Industry Welcomes Class-Action Victory

The U.S. Senate today voted 72-26 to pass S. 5, a bill that could discourage lawyers from organizing some types of lawsuits.[@@]

The bill, sponsored by Sens. Charles Grassley, R-Iowa, and Herb Kohl, D-Wis., would limit the ability of lawyers who organize class-action suits to shop for friendly courts. One provision would restrict “venue shopping” by transferring the jurisdiction of most large, multistate class-action suits filed in state courts to the federal courts.

The bill also would require a plaintiff to bring a claim in a venue with a substantial connection to the alleged injury; require lawyers that organize the suits to give class members a clear explanation of their rights; and require judges to take a class look at settlement arrangements designed so that class members get compensation in the form of coupons rather than in cash.

Many members of the House want stronger limits on class-action suits, but the bill appears to have a good chance of passing in the House.

Targets of major waves of class-action suits have included managed care companies and issuers of interest-sensitive life policies that performed poorly when rates started falling in the 1990s.

The American Council of Life Insurers, Washington, and the National Association of Insurance and Financial Advisors, Falls Church, Va., have released statements praising the Senate for passing the bill.