[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                  CLASS ACTIONS SEVEN YEARS AFTER THE 
                       CLASS ACTION FAIRNESS ACT

=======================================================================

                                HEARING

                               BEFORE THE

                    SUBCOMMITTEE ON THE CONSTITUTION

                                 OF THE

                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             SECOND SESSION

                               __________

                              JUNE 1, 2012

                               __________

                           Serial No. 112-131

                               __________

         Printed for the use of the Committee on the Judiciary


      Available via the World Wide Web: http://judiciary.house.gov



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                       COMMITTEE ON THE JUDICIARY

                      LAMAR SMITH, Texas, Chairman
F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        HOWARD L. BERMAN, California
HOWARD COBLE, North Carolina         JERROLD NADLER, New York
ELTON GALLEGLY, California           ROBERT C. ``BOBBY'' SCOTT, 
BOB GOODLATTE, Virginia                  Virginia
DANIEL E. LUNGREN, California        MELVIN L. WATT, North Carolina
STEVE CHABOT, Ohio                   ZOE LOFGREN, California
DARRELL E. ISSA, California          SHEILA JACKSON LEE, Texas
MIKE PENCE, Indiana                  MAXINE WATERS, California
J. RANDY FORBES, Virginia            STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr.,
TRENT FRANKS, Arizona                  Georgia
LOUIE GOHMERT, Texas                 PEDRO R. PIERLUISI, Puerto Rico
JIM JORDAN, Ohio                     MIKE QUIGLEY, Illinois
TED POE, Texas                       JUDY CHU, California
JASON CHAFFETZ, Utah                 TED DEUTCH, Florida
TIM GRIFFIN, Arkansas                LINDA T. SANCHEZ, California
TOM MARINO, Pennsylvania             JARED POLIS, Colorado
TREY GOWDY, South Carolina
DENNIS ROSS, Florida
SANDY ADAMS, Florida
BEN QUAYLE, Arizona
MARK AMODEI, Nevada

           Richard Hertling, Staff Director and Chief Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
                                 ------                                

                    Subcommittee on the Constitution

                    TRENT FRANKS, Arizona, Chairman

                   MIKE PENCE, Indiana, Vice-Chairman

STEVE CHABOT, Ohio                   JERROLD NADLER, New York
J. RANDY FORBES, Virginia            MIKE QUIGLEY, Illinois
STEVE KING, Iowa                     JOHN CONYERS, Jr., Michigan
JIM JORDAN, Ohio                     ROBERT C. ``BOBBY'' SCOTT, 
                                     Virginia

                     Paul B. Taylor, Chief Counsel

                David Lachmann, Minority Staff Director


                            C O N T E N T S

                              ----------                              

                              JUNE 1, 2012

                                                                   Page

                           OPENING STATEMENTS

The Honorable Trent Franks, a Representative in Congress from the 
  State of Arizona, and Chairman, Subcommittee on the 
  Constitution...................................................     1
The Honorable Jerrold Nadler, a Representative in Congress from 
  the State of New York, and Ranking Member, Subcommittee on the 
  Constitution...................................................     3
The Honorable John Conyers, Jr., a Representative in Congress 
  from the State of Michigan, and Ranking Member, Committee on 
  the Judiciary..................................................    37

                               WITNESSES

Martin H. Redish, Ancel Professor of Law and Public Policy, 
  Northwestern University School of Law
  Oral Testimony.................................................    39
  Prepared Statement.............................................    41
Thomas M. Sobol, Partner, Hagens Berman Sobol Shapiro, LLP
  Oral Testimony.................................................    51
  Prepared Statement.............................................    53
John H. Beisner, Partner, Skadden, Arps
  Oral Testimony.................................................    62
  Prepared Statement.............................................    65

          LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING

Material submitted by the Honorable Jerrold Nadler, a 
  Representative in Congress from the State of New York, and 
  Ranking Member, Subcommittee on the Constitution...............     4

                                APPENDIX
               Material Submitted for the Hearing Record

Response to Questions for the Record from Martin H. Redish, Ancel 
  Professor of Law and Public Policy, Northwestern University 
  School of Law..................................................    98
Response to Questions for the Record from John H. Beisner, 
  Partner, Skadden, Arps.........................................   105


