CLASS ACTION FAIRNESS ACT OF 2005--Resumed
Mr. President, I thank the Senator from Utah. Mr. President, I oppose the Class Action Fairness Act, S. 5. Notwithstanding its title, I do not think this bill is fair. I do not think it is fair to citizens who are injured by corporate…
Mr. President, I thank the Senator from Utah.
Mr. President, I oppose the Class Action Fairness Act, S. 5. Notwithstanding its title, I do not think this bill is fair. I do not think it is fair to citizens who are injured by corporate wrongdoers and are entitled to prompt and fair resolution of their claims in a court of law. I do not think it is fair to our State courts, which are treated by this bill as if they cannot be trusted to issue fair judgments in cases brought before them. And I do not think it is fair to State legislatures, which are entitled to have the laws that they pass to protect their citizens interpreted and applied by their own courts. This bill is not only misnamed, it is bad policy, and I do think it should be defeated.
Make no mistake, by loosening the requirements for Federal diversity jurisdiction over class actions, S. 5 will result in nearly all class actions being removed to Federal court. This is a radical change in our Federal system of justice. We have 50 States in this country, each with its own laws and courts. State courts are an integral part of our system of justice. They have worked well for our entire history. It is hard to imagine why this Senate, which includes many professed defenders of federalism and the prerogatives of State courts and State lawmakers, would support such a wholesale stripping of jurisdiction from the States over class actions. By removing these actions from State court, Congress would shift adjudication away from State lawmakers and State judges towards Federal judges, who are often not as familiar with the nuances of State law. In my opinion, the need for such a radical step has not been demonstrated.
Actually, the leaders of the Federal and State judiciary agree. I don't know if it has taken a position on this particular bill, but the Judicial Conference of the United States has opposed legislation like S. 5 that would remove most class actions from State to Federal court. Federal judges don't particularly like diversity jurisdiction cases. They certainly are not in favor of legislation that would bring many more large, complicated civil cases brought under State law to their courts. And the Board of Directors of the Conference of State Chief Court Justices expresses quite well the concerns of State judges about this bill. Its letter states:
Absent hard evidence of the inability of the state judicial
systems to hear and fairly decide class actions brought in
state courts, we do not believe such a procedure [transfer of
class actions to federal court] is warranted. . . . Our
position is not new and it is consistent with the position of
our counterparts in the federal judicial system.
Class actions are an extremely important tool in our system of justice. They allow plaintiffs with very small claims to band together to seek redress. Lawsuits are expensive. Without the opportunity to pursue a class action, an individual plaintiff often simply cannot afford his or her day in court. But through a class action, justice can be done and compensation for real injuries can be obtained.
Yes, I do agree, there are abuses in some class action suits. Some of the most disturbing have to do with class action settlements that offer only discount coupons to the members of the class and a big payoff to the plaintiffs' lawyers. I am pleased that the issue of discount coupons is addressed in the bill, because the bill we considered in October 2003 did nothing about that problem. The bill now requires that contingency fees in coupon settlements will be based on coupons redeemed, not coupons issued. Attorney's fees will also be determined by reasonable time spent on a case and will be subject to court approval. The bill also allows a court to require that a portion of unclaimed coupons be given to one or more charitable organizations agreed to by the parties. I do agree, these are all good changes, but they do not change my view that the bill, as a whole, unfairly interferes with the States' administration of justice.
I appreciate that the supporters of S. 5 modified the new diversity jurisdiction rules for class actions in an effort to allow plaintiffs in State class actions more opportunities to remain in State court. Under the new bill, a district court must decline jurisdiction if two- thirds of the plaintiffs and the primary defendants are from the State where the action was filed, and there is at least one defendant who is a citizen of that State from whom significant relief is sought and whose alleged conduct forms a significant basis for the claims asserted by the proposed class. In addition, the principal injuries resulting from the alleged conduct of each defendant must have occurred in the State in which the action was originally filed.
These criteria are an improvement on the underlying bill. But the jurisdictional requirements for class actions to remain in State courts are still too burdensome. Under the new language, for example, a class action brought by Wisconsin citizens against a Delaware-based company for selling a bad insurance policy would probably be removed to Federal court even if Wisconsin-based agents were involved in selling the policies.
