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DLC | New Dem Daily | May 1, 2020
Compromise on Class Action Reform

Thanks to Sen. Dianne Feinstein (D-CA), the U.S. Senate may be one step closer to passing an important reform measure to rein in the abuse of class action lawsuits by attorneys seeking friendly courts and deep pockets instead of justice and compensation for citizens suffering harm.

Feinstein sponsored an amendment, also backed by Sens. Herb Kohl (D-WI), Orrin Hatch (R-UT and Chairman of the Judiciary Committee) and Charles Grassley (R-IA), that addressed lingering concerns that class action reform would let defendants remove lawsuits to federal court that really belong in state courts.

Hardly anyone fully defends the current situation, in which more and more big national class-action suits involving plaintiffs all over the country are being tried in a handful of sleepy state courts in jurisdictions known for extremely pro-plaintiff policies and decisions. Many of these proliferating cases (the number of pending state court cases jumped 1,042 percent over the past 10 years) result in "coupon settlements" in which plaintiffs recover little of value while attorneys reap huge fees.

From a legal point of view, as Duke University Law Professor and former U.S. Solicitor General Walter Dellinger pointed out in a recent report for the Progressive Policy Institute, the class action problem flows from a loophole in the procedural rules whereby federal courts normally hear cases involving parties from different states. The loophole lets plaintiffs' attorneys bring cases of national significance in state courts of their choosing.

As a result, says Dellinger: "Consumers are paying a big price. 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."

The class action reform bill that passed the House in the last Congress would have let class action suits involving more than $2 million in claims and in which citizens of different states are on opposing sides be heard in federal, not state courts. Some critics complained this rule would let some essentially local suits be removed to federal court just because a significant number of plaintiffs were from another state.

The Feinstein amendment modifies the bill to keep "in-state" class actions -- those in which two-thirds of the plaintiff class are residents of the state where the primary defendants live or operate -- in state court. For other scenarios with significant overlap between plaintiff and defendant locations, her amendment allows federal courts to consider taking jurisdiction, without requiring removal. Finally, the Feinstein amendment increases the threshold for federal jurisdiction in class action cases from $2 million to $5 million.

The compromise in the Senate Judiciary Committee action comes on the heels of a recent Ameican Bar Association resolution endorsing the idea of expanding federal jurisdiction over class action filings with little or no "legitimate state-court interests."

We anticipate this compromise will make it much more likely that Senate Democrats can support reform legislation, addressing what The Washington Post has called "the sorry world of class action litigation."

Feinstein is building on the efforts of New Democrat Reps. Cal Dooley of CA and Jim Moran of VA, and Sens. Tom Carper of DE and Herb Kohl of WI, in supporting and shaping this legislation. She's made a good bill better, and New Democrats should support the compromise she's achieved.

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