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Regulation and Compliance > Legislation

Class Action Reform Bill Introduced

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Bipartisan legislation that would allow large class-action lawsuits to be heard in federal, rather than state, courts has been introduced in the House of Representatives with strong support from insurance and business groups.

The legislation is sponsored by Reps. Bob Goodlatte, R-Va., and Rick Boucher, D-VA., and has numerous other co-sponsors.

Called the Class Action Fairness Act of 2001, the legislation would establish federal court jurisdiction over any class action in which the aggregate amount in controversy exceeds $2 million and any member of the plaintiff class is a citizen of a different state than any defendant.

By contrast, current law establishes federal jurisdiction only when every member of the plaintiff class is a citizen of a different state from every defendant and each member of the class is seeking damages of more than $75,000.

However, the new rules established by the bill would not apply to certain limited situations. These include:

(1) where the substantial majority of members of the plaintiff class and the primary defendants are citizens of the same state in which the action was originally filed and the claims will be governed primarily by the laws of that state;

(2) the primary defendants are states, state officials or other government entities against whom a federal court may not be able to order relief; or

(3) there are fewer than 100 members of the plaintiff class.

In addition, the legislation contains new protections for plaintiff class members. First, members must receive plain English notices that they are members of the class and which provide essential information in an easily understandable tabular format.

Second, coupon settlements, in which members receive only coupons as relief for their injuries, must be approved by the judge.

Third, settlements in which the class members suffer a net loss are barred.

In addition, the legislation bars schemes in which some class members receive more money than other members based on geography or other factors.

Margaret Durbin, senior counsel with the American Council of Life Insurers, says ACLI strongly supports the legislation because it would establish long overdue and very balanced reforms for class-action lawsuits.

The legislation, announced at a press briefing, did not have a formal bill number at press time.

Reproduced from National Underwriter Life & Health/Financial Services Edition, July 6, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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