The
U.S.
Class Action Fairness Act of 2005, 28
U.S.C. Sections 1332(d), 1453, and
1711-1715, expanded federal jurisdiction over many large
class-action lawsuits and mass actions taken in
the United States.
The bill was the first major legislation in the second term for the
Bush Administration. Business groups
and
tort reform supporters had lobbied
for the legislation, arguing that it was needed to prevent
class-action lawsuit abuse. President George W. Bush had vowed to
support this legislation.
The Act gives federal courts
jurisdiction to certain class actions in which
the
amount in controversy
exceeds $5 million, and in which any of the members of a class of
plaintiffs is a citizen of a state different from any defendant,
unless at least two-thirds or more of the members of all proposed
plaintiff classes in the aggregate and the
primary defendants are citizens of the state in which the action
was originally filed. The Act also directs the Courts to give
greater scrutiny to class action settlements, especially those
involving coupons.
Support
The Act accomplished two key goals of tort reform advocates:
- Reduce "forum-shopping" by
plaintiffs in friendly state courts by expanding federal diversity jurisdiction to class
actions where there is not "complete diversity" giving federal
jurisdiction over class actions against out-of-state defendants. Proponents argued that "magnet jurisdictions"
such as Madison
County, Illinois
were rife with abuse of the class action
procedure.
- Requires greater federal scrutiny procedures for the review of
class action settlements and changes the rules for evaluating
coupon settlements, often reducing attorney's fees that are deemed
excessive relative to the benefits actually afforded class members.
For example, in an infamous Alabama class action involving Bank of
Boston, the attorneys' fees exceeded the relief to the class
members, and class members lost money paying attorneys for the
"victory."
Critics
Critics charged that the legislation would deprive Americans of
legal recourse when they were wronged
by powerful
corporations. Congressman
Ed Markey (D-Mass.) called the bill "the
final payback to the
tobacco
industry, to the
asbestos industry, to
the
oil industry, to the
chemical industry at the expense of
ordinary families who need to be able go to court to protect their
loved ones when their health has been compromised."
Critics charge that this bill will make it far more difficult to
bring class action suits, and may prolong such
litigation, clogging the federal courts' dockets.
The act also gives the Federal government the ability to somewhat
control, through judicial appointments, outcomes that were
previously under state control. No Republican legislators voted
against the bill.
Critics argue that the expansion of federal jurisdiction comes at
the expense of state's rights and
federalism, something Republicans have
historically protested; however, proponents respond that the bill
is consistent with the Framers' original intent for the role of
federal courts and diversity jurisdiction expressed by
Alexander Hamilton in
Federalist No. 80.
Impact
A study by researchers at the
Federal Judicial Center has found
that the enactment of CAFA was followed by an increase in the
number of class actions filed in or removed to the federal courts
based on diversity jurisdiction. This finding is consistent with
the congressional intent in enacting CAFA. The observed increase
was due primarily to increases in consumer class actions. Somewhat
surprisingly, the FJC study found that much of the increase in
diversity class actions has been driven by an increase in original
filings in federal courts. This finding suggests that plaintiffs'
attorneys are choosing the federal forum, post-CAFA, rather than
defendants' counsel through removal, contrary to
expectations.
See also
Further reading
- Salon: "Erin Brockovich, drop dead"
- American Law Media: "A Class Act"?
- "They’re Making a Federal Case Out of It ... In State Court" Manhattan Institute, Issue #3, September
2001
- million Class Action Controversy?--Go to Federal
Court", Court Watch, November 8, 2005 (Also, links to the
Act)
- Kamilewicz v. Bank of Boston Corp., 100 F.3d 1348 (7th
Cir. 1996)
- "Understanding the Class Action Fairness Act of
2005", Prof. William Rubenstein, UCLA School of Law
- "CAFA and Erie: Unconstitutional Consequences?",
Note, Fordham Law Review, November 2006
- Emery G. Lee III & Thomas E. Willging, The Impact of the Class Action Fairness
Act of 2005 on the Federal Courts (FJC, April 2008)
- "A Step Up in Class," ABA Journal, May 2008
References
External links