[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
FAIRNESS IN CLASS ACTION LITIGATION ACT OF 2015
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HEARING
BEFORE THE
SUBCOMMITTEE ON THE CONSTITUTION
AND CIVIL JUSTICE
OF THE
COMMITTEE ON THE JUDICIARY
HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
ON
H.R. 1927
__________
APRIL 29, 2015
__________
Serial No. 114-24
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Printed for the use of the Committee on the Judiciary
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Available via the World Wide Web: http://judiciary.house.gov
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COMMITTEE ON THE JUDICIARY
BOB GOODLATTE, Virginia, Chairman
F. JAMES SENSENBRENNER, Jr., JOHN CONYERS, Jr., Michigan
Wisconsin JERROLD NADLER, New York
LAMAR S. SMITH, Texas ZOE LOFGREN, California
STEVE CHABOT, Ohio SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California STEVE COHEN, Tennessee
J. RANDY FORBES, Virginia HENRY C. ``HANK'' JOHNSON, Jr.,
STEVE KING, Iowa Georgia
TRENT FRANKS, Arizona PEDRO R. PIERLUISI, Puerto Rico
LOUIE GOHMERT, Texas JUDY CHU, California
JIM JORDAN, Ohio TED DEUTCH, Florida
TED POE, Texas LUIS V. GUTIERREZ, Illinois
JASON CHAFFETZ, Utah KAREN BASS, California
TOM MARINO, Pennsylvania CEDRIC RICHMOND, Louisiana
TREY GOWDY, South Carolina SUZAN DelBENE, Washington
RAUL LABRADOR, Idaho HAKEEM JEFFRIES, New York
BLAKE FARENTHOLD, Texas DAVID N. CICILLINE, Rhode Island
DOUG COLLINS, Georgia SCOTT PETERS, California
RON DeSANTIS, Florida
MIMI WALTERS, California
KEN BUCK, Colorado
JOHN RATCLIFFE, Texas
DAVE TROTT, Michigan
MIKE BISHOP, Michigan
Shelley Husband, Chief of Staff & General Counsel
Perry Apelbaum, Minority Staff Director & Chief Counsel
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Subcommittee on the Constitution and Civil Justice
TRENT FRANKS, Arizona, Chairman
RON DeSANTIS, Florida, Vice-Chairman
STEVE KING, Iowa STEVE COHEN, Tennessee
LOUIE GOHMERT, Texas JERROLD NADLER, New York
JIM JORDAN, Ohio TED DEUTCH, Florida
Paul B. Taylor, Chief Counsel
James J. Park, Minority Counsel
C O N T E N T S
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APRIL 29, 2015
Page
THE BILL
H.R. 1927, the ``Fairness in Class Action Litigation Act of
2015''......................................................... 3
OPENING STATEMENTS
The Honorable Ron DeSantis, a Representative in Congress from the
State of Florida, and Vice-Chairman, Subcommittee on the
Constitution and Civil Justice................................. 1
The Honorable Steve Cohen, a Representative in Congress from the
State of Tennessee, and Ranking Member, Subcommittee on the
Constitution and Civil Justice................................. 5
The Honorable Bob Goodlatte, a Representative in Congress from
the State of Virginia and Chairman, Committee on the Judiciary. 6
The Honorable John Conyers, Jr., a Representative in Congress
from the State of Michigan and Ranking Member, Committee on the
Judiciary...................................................... 34
WITNESSES
John H. Beisner, Partner, Skadden, Arps, Slate, Meagher & Flom
LLP, Washington, DC
Oral Testimony................................................. 36
Prepared Statement............................................. 39
Mark Behrens, Partner, Shook, Hardy & Bacon, L.L.P., Washington,
DC
Oral Testimony................................................. 56
Prepared Statement............................................. 58
Alexandra D. Lahav, Joel Barlow Professor of Law, University of
Connecticut School of Law, Hartford, CT
Oral Testimony................................................. 68
Prepared Statement............................................. 70
Andrew Trask, Counsel, McGuireWoods LLP, United Kingdom
Oral Testimony................................................. 82
Prepared Statement............................................. 84
LETTERS, STATEMENTS, ETC., SUBMITTED FOR THE HEARING
Material submitted by the Honorable Steve Cohen, a Representative
in Congress from the State of Tennessee, and Ranking Member,
Subcommittee on the Constitution and Civil Justice............. 8
APPENDIX
Material Submitted for the Hearing Record
Letter from John H. Beisner, Partner, Skadden, Arps, Slate,
Meagher & Flom LLP, Washington, DC............................. 104
Prepared Statement of F. Paul Bland, Executive Director, Public
Justice..................................................106
deg.OFFICIAL HEARING RECORD
Unprinted Material Submitted for the Hearing Record
Material submitted by the Honorable Steve Cohen, a Representative
in Congress from the State of Tennessee, and Ranking Member,
Subcommittee on the Constitution and Civil Justice............. 7
FAIRNESS IN CLASS ACTION LITIGATION ACT OF 2015
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WEDNESDAY, APRIL 29, 2015
House of Representatives
Subcommittee on the Constitution
and Civil Justice
Committee on the Judiciary
Washington, DC.
The Subcommittee met, pursuant to call, at 3:59 p.m., in
room 2141, Rayburn Office Building, the Honorable Ron DeSantis
(Vice-Chairman of the Subcommittee) presiding.
Present: Representatives DeSantis, Goodlatte, Cohen,
Conyers, Nadler, and Deutch.
Staff present: (Majority) Paul Taylor, Chief Counsel;
Tricia White, Clerk; (Minority) James J. Park, Minority
Counsel; and Veronica Eligan, Professional Staff Member.
Mr. DeSantis. The Subcommittee on the Constitution and
Civil Justice will come to order. Without objection, the Chair
is authorized to declare a recess of the Committee at any time.
On February 27, this Subcommittee held a hearing on the
10th anniversary of the enactment into law the Class Action
Fairness Act to explore further potential reforms to our class
action litigation system. One problem highlighted at the
hearing was that under current rules, Federal courts are
allowed to permit class action lawsuits to proceed before there
has been a showing that all members of the class actually share
a common injury of similar type and extent. Consequently,
classes have been certified to include, for example, all owners
of an allegedly defective product, when only a very small
fraction of those who purchased the product suffered any bad
results.
Consequently, people who have had no problems with their
purchase because they suffered little or no injury have been
forced into a lawsuit against their will because members of a
class action lawsuit do not have the choice to opt into the
lawsuit. They can only choose to opt out if they are aware that
they are part of the lawsuit at all.
House Judiciary Committee Chairman Bob Goodlatte along with
Subcommittee Chairman Franks introduced the Fairness in Class
Action Litigation Act of 2015, which would tighten Federal
class action rules so that a Federal class could only be
certified upon a showing that all unnamed members of the
proposed class have suffered an injury of the same type and
extent as the named class representatives who are supposed to
have injuries that are typical of the class.
A Defense Research Institute poll showed that when asked
``Would you support or oppose a law saying that in order to
join a class action lawsuit a person has to show that he or she
has actually been harmed,'' 78 percent of those surveyed they
would support such a law, which includes 75 percent of women,
73 percent of people age 18 to 29, 71 percent of African-
Americans, 75 percent of Hispanics, 71 percent of registered
Democrats, 73 percent of liberals, 86 percent of registered
Republicans, and 85 percent of conservatives.
The Fairness in Class Action Litigation Act is a simple
one-page bill that makes clear that common sense principles
should apply in class actions and that only those people who
share the same type and extent of injuries as the class
representatives should be allowed to be forced into a class
action lawsuit. It would tighten the typicality requirements
under the Federal class action rules such that a Federal class
could only be certified upon a showing by a preponderance of
the evidence that all unnamed members of the proposed class
have suffered an injury of the same type and extent as the
named class representatives.
Currently, under existing Federal class action rules there
are requirements that a class share questions of law and fact
in common, and that the claims and defenses of the
representative parties would be typical of that class. But
under those standards, courts have allowed classes to be
certified before there has been a showing that all members of
the class actually share a common injury of similar type and
extent.