In addition, the new bill provides that district courts can only decline jurisdiction if during the 3-year period preceding the filing of the action no other similar class action has been filed against any of the defendants even if the case is filed on behalf of other plaintiffs. Thus, the filing of a class action in one State court may lead to the successful removal of a similar case filed in another State on behalf of plaintiffs in that State. If a defendant is engaging in conduct in number of different States that violates the separate laws of those States, why shouldn't that defendant be held accountable in different State courts under different state laws? Do we really need the Federal courts to get involved in these State law cases?
The bottom line is that this bill still sends the majority of class actions to Federal court. The proponents of this bill have chosen a remedy that goes far beyond the alleged problem.
Furthermore, under S. 5, many cases that are not class actions at all are included in the definition of ``mass action,'' a new term coined by this bill. S. 5 simply requires that the plaintiffs be seeking damages of more than $75,000 for the case to be considered a mass action and, therefore, removable to Federal court. This provision unfairly limits State court authority to manage its docket and to consolidate claims in order to more efficiently dispense justice.
A particularly troubling result of this bill will be an increase in the workload of the Federal courts. We all know these courts are already overloaded. In the 2004 Year End Report on the Federal Judiciary, for example, Chief Justice Rehnquist reported that the current budget crisis in the Federal judiciary has forced courts to impose hiring freezes, furloughs, and reductions in force. He noted that there is a dire need for additional federal judgeships to deal with the Federal courts' ever-increasing caseload. The Congress has led the way in bringing more and more litigation to the Federal courts, particularly criminal cases. Criminal cases, of course, take precedence in the Federal courts because of the Speedy Trial Act. So if you look at this bill in the context, the net result of removing virtually all class actions, civil cases, of course, to Federal court will be to delay those cases.
There is an old saying with which everyone is familiar: ``justice delayed is justice denied.'' I hope my colleagues will think about that aphorism before voting for this bill. Let's think about the real world of Federal court litigation and the very real possibility that long procedural delays in overloaded Federal courts will mean that legitimate claims may never be heard. My colleagues who support this bill tend to dismiss these arguments. They say that the Federal courts will offer adequate redress for legitimate claims, that they will faithfully apply State laws. I certainly hope they are right because this bill seems to be headed for enactment. But if they are wrong, citizens and consumers will be the ones who suffer.
One little-noticed aspect of this bill illustrates the possibilities for delay
that the bill provides, even to defendants who are not entitled to have a case removed to Federal court under the bill's relaxed diversity jurisdiction standards.
Under current law, if a Federal court decides that a removed case should be remanded, or returned, to State court, that decision is generally not appealable. It would be different under this bill, if it becomes law. This bill allows defendants to immediately appeal a decision by a Federal district court that a case does not qualify for removal to Federal court and should be remanded to State court.
Fortunately, the revised bill now requires such appeals to be decided promptly. It does not, however, do anything about the fact that the lower court may take months or even years to make a decision on the motion to remand. That means that a plaintiff class that is entitled, even under this bill, to have a case heard by a State court may still have to endure years of delay while its remand motion is pending in the Federal district court. Where is the ``fairness'' in that? I plan to offer an amendment to address that problem, and I certainly hope the bill's sponsors and supporters will give it serious consideration.
When I offered this amendment in the Judiciary Committee, I learned that a number of the supporters of the bill recognize the importance of the issue that my amendment raises. The chairman of the Judiciary Committee indicated that he would take a serious look at it and see if there is an accommodation that can be reached. So I did not seek a vote in committee on the amendment. I stand ready to negotiate on this issue and I hope there will be a serious effort here to reach agreement.
We have heard a lot of talk on this floor about the need to pass this bill without amendment--without any amendment at all--to protect some kind of ``delicate balance'' with the House and with the corporate supporters of the bill like the Chamber of Commerce. I ask my colleagues who support this bill, why would you not support a reasonable amendment that will make this bill fairer to plaintiffs who bring cases that under the bill's own terms should remain in State court? Please don't let this so-called delicate balance override your duty as legislators to do what is right.
