[Congressional Bills 109th Congress]
[From the U.S. Government Publishing Office]
[H.R. 516 Introduced in House (IH)]
109th CONGRESS
1st Session
H. R. 516
To amend the procedures that apply to consideration of interstate class
actions to assure fairer outcomes for class members and defendants, to
outlaw certain practices that provide inadequate settlements for class
members, to assure that attorneys do not receive a disproportionate
amount of settlements at the expense of class members, to assure prompt
consideration of interstate class actions, to amend title 28, United
States Code, to allow the application of the principles of Federal
diversity jurisdiction to interstate class actions, and for other
purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
February 2, 2005
Mr. Goodlatte (for himself, Mr. Boucher, Mr. Sensenbrenner, Mr. Smith
of Texas, Mr. DeLay, Mr. Blunt, Mr. Cantor, Ms. Pryce of Ohio, Mr.
Dreier, Mr. Manzullo, Mr. Kingston, Mr. Feeney, Mr. Coble, Mr. Chabot,
Mr. Forbes, Mr. Pence, Mr. Issa, Mr. Keller, Mr. Bachus, Mr.
Hostettler, Mr. Gallegly, Mr. Daniel E. Lungren of California, Mr.
Flake, Mr. Bradley of New Hampshire, Mr. Carter, Mr. Sessions, Mr.
Rogers of Michigan, Mr. Kuhl of New York, Ms. Hart, Mr. Norwood, Mr.
Pearce, Mr. Gilchrest, Mr. Chocola, Mr. Hensarling, Mr. Baker, Mrs.
Biggert, Mr. Kennedy of Minnesota, Mr. Burgess, Mr. Gingrey, Mr. Cox,
Mr. Dent, Mr. Wicker, Mr. Cannon, Mr. Cunningham, Mr. Miller of
Florida, Mr. Fitzpatrick of Pennsylvania, Mr. McCrery, Mr. Stearns, Ms.
Foxx, Mr. Conaway, Mr. Moran of Virginia, Mr. Matheson, Mr. Holden, Mr.
Boyd, Mr. Tanner, Mr. Cooper, Mr. Cramer, Mr. Scott of Georgia, Mr.
Davis of Tennessee, Mr. Moore of Kansas, Ms. Ginny Brown-Waite of
Florida, and Mr. Boren) introduced the following bill; which was
referred to the Committee on the Judiciary
_______________________________________________________________________
A BILL
To amend the procedures that apply to consideration of interstate class
actions to assure fairer outcomes for class members and defendants, to
outlaw certain practices that provide inadequate settlements for class
members, to assure that attorneys do not receive a disproportionate
amount of settlements at the expense of class members, to assure prompt
consideration of interstate class actions, to amend title 28, United
States Code, to allow the application of the principles of Federal
diversity jurisdiction to interstate class actions, and for other
purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Class Action
Fairness Act of 2005''.
(b) Reference.--Whenever in this Act reference is made to an
amendment to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provision of title
28, United States Code.
(c) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; reference; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Consumer class action bill of rights and improved procedures
for interstate class actions.
Sec. 4. Federal district court jurisdiction of interstate class
actions.
Sec. 5. Removal of interstate class actions to Federal district court.
Sec. 6. Appeals of class action certification orders.
Sec. 7. Effective date.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--The Congress finds as follows:
(1) Class action lawsuits are an important and valuable
part of our legal system when they permit the fair and
efficient resolution of legitimate claims of numerous parties
by allowing the claims to be aggregated into a single action
against a defendant that has allegedly caused harm.
(2) For many years there have been abuses of the class
action device that have--
(A) harmed class members with legitimate claims and
defendants that have acted responsibly;
(B) adversely affected interstate commerce; and
(C) undermined public respect for the judicial
system in the United States.
(3) Class members have been harmed by a number of actions
taken by plaintiffs' lawyers, which provide little or no
benefit to class members as a whole, including--
(A) plaintiffs' lawyers receiving large fees, while
class members are left with coupons or other awards of
little or no value; and
(B) unjustified rewards being made to certain
plaintiffs at the expense of other class members.
(4) Through the use of artful pleading, plaintiffs are able
to avoid litigating class actions in Federal court, forcing
businesses and other organizations to defend interstate class
action lawsuits in county and State courts where--
(A) the lawyers, rather than the claimants, are
likely to receive the maximum benefit;
(B) less scrutiny may be given to the merits of the
case; and
(C) defendants are effectively forced into
settlements, in order to avoid the possibility of huge
judgments that could destabilize their companies.