Consequently, classes have been certified to include, for
example, all owners of a certain washing machine that allegedly
produced moldy smelling laundry. But as it turned out, in that
case only a very small fraction of those who purchased the
washing machine suffered any adverse result. Yet those people
were still lumped into the class as members, greatly inflating
the class size, and thereby unduly pressuring the company to
settle by dramatically growing the size of the class for which
damages could be awarded. The company did not settle in that
case, but instead took their case to the Supreme Court, which
denied cert last year, making clear that the Court will not
resolve this issue any time soon.
I look forward to hearing from our witnesses today, and it
is my pleasure to recognize the Ranking Member of the
Subcommittee, Mr. Cohen from Tennessee, for his opening
statement.
[The bill, H.R. 1927, follows:]
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Mr. Cohen. Thank you, Mr. Chair. Monday night we saw
Baltimore, riots and flames. Riots on Saturday night in
Baltimore, Maryland subsequent to the killing of an unarmed
African-American male by law enforcement for doing nothing
except diverting his eyes from the law enforcement officer.
Spine broken in two or three places, coma, dead within a week.
Mr. Gray.
Charleston, South Carolina, Walter Scott runs from a
policeman. No offense. Maybe traffic. Shot down on video. Video
witnesses it. Dead. Cleveland, Ohio, Tamir Rice, video, shot
dead, policeman. Did nothing. Toy pistol. Eric Garner, Staten
Island, dead. Michael Brown, dead.
Committee, civil rights action, zero. No action by this
Committee of the United States Congress on constitutional
rights, on the death of human beings. African-American lives
count, too, and they are being killed on a regular basis and
seen in this country, and nobody in this Congress seems to care
that has authority to have a hearing or to bring a bill to a
vote.
And yet we have got a hearing to destroy class actions,
actions that take care of little people that have a problem
with a large corporation that might have a defective product,
and then we have got a rule right now that takes care of how
you set up a class. But we are not concerned about civil
rights. We are concerned about destroying what we have had for
years, a system of class actions to protect the little guy.
The expert on this subject is a Professor Arthur Miller,
pretty much an undisputed leading expert on Federal civil
procedure, and he said this bill will effectively wipe out Rule
23. He noted requiring proof of injury, including the extent of
injury prior to certification, will make class actions
pointless to eliminating the efficiencies that class actions
are supposed to provide.
And then we have got a little Joseph Heller thrown in, a
little catch-22. Before you get your action filed, you have got
to know every member by name. Well, by definition you cannot
know that because the reason you have a class action is because
there are so many plaintiffs that you cannot name them all, so
you have a representative plaintiff.
Yes, Eric Garner, Michael Brown, Walter Scott, Tamir Rice,
and Mr. Gray, dead. This is the civil rights committee, and we
are concerned about destroying the little man's opportunity to
have an action taken in a civil system for remedy of damages
because a washing machine manufacturer front loader has got a
problem, and people are seeking redress of grievances. But life
and death, we do nothing.
Somehow or another, Mr. Chairman, we have got to put our
priorities in order, and we have got to look after human life
and civil rights, and care about what is happening in this
country, and really care about what is significant, and not
just caring about manufacturers and folks who are producing
products that others are showing may be defective and they owe
them damages, and make it more difficult for those little
people to collect damages.
But before they can even collect damages or produce those
products, they have got to be alive. And I would submit to you,
Mr. Chairman, that is what this Committee should be dealing
with is civil rights. I yield back the balance of my time.
Mr. DeSantis. The gentleman yields back. The Chair now
yields 5 minutes to the Chairman of the full Committee, Mr.
Goodlatte.
Mr. Goodlatte. Thank you, Mr. Chairman. 10 years ago I
helped usher the Class Action Fairness Act through Congress and
to the President's desk, where it was signed into law. This
legislation corrected a serious flaw in our Federal
jurisdictional statutes that forbade Federal courts from
hearing most interstate class actions, and allowed those who
abused the class action system to victimize those very little
people that the gentleman from Tennessee just referenced.
While the reforms contained in the Class Action Fairness
Act have been integral to improving the civil justice system in
the United States, abusive class action practices still exist
today, and there are further ways to improve the system to
ensure that class action lawsuits are benefitting the victims
they are intended to compensate. The class action device is a
necessary and important part of our legal system. It promotes
efficiency by allowing plaintiffs with similar claims to
adjudicate their cases in one proceeding, and it promotes
fairness by allowing claims to be heard in cases in which there
are small harms to a large number of people that would
otherwise go unaddressed because the cost for an individual
plaintiff to sue would far exceed the benefits.
Yet other than the Class Action Fairness Act, no major
reforms to the laws governing Federal class actions have been
adopted since 1966. Judging by some of the problems that have
arisen since CAFA was enacted 10 years ago, additional reform
is needed. I am concerned that in the years since CAFA was
enacted, there has been a proliferation of class actions filed
by lawyers on behalf of classes, including members who have not
suffered any actual injury. These class actions are often
comprised of class members that do not even know they have been
harmed, do not care about the minor or nonexistent injuries the
lawsuit is based on, and generally have no interest in pursuing
wasteful litigation.
When classes are certified that include members who do not
have the same type and extent of injury as the class
representatives, those members siphon off limited compensatory
resources from those who are injured and who have suffered
injuries of greater extent, and lead to substantial under
compensation for consumers who have suffered actual or greater
harm.
Given that class actions lawsuits involve more money and
touch more Americans than virtually any other litigation
pending in our legal system, it is important that we have a
Federal class action system that benefits those who have been
truly injured and injured in comparable ways, and is fair to
both plaintiffs and defendants.
And to that end, last week I introduced the Fairness in
Class Action Litigation Act. The bill requires only that a
class be composed of members with an injury of the same type
and extent, with ``injury'' defined as ``the alleged impact of
the defendant's actions on the plaintiff's body or property.''
That type and extent of alleged impact of the defendant's
actions could be de minimus or even nonexistent as when
statutory damages are allowed in such cases. But members whose
injuries were only de minimus or nonexistent would have to
bring their case in a separate class consisting of just members
with de minimus or nonexistent injuries.
The bill would thereby achieve a very important reform:
clustering actually injured or similarly injured class members
in their own class. People who are injured deserve to have
their own class actions in which they present their uniquely
powerful cases and get the recoveries they deserve. Under this
legislation, uninjured or non-comparably injured people can
still join class actions, but they must do so separately
without taking away from the potential recovery of actually or
comparably injured people.
This is what this legislation is designed to take care of,
is to help people, little people, who are truly in need. And I
look forward to the witness' testimony today.
Mr. Cohen. Mr. Chairman?
Mr. DeSantis. Yes.
Mr. Cohen. I would like to enter some letters for the
record, letters from different consumer, public interest, civil
rights groups: Alliance for Justice, American Antitrust
Institute, the AFSCME, American Civil Liberties Union, Consumer
Federation of America, Consumers Union, the NAACP, National
Consumer Law Center, Public Citizen, and the Southern Poverty
Law Center; letters from Wade Henderson and Nancy Zirkin of the
Leadership Conference of Civil Rights; Arthur Miller, the
professor I noted in my opening remarks; Professor Samuel
Issacharoff of NYU School of Law;* a letter from the Committee
to Support Antitrust Law; a letter from 25 healthcare
professional attorneys; and Mr. Richard Seymour, among others.
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*Note: The referenced material, a letter from Professor Samuel
Issacharoff of NYU School of Law, is not printed in this hearing record
but is on file with the Subcommittee and can also be accessed at:
http://docs.house.gov/meetings/JU/JU10/20150429/103386/HHRG-114-JU10-
20150429-SD003.pdf.
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Mr. DeSantis. Without objection.
[The information referred to follows:]
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Mr. Cohen. Thank you, sir.
The Chair now recognizes the Ranking Member of the full
Committee, Mr. Conyers from Michigan, for 5 minutes.