     CLASS ACTIONS SEVEN YEARS AFTER THE CLASS ACTION FAIRNESS ACT

                              ----------                              


                          FRIDAY, JUNE 1, 2012

                  House of Representatives,
                  Subcommittee on the Constitution,
                                Committee on the Judiciary,
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 9:30 a.m., in 
room 2141, Rayburn House Office Building, the Honorable Trent 
Franks (Chairman of the Subcommittee) presiding.
    Present: Representatives Franks, Chabot, King, Nadler, 
Conyers, and Scott.
    Staff Present: (Majority) Zachary Somers, Counsel; Sarah 
Vance, Clerk; (Minority) Heather Sawyer, Counsel; and Veronica 
Eligan, Professional Staff Member.
    Mr. Franks. Good morning to everyone. I appreciate the 
witnesses being here, those in the audience, and the Members.
    Without objection, the Chair is authorized to declare the 
recess of this Committee at any time.
    In 2005, Congress passed the Class Action Fairness Act, or 
CAFA as it is commonly known, and President Bush signed it into 
law. The bill was introduced by Mr. Goodlatte in the House and 
Mr. Grassley and Mr. Kohl in the Senate and received strong 
bipartisan support in both chambers. Seven years have passed 
since then and, as the primary Subcommittee with jurisdiction 
over civil justice reform, I think it is time to take a look at 
how CAFA is working. So I have called today's hearing to 
examine what has worked, what hasn't, and to see what Congress 
may have missed when it wrote CAFA.
    The class action is a mechanism designed to allow injured 
parties to join together with others who have suffered the same 
harm when their claims are not large enough to make pursuing 
them individually cost-efficient. If used properly, class 
actions are a valuable tool in our system of justice, but they 
are only beneficial when redress of actual injury suffered by 
class members is the priority of the litigation. However, in 
recent years, class actions have been used with increased 
frequency and in ways that do not promote the interests they 
were intended to serve.
    CAFA was designed as a balanced approach to address some of 
the most egregious problems in class action litigation. The act 
was not intended to be a panacea that would correct all issues 
with class action litigation. Rather, its goals were to promote 
fairness, ensure that interstate class actions are tried in 
Federal court, and establish new protections for consumers 
against abusive class action settlements.
    In many ways, the act has been highly successful at 
achieving its goals. Nationwide class actions are now more 
regularly filed in Federal court and defendants can now more 
easily remove these class actions from State to Federal court. 
CAFA has also been successful at placing coupon settlements, in 
which the class members are compensated in near-worthless 
coupons, under increased scrutiny.
    However, despite CAFA's successes, many observers have 
concluded that some Federal courts have failed to follow 
congressional intent in applying the statute. This has allowed 
plaintiffs' attorneys to develop new tactics to get around some 
of CAFA's provisions in ways that have undermined the goals of 
Congress.
    Additionally, other legal commentators have raised concerns 
about abuses that CAFA did not address. One of the problems 
that has emerged since CAFA's enactment is a new form of forum 
shopping. Whereas prior to CAFA plaintiffs' attorneys filed 
suit in what were perceived to be the most favorable State 
courts, after CAFA it appears that attorneys are choosing to 
file class actions in certain Federal appeals circuits due to a 
favorable circuit precedent. This is a troubling trend 
considering that Federal law is supposed to be applied 
uniformly throughout the country.
    This nonuniform application of the law has cut against 
congressional intent that interstate class actions be tried in 
Federal court and has led to attempts to game the system. For 
instance, certain Federal appeals circuits have allowed 
plaintiffs' attorneys to avoid Federal jurisdiction by putting 
the burden on the defendant to prove to a, ``legal certainty'' 
that the damages at issue exceed the $5 million jurisdictional 
minimum. Defendants are obviously reticent to prove the 
plaintiff's case on damages to a legal certainty.
    In other cases, plaintiffs' attorneys have been permitted 
to avoid CAFA's requirements by splitting mass actions into 
groups of 99 or fewer plaintiffs to avoid CAFA's requirement 
that mass actions with 100 or more plaintiffs be tried in 
Federal court.
    Additionally, although CAFA did restrict coupon settlements 
in many class actions, an equally egregious replacement has 
emerged: cy-pres settlements. In these cases, an uninjured 
third-party with no connection to the litigation, usually a 
nonprofit organization, is awarded money as part of a 
settlement because it would be too difficult or costly to 
identify alleged victims. These settlements present a whole 
host of problems, not the least of which is that they almost 
certainly violate the Constitution's Article III ``case or 
controversy'' requirement.
    Now, these, I am sure, are just a few of the problems that 
have emerged since CAFA was enacted 7 years ago. Although I 
believe that CAFA has been a success overall, I hope that 
through this hearing we can examine what improvements may be 
needed to ensure that this system is functioning as it should. 
We must make sure that the rules governing class actions are 
fair to both plaintiffs and defendants and that they comply 
with the dictates of Article III of the Constitution.
    And, with that, I would now yield to the Ranking Member of 
the Subcommittee, Mr. Nadler, for his opening statement.
    Mr. Nadler. Thank you, Mr. Chairman.
    At the start of the 109th Congress 7 years ago, Republican 
leadership made the Class Action Fairness Act one of their top 
legislative priorities. Having failed to pass similar 
legislation in prior Congresses, they wasted no time after 
taking control of both houses in the November 2004 elections. 
Republicans introduced a bill on January 25, 2005, rushed it 
through both chambers, and got it on the President's desk for 
signature 24 days later. They moved so fast that the Committee 
report, upon which many defendants rely in making removal 
arguments to the courts, was not even filed until 10 days after 
the bill had been signed into law.
    CAFA's proponents claimed that the law was needed to stop 
plaintiffs' lawyers from bringing class actions to State courts 
known to be hostile to defendants, particularly out-of-State 
defendants, and then leveraging those cases to force large 
settlements. Never mind the many State class actions have 
uncovered significant corporate wrongdoing, vindicated 
protections provided under State law, and compensated victims. 
It was, after all, State class actions that finally uncovered 
years of corrupt practices in the tobacco industry, including 
its promotion of addiction through manipulation of nicotine 
levels and efforts to recruit teenage smokers. These class 
actions required the tobacco industry to pay $200 billion for 
the public health disaster caused by smoking, dismantled 
certain industry groups that had spearheaded the industry's 
public disinformation campaigns, and banned certain forms of 
advertising and marketing.
    State class actions have similarly uncovered contamination 
of groundwater that cause certain forms of cancer, fraudulent 
pricing practices and misleading advertising by drug companies, 
and predatory payday lending practices. Lawsuits asserting 
State common law tort and fraud claims and seeking the 
protection of State consumer and environmental laws have 
resulted in much needed reform of corporate practices and have 
compensated those harmed by corporate wrongdoing.
    Despite these benefits, CAFA's proponents unquestionably 
sought to discourage class actions altogether by funneling them 
away from State courts into the Federal courts, where it was 
believed that Federal judges would be reluctant to certify 
classes and would prove more favorable to defendants. Seven 
years later, CAFA certainly appears to have achieved its core 
goal of removing class actions from State to Federal courts. 
Studies undertaken on behalf of the Federal Judicial 
Conference, for example, show that the number of class actions 
either removed to or filed originally in Federal court have 
greatly increased since CAFA's passage.
    These empirical studies tell us nothing about whether CAFA 
has had an overall positive or negative impact on the 
enforcement of legal rights, access to the courts, or the just, 
speedy, and inexpensive resolution of class actions.
    Kevin Clermont and Theodore Eisenberg, professors of law at 
Cornell University, studied Federal court decisions involving 
CAFA and concluded that the law has ``produced a lot of 
litigation in its short life,'' mostly over questions regarding 
who bears the burden of proving removal or the law's effective 
