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PPI | Policy Report | March 11, 2020
The Class Action Fairness Act
Curbing Unfairness and Restoring Faith in our Judicial System
By Walter Dellinger


Editor's Note: The full text of this policy report is available in Adobe PDF format, only. (Requires Adobe Acrobat Reader.)

Introduction

A rapidly growing number of class actions that are being filed in some of our state courts appear to be doing more harm than good. Under the current regime, most participants in those cases -- not just the defendants -- tend to be losers. The states whose courts have honorably decided not to play class action games are, contrary to fundamental federalism principles, being forced to transfer authority over their citizens' claims and the interpretation of their own laws to other states whose courts seem to have an insatiable appetite for such lawsuits. Consumers are paying a big price as well. Even though they are supposed to be the beneficiaries of these lawsuits, there is mounting evidence that much (if not most or all) of whatever monetary recoveries are obtained in state court class actions often go to the counsel who brought the actions, not the persons on whose behalf they supposedly were filed. And consumers are ultimately paying the bill for those recoveries in the form of a "litigation tax" that must be added to the prices they pay everyday for products and services. As The Washington Post recently editorialized, "no component of the legal system is more prone to abuse" than class actions.

The Framers of the U.S. Constitution actually foresaw -- and tried to prevent -- the types of problems that are raised by these class actions when they gave federal courts "diversity jurisdiction" over cases that involve interstate commerce. Unfortunately, the federal statutes exercising that constitutional authority were drafted before the evolution of the modern class action lawsuit and have been interpreted to exclude most interstate class actions from federal court. The upshot is that even multimillion dollar cases, brought on behalf of tens of thousands of class members living in all 50 states, with outcomes that set national policy, are heard in state (not federal) courts. Some members of the bar have seized on this opportunity, searching out and finding state court venues where the judges will readily certify cases for very lucrative treatment as either class actions or their kin, mass joinder actions.

Last year, the House of Representatives passed a bill -- the Class Action Fairness Act of 2002 -- that would correct this anomaly and ensure that multistate class actions can be heard in federal courts. Similar legislation was introduced in the Senate in February and in the House last week. These bills would establish a concept of diversity jurisdiction that would allow the largest interstate class actions into federal court, while preserving exclusive state court control over smaller, primarily intrastate disputes. As several major newspaper editorial boards -- ranging from the Post to the Wall Street Journal -- have recognized, enactment of such legislation would go a long way toward curbing unfairness in certain state court class actions and restoring faith in the fairness and integrity of the judicial process.


Download the full text of this report. (PDF)

Walter Dellinger is a partner at O'Melveny & Myers LLP and is the Douglas Maggs Professor of Law at Duke University. He served as assistant attorney general, 1993-1996, and as acting solicitor general of the United States, 1996-1997.



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