Mr. Conyers. Thank you, Mr. Chairman. Members of the
Committee and distinguished witnesses, and particularly the one
from the University of Connecticut School of Law, and visitors
here in the hearing room, this H.R. 1927 Fairness in Class
Action Litigation is yet another measure that would shield
corporate wrongdoers from being held accountable to victims
whom they have harmed. And its boldness is a little
breathtaking in my view.
And here is how the bill proceeds to accomplish this
shielding of wrongdoers. To begin with, H.R. 1927 will make it
even more difficult for these victims, particularly those whose
civil rights have been violated, to obtain relief through the
procedure vehicle of class actions. Under the current law, the
courts have strictly limited the grounds pursuant to which a
large group of plaintiffs may be certified as a class action.
It is not all that easy.
Rather than improving upon this process, however, H.R. 1927
imposes even more restrictive requirements that will make the
process further unfair to plaintiffs. It does it by prohibiting
a Federal court from certifying a class action unless a party
can prove that every putative class member suffered the same
injury to the same extent. Worse yet, the bill limits what
qualifies as an injury to only those actions that impact a
plaintiff's ``body or property.''
A literal interpretation of this language could clearly
exclude civil rights and other types of class actions where the
alleged injury does not have a tangible impact on a plaintiff's
body or property. According to Professor Samuel Issacharoff of
the New York University School of Law, Brown v. the Board of
Education, under the bill's definition of ``injury,'' could
never have been brought as a class action because the class
representative in that case could not have shown injury to the
body or property of each child affected by the separate but
equal policy. Arthur Miller, a foremost scholar on Federal
practice and procedure, similarly warned that the bill's
definition of ``injury'' could threaten substantive rights.
While I doubt the author of this legislation intended to
specifically preclude civil rights class actions or other class
actions designed to vindicate fundamental constitutional
rights, H.R. 1927 before us today has language that could lead
to that result.
Another problem. It will make class certification more
difficult and expensive to the detriment of all litigants.
Class actions allow consumers injured in substantially the same
manner by the same defendants the ability to hold the
wrongdoers accountable without having to engage in multiple
duplicative actions. Most importantly, class actions make it
economically feasible for those who have smaller, but not
inconsequential, injuries to obtain justice. These actions
include such diverse matters as breach of warranty, products
liability, and employment discrimination.
Unfortunately, since the enactment of the Class Action
Fairness Act a decade ago, class actions have become more
difficult, more expensive, and cumbersome to pursue,
particularly in light of a number of Supreme Court decisions
further restricting class actions. So taken together, these
developments have denied the benefits of the class action
device to many.
This measure before us today will only exacerbate this
problem by forcing plaintiffs to demonstrate the same alleged
impact or body or property on behalf of all putative class
members before certification. Having to litigate a common
factual question, such as the extent and nature of an alleged
injury prior to certification and prior to full discovery
defeats the point of having a class action in the first place.
Undermining such efficiency would be bad, not only for
plaintiffs, but for defendants as well. It would increase time
an expense to the litigation that defendants could face by
potentially forcing them to litigate numerous small cases
rather than a single class action.
And finally, the act will increase the workload of our
already overburdened Federal courts and undermine the rules
enabling act process. Class actions conserve taxpayer dollars
by promoting judicial efficiency. Instead of being inundated by
thousands of similar lawsuits, a court can determine the issue
in a unified class action proceeding. By restricting class
actions, however, 1927 will substantially add to the caseload
of the Federal court system, which we already know is
overburdened.
Additionally, 1927 circumvents the extremely thorough rules
enabling act process. Now, this process allows the Judicial
Conference of the United States, the policymaking arm of the
Federal judiciary, to craft amendments to Federal civil
procedure rules using a multi-stage, multiyear deliberative
process involving input from experts, practitioners, judges,
and the public. Indeed, the Judicial Conference is currently
considering amendments to the class actions rules that have
been for several years. Congress ought to let that process work
as intended first.
Accordingly, I look forward to hearing from today's
witnesses, and I thank them for their participation. And I
thank the Chairman for the time.
Mr. DeSantis. I thank the gentleman. Without objection,
other Members' opening statements will be made part of the
record.
Let me now introduce our witnesses. Our first witness is
John Beisner, a partner at the Skadden law firm's Mass Torts,
Insurance, and Consumer Litigation Group. He focuses on the
defense of purported class actions, mass tort matters, and
other complex civil litigation in both Federal and State
courts. He also regularly handles appellate litigations and has
appeared in matters before the U.S. Supreme Court. In 2013, he
received a Burton Award for Legal Achievement, which recognizes
excellence in legal scholarship.
Our second witness is Mark Behrens, a partners at the
Shook, Hardy & Bacon law firm. He has authored or co-authored
over 150 amicus briefs on behalf of national and State business
and civil justice organizations in cases before the United
States Supreme Court and other State and Federal courts. He has
published over 50 scholarly articles in leading national
journals and law reviews.
Our third witness is Alexandra Lahav, a professor at the
University of Connecticut School of Law. Her research primarily
focuses on procedural justice and the limits of due process in
class actions and aggregate litigation. Her work has been cited
in Federal district opinions, academic articles, and treatises.
She regularly presents to academics and practitioners. She is
also the co-author of the 4th edition of the popular civil
procedure case book, Civil Procedure: Doctrine Practice in
Context, and is currently writing a book entitled, In Praise of
Litigation, which defends lawsuits in America.
Our final witness is Andrew Trask, counsel at the
McGuireWoods law firm. Mr. Trask has defended more than 100
class actions involving all stages of the litigation process.
While his work has concentrated on products liability and
consumer fraud cases, he has also defended class actions
involving telecommunications products, business contracts,
securities, ERISA, the U.S. antitrust laws, and environmental
claims, among others.
Each of these witnesses' written statements will be entered
into the record in their entirety. I ask that each witness
summarize his or her testimony in 5 minutes or less. To help
you stay within the time, there is a timing light in front of
you. The light will switch from green to yellow indicating that
you have 1 minute to conclude your testimony. When the light
turns red, it indicates that the witness' 5 minutes have
expired.
Before I recognize the witnesses, it is the tradition of
the Subcommittee that they be sworn. So please, witnesses,
stand and be sworn. If you will raise your right hand.
Do you solemnly swear that the testimony that you are about
to give will be the truth, the whole truth, and nothing but the
truth, so help you God?
[A chorus of ayes.]
Mr. DeSantis. You may be seated. All witnesses answered in
the affirmative.
It is my pleasure to now recognize our first witness, Mr.
Beisner. Please turn on your microphone before speaking, and
you are recognized for 5 minutes.
TESTIMONY OF JOHN H. BEISNER, PARTNER, SKADDEN, ARPS, SLATE,
MEAGHER & FLOM LLP, WASHINGTON, DC
Mr. Beisner. Thank you. Good afternoon, Mr. DeSantis,
Ranking Member Conyers, and Ranking Member Cohen, and Members
of the Subcommittee. I appreciate the opportunity to appear
today on behalf of the U.S. Chamber Institute for Legal Reform
to voice support for H.R. 1927, the Fairness in Class Action
Litigation Act of 2015.
Several months ago, this Subcommittee held a hearing
exploring continuing problems with class action litigation
since the 2005 enactment of the Class Action Fairness Act. One
of the primary abuses identified in that session was the
increasing frequency with which some Federal courts are
certifying overbroad or no injury class actions. What I am
talking about are lawsuits brought by a person who allegedly
experienced a problem with a product or service, and then seeks
to represent every other person who bought the product or
service regardless of whether they experienced a problem.
As I have detailed in my written testimony and as shown by
the record from that earlier hearing, this problem is real.
These overbroad, no injury cases have a highly distortive
effect at several levels. First of all, they improperly magnify
the value and magnitude of the claims asserted. In some Federal
courts the law seems to be that one disgruntled customer can
dramatically exaggerate the value of an idiosyncratic product
defect lawsuit by suing on behalf of thousands of others who
are not disgruntled at all.
Further, these class actions can have a highly distortive
effect at trial. Let me give an example. If a consumer buys a
new car and experiences an oil leak, he might bring a class
action on behalf of others who bought the same model of
vehicle. If the proposed class is certified and the case gets
to trial, that person as the class representative would tell
his oil leak story to the jury, and if the jury was sympathetic
to that story, it might award damages to everyone in the class,
even though no one had an oil leak problem.