date, and that ``most of this litigation has been socially 
wasteful.''
    I would ask unanimous consent to submit their article, 
``CAFA Judicata: A Tale of Waste and Politics,'' for the 
record.
    Mr. Franks. Without objection.
    Mr. Nadler. Thank you.
    [The information referred to follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Nadler. Their conclusion is quite a blow for a law 
touted as a key part of the Republicans' tort reform agenda. 
Far from reducing frivolous, time-consuming, and expensive 
litigation, CAFA appears to have encouraged such litigation, 
enmeshing the parties and the courts in lengthy battles over 
threshold questions that threaten meaningful access to the 
courts and delay resolution of claims on their merits. Of 
course, that may be the real intent of the law.
    I, along with several colleagues, expressed grave concerns 
and voted against CAFA because of the threat it poses to 
meaningful vindication of State-based rights. It is State, not 
Federal, law that provides many core health, safety, and 
consumer protections. It is, therefore, the State, and not 
Federal courts, that have authority to interpret their State's 
law and enforce their State's vision of justice. CAFA upends 
this system, making it far more likely that Federal judges will 
have the last word on the meaning of State law.
    While Federal judges presiding over a case under CAFA must 
apply State law under the principles of judicial federalism 
announced long ago in Erie Railroad Company v. Tompkins that 
this task will prove more difficult as more and more cases are 
removed from the State court. Gaps in States' substantive law 
will grow wider as State courts are deprived of the opportunity 
to address certain areas of State law, weakening the ability of 
States to regulate activity within their borders, and protect 
their citizens.
    It has also become fairly common for defendants to remove 
cases to Federal court and then to argue that a removed case is 
too complex and unmanageable, because of the variety of State 
laws that must be considered in the cases; it is too complex 
and unmanageable to be certified as a class action under the 
Federal rules. So, first, get it into Federal court; and, 
second, say that Federal courts are incapable of handling it, 
case dismissed. This seems like a one-two sucker punch, and I 
am curious to hear from our witnesses today on how this 
practice falls within the rubric of fairness under the Class 
Action Fairness Act.
    I am most interested in hearing about whether the 
additional burden that CAFA imposes on Federal courts is 
harming the quality of justice, not just for CAFA cases, but 
for all other cases on the Federal docket. We raised concerns 
about the vacancies in the Federal bench before CAFA was 
passed. The percentage of vacancies has since doubled, from 5 
percent to 10 percent as of September 2011. Yet the Senate 
refuses to confirm the President's nominees. Something must 
give in this equation. Congress cannot and should not continue 
to burden and hamstring the courts simultaneously, particularly 
where there is no demonstrated need to do so and no 
corresponding assurance that Federal judges are willing and 
able to undertake the task that we have imposed.
    With that, I look forward to hearing from our witnesses, 
and I yield back the balance of my time.
    Mr. Franks. I thank the gentleman.
    And I now yield to the Ranking Member of the full 
Committee, Mr. Conyers, for his opening statement.
    Mr. Conyers. Thank you, Mr. Chairman.
    Anyone listening to our opening statements would think that 
we are talking about two different things. The wide differences 
of the view are astounding, but they happen regularly in the 
Judiciary Committee. I tend to lean toward the Nadler 
description of what it is we are doing here today and why we 
are doing it, and I would like to add a few other additional 
points to that viewpoint.
    First of all, I think the Class Action Fairness Act was 
seriously misnamed. It is anything but that. It was designed to 
benefit the defendants and work to the detriment of the large 
numbers of people who suffered harm. The fact is that the Class 
Action Fairness Act has worked well in helping defendants 
remove cases to the Federal court, where the proponents think 
they will have a greater advantage. As much as this bill was 
promoted as a necessary curb to forum shopping, it has proved 
to be the ultimate form of forum shopping for the defendants.
    I had three concerns in 2005. I still have them, and would 
point out that, first, the Class Action Fairness Act undermines 
State laws and State courts. State law provides the source of 
many consumer and environmental protections through tort and 
statutory law. Class actions are vital to enforcing these 
rights, as they allow the aggregation of smaller claims that 
otherwise might not warrant individual litigation. The Class 
Action Fairness Act makes virtually every class action, by 
allowing removal by the defendant so long as at least one 
defendant and one class member are diverse, removable to the 
Federal courts, divesting State courts, of course, of the 
ability to interpret and develop State law.
    Secondly, the Class Action Fairness Act makes class 
certification more difficult and expensive. We warned that 
Federal courts would be less likely to certify class actions, 
especially given the requirements of the Federal rules of civil 
procedure for predominant questions of law and fact. And then 
especially in the wake of the Supreme Court decision in Wal-
Mart Stores v. Dukes, where a million and a half female workers 
had their case thrown out as a result of a five-four 
ideological division in the Court on whether the suit satisfied 
the requirement, whether these were questions of law or fact 
common to the class of female employees. The five conservative 
justices said ``no,'' shutting down the suit and limiting the 
ability of other plaintiffs to ban together. This rule makes 
Federal courts an even more favorable forum for defendants in 
both environmental/consumer and employment discrimination 
cases.
    Third, we expressed the concern that the bill would 
increase the workload of our already overburdened courts. It 
has been already observed that the number of vacancies has 
doubled and there are far fewer Federal judges than State 
judges. And growing caseloads leave Federal judges even less 
time.
    And so I look forward to the testimony, and I yield back 
the balance of my time.
    Mr. Franks. And I thank the gentleman.
    And, again, I welcome the witnesses here this morning.
    Our first witness is Martin Redish, the Ancel Professor of 
Law and Public Policy at Northwestern University School of Law. 
He has been described as ``without a doubt the foremost scholar 
on issues of Federal court jurisdiction in this generation'' 
and has been recognized as the 16th most cited legal scholar of 
all time. Professor Redish is the coauthor and the author of 
more than 80 articles and 15 books, including the book 
``Wholesale Justice: Constitutional Democracy and the Problem 
of the Class Action Lawsuit.''
    Our second witness is Thomas Sobol, a managing partner of 
Hagens Berman Sobol Shapiro's Cambridge office. In practice for 
almost 30 years, he leads drug-pricing and healthcare class 
actions against pharmaceutical and medical device 
manufacturers, recovering more than $12 billion for his 
clients. Mr. Sobol has served as a Special Assistant Attorney 
General for the Commonwealth of Massachusetts and the States of 
New Hampshire and Rhode Island and as private counsel for 
Massachusetts and New Hampshire in litigation against the 
tobacco industry.
    Our final witness is John Beisner, co-head of Skadden's 
Mass Torts and Insurance Litigation group. Over the past 25 
years, he has defended major U.S. and international 
corporations in more than 600 purported class actions filed in 
Federal courts and in 40 State courts at both the trial and 
appellate levels, including matters before the U.S. Supreme 
Court. Mr. Beisner a frequent writer and lecturer on class 
action and complex litigation issues and has been an active 
participant in litigation reform initiatives.
    And, again, I want to thank you all for appearing before us 
today.
    And each of the witnesses' written statements will be 
entered in the record in its entirety. I would ask that each 
witness summarize his testimony in 5 minutes or less. To help 
you stay within that time, there is a timing light on the 
table. When the light switches from green to yellow, you will 
have 1 minute to conclude your testimony. When the light turns 
red, it signals that the witness' 5 minutes have expired.
    And before I recognize the witnesses, it is the tradition 
of the Subcommittee that they be sworn. So if you will please 
stand.
    [Witnesses sworn.]
    Mr. Franks. Thank you. You may take a seat.
    Also, to the witnesses, please turn on your microphone 
before speaking.
    I would now recognize our first witness, Professor Redish, 
for 5 minutes.

