NU Online News Service, Mar. 8, 9:52 a.m. — Washington
The House Judiciary Committee Thursday approved legislation that would let defendants in multistate class action lawsuits have the cases heard in federal rather than state courts.
The Committee approved the legislation, H.R. 2341, by a 16-10 vote. The bill is strongly supported by the insurance industry.
Jack Dolan, a representative of the American Council of Life Insurers, Washington, called the Judiciary Committee’s action an important step towards addressing the national problem of runaway class action lawsuits.
“The legislation would bring order and fairness to a system that is running amok,” Dolan said.
Multistate class actions belong in federal courts, said Melissa Shelk, vice president of federal affairs for the American Insurance Association, Washington.
Moreover, Shelk said, putting the suits in the federal courts will be better for consumers, because the federal courts offer many protections, such as judicial scrutiny of so-called “coupon” settlements.
Coupon settlements are those in which the consumer-plaintiffs in a class action suit receive a coupon for a minimal discount on the purchase of a product from the defendant, while the plaintiffs’ lawyers receive a substantial fee.
Under H.R. 2341, federal district courts will have jurisdiction in any class action in which the amount in controversy exceeds $2 million and in which any member of the plantiffs’ class is a citizen of a state different from any defendant.
In addition, the legislation establishes a “class action bill of rights,” which includes judicial review of noncash settlements, protection against loss by class members because of payments to the class counsel and standardized settlement notification information.