The distortion is clear. If a class member who had no
problem with his vehicle had to present his case to a jury
individually, he would be laughed out of court. His testimony
would go something like this: Question, Mr. Plaintiff, have you
had any problem with your vehicle? No. Are you satisfied with
your vehicle? Yes. Did the vehicle meet your expectations? Yes.
Did you get what you paid for? Yes. So what are you doing here
presenting a claim to this jury? What do you want? Well, I want
you to order the car manufacturer to pay me some money because
some other guy had an oil leak in his car. Obviously this
scenario is absurd, but that is what overbroad, no injury class
actions are all about.
This bill presents a simple, elegant solution to the
problem. It says that if a person brings a lawsuit alleging
personal injury or economic loss, he can proceed on a class
basis only if he shows that each proposed class member suffered
an injury of the same type or extent he did. So going back to
our example, our friend who had the oil leak can bring a class
action and try to represent other owners of that same model of
vehicle who also had an oil leak. But he would not be allowed
to represent and seek compensation for people who have not had
the oil leak problem.
Although very important, the enactment of this bill would
not affect a sea change in class action law. The bill would
simply emphasize what the Supreme Court and certain other
Federal courts have already said. It would highlight and codify
Rule 23(a)(3) of the Federal Rules of Civil Procedure by making
clear that the claims of the class representative must be
typical of those putative class members she seeks to represent.
Now, I have seen some commentary saying the bill would be
the death knell of civil rights cases and intangible loss cases
in which no personal injury or tangible economic loss is
alleged. I do not think that is correct. The bill simply says
that if the class representative alleges personal injury or
economic loss, she can represent only those who suffered the
same type and extent of injury, but if the class representative
does not allege personal injury or economic loss, the bill
would have no effect. In such a case, the bill would not
require a showing of anything. It would not pose an independent
barrier to class treatment in such cases.
I have also seen assertions that the bill would undermine,
as one commentator put it, State common law remedies for people
who buy toasters that turn out not to be able to prepare toast.
The bill would not change any of that. If a person brought a
class action alleging that his toaster malfunctioned, this bill
would not preclude class treatment, but the class could only
include persons who had that problem.
This bill is a common sense solution to a growing problem
that is perverting the purposes of class actions, and I
respectfully urge its enactment. Thank you.
[The prepared statement of Mr. Beisner follows:]
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Mr. DeSantis. I thank the gentleman.
I now recognize our second witness, Mr. Behrens. Please
turn on your microphone before you speak, and you are
recognized for 5 minutes.
TESTIMONY OF MARK BEHRENS, PARTNER,
SHOOK, HARDY & BACON, L.L.P., WASHINGTON, DC
Mr. Behrens. Thank you, Mr. Chairman, Ranking Member
Conyers, Ranking Member Cohen, and other Members of the
Subcommittee. I am testifying today on behalf of the IADC, the
International Association of Defense Counsel, which is a global
organization of lawyers who practice in the area of civil
defense. IADC supports fair compensation for genuine injuries.
This bill would support that mission. It is about providing
fairness to people with genuine injuries and not those who are
not injured.
IADC is concerned about overly broad, no injury class
actions. As Mr. Beisner talked about, these are cases where the
named plaintiff has suffered a concrete harm, but by and large
the countless others that that person seeks to represent in the
class have suffered no actual injury whatsoever. This is not a
case of widespread product defect. These are cases where most
of the people are perfectly happy with the product they have
and it has not malfunctioned. Yet what we have is somebody who
is very atypical, who has a concrete injury that is trying to
bring a lawsuit on behalf of everybody else who has not.
These types of lawsuits undercompensate people who have
genuine harm, and at the same time they overcompensate people
who have not been harmed at all and may never be. They raise
prices for all consumers and put a strain on our economy. In my
written testimony I mention several other problems, and I will
go into an example of exactly how this could happen.
In washing machine cases, now there have been class actions
filed against washing machine manufacturers that make front
loading washing machines. We all probably have one in our home.
These lawsuits are so large in scope, they would pull in more
than 10 million American consumers. There was a case that went
forward in Ohio in a bellwether case under the 6th Circuit
where the Federal court in Cleveland was asked to certify a
class, and did, that involved over 200,000 Ohio residents.
The two named plaintiffs both alleged that they had smelly
washers, that they had washers that for them created an
experience where their clothes smelled moldy. Most of the other
people in the class never had any problems. The Consumer Union
reports that only 1 percent of washer owners complained that
they ever had this type of problem after 4 years of using their
product. So here we have two named plaintiffs who are atypical
of virtually everybody else that is in the class.
The case was certified and affirmed by the 6th Circuit. It
went to the United States Supreme Court, came back down, was
re-certified again. Went to trial in Cleveland. The jury
deliberated 2 hours and came back and found that the products
were not defective. The general counsel or head of litigation
at Whirlpool at the time said, ``Nobody has been injured, and
only 1 to 2 percent of the people have any complaints. This is
lawyer driven, not customer driven, litigation.''
Yet some might say that this is a victory, that Whirlpool
was able to vindicate itself. Well, it spent 9 years in
litigation and millions of dollars to defend a lawsuit where
most of the people in the class were perfectly satisfied with
the product, and the incidence of malfunction was very remote.
So who ends up paying for that? The people that bought the very
washers that are in the class action end up paying more for
their product for something that they were already satisfied
with to begin with. These are, as he said, lawyer-driven class
actions.
The Fairness in Class Action Litigation Act is a modest and
targeted reform that would deal with this situation. It is not
going to eviscerate class actions as has been alleged. It is
simply going to promote the requirement that is in Rule 23
right now that the named class representative is typical of the
members of the class. It would better align the interest of the
named representative and the people that that person purports
to represent. That is all the legislation does, requires them
to have the same type and extent of injury.
There is precedent in Congress for enacting class action
reform. You all had a hearing about 2 months ago that looked at
the success of the Class Action Fairness Act. That was an
example back in 2005 where the Committee heard testimony of
certain abuses in the class action system and focused on just
dealing with those abuses, coupon settlements and having some
State courts dictate nationwide policy.
And you all fixed that, but the law has evolved over the
last decade. This is the problem we face today, that American
businesses face, and it is one that the Committee should
change. The DRI president was here also I know and testified
about data and his poll that showed about 75 percent of
Americans believe that if you are going to be brought into a
class action lawsuit, you should have a genuine injury and not
simply a potential that an injury could occur.
Thank you, Mr. Chairman.
[The prepared statement of Mr. Behrens follows:]
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__________
Mr. DeSantis. The gentleman's time has expired.
I now recognize our third witness, Ms. Lahav, for 5
minutes.
TESTIMONY OF ALEXANDRA D. LAHAV, JOEL BARLOW PROFESSOR OF LAW,
UNIVERSITY OF CONNECTICUT SCHOOL OF LAW, HARTFORD, CT
Ms. Lahav. Thank you so much for inviting me. It is a real
honor to be here. You have asked me to testify about House Bill
1927.
I think this bill is a terrible idea. It will eliminate
class actions for legitimate claims and prevent people from
asserting their rights and liberties. It will violate
federalism principles by usurping States' rights to make their
own contract and consumer protection law. It is probably
unconstitutional under the 7th Amendment. It is not necessary,
and it is wasteful. The rule makers are currently considering
changes to Rule 23 in a fair, open, and professional process,
and we should allow that process to play out.
I understand that the defense lawyers who are testifying
here today are upset about a certain narrow category of class
actions alleging State law contract claims. Passing this bill
is like cutting off your hand if you have a splinter. This bill
would wipe out class actions in civil rights cases seeking
injunctive relief, in employment discrimination cases seeking
back pay, in cases enforcing important laws that protect
competition in our economy, like antitrust laws, and in cases
enforcing our liberty and privacy interests which Congress has
protected by legislation.
How will the bill do this? It is because of the language.