   TESTIMONY OF MARTIN H. REDISH, ANCEL PROFESSOR OF LAW AND 
      PUBLIC POLICY, NORTHWESTERN UNIVERSITY SCHOOL OF LAW

    Mr. Redish. Thank you, Mr. Chairman.
    I would like to preface the substance of my comments by 
emphasizing that it is now time for Congress to take control of 
important procedural issues. Normally, Congress cedes to the 
Rules Advisory Committee and ultimately to the Supreme Court 
the control of the Federal Rules of Civil Procedure. But there 
are certain procedural devices--class actions being perhaps the 
most important, but others, including discovery abuse and 
discovery cost allocation, which are deserving of significant 
concern now--have enormous impact on the lives of our citizens, 
have sociopolitical impacts on the Nation and on the economy 
that go well beyond the four walls of the courthouse.
    The Advisory Committee is not elected, is not accountable, 
is not representative. The Supreme Court, for very important 
reasons, is not elected or accountable. It is only this body, 
the Congress of the United States, that is representative of 
and accountable to the electorate. It is this body that should 
be making the basic moral socioeconomic choices as to how 
procedure operates when that procedure has significant impact 
outside of the four walls of the courthouse.
    Now, today our concern is the class action. The Class 
Action Fairness Act was a major reform that I believe has done 
a great deal of good, but it is time to move on to other areas 
of reform. The modern class action has significant pathologies 
that undermine basic due process rights of individual litigants 
and, more importantly for present purposes, the separation of 
powers and distribution of authority between the judicial and 
legislative branches.
    The class action, contrary to the views of many, is not a 
roving instrument to do justice. The class action is a Federal 
Rules of Civil Procedure appearing in Rule 23. It comes right 
after Rule 22 dealing with interpleader and before Rule 24 
dealing with intervention. A lawsuit does not arise under Rule 
23. A lawsuit arises under the substantive law, be it 
legislative, common law, or constitutional law, that is being 
enforced in the particular proceeding.
    What has happened in all too many situations is that, 
through a process equivalent to a type of alchemy, the class 
action procedure, in direct contravention to the directives of 
the Rules Enabling Act pursuant to which the Federal rules were 
enacted and in direct contravention to the separation of powers 
between the branches, alters the underlying DNA of the 
substantive law.
    Substantive law contains two portions: a proscriptive 
portion, what primary behavior is prohibited or restricted; and 
a remedial portion, how are we to remedy violations of the 
proscriptive portions of the law. In all the laws that are 
being enforced in the modern class action, the remedial device 
chosen by Congress or in diversity cases by the state, 
legislatures is a compensatory device. The legislative body 
simultaneously deters future harm and compensates individuals 
who have been injured as a result of the violation of their 
legal rights.
    But in all too many situations, the class action is what I 
call a ``faux class action.'' It is a cardboard cutout of a 
class action. Many class members, because they become members 
of the class through mere inertia rather than by any 
affirmative choice on their part, are completely unaware that 
they are involved in a lawsuit. Many are unfindable and 
unreachable. Oftentimes the claims are so small that it 
wouldn't make sense for them, as a matter of economic 
efficiency, to file.
    What happens in these cases is that the lawyers become the 
real parties in interest. The lawyers, bringing these suits, 
who are uninjured in any legally cognizable way, are the ones 
pursuing the remedy. This is not necessarily illegal because we 
have qui tam suits, but that is not what these underlying laws 
have provided.
    The cy-pres remedy that has been provided as a means of 
covering these kinds of violations of substantive law has been 
used all too often where the money that goes unclaimed is given 
to a charity. The charity is not an injured party, the charity 
has not suffered harm, and this is a symptom of the perversion 
of the class action process. I believe significant legislative 
reforms are called for.
    Thank you.
    Mr. Franks. Thank you, Professor.
    [The prepared statement of Mr. Redish follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    


                               __________
    Mr. Franks. And I now recognize Mr. Sobol for 5 minutes.

            TESTIMONY OF THOMAS M. SOBOL, PARTNER, 
                HAGENS BERMAN SOBOL SHAPIRO, LLP

    Mr. Sobol. Good morning, Mr. Franks. Good morning, Members 
of the Subcommittee.
    I bring to bear 30 years of the practice of law and some 
real-world experience in dealing with class actions. And while 
I do so, my views are my own, not those of my clients or my 
firm.
    Now, if the proponents of CAFA made one promise about the 
new statute, it was, to use their own words, this: that CAFA 
does not change substantive law--that is, in effect, it is a 
procedural provision only.
    Now, judged by those terms, CAFA is an abysmal failure. It 
is true that over the past 7 years since its passage, CAFA has 
changed where cases get filed, and it has stopped or prevented 
the occasional reverse auction where the rights of consumers 
are not sufficiently recognized. But CAFA's biggest impact has 
been to deny consumers access to substantive State laws that 
protect consumers.
    CAFA usurped from State courts the ability to interpret 
their own laws and protect their own citizens. It vested in the 
Federal judiciary with virtually sole authority over nationwide 
or multi-State class actions. But, at the same time, CAFA did 
not provide any instruction as to how the Federal judiciary was 
to handle these numerous large State-law-based consumer 
protection cases. It did not explain how a single Federal judge 
was to handle what previously had been the work of numerous 
State court judges addressing many separate State class actions 
involving State law.
    By failing to do so, CAFA presents the Federal judiciary 
with a problem for which there is no immediate solution. As a 
result, Federal courts often deny certification of multi-State 
class actions when multiple States' laws are at play. The 
denial of access of justice is not based on the merits of the 
case but on a technical procedural issue under the Federal 
Rules of Civil Procedure--manageability. And the result is that 
consumers are denied access to justice.
    Decades ago, every State passed consumer protection 
statutes prohibiting unfair or deceptive trade practices. But 
when all is said and done, State consumer protection laws are 
based on a single simple proposition: Don't lie, don't steal, 
don't cheat. Most big and small businesses have no problem 
complying with this simple proposition. It is only the rare and 
unethical of businesses or businesspersons who become 
defendants in significant consumer protection matters. On this, 
there can be no partisan view and no belief that businesses 
need to be free to lie, steal, or cheat.
    Now, contrary to most Federal statutes and regulations, 
every State consumer protection statute provides both public 
and private enforcement. And the predominance of State action 
in this area is consistent with tradition. The Supreme Court 
has long recognized the historic primacy of State regulation in 
matters of health and safety. But then Congress enacted CAFA, 
brandishing a machete where a scalpel would have sufficed to 
address complaints about the class action vehicle. In wielding 
this awkward instrument, Congress ignored its potential and 
likely effects on consumers' ability to bring State consumer 
protection and common law claims.
    Since the passage of CAFA, Federal courts have denied 
efforts to certify claims by consumers basically on the basis 
that the cases are too complicated or too unmanageable. In 
other words, as I think that Mr. Nadler indicated, there has 
been a one-two punch. First, the cases must go to Federal 
court, and they all get consolidated into one place. But now 
that they are all consolidated in one place, they are too 
complicated to proceed.
    As the grounds of the denial of class certification, 
Federal courts often cite the need to apply the law of the 
State where each consumer resides because each respective 
State's interest in enforcing its consumer laws trumps its 
interest. But by refusing to certify any class in the face of 
unmanageability or insurmountable obstacles posed by multiple 
State laws, these certification refusals deny American citizens 
their constitutional guarantee to a day in court.
    Thank you, Mr. Chairman.
    Mr. Franks. Thank you, sir.
    [The prepared statement of Mr. Sobol follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
                               __________

    Mr. Franks. And, Mr. Beisner, we recognize you for 5 
minutes, sir. And don't forget your microphone.