(5) These abuses undermine the Federal judicial system, the
free flow of interstate commerce, and the intent of the framers
of the Constitution in creating diversity jurisdiction, in that
county and State courts are--
(A) handling interstate class actions that affect
parties from many States;
(B) sometimes acting in ways that demonstrate bias
against out-of-State defendants; and
(C) making judgments that impose their view of the
law on other States and bind the rights of the
residents of those States.
(6) Abusive interstate class actions have harmed society as
a whole by forcing innocent parties to settle cases rather than
risk a huge judgment by a local jury, thereby costing consumers
billions of dollars in increased costs to pay for forced
settlements and excessive judgments.
(b) Purposes.--The purposes of this Act are--
(1) to assure fair and prompt recoveries for class members
with legitimate claims;
(2) to protect responsible companies and other institutions
against interstate class actions in State courts;
(3) to restore the intent of the framers of the
Constitution by providing for Federal court consideration of
interstate class actions; and
(4) to benefit society by encouraging innovation and
lowering consumer prices.
SEC. 3. CONSUMER CLASS ACTION BILL OF RIGHTS AND IMPROVED PROCEDURES
FOR INTERSTATE CLASS ACTIONS.
(a) In General.--Part V is amended by inserting after chapter 113
the following:
``CHAPTER 114--CLASS ACTIONS
``Sec.
``1711. Judicial scrutiny of coupon and other noncash settlements.
``1712. Protection against loss by class members.
``1713. Protection against discrimination based on geographic location.
``1714. Prohibition on the payment of bounties.
``1715. Definitions.
``Sec. 1711. Judicial scrutiny of coupon and other noncash settlements
``The court may approve a proposed settlement under which the class
members would receive noncash benefits or would otherwise be required
to expend funds in order to obtain part or all of the proposed benefits
only after a hearing to determine whether, and making a written finding
that, the settlement is fair, reasonable, and adequate for class
members.
``Sec. 1712. Protection against loss by class members
``The court may approve a proposed settlement under which any class
member is obligated to pay sums to class counsel that would result in a
net loss to the class member only if the court makes a written finding
that nonmonetary benefits to the class member outweigh the monetary
loss.
``Sec. 1713. Protection against discrimination based on geographic
location
``The court may not approve a proposed settlement that provides for
the payment of greater sums to some class members than to others solely
on the basis that the class members to whom the greater sums are to be
paid are located in closer geographic proximity to the court.
``Sec. 1714. Prohibition on the payment of bounties
``(a) In General.--The court may not approve a proposed settlement
that provides for the payment of a greater share of the award to a
class representative serving on behalf of a class, on the basis of the
formula for distribution to all other class members, than that awarded
to the other class members.
``(b) Rule of Construction.--The limitation in subsection (a) shall
not be construed to prohibit any payment approved by the court for
reasonable time or costs that a person was required to expend in
fulfilling his or her obligations as a class representative.
``Sec. 1715. Definitions
``In this chapter:
``(1) Class action.--The term `class action' means--
``(A) any civil action filed in a district court of
the United States pursuant to rule 23 of the Federal
Rules of Civil Procedure; or
``(B) any civil action that is removed to a
district court of the United States and that was
originally filed pursuant to a State statute or rule of
judicial procedure authorizing an action to be brought
by one or more representatives on behalf of a class.
``(2) Class counsel.--The term `class counsel' means the
persons who serve as the attorneys for the class members in a
proposed or certified class action.
``(3) Class member.--The term `class member' means any of
the persons who fall within the definition of the proposed or
certified class in a class action.
``(4) Proposed settlement.--The term `proposed settlement'
means an agreement that resolves claims in a class action, that
is subject to court approval, and that, if approved, would be
binding on the class members.''.
(b) Technical and Conforming Amendment.--The table of chapters for
part V is amended by inserting after the item relating to chapter 113
the following:
``114. Class Actions........................................ 1711''.
SEC. 4. FEDERAL DISTRICT COURT JURISDICTION OF INTERSTATE CLASS
ACTIONS.
(a) Application of Federal Diversity Jurisdiction.--Section 1332 is
amended--
(1) by redesignating subsection (d) as subsection (e); and
(2) by inserting after subsection (c) the following:
``(d)(1) In this subsection--
``(A) the term `class' means all of the class members in a
class action;
``(B) the term `class action' means any civil action filed
pursuant to rule 23 of the Federal Rules of Civil Procedure or
similar State statute or rule of judicial procedure authorizing
an action to be brought by one or more representative persons
on behalf of a class;
``(C) the term `class certification order' means an order
issued by a court approving the treatment of a civil action as
a class action; and
``(D) the term `class member' means any of the persons who
fall within the definition of the proposed or certified class
in a class action.
