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House Judiciary Committee Approves Class Action Bill

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House Judiciary Committee Approves Class Action Bill



The House Judiciary Committee approved legislation on March 7 that would allow defendants in multistate class action lawsuits to 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, calls the Judiciary Committees 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 says.

Melissa Shelk, vice president of federal affairs for the American Insurance Association, Washington, says that multistate class actions belong in federal courts.

Moreover, she says, the system will be better for consumers since it includes numerous 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 to purchase a product from the defendant at a minimal discount, while the plaintiff 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.

Reproduced from National Underwriter Life & Health/Financial Services Edition, March 11, 2002. Copyright 2002 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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