United States federal legislation
The
U.S.
Class Action Fairness Act of 2005
, 28
U.S.C.
§§ 1332(d), 1453, 1711?15, expanded federal
subject-matter jurisdiction
over many large
class action
lawsuits and mass actions in the United States.
The bill was the first major piece of legislation of the second term of the
Bush
Administration. Business groups and
tort reform
supporters had lobbied for the legislation, arguing that it was needed to prevent class action abuse.
[1]
President George W. Bush had vowed to support this legislation.
The Act permits federal courts to preside over certain class actions in
diversity jurisdiction
where the aggregate
amount in controversy
exceeds $5 million; where the class comprises at least 100 plaintiffs; and where there is at least "minimal diversity" between the parties (i.e., at least one plaintiff class member is diverse from at least one defendant). The court, however, may decline jurisdiction under certain circumstances and is required to decline jurisdiction in others. The Act also directs the courts to give greater scrutiny to class action settlements, especially those involving corporations.
Support
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The Act accomplished two key goals of tort reform advocates:
- Reduce "
forum shopping
" by plaintiffs in friendly state courts by extending federal
diversity jurisdiction
to class actions where there is not "complete diversity", thereby giving federal
subject-matter jurisdiction
over a broader set of class actions. Proponents argued that "magnet jurisdictions" such as
Madison County, Illinois
were rife with abuse of class action procedure.
- Requires greater federal scrutiny procedures for the review of class action settlements and changes the rules for evaluating
coupon settlements
, often reducing attorney's fees that are deemed excessive relative to the benefits actually afforded class members. For example, in an infamous Alabama class action involving Bank of Boston, attorneys' fees exceeded the relief to class members, and class members lost money paying attorneys for the "victory."
[2]
The Act passed the Senate 72 to 26, with all 53 Republicans voting in favor, and the Act passed the House 279 to 149, with the support of 50 Democrats and all but one Republican. President
George W. Bush
signed the Act into law on February 18, 2005.
Critics
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Critics charged that the legislation would deprive Americans of
legal recourse
when they were wronged by powerful
corporations
. Congressman
Ed Markey
(D-Mass.) called the bill "the final payback to the
tobacco industry
, to the
asbestos
industry, to the
oil industry
, to the
chemical industry
at the expense of ordinary families who need to be able go to court to protect their loved ones when their health has been compromised."
[2]
Critics charge that this bill makes it far more difficult to bring class action suits, and may prolong such
litigation
, clogging federal court dockets. The Act also gives the federal government some ability to control, through judicial appointments, outcomes that were previously under state control.
[3]
Critics argue that the expansion of federal jurisdiction comes at the expense of state's rights and
federalism
, something Republicans have historically protested; however, proponents respond that the bill is consistent with the founders' original intent for the role of federal courts and diversity jurisdiction expressed by
Alexander Hamilton
in
Federalist No. 80
.
[4]
[
citation needed
]
Impact
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A study by researchers at the
Federal Judicial Center
found that CAFA was followed by an increase in the number of class actions filed in or removed to the federal courts based on diversity jurisdiction. This finding is consistent with congressional intent in enacting CAFA. The observed increase was due primarily to increases in consumer class actions. Somewhat surprisingly, the FJC study found much of the increase in diversity class actions was driven by an increase in original filings in federal courts. This finding suggests plaintiffs' attorneys are choosing the federal forum, post-CAFA, rather than defendants' counsel through removal, contrary to expectations.
[5]
See also
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References
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Further reading
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- Salon: "Erin Brockovich, drop dead"
- American Law Media: "A Class Act"?
- "They’re Making a Federal Case Out of It ... In State Court" Manhattan Institute, Issue #3, September 2001
[
permanent dead link
]
- "$5 million Class Action Controversy?--Go to Federal Court", Court Watch, November 8, 2005 (Also, links to the Act)
- Kamilewicz v. Bank of Boston Corp.
, 100 F.3d 1348 (7th Cir. 1996)
- "Understanding the Class Action Fairness Act of 2005"
, Prof.
William Rubenstein
, UCLA School of Law
- "CAFA and Erie: Unconstitutional Consequences?", Note, Fordham Law Review, November 2006
- Emery G. Lee III & Thomas E. Willging, The Impact of the Class Action Fairness Act of 2005 on the Federal Courts (FJC, April 2008)
- "A Step Up in Class," ABA Journal, May 2008
- "CLASS ACTION REFORM: WILL PERCEPTION BECOME REALITY"
External links
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