      TESTIMONY OF JOHN H. BEISNER, PARTNER, SKADDEN, ARPS

    Mr. Beisner. Good morning, Chairman Franks, Ranking Member 
Nadler, and Members of the Subcommittee. Thank you for inviting 
me to testify here today about the Class Action Fairness Act 
and paths forward for improving Federal class action practice.
    CAFA's success in reforming Federal class action practice, 
I believe, is undeniable. The law has accomplished each of its 
stated primary goals: one, assuring fair and prompt recoveries 
for class members with legitimate claims; two, restoring the 
intent of the Framers of the Constitution by authorizing 
Federal jurisdiction over interstate class actions of national 
importance; and, three, encouraging innovation on the part of 
American businesses.
    Most importantly, CAFA has allowed a substantial number of 
class actions to be heard by Federal courts that otherwise 
would have proceeded in State courts. Many of those State 
courts were previously regarded as magnet jurisdictions because 
they allowed lax class certification standards and therefore 
attracted huge numbers of class actions.
    One such magnet jurisdiction was Madison County, Illinois. 
Prior to CAFA, this small, otherwise quiet county was a hotbed 
of class action activity, with 177 class actions, many of them 
nationwide cases, filed in the 2 years before CAFA was enacted. 
In the 2 years following CAFA's enactment, only 16 class 
actions were filed in that county, representing an annualized 
decline of over 90 percent.
    CAFA has also accomplished its stated goal of assuring fair 
and prompt recoveries for class members with legitimate claims. 
This important success of CAFA is largely attributed to 
increased scrutiny of coupon class actions that frequently 
offered class members only illusory benefits.
    CAFA has also encouraged innovation by sounding the death 
knell for improper coercive nationwide class actions. Prior to 
CAFA, magnet State courts frequently certified nationwide class 
actions. And the way they did it--and I think this is 
important, because there have been many references to this 
point--the way they did it was by ignoring what the State laws 
were. The State court in Madison County, Illinois, frequently 
said, we don't care what the other States' laws are; we are 
going to apply Illinois law to all claims nationwide. And that 
was depriving consumers of access to justice under the laws of 
their home State, what their home State legislators had decided 
to do.
    And the complaints about nationwide class actions not being 
certified by Federal courts, it is in respect of those 
principles that the applicable State laws should be applied. 
And the simple solution is to bring single State class actions, 
which is what most counsel are doing these days.
    Now, like every piece of legislation, there have been a few 
bumps along the road in implementing the statute. A few courts 
have misconstrued the intent of the legislation. Most notably, 
some courts have ignored CAFA's presumption of Federal 
jurisdiction by imposing legal certainty-type obligations on 
defendants seeking to remove claims to Federal court. Some 
courts have also erred by applying CAFA's home State and local 
controversy exceptions to Federal jurisdiction, I believe, more 
broadly than Congress intended.
    And some recent rulings by Federal courts and the Judicial 
Panel on Multidistrict Litigation have suggested that single 
State class actions may be remanded to State courts--I am 
sorry--be remanded to the originating transferor courts before 
class certification is decided, I think undermining Congress' 
intent to have uniform decisions made in those cases, or at 
least consistent decisions.
    Now, because CAFA was primarily a jurisdictional statute, 
there are a few troubling aspects of class action practice that 
were not addressed by the legislation and remain. One is that 
some Federal courts are not following the requirement that 
courts conduct a rigorous analysis of Rule 23 prerequisites to 
class certification. As Professor Redish has noted earlier, 
there are concerns about cy-pres settlements. And a small 
number of Federal courts, particularly in California, have 
endorsed extremely overbroad class actions in which many of the 
class members do not have Article III standing because they 
were not injured. These include cases in which a case is 
permitted to go forward even though the vast majority of class 
members never had a problem with the product or service at 
issue.
    CAFA was a landmark piece of legislation, and I commend the 
Subcommittee for holding today's hearing. And thank you again 
for inviting me to speak.
    Mr. Franks. Well, thank you, Mr. Beisner.
    [The prepared statement of Mr. Beisner follows:]

