Representative Robert W. Goodlatte (R-VA), who introduced the CAFA legislation earlier this year, points out several examples of runaway class action judgments from state courts.

Class Action Reform Gets Verdict in the House,
Jury Still Out in the Senate

By Christopher Armstrong

The U.S. House of Representatives this week passed the Class Action Fairness Act of 2003 (CAFA) by a vote of 253 to 170.� The bill would make it easier for defendants to move class actions into federal court by expanding federal jurisdiction and is a necessary first step in providing uniform standards for such lawsuits and preventing forum shopping by plaintiffs� attorneys.� Nevertheless, despite this much-needed reform, CAFA faces considerable opposition in the Senate.

Under CAFA, federal courts would have jurisdiction over any class action suit involving citizens of different states where the amount in controversy is at least $2 million, thereby removing the plaintiff-defendant state citizenship hurdle.� By placing these suits in federal courts instead of the state courts, CAFA will curtail trial attorneys� forum shopping designed to exploit state-to-state differences in procedural and substantive law. �The law would also allow the federal judiciary to keep a tighter rein on class action damages, limiting the frequency of cases for which lawyers walk away with millions in legal fees while plaintiffs walk away empty-handed.

Under current law, federal courts have jurisdiction over class action cases only if every plaintiff is a citizen of a different state than every defendant.� This �complete diversity� rule has made it virtually impossible for class action suits to be removed to federal court, forcing them to remain in the courts of the plaintiffs� choice.

State courts are often ill-equipped to handle cases of such size, magnitude, and complexity.� In addition, state courts have tended to produce larger, more random damages awards, which have led to increased insurance costs and consumer prices.� In fact, the only beneficiary of keeping class actions in state court seems to be the trial lawyers, who often earn between 20 and 40 percent of the multi-million dollar judgments.

As expected, the trial bar is less than happy with the current attempt to fix what is largely seen as a broken class action system.� Consequently, the American Trial Lawyers Association (ATLA) is mounting a major offensive to stop CAFA in the Senate.

According to ATLA, legal reform efforts like CAFA will �restrict the legal rights of American families.� �In fact, ATLA asserted in a recent press release that President �Bush side[d] with millionaire insurance executives instead of American families,� due to his support for true legal reform.� But by trying to frame the issue as one of �millionaire insurance executives� versus �families,� ATLA�s argument loses by virtue of its own absurdity.

According to House member James Sensenbrenner Jr. (R-WI), �The class-action judicial system itself has become a joke.� And no one is laughing except the trial lawyers � all the way to the bank.�

Representative Robert W. Goodlatte (R-VA), who introduced the CAFA legislation earlier this year, points out several examples of runaway class action judgments from state courts:

• In a class action suit against Blockbuster Video, lawyers walked away with over $9.2 million. �Plaintiffs received a $1 coupon off their next rental.

• In a class action suit against Bank of Boston, the lawyers took home over $8.5 million while the actual victims were later required to pay money at settlement.

• In a class action suit against Cheerios over a food additive � with no evidence of injury to any consumers � lawyers got nearly $2 million in fees, or approximately $2,000 per hour.� Meanwhile, the consumer plaintiffs each received a coupon for a free box of cereal.

• In a class action lawsuit against Chase Manhattan Bank, a state court awarded the plaintiffs a multi-million dollar judgment.� The trial lawyers walked away with over $4 million in attorney fees, and each plaintiff was awarded a settlement check totaling 33 cents.� Since the plaintiffs had to claim their check by mail � at the then-cost of a 34-cent stamp � the class action �win� resulted in a net loss to each claimant of a penny.

Thus, despite the organized opposition of the trial lawyers, the American people will see legal reforms like CAFA for what they really are: Weighing the interests of real victims, consumers, and fair and reasoned judgments against those of the money-hungry trial lawyer elite.

Now if only the former trial attorneys in the Senate will do the right thing.

Christopher J. Armstrong is a law student at the Catholic University of America Columbus School of Law and is interning at the Center for Individual Freedom this summer.

Return to Current Events Index