Mr. President, I note that Senator Cornyn is here. I ask unanimous consent he be permitted to speak, and then I be granted the floor thereafter. Mr. President, I ask unanimous consent that Senator Breaux be recognized and then I be…
Mr. President, I note that Senator Cornyn is here. I ask unanimous consent he be permitted to
speak, and then I be granted the floor thereafter.
Mr. President, I ask unanimous consent that Senator Breaux be recognized and then I be recognized immediately following his remarks.
Mr. President, I thank my colleague for his kind remarks. We will certainly look at whatever he has to offer in this matter. We will keep an open mind and see if we can get together.
I rise in strong support of S. 1751, Class Action Fairness Act of 2003. It used to be S. 274, but now it is renumbered to S. 1751. This bill represents a carefully balanced legislative solution in response to the widespread abuse of the class action lawsuits in our State courts. Over the past decade, it has become painfully obvious that class action abuses have reached epidemic proportions. What began as occasional outrageous class action settlements, drawing light humor, has now become a routine occurrence that is just not funny anymore. It has become equally clear that the true victims of this epidemic have been every-day consumers who represent the silent majority of unnamed class members throughout the country.
It has become too common where plaintiff class members are not adequately informed of their rights or the terms and practical implications of a proposed class action settlement. Making matters worse, judges too often approve settlements that primarily benefit class counsel, the attorneys, rather than the class members or the victims. That is turning the law on its head.
In the coming days, we will hear numerous examples of egregious State court settlements, where class members habitually receive little or nothing of value, while their attorneys receive millions of dollars in fees. The cases are numerous, but just too extensive to list.
To put these settlements in perspective, allow me to share a recent class action settlement that one of my own staff members recently actually received in the mail. This settlement notice comes from a State court in Jefferson County, TX. It involves the settlement of a class action lawsuit brought on behalf of purchasers of Bridgestone and Firestone tires. This technical legal document informs my staffer--an apparent class member by virtue of owning a set of Firestone tires--of a proposed class action lawsuit settlement that will award the lawyers $19 million in fees and costs. That is not a bad payday for lawyers when compared to what the clients get: a promise from defendants that they will make safer tires and initiate a safety program.
It strikes me these class members are getting a so-called benefit they should be getting, anyway. It seems to me they should try to have safer tires and the benefit of a safety program.
But the laughable settlement terms don't end there. Unlike the unnamed class members who do not stand to gain a single penny, those lucky enough to be named plaintiffs get to walk away with a $2,500 cash bounty. This proposed settlement, which will likely be approved by the State court, represents everything wrong with the class action system today and underscores the importance of reform--$19 million, where no one really gets any benefits except a few they choose to be named plaintiffs, who get $2,500. The attorneys walk off wealthy, happy, fat, and laughing.
The need to reform our class action system is not a new issue to the Senate. The Judiciary Committee conducted hearings in the 105th, 106th, and 107th Congresses, reporting a similar bill out of committee in the 106th Congress on a bipartisan basis. We have received mountains of evidence demonstrating the drastically increasing injustices caused by class action abuses.
After working extensively with numerous legislative proposals throughout the various Congresses, the committee reported a bill--again with bipartisan support--which I believe provides a measured response to the underlying class action problem.
This being said, I would not be surprised to hear somebody deny the existence of any problem at all. Others will try to confuse the issue with dubious claims that proposed reforms would somehow disadvantage victims with legitimate claims or further worsen class action abuses. Others may even contend past legislative reforms have contributed to recent financial debacles and that the proposed reforms will encourage more. Rest assured, Mr. President, such claims are nothing more than red herrings intended to divert the debate from the real issues.
In this regard, let me emphasize a few points regarding this bill. First, this bill doesn't eliminate all State court class action litigation. Class action suits brought in State courts have proven in many contexts to be an effective and desirable tool for protecting consumer interests and rights. Nor do the reforms we will discuss today in any way diminish the rights or practical ability of victims to band together to pursue claims against large corporations. In fact, we have included several consumer protection provisions in our legislation that I believe will substantially improve plaintiffs' chances of achieving a fair result in any settlement proposal.
There are three key components to our legislation. First, the bill implements consumer protections against abusive settlements by:
No. 1, requiring simplified notices that explain to class members the terms of proposed class action settlements and their rights with respect to the proposed settlement in ``plain English.''
No. 2, enhancing judicial scrutiny of the abhorrent coupon settlements.
No. 3, providing a standard for judicial approval of settlements that would result in a net monetary loss to plaintiffs.
No. 4, prohibiting bounties to class representatives.
No. 5, prohibiting settlements that favor class members based upon geographic proximity to the courthouse.
And No. 6, requiring notice of class action settlements be sent to appropriate State and Federal authorities to provide them with sufficient information to determine whether the settlement is in the best interest of the citizens they represent.
Second, the bill corrects a flaw in the current diversity jurisdiction statute that now prevents most interstate class actions from being adjudicated in Federal courts. Specifically, the Class Action Fairness Act amends the diversity-of-citizenship jurisdiction statute to allow larger interstate class actions to be adjudicated in Federal court by granting original jurisdiction in class actions where there is ``minimal diversity'' and the aggregate amount in controversy among all class members exceeds $5 million.
