[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]





            FAIRNESS IN CLASS ACTION LITIGATION ACT OF 2015

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

                                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

                               __________

         Printed for the use of the Committee on the Judiciary

[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


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

                         U.S. GOVERNMENT PUBLISHING OFFICE 

94-410 PDF                     WASHINGTON : 2015 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001      
      
      
      
      
      
      
      
      
      
      
      
      
      
      
                       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
                                 ------                                

           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

                              ----------                              

                             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

                              ----------                              


                       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:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                               __________
    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.
---------------------------------------------------------------------------
    *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.
---------------------------------------------------------------------------
    Mr. DeSantis. Without objection.
    [The information referred to follows:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                             
                               
                               __________
    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:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
   
                               __________
    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:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                               __________
    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:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                               __________
    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:]
    
    
    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
    
                               __________
    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

                              ----------                              


               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]

                                 [all]