``(2) The district courts shall have original jurisdiction of any
civil action in which the matter in controversy exceeds the sum or
value of $5,000,000, exclusive of interest and costs, and is a class
action in which--
``(A) any member of a class of plaintiffs is a citizen of a
State different from any defendant;
``(B) any member of a class of plaintiffs is a foreign
state or a citizen or subject of a foreign state and any
defendant is a citizen of a State; or
``(C) any member of a class of plaintiffs is a citizen of a
State and any defendant is a foreign state or a citizen or
subject of a foreign state.
``(3) A district court may, in the interests of justice, decline to
exercise jurisdiction under paragraph (2) over a class action in which
greater than one-third but less than two-thirds 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
based on consideration of the following factors:
``(A) Whether the claims asserted involve matters of
national or interstate interest.
``(B) Whether the claims asserted will be governed by laws
other than those of the State in which the action was
originally filed.
``(C) In the case of a class action originally filed in a
State court, whether the class action has been pleaded in a
manner that seeks to avoid Federal jurisdiction.
``(D) Whether the number of citizens of the State in which
the action was originally filed in all proposed plaintiff
classes in the aggregate is substantially larger than the
number of citizens from any other State, and the citizenship of
the other members of the proposed class is dispersed among a
substantial number of States.
``(E) Whether 1 or more class actions asserting the same or
similar claims on behalf of the same or other persons have been
or may be filed.
``(4) Paragraph (2) shall not apply to any class action in which--
``(A) 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;
``(B) the primary defendants are States, State officials,
or other governmental entities against whom the district court
may be foreclosed from ordering relief; or
``(C) the number of members of all proposed plaintiff
classes in the aggregate is less than 100.
``(5) In any class action, the claims of the individual class
members shall be aggregated to determine whether the matter in
controversy exceeds the sum or value of $5,000,000, exclusive of
interest and costs.
``(6) This subsection shall apply to any class action before or
after the entry of a class certification order by the court with
respect to that action.
``(7)(A) A district court shall dismiss any civil action that is
subject to the jurisdiction of the court solely under this subsection
if the court determines that the action may not proceed as a class
action based on a failure to satisfy the requirements of rule 23 of the
Federal Rules of Civil Procedure.
``(B) Nothing in subparagraph (A) shall prohibit plaintiffs from
filing an amended class action in Federal court or filing an action in
State court, except that any such action filed in State court may be
removed to the appropriate district court if it is an action of which
the district courts of the United States have original jurisdiction.
``(C) In any action that is dismissed under this paragraph and is
filed by any of the original named plaintiffs therein in the same State
court venue in which the dismissed action was originally filed, the
limitations periods on all reasserted claims shall be deemed tolled for
the period during which the dismissed class action was pending. The
limitations periods on any claims that were asserted in a class action
dismissed under this paragraph that are subsequently asserted in an
individual action shall be deemed tolled for the period during which
the dismissed action was pending.
``(8) Paragraph (2) shall not apply to any class action brought by
shareholders that solely involves a claim that relates to--
``(A) a claim concerning a covered security as defined
under section 16(f)(3) of the Securities Act of 1933 and
section 28(f)(5)(E) of the Securities Exchange Act of 1934;
``(B) the internal affairs or governance of a corporation
or other form of business enterprise and arises under or by
virtue of the laws of the State in which such corporation or
business enterprise is incorporated or organized; or
``(C) the rights, duties (including fiduciary duties), and
obligations relating to or created by or pursuant to any
security (as defined under section 2(a)(1) of the Securities
Act of 1933 and the regulations issued thereunder).
``(9) For purposes of this subsection and section 1453 of this
title, an unincorporated association shall be deemed to be a citizen of
the State where it has its principal place of business and the State
under whose laws it is organized.
``(10) For purposes of this section and section 1453 of this title,
a civil action that is not otherwise a class action as defined in
paragraph (1)(B) of this subsection shall nevertheless be deemed a
class action if--
``(A) the named plaintiff purports to act for the interests
of its members (who are not named parties to the action) or for
the interests of the general public, seeks a remedy of damages,
restitution, disgorgement, or any other form of monetary
relief, and is not a State attorney general; or
``(B) monetary relief claims in the action are proposed to
be tried jointly in any respect with the claims of 100 or more
other persons on the ground that the claims involve common
questions of law or fact.