    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
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    Mr. Franks. And I will now recognize myself for 5 minutes 
for questions.
    Professor Redish, I will begin with you, sir. You certainly 
come to the Committee with unimpeachable credentials. And I 
will therefore just ask an overarching question here at the 
beginning, and that is, given all of the challenges and all of 
the information that you have related to these types of court 
and jurisdictional issues, what would you say to Congress 
collectively would be the most important things we could do to 
improve or fix the system as it is now? What changes would we 
make, if you had the power to be Republicans and Democrats at 
the same time--and I probably would warn you not to try. But, 
please.
    Mr. Redish. Mr. Chairman, I think there are two vitally 
important reforms that could cure many of the significant 
problems to which I pointed.
    The first, and the simplest I think, would be to insert 
into the certification process an additional requirement that 
shockingly doesn't appear there, which is that before a court 
certifies a class action, it must assure itself that a victory 
would significantly benefit the members of the class. If the 
court cannot be convinced by the parties seeking to bring the 
class proceeding that a victory will be able to distribute 
funds to injured individuals, then there is no business for 
that case being certified as a class in the first place.
    And the second major change, both to assure that due 
process rights of litigants to be able to control their own 
litigation when their claims are of significant value and to 
prevent the class from turning into this cardboard-cutout, faux 
class action, where their claims aren't of significant value, 
would be to abandon the opt-out process, where--I call it 
``Book of the Month Club service''--by inertia, by doing 
nothing, you are a member of the class, but require somebody to 
make the affirmative decision that he or she wants to 
participate as a passive class member. In that sense, we will 
be bringing the class action procedure back within the 
framework of the Federal rules. It will then be a true 
aggregation device and not a manipulator of the underlying 
substantive law.
    Mr. Franks. That sounds frighteningly logical to me. Yes, 
sir.
    Let me turn to you, Mr. Beisner. As I mentioned in my 
opening statement, Federal law is supposed to be applied 
uniformly, of course, in all Federal courts. In your written 
testimony, however, you point out that certain Federal appeals 
courts are applying CAFA's provisions in significantly 
differing ways.
    How big a problem is this? And should Congress get involved 
to fix this issue, or do we just leave it to the Supreme Court 
to sort it out?
    Mr. Beisner. I think that it is a significant problem. And 
I think, as you noted in your opening statement, it has 
resulted, to some extent, in counsel favoring certain circuits 
over others in bringing class actions to start with.
    I do think that there are a number of circuit splits that 
are out there on CAFA issues--that is, circumstances in which 
the circuits are divided. Some of those have been presented to 
the Supreme Court. So far, it has not concluded to hear those 
cases, which is of course the Court's prerogative. But some of 
them, I think, are causing significant issues and preventing 
the full intent of the statute being fulfilled.
    Mr. Franks. I might go ahead to ask you then generally the 
same question I did Professor Redish, and that is, if you could 
do any one or two things to improve the system as it is, what 
would be your recipe?
    Mr. Beisner. I think that two things would be important.
    One is an effort to find ways for this system to be more 
transparent. One of the things that greatly concerns me is a 
reference to consumer class actions. Because if you peek behind 
the curtain about what really happens in those cases, to the 
extent that any money moves at the end of those cases it is 
normally between the defendant and the attorneys, primarily, in 
the lawsuit. And although I am not going to sit here and say 
that there is no class action that benefits consumers--I 
acknowledge that there are some instances where that occurs. 
But in many, many cases, the benefit to consumers in these 
class actions is very hard to find.
    The second thing I would note is--and this is along the 
lines of what Professor Redish noted earlier--I think that we 
need to recognize that the class action is a very powerful 
device. An attorney can walk into court and say, I am here to 
represent millions of people in this lawsuit. Has he or she 
asked any of them whether they want to be represented in this 
particular lawsuit? No, you just go in and do it. And it seems 
to me that some provisions that provide assurances up front 
that there are actually people out there interested in this 
lawsuit--not just the lawyer, who has, potentially, profit 
motives for being there--would be interesting.
    I know, for example, years ago, back in 1966, Congress 
passed the Magnuson-Moss Warranty Act, a landmark piece of 
legislation, and it authorized the bringing of consumer class 
actions dealing with products and warranties in Federal court. 
One of the requirements they put in there is, if you are going 
to bring a class action, you have to have 100 named plaintiffs. 
The lawyer has to go out there, and so there must be some 
interest in consumers, because I have 100 people who are 
willing to be part of this lawsuit. And it was a way of sort of 
testing the waters to make sure that there was real class 
interest in the lawsuit.
    Mr. Franks. Again, the logic seems to be breaking out all 
over the place here.
    And I would now recognize Mr. Nadler for 5 minutes.
    Mr. Nadler. Thank you.
    Mr. Sobol, you testified that Federal courts, once cases 
are removed from State courts, routinely deny certification of 
multi-State cases when multiple State laws are at play because 
of manageability concerns. Do you have recommendations for what 
we could do help with this problem?
    Mr. Sobol. I think it is important to draw a distinction--
--
    Mr. Nadler. Before that, actually, let me--why is this a 
terrible problem?
    Mr. Sobol. The reason it is a terrible problem is that the 
vast majority of consumer rights are based upon State laws, not 
Federal laws. You cannot recover under most Federal laws any 
type of consumer remedy. Instead, you must rely upon State law.
    Now, if you bring a State law case, therefore, you either 
bring a State law case--and this is important to draw a 
distinction between what Mr. Beisner said. A case can either be 
on behalf of all the States in the country for one class, or, 
alternatively, you might have, as we used to have, State 
actions, State by State by State, for the residents in that 
State, on the basis of that State's law--50 State cases.
    Now, if those 50 separate cases or 24 or whatever number of 
cases get removed to Federal court, invariably they will be 
sent a single judge, by reason of the operation of the Judicial 
Panel on Multidistrict. And you then give one Federal judge the 
task of performing what a couple of dozen State court judges--
--
    Mr. Nadler. Let me just hurry this along. And they will 
find that unmanageable and decertify.
    Mr. Sobol. And then they say it is unmanageable----
    Mr. Nadler. And decertify.
    Mr. Sobol [continuing]. So they don't certify.
    Mr. Nadler. And what is the result to the litigant? He has 
no opportunity in State or Federal court, and there is no forum 
for his rights at all?
    Mr. Sobol. And is left high and dry.
    Mr. Nadler. And there is no forum to vindicate his rights 
under State law at all.
    Mr. Sobol. No forum.
    Mr. Nadler. Thank you.
    Mr. Beisner, you just heard that exchange. Mr. Sobol 
testified that Federal judges routinely deny class 
certification and have removed cases that raise issues under 
multiple State laws based on the arguments of the Federal rules 
of commonality and that manageability requirements cannot be 
met.
    How often have you made that argument or something similar 
on behalf of a client?