The bill requires that in any class action--any--plaintiffs
prove--that means having a full-blown trial at the outset--that
they have each suffered the same ``type and extent of impact on
their body or property.'' Let us start with same type and
extent. In the testimony that I read in preparation for today
from Mr. Beisner and Mr. Trask, they said that this language
just tracks Rule 23. So if that were true, I do not see the
point in passing a law. But the fact is that the plain language
reading, the reading that courts are likely to give this bill,
would require that each plaintiff allege the same injury, an
identical injury.
So let me give you an example since we are all about
stories. Let us say that a bank decides to charge a $2 illegal
fee every time you use your ATM card. John uses the ATM 5
times. He has a $10 injury. Mary uses the ATM 100 times. She
has a $200 injury. They have not suffered an injury of the same
extent, right? One guy has got $10, the other one has $200.
Well, under this law that case could not be brought as a class
action, but nobody in their right mind is going to bring a
lawsuit for $10. And that means that the bank gets away with
stealing $10 from John. That is not right.
Not only that, but if they did bring a lawsuit somehow,
they would have to have a full-blown trial to figure out class
certification, what exactly happened to prove what happened to
John and Mary. So this creates a lot of needless work for
everyone, not just judges, but all the lawyers involved, right?
And in any event, if you have a full-blown trial before class
certification, you have to ask is a jury going to be impaneled
for that trial. And if not, the law violates the 7th Amendment.
If the jury is impaneled, then the second jury that is going to
decide the merits case is going to have to reexamine the
finding of the first jury. That also violates the 7th
Amendment.
All right. Now, let us turn to the definition of
``injury.'' ``Injury'' is defined as an alleged impact on body
or property. Now, the word ``body'' does not do any work here
because generally you cannot bring a personal injury class
action. But there are bigger problems here because the law does
not contemplate injunctive class actions, so that would kill,
as we heard, the type of class action that everyone agrees is
legitimate, class actions like Brown v. Board of Education.
Procedural law like this should not abridge people's
substantive rights, and that is what this bill would do. The
purpose of procedure is not to block cases. The purpose of
procedure is to help judges reach the merits of the case. I
understand that defendants have raised a lot of criticisms
about some consumer laws. I do not agree with their criticisms,
but it really does not matter because no matter what you think
about the benefit of the bargain type lawsuit, under the
Uniform Commercial Code, this law is not going to solve that
because these are State lawsuits, and Federal courts cannot
make State law. That is the federalism problem with this
legislation.
Right now the Judicial Conference is considering Rule 23.
They are experts. Procedure, you have to understand, is like
chess. Every time you move a piece, you have to think three
steps ahead. What are all the other pieces on the board doing?
All the possible implications of changing the procedural rules
have to be considered, and I do not think they have been in
this case. It is better to let the Rules Committee think
through all the possible implications and problems and decide
whether or not this type of change is a good change before you
go ahead and make major, major changes to the class action
rule.
Thank you so much for your time.
[The prepared statement of Ms. Lahav follows:]
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__________
Mr. DeSantis. Thank you.
I now recognize our fourth and final witness, Mr. Trask.
You are recognized for 5 minutes.
TESTIMONY OF ANDREW TRASK, COUNSEL,
McGUIREWOODS LLP, UNITED KINGDOM
Mr. Trask. Thank you, Mr. Chairman, Ranking Member Cohen,
and other Members of the Subcommittee. Thank you for the
opportunity to testify today.
I think as you have heard from each of the witnesses, the
real concern here that everyone has regardless of how we come
out on this bill is how the bill would affect primarily the
absent class member. That is, the member of the class who is
not in the caption itself and who is not the one who elected to
come before the court, but would be bound by the decision that
occurs regardless of what happens. It is my considered opinion
after litigating a number of these cases and after looking over
this bill that the interests of that absent class member are
best served by the language of this bill. This bill puts
forward a very modest reform that would prevent some of the
abuses that currently mean that absent class members do not get
the relief that they ought to have.
I would like to talk about one very specific example for
the few minutes that I have remaining. You have already heard
about the Whirlpool cases, which are an example of what happens
if an overbroad, no injury class action goes to trial. The vast
majority of class actions, however, do not go to trial. They
are settled or they are disposed of on the merits in another
way. So let us talk about settlement for a moment and what
happens when you have an overbroad, no injury class action that
is settled.
The case I would like to refer to you has gone under
several names, most commonly Pella Corp. v. Saltzman and EUBank
v. Pella Corporation. It has been up in front of the 7th
Circuit several times. The allegation here was against Pella
Corporation, which makes casement windows. Those are the
windows that go in your house like this, and the allegation in
the complaint was that these casements had an inherent defect.
Under the right conditions after a certain amount of time it is
possible that these could let water into the frame. Water is in
the frame is bad because it makes the wood wet, and wet wood
warps and does all kinds of other things that we do not like.
A class was certified in this case. In fact, two classes
were certified by Judge Zagel of the Northern District of
Illinois. And before I go any further, Judge Zagel is a very
good, very conscientious jurist, and what he did was he looked
at what was being put forward, and he certified nationwide a no
injury class where no one had an injury yet, but were all
claiming that there might be a potential injury, and it gave
them the opportunity to seek declaratory relief. It then
certified a second set of subclasses under six sets of State
law--a tongue twister if I have ever heard one. And for people
who were actually seeking injury, those were the six state laws
that would allow them to seek injury.
The defendants appealed the certification. If I had been
the defendant there I would have advised my client to do so.
The 7th Circuit Court of Appeals, led by Judge Posner in this
particular case who wrote the opinion, affirmed the
certifications. Let me also say Judge Posner is a really
careful, really conscientious, really very, very respectable
jurist. His focus was on the inherent defect that could
potentially cause harm. He believed that they could put off the
injury inquiry until after there had been the trial on
liability itself, and he stressed the importance of how Judge
Zagel had certified these six separate state law subclasses for
people who had suffered injury, pointing out that he had tried
very hard to group like with like.
Now, frankly, this would have passed muster under the bill
that is going forward now. The opinion affirming certification
occurred in 2010. 4 years later the case settled, and I will go
very briefly over what happened there. There was a single
unified settlement class. It was no longer these separated
classes. There was a claim procedure for injured members. There
was a $750 cap or $6,000 cap, depending on the procedure you
elected. The ultimate claim rate was 1 and a half percent. That
means that out of 225,000 notices that were sent out to class
members, 1,276 claims were submitted and paid money, on average
about $1,075 per claim. That meant the aggregate value of the
settlement was $1.5 million.
Most of the no injury class members received a warranty
extension. That is what the settlement claimed. In fact, they
received the warranty extension a year beforehand from Pella
Corporation, but it was reiterated in the settlement in order
to secure a release of any claims that they might have going
forward. So that was a full release of claims.
So $1.5 million, warranty extension you have already
received, full release of claims. The attorneys received $11
million in fees. The terms were so egregious that four of the
named plaintiffs, four of the people in the caption, objected
to the settlement. Their counsel removed them from the case,
replaced them with more compliant-named plaintiffs, and
proceeded to get the settlements certified by Judge Zagel. On
appeal, Judge Posner overturned the settlement calling it
scandalous.
If this statute had been in place, there would have been a
certification of a trial class given Judge Zagel's considered
opinion. However, there would not have been the settlement of
the settlement class because it mixed together these people who
did not have the same injury and should not have received the
same relief.
Very briefly, under the proposed amendments that the
Judiciary Committee, or not the Judiciary Committee, but the
Committee on Civil Rules has put forward, in fact, there would
have been almost automatic certification of the settlement
class, and that is what we are dealing with on the other end of
this. That is the reason why this particular bill is such a
good idea in this case.
Thank you very much, and I look forward to your questions.
[The prepared statement of Mr. Trask follows:]
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__________
Mr. DeSantis. Thank you for your testimony. We will now
proceed under the 5-minute rule with questions, and I will
begin by recognizing myself for 5 minutes.
You know, Mr. Beisner, if someone went to court and said,
Judge someone has a problem with their washing machine, mine
works fine, but give me some money anyway, I think we all would
agree that that case would not be taken seriously. So then why
should a class member recover money in a class action if he or
she would never be able to recover an individual action?