In any such case, the persons who allegedly were injured shall be
treated as members of a proposed plaintiff class and the monetary
relief that is sought shall be treated as the claims of individual
class members. The provisions of paragraph (7) of this subsection and
subsections (b)(2) and (d) of section 1453 shall not apply to civil
actions described under subparagraph (A). The provisions of paragraph
(7) of this subsection, and subsections (b)(2) and (d) of section 1453
shall not apply to civil actions described under subparagraph (B).''.
(b) Conforming Amendments.--
(1) Section 1335(a)(1) is amended by inserting ``(a) or
(d)'' after ``1332''.
(2) Section 1603(b)(3) is amended by striking ``(d)'' and
inserting ``(e)''.
SEC. 5. REMOVAL OF INTERSTATE CLASS ACTIONS TO FEDERAL DISTRICT COURT.
(a) In General.--Chapter 89 is amended by adding after section 1452
the following:
``Sec. 1453. Removal of class actions
``(a) Definitions.--In this section, the terms `class', `class
action', `class certification order', and `class member' have the
meanings given these terms in section 1332(d)(1).
``(b) In General.--A class action may be removed to a district
court of the United States in accordance with this chapter, without
regard to whether any defendant is a citizen of the State in which the
action is brought, except that such action may be removed--
``(1) by any defendant without the consent of all
defendants; or
``(2) by any plaintiff class member who is not a named or
representative class member without the consent of all members
of such class.
``(c) When Removable.--This section shall apply to any class action
before or after the entry of a class certification order in the action,
except that a plaintiff class member who is not a named or
representative class member of the action may not seek removal of the
action before an order certifying a class of which the plaintiff is a
class member has been entered.
``(d) Procedure for Removal.--The provisions of section 1446
relating to a defendant removing a case shall apply to a plaintiff
removing a case under this section, except that, in the application of
subsection (b) of such section, the requirement relating to the 30-day
filing period shall be met if a plaintiff class member files notice of
removal within 30 days after receipt by such class member, through
service or otherwise, of the initial written notice of the class
action.
``(e) Review of Orders Remanding Class Actions to State Courts.--
The provisions of section 1447 shall apply to any removal of a case
under this section, except that, notwithstanding the provisions of
section 1447(d), an order remanding a class action to the State court
from which it was removed shall be reviewable by appeal or otherwise.
``(f) Exception.--This section shall not apply to any class action
brought by shareholders that solely involves--
``(1) a claim concerning a covered security as defined
under section 16(f)(3) of the Securities Act of 1933 and
section 28(f)(5)(E) of the Securities Exchange Act of 1934;
``(2) a claim that relates to the internal affairs or
governance of a corporation or other form of business
enterprise and arises under or by virtue of the laws of the
State in which such corporation or business enterprise is
incorporated or organized; or
``(3) a claim that relates to the rights, duties (including
fiduciary duties), and obligations relating to or created by or
pursuant to any security (as defined under section 2(a)(1) of
the Securities Act of 1933 and the regulations issued
thereunder).''.
(b) Removal Limitation.--Section 1446(b) is amended in the second
sentence by inserting ``(a)'' after ``section 1332''.
(c) Technical and Conforming Amendments.--The table of sections for
chapter 89 is amended by adding after the item relating to section 1452
the following:
``1453. Removal of class actions.''.
SEC. 6. APPEALS OF CLASS ACTION CERTIFICATION ORDERS.
(a) In General.--Section 1292(a) is amended by inserting after
paragraph (3) the following:
``(4) Orders of the district courts of the United States
granting or denying class certification under rule 23 of the
Federal Rules of Civil Procedure, if notice of appeal is filed
within 10 days after entry of the order.''.
(b) Discovery Stay.--All discovery and other proceedings shall be
stayed during the pendency of any appeal taken pursuant to the
amendment made by subsection (a), unless the court finds upon the
motion of any party that specific discovery is necessary to preserve
evidence or to prevent undue prejudice to that party.
SEC. 7. EFFECTIVE DATE.
(a) In General.--The amendments made by this Act shall apply to--
(1) any civil action commenced on or after the date of the
enactment of this Act; and
(2) any civil action commenced before such date of
enactment in which a class certification order (as defined in
section 1332(d)(1)(C) of title 28, United States Code, as
amended by section 4 of this Act) is entered on or after such
date of enactment.
(b) Filing of Notice of Removal.--In the case of any civil action
to which subsection (a)(2) applies, the requirement relating to the 30-
day period for the filing of a notice of removal under section 1446(b)
and section 1453(d) of title 28, United States Code, shall be met if
the notice of removal is filed within 30 days after the date on which
the class certification order referred to in subsection (a)(2) is
entered.
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