    Mr. Beisner. Let me state that that is not the way it is 
happening anymore. I think Mr. Sobol----
    Mr. Nadler. Anymore? It happened but it is no longer 
happening?
    Mr. Beisner. Before CAFA was----
    Mr. Nadler. No, under CAFA.
    Mr. Beisner. Under CAFA? Under CAFA, what is happening is 
that people, as Mr. Sobol is describing, are bringing class 
actions on a single State basis. As he said, Indiana residents, 
class action is brought on behalf of Indiana residents. It is 
true, they are----
    Mr. Nadler. It is then removed to Federal court.
    Mr. Beisner. Removed to Federal court, they are brought 
before an MDL judge. And the judge is looking at those cases 
individually and deciding certification in those cases.
    Mr. Nadler. But wait a minute, wait a minute. Isn't it true 
that, in many cases, the Indiana case is brought and the 
Illinois case is brought and the New York case is brought, they 
are brought before the same judge combined, and then dismissed 
on the grounds of unmanageability? 
    Mr. Beisner. No, that is not true.
    Mr. Nadler. That is not true?
    Mr. Beisner. There is no manageability issue in those 
cases, because only one State law is applied to the law of the 
single State.
    Mr. Nadler. Would you comment on that, Mr. Sobol?
    Mr. Sobol. I differ considerably with Mr. Beisner on that.
    The practical reality, both in what happens in front of the 
judges and what happens before you even file the pleadings, is 
that the judges say, ``This is too much. I am not in a position 
to sit on a multiple State court case. I don't have the time, I 
don't have the attention, I don't have the law clerks to make 
12 or 13 or 24 separate class certification decisions. Pick 
your State, or let's find one State's law, let's try it that 
way if we can, or find a Federal law''----
    Mr. Nadler. Why can't that be done?
    Mr. Sobol. Well, first, there are no Federal laws that you 
can do it. And then when you try it under a single State law, 
then you are butchering the fact that there are separate rights 
for the----
    Mr. Nadler. So that doesn't happen, and the case gets 
dismissed on manageability.
    Mr. Sobol. Right.
    Mr. Nadler. Is that what happened in the Wal-Mart case?
    Mr. Sobol. I didn't hear you?
    Mr. Nadler. Oh, never mind. Never mind on that.
    What should we do to solve that problem, Mr. Sobol, aside 
from repealing CAFA entirely, but within CAFA?
    Mr. Sobol. Right. The specific issue that we are talking 
about is the ability of consumers to bring a single State class 
action in that State's courts. If CAFA permitted those cases to 
stay in State court, you would get rid of the significant 
problem of denying consumers access to the protection of their 
State laws.
    Mr. Nadler. And what about--let me ask you a different 
question on same thing. That would be logical, but let's assume 
that for some reason Congress chose not to the do that. What 
would you think of a provision that said that if a Federal 
court denied certification on the grounds of unmanageability 
because too many States were involved, that the State could be 
unremoved back to State court?
    Mr. Sobol. That would be another way to deal with it. Of 
course, you are talking years down the road, rather than having 
the ability to do it then, because you are not going to find 
that ruling for, as a practical matter, 2, 3, 4 years down the 
road.
    Another solution would be to have an alteration to the 
civil rules of procedure that say that you don't deny 
manageability on the basis of the fact that you have multiple 
State laws. You are still burdening the Federal judiciary with 
a task that is----
    Mr. Nadler. That amendment was rejected in this Committee 
when Mr. Conyers and I offered it 7 years ago. On the floor, 
not in the Committee--I am sorry.
    Thank you very much. My time has expired.
    Mr. Franks. Thank you, Mr. Nadler.
    And I now recognize the distinguished gentleman from Iowa, 
Mr. King.
    Mr. King. Thank you, Mr. Chairman. I appreciate being 
recognized and the testimony of the witnesses and the 
professional opinion that you bring to the hearing here today.
    I am listening to this testimony and this discussion, and I 
am thinking about the class action lawsuits that stand out in 
my mind. And some of them may or may not fit into the category 
of this discussion here today. I am thinking of the Pigford 
Farms issue as one--and I think you would all be familiar with 
that case--on down through the Love case, the Keepseagle case, 
the Garcia case.
    And I am interested in an opinion of each of you gentlemen 
as to whether the executive branch should be legally allowed to 
enter into a de facto class action agreement without the 
oversight of Congress.
    And I turn first to the gentleman, Mr. Redish.
    Mr. Redish. Congressman, that creates a very sensitive 
question of separation of powers. I believe the executive 
branch has the authority to enforce the law as it sees fit. And 
if we are talking about the exercise of authority in an 
individual case, to vest supervisory authority in Congress 
could be seen as undermining the executive power.
    So my tentative response would be, I think that is not only 
appropriate, it may well be constitutionally required. But I 
haven't studied the issue closely, so I wouldn't like to commit 
myself irrevocably on that.
    Mr. King. Okay. Mr. Sobol?
    Mr. Sobol. I can make my remarks brief, for I have no 
opinion on that subject. As far as I know, there are no 
procedural safeguards that need to be added to that situation, 
and I would leave it at that. Thank you.
    Mr. King. Mr. Beisner?
    Mr. Beisner. I am familiar with those cases, but I am much 
in the boat of Professor Redish. I am not sure I am in a 
position to offer an opinion on that, not having studied it all 
that carefully.
    Mr. King. I might take the opportunity to offer an opinion 
myself, but I think I would like a follow-up question instead. 
And that is, you are aware of the judgment fund that the 
Department of Justice maintains, Mr. Beisner?
    Mr. Beisner. Yes.
    Mr. King. And do you have any idea what is in the judgment 
fund?
    Mr. Beisner. No, I don't.
    Mr. King. Does the public have access to the amount of that 
judgement fund, to your knowledge?
    Mr. Beisner. I am not aware if they do.
    Mr. King. Does anyone on the panel know if there is public 
access to the amount in the judgment fund of the Department of 
Justice?
    Mr. Sobol. Don't know.
    Mr. Redish. No.
    Mr. King. Neither of the witnesses do.
    And are each of you aware that the Department of Justice 
occasionally reaches into the judgment fund and pays out in a 
de facto class action suit? And I am speaking specifically of 
the Garcia case.
    And I would ask Mr. Beisner first. Are you aware of that?
    Mr. Beisner. I am not aware of that.
    Mr. King. Okay.
    Are any of the witnesses familiar with the Pigford Farms 
issue? I am putting you all on the spot here.
    All right. I will make my brief statement on that, and then 
I do have a follow-up question, and I will change the subject a 
little bit. I can see what I have broached here this morning.
    But my statement is this, that I have watched class action 
lawsuits be blown out of proportion to the original claimants, 
out of proportion to the original definition. I watched the 
Pigford Farms issue come through this Judiciary Committee and 
an attempt to pass a Pigford 2, which did finally pass this 
House, but the same version did not pass the Senate. I saw 
Barack Obama be elected as President, and then I saw the 
Secretary of Agriculture, Tom Vilsack, team up with Attorney 
General Holder and go negotiate with the Black farmers and hand 
them another $1.25 billion on top of the $100 million that was 
authorized within the 2008 Farm Bill that was designated to be 
the total sum to resolve any outstanding claims on Pigford.
    So we have seen the executive branch go outside the 
directive of the Congress and reach into a slush fund of the 
Department of Agriculture for Pigford. We are watching them 
reach into this judgment fund in the Justice Department for 
Garcia and perhaps others. And I am very troubled by this lack 
of formal oversight for de facto class action suits and actual 
