(The Return of) Ignatz, by Sam Heldman

Tuesday, February 08, 2005

The class action bill is crazy.
The Senate will, today, be debating the class action "reform" bill. And the more times I read the bill, the more clear it is to me that it is a monstrosity, and that many of the people who speak in support of it are spouting falsehoods.

The bill, as I mentioned before, is largely about whether class actions will be litigated in state court (where plaintiffs' lawyers tend to prefer to file some types of class actions) or federal court (where defendants tend to prefer to litigate them). Some people on each side argue that this is some grand philosophical issue of the proper balance of federalism. Not me. I'm candid about the fact that my view of this issue is based purely on a practical assessment of the likely impact on the real world of litigation. I am quite sure that industry's support for this bill is similarly based on practical reality rather than some reading of the Federalist Papers. And I guarantee you that if the bill passes, defendants will remove class actions to federal court not based on a philosophical principle as to the proper scope of federal authority, but based on the perception that they will be more likely to win in federal court. Duh.

So why do I oppose putting more class actions in federal courts? In part, it's because in some places these days, federal judges are in general less favorably disposed towards class actions than are state court judges. So, if more class actions go to federal court, fewer of the cases will be allowed to proceed as a class action, and so there will be more unremedied corporate misconduct, and so there will be more corporate misconduct. And second, it's because if more class actions go to federal court, the federal courts will be swamped. They're already swamped, frankly, with criminal cases that could perfectly well be prosecuted in state courts. But this bill will make them swamped swamped swamped. The federal judiciary's own assessment is that class actions take about five times as much judicial work as regular civil cases. Pretty soon, the federal courts won't have time to do anything but put people in jail and hear class actions. All other cases will sit on the back burner. Too bad for everybody else, like employees who have been discriminated against, etc.

Now, some people who support this bill will tell you that it is more limited than I am making it out to be -- that it is meant to allow "removal" to federal court only of a limited set of class actions. They want you to think that it is only for those class actions in which the class is nationwide or at least multi-state; they want you to think that it's crazy for one state's court to be able to rule on matters involving plaintiffs all around the country, and they want you to think that it's very hard for a court to apply the laws of various different states. And that's what you see being argued about in the Washington Post article linked above and again here. The Post even falls for it: "The bill would send cases with plaintiffs in multiple states into the federal system."

But that's not what the bill says. The bill's Section 4 allows for federal court jurisdiction of a class action even if the class is defined to include only residents of the state in which it is filed, so long as at least one defendant is headquartered in (and incorporated in) another state. The bill goes on to say that a federal court should decline to exercise jurisdiction over a class action where more than 2/3 of the plaintiff class live in the state where the case was filed, but only if (among other things) "no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons." (The rule is a little different if the class lives in the same state as the "primary defendants," but that will be relatively more rare). So, even if you file a Texas-only class action against Ford, you'll get removed to the over-burdened and therefore grumpy federal court -- because I guarantee you that somebody will have filed a similar class action, on a state-only basis, in some other state too. [UPDATE: This is my best guess as to what the legislation means, but there is the additional problem that it is written so poorly. If you read the provision I'm talking about, you'll see what I mean. It doesn't make grammatical sense in crucial ways.]

This bill is designed to do much more than solve the so-called "problem" of multi-state class actions. This bill is designed to swamp the federal courts so severely, that the federal judges will look for every conceivable reason to quickly rule for the defendants in every class case so that they can get back to working on other cases.

posted by sam 6:44 AM 3 comments

3 Comments:

Now Sam, don't go cynical on us. Rent Mr. Smith Goes to Washington or something.

By Blogger Chris, at 2:45 PM  

Maybe this will cheer you up a bit:

Bingaman Seeks Support For Amendment To Class Action
Negotiations continued today on an amendment by Sen. Jeff Bingaman, D-N.M., that supporters of class-action legislation warned could doom the bill. Senate aides said Bingaman was discussing his amendment on the application of state consumer laws in class-action lawsuits with Sen. Dianne Feinstein of California, a key Democratic supporter of the bill. But other Democratic supporters of the bill emphasized that the bill reflects a delicate compromise and urged its passage without amendments. "For those of us who want to see this bill passed, I think this compromise is about the fairest balance we're going to get," said Sen. Thomas Carper, D-Del., a co-sponsor. Sen. Christopher Dodd, D-Conn., another co-sponsor, said Democrats plan to offer amendments he "may have been attracted to under different circumstances." But Dodd noted House leaders have pledged to pass the bill quickly only if the Senate approves it as-is.
The class-action bill would move many multistate class-action lawsuits with claims of more than $5 million from state courts to federal courts, where more stringent rules would govern the cases. The Senate compromise is identical to legislation that had the support of more than 60 senators last year, including at least 12 Democrats. Last year's Senate bill stalled after GOP and Democratic leaders clashed over unrelated amendments. But Senate leaders last week reached a unanimous consent agreement that all floor amendments must be germane.
The Bingaman amendment would give federal judges guidance for certifying class-action cases based on state consumer laws. Bingaman's spokeswoman said the amendment would help prevent a large number of class-action lawsuits from being dismissed after moving from state court to federal court under the bill. "We know the business community is pushing hard against making any improvements to the bill," Bingaman's spokeswoman said. "We do have an uphill battle, but Sen. Bingaman is talking to senators who he thinks might support what he's trying to do." Bingaman is unlikely to offer his amendment until Wednesday or later in the week, his spokeswoman said. Sen. Edward Kennedy, D-Mass., was expected to offer an amendment this afternoon to exempt wage-and-hour suits filed in state court. Minority Whip Durbin also planned to offer an amendment today to ensure the bill would not affect "mass tort" lawsuits filed in state courts, including large-scale personal injury cases.
The House will take up class action legislation next week but only if the Senate passes a clean bill without amendments, Majority Leader DeLay said today. "If the Senate passes any amendments then they are jeopardizing class action because the House won't pick up the bill, and we'll go to regular order and have hearings and everything like that," he said.

By Blogger Mike, at 4:04 PM  

Did you know that if a single person filed an $75,001 lawsuit against Ford Motor in Ohio, it would be removed to federal court? Shocking! Heaven forfend that a $5,000,000 class action be subject to diversity jurisdiction.

By Anonymous Ted, at 11:37 PM  

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