[Congressional Record Volume 146, Number 117 (Wednesday, September 27, 2000)]
[Senate]
[Pages S9386-S9390]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRAMS:
  S. 2123. A bill to provide for Federal class action reform; to the 
Committee on the Judiciary.


          consumer rights in federal class actions act of 2000

 Mr. GRAMS. Mr. President, I offer today legislation entitled 
the ``Consumer Rights in Federal Class Actions Act of 2000.'' It is 
designed to incorporate checks upon the abuses of class action law that 
has led to an increasing number of suits where the primary benefit 
accrues to the attorney, and not the class represented. The bill also 
takes steps to ensure that attorney fees in class action resolutions 
are in proportion to the benefits that actually accrue to the class.
  The last few years have seen the rise of ``coupon settlements'' in 
class action suits, in which attorneys reap literally hundreds of 
thousands of dollars in fees while the class members merely receive 
coupons for discounts on later purchases. For instance, in one well-
known airline price-fixing settlement, class members received coupons 
in $8, $10, and $25 denominations which could not be pooled. In another 
class action settlement, a manufacturer was sued because its 
dishwashers caught on fire under conditions of normal use. Under the 
settlement, customers were provided coupons to purchase replacement 
dishwashers from the very same maker. So not only are the trial lawyers 
hitting the jackpot for themselves, but the defendants in many coupon 
settlements actually receive the benefit of a promotional tool for 
their products. These types of deals only further erode the credibility 
of our judicial system.
  Moreover, notices to class members are so densely worded and 
difficult to slog through that they are routinely ignored, and the 
class action attorneys are free to proceed and negotiate without true 
accountability to their supposed clients. The idea of attorneys working 
for the benefit of their clients has been turned on its head, and now 
in many class action lawsuits class members exist for the benefit of 
the lawyer, and the lawyer walks away from the table with a large fee 
while the class members receive next to nothing.
  The Senate Judiciary Committee has recently addressed the problem of 
``coupon settlements'' with S. 353, the Class Action Fairness Act, 
which would move more large, multi-state claims into federal court 
where there has been more vigilance in reviewing class action 
certifications and settlements. This is an important reform, but I 
think we can take specific steps that go beyond this reform to cut down 
on the number of ``coupon settlements'' in class action lawsuits.
  The first reform in my bill requires that the attorney filing the 
class action lawsuit file a pleading, including a disclosure of the 
recovery sought for class members and the anticipated attorney's fees, 
along with an explanation of how any attorney's fees will be 
calculated. This will give the court and the public notice of what the 
attorney is actually attempting to accomplish with the litigation for 
the class, and for themselves.
  The second reform would require that, after a proposed settlement 
agreement has been filed by the parties, counsel for the class shall 
provide notice to the class members of the expected benefits they will 
receive, the rights they will waive through the settlement, the fee 
amount class counsel will seek, an explanation of how the attorney fee 
will be calculated and funded, and the right of any class member to 
enter comments into the court record about the proposed 
settlement terms. This will give class members a

[[Page S9390]]

more thorough knowledge about what they will receive in the settlement 
compared to what the attorney would receive, and will provide the court 
a mechanism for receiving comments from the class about the proposed 
settlement terms before rejecting or approving the agreement.

  The third reform would require a regular, continuing disclosure as to 
how many members of the class are participating in the settlement. One 
of the dirty secrets of coupon settlements is that the benefits to the 
class are often of such minimal value that the class members do not 
even bother to take the steps necessary to receive the benefit, making 
the high fees received by the attorneys even more outrageous. Some 
settlements even offer cash recoveries to class members that are so 
minimal that it is not worth their time to recover the funds. The 
required disclosure will be via Internet so that the public and legal 
researchers can access the information, and also will be mailed 
directly to the class members for their information and use.
  The final reform is that Congress will authorize a report by the 
Judicial Conference of the United States on ways to correct a 
particular abuse by class action lawyers in which they use polling 
surveys of the class to determine how many class members would utilize 
the settlement, and then submit it to the court as evidence for 
determining an appropriate fee. Courts have indeed used these tools to 
determine fees, however, the polling numbers regularly overestimate 
class utilization of the settlements by a wide margin, leading to 
inflated fee awards for class attorneys. My legislation directs the 
Conference to make recommendations to ensure that attorneys receive 
fees that are commensurate with the degree that the lawsuit benefits 
the class. The Judicial Conference is also directed to make 
recommendations affecting the broader topic of ensuring that proposed 
class action settlements are fair to the class members for whom the 
settlements are supposed to benefit.
  My legislation will expose the trial bar to greater scrutiny in 
lawsuits that are filed primarily to line their own pockets, give class 
members greater rights in assessing the settlement offers, and set in 
motion other reforms that will put attorneys fees in line with the 
benefit they bring to the class. This is a true consumers' rights bill 
that will cut down on the abuses by the trial bar and shed more light 
on who is actually being benefited by these lawsuits. I urge all of my 
colleagues to join me in supporting this commonsense reform.
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