class action lawsuits.
    But I would pose this question also, as I promised I would 
change the subject, and pop this one up. And I would start 
first with Mr. Redish. And that is, the term ``fairness'' was 
something that--well, I should actually go to Mr. Beisner, I am 
running out of time.
    You use the term ``fairness.'' Can you define that for me? 
It always confuses me when I hear that word. Marilyn and I have 
raised more than one child. We know there is no such thing as 
fair. How do you deal with that in the legal arena?
    Mr. Beisner. I think the important thing to me in that 
regard is that both sides get a fair hearing in court, that 
both sides have the ability to present their viewpoints. And I 
think that the law providing Federal court jurisdiction 
certainly has achieved that.
    Mr. King. But that is not really a definition, is it, Mr. 
Beisner?
    Mr. Beisner. I think----
    Mr. King. How does the court define it? Is there a legal 
definition that would help someone who has a blurry 
understanding of this word ``fair''? It seems like it is a 
utility word that can be used in any circumstance, and it is 
always unfair to the other person.
    Mr. Beisner. I think it is grounded in the due process 
clause of the Constitution, which I think underlies Rule 23. 
And I think the notion is that you have a procedural device 
here, the class action, which puts enormous power in the hands 
of those who are bringing the lawsuit and often invites a lot 
of corner-cutting. And I think that, in this context, the 
notion of fairness is to ensure that you don't get that sort of 
corner-cutting in the lawsuit.
    Mr. King. There is no word ``fair'' in the Constitution.
    Mr. Beisner. There is what?
    Mr. King. The word ``fair'' doesn't exist in the 
Constitution or any of the amendments, correct?
    Mr. Beisner. It doesn't exist in the Constitution, but I 
think in the class action context the underpinnings of that 
word lie in the due process----
    Mr. King. It is a long definition, I grant you that.
    And I thank you for your response, all the witnesses.
    And I yield back.
    Mr. Franks. Thank you, Mr. King.
    And I now recognize Mr. Scott for 5 minutes.
    Mr. Scott. Thank you, Mr. Chairman.
    First of all, the Pigford case, just to make a note about 
it, that was a case of well-documented historic discrimination 
against African American farmers that went on for years and 
years. And, thankfully, with the Pigford decisions, some of 
them have gotten compensation.
    Mr. Sobol, can a lawyer walk into court without any 
clients?
    Mr. Sobol. No, sir.
    Mr. Scott. Thank you.
    And, as you are aware, justice delayed is justice denied. 
If a State class action is filed and a removal action takes 
place when the case should stay in State court, how much time 
is wasted going to Federal court to try to get a removal that 
is subsequently denied and the case remains in State court? How 
much time is wasted in that process?
    Mr. Sobol. Typically, a very considerable amount of time. 
More often than not, it is going to take at least several 
months to have a removal petition heard.
    More commonly, though, for class actions, you will end up 
having to be brought into the multidistrict panel process, wait 
months for a hearing there, have the case go to the 
multidistrict judge, and then have removal issues heard there. 
Those issues are sometimes deferred for years while the court 
sits on the remaining Federal court cases.
    So a long, long time.
    Mr. Scott. And if it ultimately goes back to the State 
court, years could be wasted?
    Mr. Sobol. Yes.
    Mr. Scott. Now, if the desire is just to waste time, how 
often do Rule 11 sanctions get applied to that situation?
    Mr. Sobol. Rarely.
    Mr. Scott. Ever?
    Mr. Sobol. I would say, in my experience, never.
    Mr. Scott. How often do class actions get caught up in 
multidistrict litigation where there may be commonality but 
State laws differ, comparative versus contributory negligence, 
for example, that would dictate different outcomes? How often 
do cases that could be resolved expeditiously in State court 
get caught up in that, where you have multiyear expensive 
litigation that is often at a very inconvenient forum? I guess 
if you are in the east coast, you may just have the unfortunate 
situation that it is assigned to a judge on the west coast.
    Mr. Sobol. Since CAFA, the vast majority of cases get 
removed or filed in Federal Court, and they get delayed at a 
very considerable period of time. And the State case--as 
opposed to what a State case would do, which is, classically, 
it would move along at a relatively swift pace, unencumbered by 
these extra procedural issues.
    Mr. Scott. Thank you.
    Now, Professor Redish and Mr. Beisner, you have both talked 
about these coupons. One has said it is not big enough to make 
a difference, and the other said these things are illusory.
    A lot of times, the only way you can bring a case for which 
there are even nominal damages--for example, if a bank is 
miscalculating interest for a few cents a month, nobody can 
bring that case. Nobody can bring a case if a grocery store 
scanner is miscalculating the amount owed. The only way you can 
bring the case and stop it is to bring a class action and get 
an injunction.
    Now, if you do not have coupons, is your suggestion that 
you not be able to bring the case at all? Or that if you have a 
class action, people would be entitled to reasonable 
compensation; say, you have a couple of million people 
involved, everybody gets a couple hundred dollars? I mean, when 
is your suggestion alternative to the coupons?
    Mr. Redish. Well, Congressman, my understanding is that 
CAFA pretty much did away, at least in the Federal system, with 
the use of coupons in any event. And what has developed as an 
alternative to that is the use of this cy-pres doctrine whereby 
the bulk of the funds awarded will never, as a practical 
matter, be distributed to the actual victims, those whose legal 
rights have been violated, and instead----
    Mr. Scott. But their legal rights are vindicated with an 
injunction. You get the people to stop doing it.
    Mr. Redish. Well, if we are talking about an injunction 
class action under the (b)(2) category, that might well be 
sufficient, real relief.
    My concern is that we have a bilateral process with those 
whose rights have been violated, those who have allegedly 
violated them, and some kind of meaningful relief, whether it 
is compensatory or, if appropriate, injunctive, being awarded. 
But if that is not feasible, the idea of just bringing the 
proceeding as some sort of generic deterrent is a dramatic 
change in the underlying substantive law.
    Mr. Scott. Mr. Sobol, can you say a word about the workload 
in the Federal Court and what this has done to it?
    Mr. Sobol. I couldn't hear you.
    Mr. Scott. The workload in the Federal Courts?
    Mr. Sobol. The Federal judiciary is very much overworked. 
Particularly those judges who get MDL cases tend to be the most 
overworked and the most qualified judges. It is very difficult 
for them to sit on an MDL case and be expected to handle a 
dozen or two dozen or three dozen separate State court cases.
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Franks. Well, this has been enlightening to me, if no 
one else.
    I appreciate all of you for coming. I appreciate the 
witnesses for your very insightful testimony, and appreciate 
the Members for being here.
    And, without objection, all Members will have 5 legislative 
days to submit to the Chair additional written questions for 
the witnesses, which we will forward on and ask the witnesses 
to respond as promptly as they can so that their answers may be 
made part of the record.
    Without objection, all Members will have 5 legislative days 
within which to submit any additional materials for inclusion 
in the record.
    And, with that, again, I sincerely thank the witnesses, and 
I thank the Members and observers. And this hearing is now 
adjourned.
    [Whereupon, at 10:35 a.m., the Subcommittee was adjourned.]

                            A P P E N D I X

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