The bill balances the State's interest in local disputes by providing that class actions filed in the home State of the primary defendants would remain in State court subject to a triple-tiered formula that looks at the composition of the plaintiffs' class membership. This formula has become known as the Feinstein Compromise.
To enforce the jurisdictional changes, the bill modifies the Federal removal statutes to ensure that qualifying interstate class actions initially brought in State courts may be heard by Federal courts if any of the real parties in interest so desire.
Although some critics have argued this amendment to diversity jurisdiction somehow violates the principles of federalism or is inconsistent with the Constitution, I think their concerns miss wide of their mark. I fully agree with Mr. Walter Dellinger, former Solicitor General, who previously testified at one of our Judiciary Committee hearings that it is ``difficult to understand any objection to the goal of bringing to the Federal court cases of genuine national importance that fall clearly within the jurisdiction conferred on those courts by article III of the Constitution.''
Finally, I wish to express my appreciation to the many individuals who have shared with me the details of their experiences of class action litigation. In particular, I am grateful to those victims of various abuses of the current system who have come forward and told their stories in the hope that something positive might come out of their terrible experiences.
Among those who have come forward is Irene Taylor of Tyler, TX, who was bilked out of approximately $20,000 in a telemarketing scam that defrauded senior citizens out of more than $200 million. In a class action brought in Madison County, IL, a notorious county for these cases, a forum shop county where attorneys forum shop to get these big verdicts and these favorable court rulings, the attorneys purportedly representing Mrs. Taylor negotiated a proposed settlement which will exclude her from any recovery whatsoever.
Martha Preston of Baraboo, WI, provides another excellent example. Ms. Preston was involved in the famous BancBoston case brought in Alabama State court which involved the bank's alleged failure to post interest to mortgage escrow accounts in a prompt manner.
Although Ms. Preston received a settlement of about $4, approximately $95 was deducted from her account to help pay the class action counsel's legal fees of $8.5 million. Notably, Ms. Preston testified before my committee 5 years ago asking us to stop these abusive class action lawsuits, but it appears that at least thus far her plea has not been heard. So I urge my colleagues to support this modest effort to reform the abuses in the current system, abuses that are actually hurting those the system is supposed to help.
Mr. President, I wish to take a minute or two with some charts to show how bad the system is. Under current law, in many State class action lawsuits, all of the money--every stinkin' dime--goes to the attorneys. I am not against attorneys. I am one myself. I think they deserve to be paid reasonable fees, but in these class action suits every bit of the money goes to attorneys.
In the BancBoston case, lawyers got $8.5 million. In the case I just mentioned, some of the plaintiffs had to pay the attorneys additional moneys, getting nothing out of it, but the attorneys got $8.5 million.
I don't know, but that just smells to me a little bit. Maybe I am just too critical, but when the attorneys who represent the clients get $8.5 million and the clients have to again pay the attorneys even more, there is something wrong with that.
Take the second one, the Blockbuster case. The lawyers got $9.25 million. What did the plaintiffs get? One dollar off their next movie. Come on. Doesn't that seem a little disproportionate to you, $9.25 million for attorneys and $1 for the client? Now, true, there are many clients, but it doesn't seem too right to me.
Take the frequent flier case. The lawyers got $25 million. The plaintiffs got a coupon worth $25 to $75. Again, now I understand in that particular case--I may have it mixed up with another case--after getting a huge settlement, they then turned around and sued the plaintiffs for more money.
Take the Coca Cola sweetener case. The lawyers got $1.5 million and the plaintiffs get a 50-cent, a 50-penny coupon. I don't know about you, but that also smells to me. Again, I am not against attorneys getting reasonable fees, but it seems to me these are scams more than anything else. They will say they are correcting societal wrongs, but why then do they get all the money and the plaintiffs who have to put their names on the line get relatively nothing? Talk about class action abuse.
Let's go to that Blockbuster Video case. After being named in 23 class action lawsuits, Blockbuster agreed to provide class members with only $1-off coupons, ``buy one get one free'' coupons, and free Blockbuster favorites video rentals . . . while attorneys are reported to receive around $9.2 million in fees. That is according to the RockyMountainNews.com. It just does not seem right. But that is the way it is.
The class action abuse I mentioned in the BancBoston settlement over disputed accounting practices produced $8.5 million in attorneys fees and actually cost class members around $80 each. Later plaintiffs' attorneys in this case also sued the class members--the individuals who they brought the suit for--they sued them for an additional $25 million. There is something wrong with that. I don't care what anybody says.
Take this one. This is a class action abuse, something this bill would correct. There was a settlement with Cheerios over food additives that produced $2 million in attorneys fees while class members only received coupons for more Cheerios, something they complained about to begin with. I happen to like Cheerios. I have nothing against Cheerios. I eat them. But why would attorneys get $2 million while class members get a coupon for another box of Cheerios? It does not seem right to me.