Mr. Beisner. They should not in that circumstance, but that
is how these class actions are often brought is to include all
of these individuals who have had no problem. I was taken by
one of the witnesses talking earlier about this bill cutting
off one's hand to address a splinter. That is sort of what we
are talking about with these class actions. You create this
class of millions of people because allegedly a small number
had a problem, and rather than addressing the problem they had,
you get this gargantuan class action.
Mr. DeSantis. So, I mean, why would we want an individual
to be paid for a product that functions properly and has
satisfied his or her expectations?
Mr. Beisner. You should not, and the reason is that, as has
been noted in several decisions in my testimony by judges
ranging from John Minor Wisdom to Frank Easterbrook over the
years have made clear, all this does is means that the people
who really are injured probably are not going to be properly
compensated, and you drive up prices for everybody else because
you are just redistributing money to address claims that do not
involve any real injury.
Mr. DeSantis. And so, for some courts, I mean, every
product that is mass produced, there are going to be some
problems somewhere along the line with some of the consumers.
So basically under the approach of some courts, you could
potentially have a class action for almost any product that is
produced in the country, correct?
Mr. Beisner. That is the concern, and that is the worry
that is happening here that you find one person that, as I used
in the example, had an oil leak, and it mushrooms into a
lawsuit that frankly wastes a lot of the court's time dealing
with claims that really are not out there.
Mr. DeSantis. If the percentage of class members who
typically submit claims forms in a class action settlement is
between 1 and 5 percent, then who is the one benefitting from
the class actions?
Mr. Beisner. Well, I think that is one of the concerns that
was highlighted at the Subcommittee's hearing several months
ago was the fact that in a very large percentage of consumer
class action settlements anyway, the claims rates are low. And
it is commonplace that the aggregate amount that the class gets
is substantially less than what the attorney's fees are that
are awarded in the case.
Mr. DeSantis. So in your opinion, do you think a class
action in which one plaintiff experienced a problem and the
vast majority of the class did not should satisfy the
typicality requirement?
Mr. Beisner. It should not. The class representative, if
the typicality requirement is properly invoked and imposed,
should limit the class to people who had the same experience as
the class representative.
Mr. DeSantis. Now, how do victims suffer under a class
action system in which those who are minimally injured or not
injured at all occupy the same class action as those who do
have significant injuries?
Mr. Beisner. Well, I think the problem in that circumstance
is that if a settlement is negotiated, the people who have had
the bad experience, if there are some there, may be
undercompensated in order to provide some benefit to those who
have not had the problem. And as I said earlier, I think
another problem with these is it just jacks up problems on
various things because somebody has got to pay to provide
relief who had a perfectly satisfactory experience with the
product or service that they purchased.
Mr. DeSantis. Now, when you have injured and non-injured
members in a class, how does that, if at all, diminish due
process rights for the defendant who is defending against it?
Mr. Beisner. Well, I think the problem with the due process
perspective with sort of the trial example I was talking about
earlier is if you put before the jury a person who comes in
with their truckload of laundry that they think is moldy and
say please give me compensation, it does not fairly tell the
jury about the fact that most of the people who are in the
class that that person represents are perfectly happy with
their product, which is a situation we have in a lot of these
cases.
Mr. DeSantis. Thank you. My time has expired, and I will
now recognize for 5 minutes the Ranking Member of the
Subcommittee, Mr. Cohen.
Mr. Cohen. Thank you, sir. Mr., is it Beisner?
Mr. Beisner. It is actually Beisner. Thank you.
Mr. Cohen. Beisner. Are you familiar with Professor Arthur
Miller?
Mr. Beisner. Yes, I am.
Mr. Cohen. Tell me what you know about Professor Arthur
Miller's background.
Mr. Beisner. He is a professor who used to teach at
Harvard. Was at Michigan before that, and he is now at NYU, and
he is a plaintiff's lawyer. He is affiliated with a plaintiff's
law firm in Houston, Texas.
Mr. Cohen. Is he considered an expert on the subject of
class actions?
Mr. Beisner. I think he appears in court. He is an advocate
on that. He is an expert, and you have got a row of experts at
this panel here as well.
Mr. Cohen. Professor Miller says this is a kill class
actions bill. Ms. Lahav, why would you think he would say such,
this expert on class actions?
Ms. Lahav. Because it is a fact. The way the bill is
drafted, it is drafted in such a way that there is no class
that can meet the requirements of the bill as an ordinary court
would read the language of the bill. So that is the reason why
Professor Miller would say that. I just would like to say one
other thing about Professor Miller is that one of his claims to
fame is he actually represented the defendants in a case called
Shutts, which is the most famous class action case. So I would
say he is in between everybody in terms of his position.
Mr. Cohen. Lots of suggestions that in the Whirlpool case
there were no damages to a lot of people. What is your
position? What do you believe about that? Is there such a thing
as----
Ms. Lahav. No. Actually Mr. Beisner said earlier, he said
did you get what you paid for. That is what these types of
class actions are. I like to think of them of benefit of the
bargain class actions. No, I did not like litigate the
Whirlpool or any case----
Mr. Cohen. Mr. Beisner, you are litigating the Whirlpool
case, is that correct?
Mr. Beisner. I am not in the Whirlpool case, no.
Mr. Cohen. Have you been in the Whirlpool case?
Mr. Beisner. No.
Mr. Cohen. Have you been in a case that would be affected
by this litigation?
Mr. Beisner. Well, I mean, I am in a number of class
actions that would be affected by the legislation.
Mr. Cohen. Okay. Go ahead, Ms. Lahav. Thank you, sir.
Ms. Lahav. He may be doing one of the Washington cases. But
at any rate, here is what I understand not being directly
involved in the cases. The alleged defect was mold, that the
washing machines got moldy. Sometimes that means that the
laundry smells, but in any event the washing machine gets
moldy.
And then what the manufacturer did is they sold a product
that purported to fix the mold problem. It was called Affresh.
So the idea is, well, you bought this washing machine. I do not
know how much that one cost. Mine cost $750, we will call it
$750. It is not an exorbitant amount, but anyway you paid $750
for it. And then they say, well now you are going to have to
buy all these extra tablets to put in your washing machine for,
you know, $300 over the life of the machine.
And there was a warranty, but when plaintiffs asked the
company to fix the mold as part of the warranty, the company
said, no, it is your fault that the machine got moldy, and
thus, as I understand, the lawsuit was born.
So the real actual question and legal question is when
people buy a washing machine, do they expect it to be moldy or
not? I do not, but that is me. And in any event, the point is
that that question is not for us to decide in this hearing.
That is a question for a court to decide, whether people in
that class got the benefit of the bargain. And that case did go
to trial, and the jury did make a decision in that case, and
that is how litigation is supposed to work.
Mr. Cohen. There is a study going on right now in the
judicial branch of this particular issue, the Judicial
Conference of the United States. It is a study of potential
amendments to Rule 23. Why should we not let the judicial
branch give us a remedy if there is a problem?
Ms. Lahav. I think that is the way to go. First of all, the
people at the FJC, the Federal Judicial Center, who do those
studies, they are really superb in terms of the level of
competence that they have. And I think the judges are in a
position to determine what is the best course of action in
terms of reforming Rule 23. It happens that they really are
studying it right now, and they plan to have a proposal this
calendar year, so it does seem to me like waiting and seeing
what happens with that is the better course of action.
Mr. Cohen. And there was some issue about possible civil
rights cases being affected, and I think Mr. Beisner did not
think they would be affected. Do you think they would be
affected?
Ms. Lahav. They certainly would be affected. All injunctive
actions would be affected by this bill the way it is written.
That is correct. I do not see a way around that.
Mr. Cohen. I yield back the balance of my time.
Mr. DeSantis. The gentleman yields back. The Chair
recognizes the gentleman from Michigan, the Ranking Member of
the full Committee, for 5 minutes.
