problems we were seeing and about the runaway abuses.
The Class Action Fairness Act will address some of the more egregious problems with the class action system while preserving class action lawsuits as a very important tool which brings representation to the unrepresented.
Let me underscore for my colleagues that S. 5 is a very delicate compromise. As my colleagues already know, this bill has gone through many changes to accommodate Democratic Senators, much to the frustration of some of my Republican colleagues who think we have gone too far.
I worked in good faith with these colleagues on the other side of the aisle to bring people together and to address valid concerns to increase support for this bill, most importantly to, hopefully, have 60 votes on board, the supermajority it takes to bring a halt to debate, to get to finality, to get this bill passed, to get it to the House where we are told it will pass if we do not change it, and go to the President very quickly.
I did not think then that we needed to make any changes to the class action bill that was originally introduced several Congresses ago, but as compromise is often necessary
in this process if I wanted 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 that compromise.
Nevertheless, with all the compromises we cut, S. 5 still retains the goal we set out to achieve: to fix some of the most egregious problems we are seeing in the class action system and to provide a more legitimate forum for nationwide class action lawsuits.
The deal that was struck is a very carefully crafted compromise that does not need to be modified any further. So I am asking my colleagues to withhold the offering of amendments to avoid disrupting the balance we have achieved.
My colleagues should not be fooled. The amendments that are going to be offered are an attempt to weaken or gut the bill. Some amendments may sound reasonable, but they pose a problem in the other body. Other amendments may sound good, but they do not have anything to do with class action reform. Other amendments are, plain and simple, poison pills.
We have worked far too long and we have worked far too hard to have this bill come down because folks are misled into supporting an amendment that in reality perpetuates the problem and preserves the status quo.
We have worked far too long and too hard to have this bill delayed and complicated with amendments that the House will never accept.
We have also worked far too long and far too hard to have this bill bogged down by amendments that are not critical to the core purpose of the legislation.
So then let's get this bill past the finish line, not create more hurdles and obstacles. I ask my colleagues to vote against the amendments and keep the bill clean. How often do we in this body, the Senate of the United States, have the respect the House is giving us by saying if this bill is not changed any more, they will buy it the way it is? That happens once in a decade. We ought to take advantage of it.
I would like to highlight, before I sit down, some of the changes we made to the bill to increase support for this bill since Senator Kohl and I introduced the first Class Action Fairness Act in the 105th Congress, now 8 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, including amounts and sources of attorney's fees. Since plaintiffs give up their right to sue, they need to understand the ramifications of their actions and should not have to hire another attorney to find out what these notices mean.
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 notice would provide State officials with an opportunity to object if the settlement terms are unfair to their citizens.
Our bill also required that courts closely scrutinize class action settlements where the plaintiffs only receive coupons or noncash awards while the lawyers get the bulk of the money.
It required the Judicial Conference to report back to the Congress on the best practices in class action cases and how to best ensure fairness of these 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 courts those class actions with fewer than 100 plaintiffs, class actions that involve less than $5 million, and class actions in which a State government entity is the primary defendant.
Our bill still does many of these things, but we have made a number of modifications to get this bipartisan support.
In the Judiciary Committee in the 108th Congress, we incorporated Senator Feinstein's amendment which would leave in State court class action cases brought against a company in its home State where at least 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 would be treated under this bill. In our negotiations and outside the committee with Senators SCHUMER, DODD, and LANDRIEU, we made numerous changes, so I will only mention a few of the more important compromises we reached.
For example, we made changes to the coupon settlement provisions in the bill providing that attorney's 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 for these Senators the bounties provision because of a concern that it would harm civil rights plaintiffs.
We deleted provisions in the bill that dealt with specific notice requirements because the Judicial Conference had already approved similar notice arrangements 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 fail to meet rule 23 requirements so that existing law applies.
We deleted a provision allowing plaintiff class action members to remove class actions to Federal court because of gaming concerns. We placed reasonable time limits on the appellate review of remand orders in the bill. We clarified that citizenship of proposed class members is to be determined on the date the plaintiff filed the original complaint or when plaintiffs amend the complaint.
We made further modifications to the FEINSTEIN compromise already referred to and to the mass action language Senator Specter was concerned about. We clarified that nothing in the bill restricts the authority of the Judicial Conference to promulgate rules with respect to class actions.
Finally, we drafted a new what is called local class action exception, which would allow class members to remain in State court if, one, more than two-thirds of the class members are citizens of this forum State; two, 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 for the plaintiffs' claims; three, the 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, four 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 all of 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 State court. So we have made significant concessions to get our Democratic colleagues on board this Class Action Fairness Act. Of course, some of my Republican colleagues feel we have made too many compromises. But these folks on the other side of the aisle have been telling us that they are ready to support the bill and get it passed, so the time has come that hopefully no more politics are played, that we get down to business and we get this bill done. It is time to make real progress on a class of lawsuits that has become burdensome for business, not beneficial to the plaintiffs, and enriching of attorneys.
If we do that--and we do that when we pass this bill--again I want to remind my colleagues that we have crafted a carefully balanced bill that consists of a number of compromises and some would say too many compromises. I think we have done a pretty good job of addressing legitimate concerns with the bill and I am hopeful we will not see a lot of amendments to disrupt this compromise. I am hopeful my colleagues will join me and vote against all killer amendments that gut or weaken the bill. I am hopeful my colleagues will join me and vote against poison-pill amendments that the House will never accept.
All of these amendments need to be defeated because we should send a clean bill to the House. All of our hard work on forging a bipartisan compromise bill should not go down the drain.
The bottom line is this class action reform is badly needed. Both plaintiffs and defendants alike are calling for change. The Class Action Fairness Act will help curb the many problems that have plagued the class action system. S. 5 will increase class members' protection and ensure the approval of fair settlements. It will allow nationwide class actions to be heard in a proper forum, the Federal courts, but keep primarily State class actions where they belong, in State court. It will preserve the process but put a stop to the more egregious abuses. It will also put a stop to the frivolous lawsuits that are a drag on the economy.
Now that we have worked together on a very delicate compromise, we should be able to get this bipartisan bill done without changes.
I see another person who has worked very hard on this bill has come to the Chamber and that is Senator Carper of Delaware. There is no person who has been more determined to get this bill passed and get it passed in a bipartisan way, and I appreciate very much the cooperation he has given us over the last year but, more importantly, in a time when I have been involved with a lot of issues other than class action, he has kept me focused on this bill that I want to get passed, and he has helped me get the job done. I thank Senator Carper as well as other Democrats who have helped in this process.
I yield the floor.
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