June 5, 2003
Re: Opposition to HR 1115, “The Class Action Fairness Act of 2003”
Consumers Union (CU) writes to express opposition to HR 1115, “The Class Action Fairness Act of 2003.” We are concerned that this legislation will deny consumers adequate relief when they are defrauded, injured, or otherwise harmed, and will undermine the ability of state courts to hear cases primarily concerned with their own residents. Despite its name, we believe that the bill is unfair to consumers, and we urge you to oppose it.
It seems that a concerted effort has been initiated in recent years to undermine the legitimate uses for class actions by over-emphasizing the relatively infrequent occasions when abuse occurs. CU understands that there are some instances of abuse of the class action process – collusive settlements in which consumers get only coupons toward future services for which they must pay, while defendants and class lawyers are unjustly enriched. Indeed, in 2002 CU entered a case as an Objector to a class action settlement we believed was unfair to consumers; the state judge accepted our argument and rejected the settlement.
CU would support narrowly tailored legislation intended to curb such abuses. HR 1115 is not that legislation. Further, while there may be abuses, class actions have worked well for consumers and those instances far outweigh the problem cases.
HR 1115 permits defendants to remove most state class action suits to federal court. While a class could meet state law class certification requirements, it could fail to meet the federal class certification requirements. This could result in the federal courts’ denial of class certification and dismissal (not remand) of the case. A consumer would now have two options, none of which would lead to a just result. A consumer could bring the claim in state court as an individual action. Class actions are a much more efficient way of resolving disputes than individual cases-individual cases are often for such small amounts they are impractical to litigate and lack the same deterrent effect when they are brought. In the alternative, a litigant could re-file an amended class certification in state court. This re-filing again opens the door under HR 1115 for the defendant to remove the case to federal court, resulting in legal ping-pong for the wronged class members.
Proponents of HR 1115 argue that it will make the class action system fairer and more prompt. We find that hard to reconcile with HR 1115’s Section 6, for example, which provides for a nondiscretionary appeal of class certification orders and a mandatory stay of discovery pending the appeal. In other words, a defendant can automatically appeal the class certification without proving the appeal has merit, and that appeal alone will result in halting the proceedings. This could add 1-2 years to class action cases, and perhaps even give defendants time to destroy and hide documents. It is hard to see how this will make the class action system fairer and more prompt.
Further, one amendment to the bill added in Committee takes the extreme step of making the bill’s already harmful provisions retroactive to pending cases where the class has not yet been certified, affecting potentially thousands of cases nationwide. Another amendment, while making sensible changes recommended by theJudicial Conference on issues of notice to the class, does not fix the other problems highlighted by the Judicial Conference, including the federalization of class actions which have a true nexus to the state.
The problems that do exist in class actions – coupon settlements that provide little or no value to consumers, duplicative state class actions that affect residents of many states, confusing notification procedures that make it hard for class members to understand their rights – can be addressed by far more carefully tailored legislation than HR 1115. For example, a more constructive approach is one offered by the Judicial Conference, which is headed by Chief Justice Rehnquist and represents the Chief Judge of every United States Court of Appeals. The Conference has studied the complex problems of class action reform over the past decade and considered the views of state and federal judges, plaintiff and defense lawyers, consumer and civil rights groups and leading academics. The Judicial Conference has taken the following steps to address concerns about class actions, doing so without undermining legitimate claims:
— Implement new practices to protect class members from abusive practices that go into effect in December, 2003, including requiring a specific hearing before the judge on whether a class action settlement is “fair, reasonable, and accurate.”
— Allow for discretionary appeals of class certification from federal district to federal appeals courts, but without giving litigants the power to stay the case, and thereby delay, the proceedings during the appeal process as is found in HR 1115.
— Made legislative recommendations providing that only those cases that are truly interstate actions be moved to federal. The Judicial Conference recommendations preserve the rights of state courts to hear cases involving their own residents where a defendant is headquartered in the state or has its principal place of business in the state (unlike HR 1115, where these cases would be moved to federal court regardless of their truly single state character).
— Continue the study of class action reforms to determine if more reforms are warranted.
By contrast, HR 1115’s sweeping provisions will only clog an already overburdened federal judiciary and slow the pace of certifying class actions. Removal to federal court of virtually all cases also undermines an important and traditional function of state courts and will slow – and in some cases thwart – the continual interpretation of state law. The ABA Task force on Class Action Legislation’s recent report noted: “Any expansion [of federal court jurisdiction] should preserve a balance between legitimate state-court interests and federal-court jurisdictional benefits.” (emphasis added).
HR 1115 lacks that balance. Federal court decisions on issues of state law solve the narrow legal issue of the particular case without providing legal precedent for future state court cases of the particular state law in question. Further, class actions are among the most resource-intensive cases before the federal judiciary.
We agree that class actions can be made a fairer and more effective means of consumer relief. We believe, however, that the sweeping changes mandated by HR 1115 are designed to impede legitimate class actions, not to make them fairer or more efficient.
HR 1115 is a poorly conceived proposal that will substantially reduce the effectiveness of one of the most important legal tools consumers now have: state court class actions. We urge you to oppose this bill.
Senior Product Safety Counsel