Mr. Conyers. Thank you, Mr. Chairman. Let me ask Attorney
Lahav the following question. Professor Arthur Miller, arguably
the foremost expert on Federal practice and procedure, has said
this: ``H.R. 1927 is truly a solution in search of a problem,''
because Rule 23 doctrines and procedures are capable of dealing
with overly broad theoretical classes. Is that a fair statement
of law as you understand it?
Ms. Lahav. Yes, that is correct. I mean, I think that the
courts have since the passage of the Class Action Fairness Act
and also a procedural rule that permits appeals from class
certification decisions, that the law in class actions has
developed pretty significantly. And courts are very rigorous in
their interpretation of Rule 23 and their application of it,
and you saw in 2011 with the Walmart case that that level of
rigor is being affirmed by the Supreme Court.
The plaintiffs in class actions have to show that they are
typical of the class members, and if they cannot show that,
then they do not get a class. And actually I think that Mr.
Trask's testimony about the Pella case and the first judge,
whose name I forget, his initial decision demonstrates how
careful judges are in crafting class actions. And there are
lots of cases I can cite you from Judge Easterbrook, and Judge
Posner, judges on the 1st Circuit and the 2nd Circuit, you name
your circuit, the 5th Circuit, who are doing a great job
looking at class actions, policing class actions. And I think
that we can trust them to apply the law fairly and rigorously
in this area, and that is what they have been doing.
Mr. Conyers. Thank you. Now, is there such a thing as a no
injury class action? This is a kind of new one on me. What do
you know about that?
Ms. Lahav. Not that you can get certified. There is
something called a benefit of the bargain theory of law. It is
State consumer law under the Uniform Commercial Code, the UCC,
which I have to confess I found exceedingly boring when I was
in law school. And what I understand that means is if you buy
something you should get what you pay for. So if you buy
roofing tiles and you think that they meet the requirements of
the National Roofers Association or whatever it is, and then it
turns out that they are shoddy roofing tiles, you can get
compensation for that under the UCC, under State law, even if
your roofing tile did not fall apart. And that is the idea of
did you get what you paid for.
And there are other examples that I can give. One of the
cases gives a great example of if you buy a gold ring and the
gold ring, they tell you it is 18-carat gold, and then it turns
out it is 10-carat gold. You did not get what you paid for. You
might be just as happy with the ring, right? I wear my wedding
ring. I am happy with it. But if I learned that it was not 18-
carat gold, well, I would think that the person who sold it to
me should give me the difference of the value there. That is
what a benefit of the bargain class action is.
Mr. Conyers. Now, your fellow witness, Mr. Beisner, says
that H.R. 1927 is merely a codification of an interpretation of
Rule 23's typicality requirement that is already applied by
some Federal courts. Do you think that that is accurate, or do
you support that?
Ms. Lahav. No, I do not. I think that is not a correct
description of the law of class actions.
Mr. Conyers. What is the problem?
Ms. Lahav. Well, so it is correct in every court in the
United States you have to have a rigorous showing by a
preponderance of the evidence that you are typical of the other
class members. But you do not have to show that you have the
same and extent of injury. That is the language in this bill.
So that is my John and Mary.
John and Mary are similar in the sense that the bank, you
know, it is a story, right, an illegal fee of $2 for each
transaction, but they had different transactions, so the extent
of their injury is different. The John and Mary case could be
certified today under the current law. It could not be
certified under H.R. 1927, so that would be a difference that
this bill would create.
Mr. Conyers. I thank you very much for your responses to my
question. Thank you, Mr. Chairman.
Mr. DeSantis. Thank the gentleman. The Chair now recognizes
the gentleman from New York for 5 minutes.
Mr. Nadler. Thank you. Mr. Beisner, let us go ahead with
Professor Lahav's hypothetical. You have got this bank that is
cheating everybody by putting a $2 illegal fee on all ATM
transactions. And let us say it is a small bank, so it is 4
million people who uses its ATM machines. Now, under this bill,
in order to certify a class, they have to affirmatively
demonstrate through admissible evidentiary proof that each
proposed class member, all 4 million of them, suffered an
``injury of the same type and extent as the injury of the named
class representative/representatives.'' So you have to show by
this language.
Why does that not mean that they have to have 4 million
witnesses or documentary evidence as to the extent of the
damages to 4 million people by name?
Mr. Beisner. No, they would not need that at all. This is
the same sort of, first of all----
Mr. Nadler. Why would they not?
Mr. Beisner. Why would they not? Because when you do class
certification, there is a normal process where you have to
already demonstrate class-wide proof of the----
Mr. Nadler. Yes, but this hinders that.
Mr. Beisner. No, it does not because, you know, this idea
of the full-blown trial is needed. There is no mention of a
trial in here.
Mr. Nadler. It says ``affirmatively demonstrates through
admissible evidentiary proof.''
Mr. Beisner. Right.
Mr. Nadler. How else would you meet that phrase?
Mr. Beisner. That is required now to get class
certification.
Mr. Nadler. I am not talking about right now. How would you
meet that phrase without bringing in all these witnesses or
documentary evidence for each of these witnesses? Not
witnesses----
Mr. Beisner. You would not. As I stated in my testimony,
you would get evidence from the bank of the records, and you
would demonstrate that these people got less money than they
were entitled to. That is how it is done.
Mr. Nadler. And you have got a different amount of less
money, why would they not fall out of the class?
Mr. Beisner. I do not----
Mr. Nadler. Actually why would they not invalidate the
class because they did not suffer an injury of the same type
and extent.
Mr. Beisner. Sure. Depending, you know, if you had dramatic
differences in the amounts of money, it may not qualify here.
Mr. Nadler. It does not say ``dramatic.'' It says ``the
same.''
Mr. Beisner. The same type----
Mr. Nadler. Some are $2, some are $10.
Mr. Beisner. The same type and extent. It does not say
``identical amount.'' This would be----
Mr. Nadler. Ms. Lahav, why is he wrong? Ms. Lahav, why is
he wrong or disingenuous?
Ms. Lahav. Because it says ``same.'' It does not say ``kind
of,'' ``similar,'' ``in the same family,'' you know. It says
``same type and extent.'' So a court----
Mr. Nadler. And ``extent'' means $2, not $6.
Ms. Lahav. That is my reading of it. I think that a court
would read it and say you do not have the same type and extent
of injury. You lost $200, and you $10, and you are different.
Mr. Nadler. And, Mr. Beisner, why are we wrong in saying
that Section B of the bill, it says ``The term 'injury' means
the alleged impact of the defendant's actions on the
plaintiff's body or property,'' means that civil rights
lawsuits and other types of intangible or non-damage to the
body are not excluded from class actions?
Ms. Beisner. I think there is a simple answer to that. If
you are in a civil rights suit and if the named plaintiff is
not alleging that they had damage to property of any sort, they
are then alleging the same type of injury as all class members.
Mr. Nadler. But it does not say that.
Mr. Beisner. Yes, it does.
Mr. Nadler. ``'Injury' means the alleged impact of the
defendant's actions to plaintiff's body or property.'' As I
read that, as anybody familiar with the English language would
read that, it means that you have to have an injury to the body
or property.
Mr. Beisner. No, I do not think so. It said each proposed
class member suffered injury to body or property of the same
type or extent. He would say I----
Mr. Nadler. Section B says ``The term 'injury' means the
alleged impact of defendant's actions on the plaintiff's body
or property.''
Mr. Beisner. Right.
Mr. Nadler. You would be correct if this bill only had
Section A but not Section B.
Mr. Beisner. No.
Mr. Nadler. Why is Section B in here? What is the point of
it?
Mr. Beisner. To deal with precisely the thing you are
talking about, to take injunctive relief cases out of the bill,
what they would say, let us read that in there. Each proposed
class member suffered A, and then insert in there ``injury to
plaintiff's body or property of the same type or extent as the
injury of the named class representative/representatives.''
What the class representative would say is I did not suffer any
bodily or economic harm here. I am here for injunctive relief,
and that is what the class member----
Mr. Nadler. That is very nice, but that is not what the
bill says.
Mr. Beisner. No----
Mr. Nadler. The bill says ``The term 'injury,''' and you
can only get a class action for an injury of the same type and
extent. It has got to be an injury of the same type and extent.