As my colleagues can see, this is a policy that is being abused, and we are only mentioning a few of the abuses. I have no problems with legitimate, honest class action suits where attorneys are acting in the best interests of their clients. But I do have problems with some of these phony approaches that it seems to me are blatantly wrong on their face, where the attorneys get huge fees and the class members get virtually nothing. That is what is happening in these particular cases.
This bill will correct some of those ills without taking away the right to pursue class actions, and in certain cases they will have to be pursued in Federal court. I remember when I practiced law--that was a long time ago, before I became a Senator--we would die to get into Federal court because everybody knew it was a more important case, that the Federal courts handle more important cases, people thought, and still do think that.
For some reason, these class action lawyers do not want to go to Federal courts. Now, why is that? Because they can forum shop into Madison County, IL, where they get judges and jurors to hammer the defendants with outrageous verdicts that benefit basically only the attorneys. Now, that is wrong.
There are at least five States in this Nation where they forum shop class action cases. Grisham wrote a book about this. He is a great storyteller, but I can almost name every fictionalized attorney in that book.
Some of them are great lawyers. Some of them are leaders in bringing litigation to correct societal wrongs. Some of them deserve credit for doing that. But this is a system that is out of control. This bill will help to straighten it out, and I think resuscitate the respect for my profession because attorneys who bring these actions will have to do so pursuant to fairness and rules that make sense rather than forum shop to areas where they can get big verdicts and big legal fees but do injustice.
Now I will speak about ``Let's Play Class Action Monopoly.'' Go. Come up with an idea for a lawsuit, it states on the top of the board. Find a plaintiff to pay off, or a set of plaintiffs. Make allegations. You do not need any proof to make allegations. Get out of rule 23 free. So you get out of the rule. Convince your magnet State court judge to certify the class, which is also another scam in some of these jurisdictions where the judges do not seem to appreciate the law or abide by the law.
File copycat lawsuits in State courts all over the country. Sue as many companies in as many States as possible even if they have no connection to the State.
It states in the bottom right: Who gets the money? Go left on the bottom. Columbia House case, $5 million for lawyers, discount coupons for plaintiffs; Blockbuster case, $9.25 million for lawyers, free movie coupons for plaintiffs, and not too many of them; BancBoston case, $8.5 million for lawyers. Some plaintiffs pay more fees rather than get anything out of it.
So in the bottom left, what happens to me? Your employer takes a hit, maybe lays you off. Next one, your health and car insurance premiums go up. The lawyers win. You lose.
I have tried cases on both sides of the table. I started out as a defense lawyer, and I defended these types of cases. Then in the latter years of my practice, I became primarily a plaintiff's lawyer where I brought cases for and on behalf of individuals who were injured. I brought cases for injured people and got them big verdicts they deserved. They walked away with the bulk of the money, which is only right. Yes, they were happy to pay my fees because they always came out well.
In some of these cases, this is a scam. Now, there are legitimate class action cases, but there are many of them out there today that are not. It is a disgrace to our profession. This bill will clarify and straighten out some of the wrongs that are going on. It is high time we do this. The only reason we might not do it is because there is a filibuster on the motion to proceed. Normally, we never have a filibuster on a motion to proceed. Normally, we just go to the bill, and then if somebody wants to filibuster, they filibuster the bill, especially if they have the votes. Why not?
But a filibuster is happening even on the motion to proceed. Why is that? Why a filibuster to begin with, on something that really makes sense? Because there are trial lawyers in this country who pay big premiums. That is why they make a lot of this money, so they can pay big premium dollars to politicians who will vote for them no matter what the rules are.
I want to make it clear, not all class action lawyers are bad. Some of them do what is right, and they are not afraid to go to Federal court. They know they can get their big verdicts in Federal courts as well because they have cases where they should get verdicts. When we have these forum shop cases, something is wrong.
Why is it that we have to have a filibuster on the motion to proceed, or require a cloture vote on the motion to proceed to a bill? Why do they not just let us bring the bill up, and then if they want to filibuster, filibuster the bill? Because we are at the end of a session where every minute counts, every second counts, every hour counts, every day counts. By delaying, those who do not want this bill can help their trial lawyer friends who are very involved in the political process because they have millions of dollars that, in many cases, they do not deserve; that they can give for political purposes to keep these types of injustices going. That is why this bill is important. That is why there is a huge bipartisan vote for this bill.
The question is: Can we get 60 votes? I personally believe we can. I believe it would be a disgrace for this body to not overwhelmingly vote for this bill. It is a bipartisan bill. It has been well thought out. We have worked hard to accommodate various members on both sides of the aisle. I think it will redeem our profession from those fly-by-nights who are just in it for the money, without regard to helping their real clients.
I would like to see that happen because the law profession is a great profession, but in recent years it has been steadily eroded by people who are not doing what is right in the profession. These are just some egregious cases that are all too often happening because some lawyers do not do what is right.
I am for the good lawyers. But I am against those who are just in it for the money and not really helping their clients. This bill will not stop them from bringing litigation, but it will even up the situation so at least there will not be the same amount of forum shopping, and better, more honest judges will be deciding these cases along with better and more honest juries.
I suggest the absence of a quorum.