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Industry Hails Passage Of Class Action Bill

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Legislation to reform the nations class action tort system was signed into law by President Bush Feb. 18, just one day after it was passed by the House. The legislation, which took several years to win passage in Congress, is the first bill to be signed by the President during his second term.

“By working together over several years, we have agreed on a practical way to begin restoring common sense and balance to Americas legal system,” the President said during a signing ceremony at the White House. “The Class Action Fairness Act of 2005 marks a critical step toward ending the lawsuit culture in our country. The bill will ease the needless burden of litigation on every American worker, business and family. By beginning the important work of legal reform, we are meeting our duty to solve problems now and not to pass them on to future generations.”

The newly signed law, known as S. 5, is designed to prevent abuses in the class action system, such as “venue shopping” by making it easier to remove class action cases to the federal court system. Additionally, the law increases judicial oversight of settlements, most notably “coupon settlements” in which class members receive coupons instead of a monetary settlement.

“The bill requires judges to consider the real monetary value of coupons and discounts, so that victims can count on true compensation for their injuries,” Mr. Bush said. “It demands settlements and rulings to be explained in plain English, so that class members understand their full rights.”

Frank Keating, president and CEO of the American Council of Life Insurers, hailed the bills being signed into law, as well as those who led the lobbying efforts resulting in its passage.

“President Bush deserves high marks for his determination in getting the reform legislation enacted into law,” Keating said. “Congress also deserves great credit for acting quickly this year to address class action abuses. In addition, Tom Donohue and the U.S. Chamber of Commerce earned special recognition for their role on this issue. Without the leadership of Tom and Chamber, it is not clear whether wed be celebrating today.”

The new law, Keating said, “will help remove the threat of frivolous lawsuits by, among other things, ensuring cases involving people from varying states will be heard in federal courts. No longer will certain trial lawyers be allowed to hunt for a jurisdiction that will easily grant class action status to a case involving people from around the country.

“But lets also be clear about the rights of plaintiffs: They will continue to enjoy all rights to have their grievances addressed. No one with a legitimate complaint will be denied their day in court,” Keating said.

“Perhaps the biggest winner today is the consumer, who has ultimately been paying the high price for class action abuses, which unnecessarily drove up the cost of products and services,” Keating said. “Indeed, the signing of The Class Action Fairness Act of 2005 represents a good day for the nation.”

The role of the Chamber drew criticism from opponents of the bill, who claimed it is a gift for special interests that will limit the rights of ordinary American citizens.

“This brazen and shameless attack on Americans legal rights was well-funded by the insurance, drug and other industries,” said Todd A. Smith, president of the Association of Trial Lawyers of America, after the House approved the bill. “Indeed, the U.S. Chamber of Congress openly acknowledgedthat it spent more than $53 million in 2004 alone on efforts to lobby this bill and others that undermine the legal rights of American families.”

Smith offered some comfort to the bills opponents, however, claiming that the victory on class action reform would be among very few for the industry in Congress this year. “Members on both sides of the aisle have acknowledged that corporate and insurance interests face bleak prospects in the upcoming session for their other legislative prioritiesrestricting the rights of innocent victims of medical negligence and bailing out the asbestos manufacturers,” he said. “These constitutional guarantees must not be for sale.”

The Consumer Federation of America was also critical, claiming the legislation is anti-consumer and will limit access to the justice system.

“While purporting to curtail class action abuses, S. 5 virtually wipes out state class actions, thereby removing what is sometimes the only venue for redress of injury or fraud for consumers,” said Rachel Weintraub, assistant general counsel for the CFA. “The bill makes it more difficult for consumers to obtain effective and efficient judicial relief for injuries, for example, caused by defective products, fraud in the marketplace or discrimination. The jurisdictional changes mandated by S. 5 are designed solely to impede class actions, not to make them fairer or more efficient.”

Reproduced from National Underwriter Edition, February 25, 2005. Copyright 2005 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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