Mr. Beisner. No.
Mr. Nadler. And then it says ``An 'injury' means alleged
impact on the plaintiff's body or property.'' Ms. Lahav, is he
being disingenuous?
Ms. Lahav. Under this reading it is okay to have a no
injury class action. I thought the whole point of it was that
we do not want no injury class actions anymore.
Mr. Beisner. No, that is----
Mr. Nadler. And let me ask you one last question. You say
that there was no injury, for instance, in the Whirlpool
washing machine case. If there is no injury there, why did the
Supreme Court not throw it out on standing?
Mr. Beisner. Well, the Supreme Court did not cite the case.
They did not consider, so they did not throw it out on that
ground. They did send it back to the----
Mr. Nadler. Why did they deny cert then if there is clearly
no standing?
Mr. Beisner. The vast majority of cases they do deny cert.
They just do not reach the issue.
Mr. Nadler. Ms. Lahav?
Ms. Lahav. Look under State law. There is standing. Judge
Easterbrook said it. Judge Jones said it.
Mr. Nadler. And if there is standing, that means there is
injury. And if there is standing that means that the court
found there is injury.
Ms. Lahav. It is a State law question.
Mr. Nadler. But if the State court said there was standing,
they said there was injury. Without injury there is no
standing, correct?
Ms. Lahav. Correct, yes.
Mr. Nadler. Thank you.
Ms. Lahav. Under State law there is an injury.
Mr. Nadler. Thank you.
Mr. DeSantis. The gentleman's time has expired. The Chair
now recognizes the gentleman from Florida for 5 minutes.
Mr. Deutch. If I did not have a few comments I would like
to offer, I would probably just say that the defense rests.
[Laughter.]
Thank you, Mr. Chairman. Look, today's hearing may be on
the Fairness in Class Action Litigation Act, but it is really,
I believe, a hearing on the 7th Amendment of the United States,
to the U.S. Constitution. The 7th Amendment guarantees all
Americans the right to a trial by jury in civil cases. It is
part of the Bill of Rights. It is kind of important.
Our Nation's framers understood that the right to jury
trial in civil disputes would ensure a level playing for all
Americans, not just the wealthy and the well connected. Class
actions are also an essential feature of our legal system
because they allow individuals in similar situations to file
lawsuits that would be far too expensive to file on their own.
And they might be too expensive for our courts to hear on their
own, too.
In an era of overloaded dockets and overstretched financial
resources, class actions help our courts administer justice
fairly and efficiently. They make it possible for the courts to
resolve cases that involve large numbers of people harmed by a
similar practice or with similar claims to be heard at the same
time. Class actions also prevent and deter future actions that
violate individuals' rights or threaten the health and safety
of our communities. And the ability to gain access to the
courts through a class action is an effective check outside the
Federal regulatory system on potentially bad behavior by large
and powerful entities.
Our laws already provide strong oversight to prevent class
actions abuse. Under Rule 23, for example, only after
confirming numerous findings may courts even grant class
certification, a point that Mr. Beisner just acknowledged. And
these findings allow courts to permit discovery, conduct
hearings, and consider testimony, and collect evidence before
issuing certification of a class. Afterwards, it is not the
parties involved in the litigation that decide whether to
certify, but the judge who has reviewed the evidence. In other
words, we have a mechanism in place to weed out frivolous
claims, and unless you consider the findings of an impartial
judge to be frivolous, then the system we have works.
This legislation does not improve class actions. It is
meant to add class actions. The bill would prohibit a Federal
court from certifying a class unless the parties seeking class
certification produces evidentiary proof that each proposed
class member suffered an injury of the same type and extent as
the injury of the named representative. That is the experience
that we just heard.
This legislation would make it impossible for victims to
form a class. It would close the doors of the courtroom to the
most in need of a remedy or judicial protection. It would
guarantee that only those with the financial means to file
extensive litigation get their day in court, and it would shut
out Americans unable to pay the toll for justice. And it would
pile on the backlog that our courts face, making it harder for
all Americans to have their cases heard.
Class actions are a critical component of our legal system
and protect the 7th Amendment rights of people seeking relief.
As former Supreme Court Justice William O. Douglas described,
``The class action is one of the few legal remedies that a
small claimant has against those who command the status quo.''
For example, this bill would make it impossible for the
homeowners in Hobby v. RCR Holdings to be brought in the
Eastern District of Louisiana in 2013 to receive relief, relief
that some of my own constituents would have been denied without
this class action.
This case provided relief to class members in condominiums
in Boynton Beach, Florida whose homes were built with tainted
Chinese drywall between 2005 and 2007 after Hurricane Katrina.
The defective drywall used in these condos devastated the
families who owned them. Not only did a sulfuric smell leak
from their walls and permeate their homes, but it caused real
damage. That damage ranged in some instances from mild to
severe, corroding of electrical systems, and wires, and pipes,
breaking cooling units, destruction of other household
appliances. Sometimes what they endured from the Chinese
drywall differed from the contaminated Chinese drywall, but the
struggles that they faced were the same. Sometimes they were
sick. Sometimes other members of their family became ill.
This class action compensated members for their property
damage as well as other financial losses, such as foreclosure
and rental vacation properties rendered impossible to rent.
Under this bill, Chinese drywall victims with contaminated
drywall would have been on their own and out of luck. That is
how this would have affected my constituents.
Ms. Lahav, in the remaining few seconds that I have, this
definition that in this bill would be a bar to bringing civil
rights cases. Can you just explain that to us?
Ms. Lahav. Yes. It says you have to have an impact on the
body or property of the individual, but often in civil rights
cases we are defending rights that do not have a direct impact
on body or property, such as due process rights, the right to
vote, the right to be free from certain kinds of
discrimination. You might be seeking an injunction instead of
damages for the thing that happened to you. None of that is
accounted for in this bill. And it says ``no Federal court
shall certify any proposed class.'' That includes all those
cases.
Mr. Deutch. Thus, Mr. Chairman, we would find ourselves in
a situation where we would be curtailing the rights of
individuals to pursue their 7th Amendment rights, at the same
time that they are pursuing those rights to uphold other
constitutional rights.
Mr. DeSantis. The gentleman's time has expired. Mr. Trask,
I saw you in some of these exchanges. Do you have anything to
interject about some of the issues that the minority side has
raised?
Mr. Trask. Nothing that is not already in my written
testimony, but I am more than happy to say that I really do
believe that the way that the bill has been constructed was
specific enough to make sure that civil rights class actions
would, in fact, still be protected. There is a longstanding
statutory canon that says expressio unius exclusio alterius.
And if you will forgive my horrible high school Latin, what
that means is when you single out one or two things, you leave
everything else alone. In this case, the definition as it was
written in singled out injury to body or property as being the
things that have to be similar. That means that any other kinds
of injuries that are asserted would be left alone.
Moreover, and I think Ms. Lahav pointed out that I was
trying very hard to point out that we have some very careful
and conscientious jurists on the bench. Jurists like Judge
Zagel and Judge Posner, to name just a few, are the types of
judges who are not going to allow language to completely
eviscerate the class action. About every 10 years it appears
that there is some class action reform proposed, either CAFA or
the PSLRA. And every 10 years what happens is various interests
get up and claim that either the securities class action or the
class action in general is going to be eviscerated and die.
And I have to tell you I keep defending the things, which
means that so far they are doing fine. I do not think that this
bill is going to do any worse harm than CAFA did. And frankly,
I think what it is going to do is protect the interest of those
absent class members that are there. Thank you.
Mr. DeSantis. Great. Well, thank you to the witnesses. This
concludes today's hearing. Thanks to all our witnesses for
attending.
Without objection, all Members will have 5 legislative days
to submit additional written questions for the witnesses or
additional materials for the record.
Thank you again. Thanks to the Members. This hearing is
adjourned.
[Whereupon, at 5:14 p.m., the Subcommittee was adjourned.]
A P P E N D I X
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Material Submitted for the Hearing Record
Letter from John H. Beisner, Partner, Skadden, Arps, Slate,
Meagher & Flom LLP, Washington, DC
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
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