It is important to remember that this debate is not about resolving questions of Federal law in the Federal courts. Federal question of jurisdiction already exists for that. Any case involving a Federal statute can be removed to Federal court under current law. This bill takes cases that are brought in State court solely under State laws passed by State legislatures and throws them into Federal court. This bill is about making it more time-consuming and more costly for citizens of a State to get the redress that their elected representatives have decided they are entitled to if the laws of their State are violated.
Diversity jurisdiction in cases between citizens of different States has been with us for our entire history as a nation. Article III, section 2 of the Constitution provides: ``The judicial Power shall extend . . . to Controversies between Citizens of different States.'' This is the constitutional basis for giving the Federal courts diversity jurisdiction over cases that involved only questions of State law.
The very first Judiciary Act, passed in 1789, gave the Federal courts jurisdiction over civil suits between citizens of different States where over $500 was at issue. In 1806, in the case of Strawbridge v. Curtiss, the Supreme Court held that this act required complete diversity between the parties. In all other instances, the Court said, a case based on State law should be heard by the State courts. So this bill before us changes a nearly 200-year-old practice in this country of preserving the Federal courts for cases involving Federal law or where no defendant is from the State of any plaintiff in a case involving only State law.
Why is such a drastic step necessary? Why do we need to prevent State courts from interpreting and applying their own State laws in cases of any size or significance? One frequent argument is that businesses cannot get a fair day in court because of renegade State court judges. Yet, there really is no evidence to back up these claims. Of the 3,141 counties, parishes, and boroughs in the State court systems of the United States, the so-called American Tort Reform Association could only identify nine jurisdictions that they consider ``unfair'' to defendants. Four other jurisdictions were declared as ``dishonorable mentions.'' But, the association only provided data on two of these jurisdictions--Madison County, IL, which the Senator from Utah was talking about, and St. Clair County, IL. The Senator from Utah cited statistics of increases in class action filings up through 2003. Yet in Madison County, the villain in the story told by the Senator from Utah, the number of class action filings has decreased by 30 percent between 2003 and 2004. So defendants have decided that State judges are unfair in two jurisdictions out of 3,000, but how does this constitute a crisis? The answer is simple there isn't one.
Another argument we hear is that the trial lawyers are extracting huge and unjustified settlements in State courts, which has become a drag on the economy. We also hear that plaintiffs' lawyers are taking the lion's share of judgments or settlements to the detriment of consumers. But a recent empirical study contradicts these arguments. Theodore Eisenberg of Cornell Law School and Geoffrey Miller of NYU Law School recently published the first empirical study of class action settlements. Their conclusions, which are based on data from 1993-2002, may surprise some of the supporters of this bill.
First, the study found that attorneys' fees in class action settlements are significantly below the standard 33 percent contingency fee charged in personal injury cases. The average class action attorney's fee is actually 21.9 percent. In addition, the attorneys' fees awarded in class action settlements in Federal court are actually higher than in State court settlements. Attorney fees as a percent of class recovery were found to be between 1 and 6 percentage points higher in Federal court class actions than in State court class actions.
A final finding of the study is that there has been no appreciable increase in either the amount of settlements or the amount of attorneys' fees awarded in class actions over the past 10 years. The study, therefore, indicates that there is no crisis here, no explosion of huge judgments, no huge fleecing of consumers by their lawyers. This bill is a solution in search of a problem. It is a great piece of legislation for wrongdoers who would like to put off their day of reckoning by moving cases to courts that are less convenient, slower, and more expensive for those who have been wronged. It is a bad bill for consumers, for State legislatures, and for State courts.
This bill seems not to be about class action abuses, but about getting cases into Federal court where it takes longer and is more expensive for plaintiffs to get a judgment. The cumulative effect of this bill is to severely limit State court authority and ultimately limit victims' access to prompt justice. Despite improvements made since the last time the Senate considered this bill, the bill will still place significant barriers for consumers who want to have their cases heard in State court. Remand orders are still appealable, and the mass tort definition does not protect State courts' authority to consolidate cases and manage their dockets more efficiently. All the elements outlined in the bill before us will result in the erosion of State court authority and the delay of justice for our citizens. Therefore, I cannot support this unfair ``Class Action Fairness Act'' bill.
I yield the floor.