[Congressional Record Volume 149, Number 20 (Tuesday, February 4, 2003)]
[Senate]
[Pages S1873-S1877]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. GRASSLEY (for himself, Mr. Kohl, Mr. Hatch, Mr. Carper, 
        Mr. Specter, Mr. Miller, Mr. Chafee, and Mr. Lugar):
  S. 274. A bill to amend the procedures that apply to consideration of 
interstate class actions to assure fairer outcomes for class members 
and defendants, and for other purposes; to the Committee on the 
Judiciary.
  Mr. GRASSLEY. Mr. President, I rise today to introduce The Class 
Action Fairness Act of 2003, a bill that will help curb class action 
lawsuit abuse. For the last several Congresses, Senators Kohl, Hatch 
and others have joined me in introducing this important measure. Over 
the years, we have held several hearings on the numerous abuses of the 
class action system and the urgent need for reform. The Senate 
Judiciary Committee marked up and reported a similar class action bill 
in the 106th Congress, and in the 107th Congress the Judiciary 
Committee held a hearing on class action abuse. This bi-partisan bill 
has garnered increasing support over the years, and I look forward to 
even greater support in this Congress.
  Abuses of the class action system abound. Specifically, class action 
cases have proven to be an easy way for attorneys to make millions of 
dollars while the plaintiff class members receive little or nothing of 
value. We all are familiar with the many class action lawsuits where 
plaintiffs were awarded nothing or coupons of limited value, while the 
lawyers got all the money in attorney's fees. Everyone of us has found 
ourselves to have been a potential member of a plaintiff class in a 
class action lawsuit, and for those of us who are not lawyers, it has 
been impossible to know what our rights are or whether we are being 
served the attorneys we never hired in the first place.
  In addition, most class action lawsuits are being filed in state 
courts, even though these are usually the cases that involve the most 
money, have nationwide implications, and implicate citizens from all 50 
States. Lawyers often game the system so they can bring lawsuits in 
State courts, which are more likely to certify class actions without 
adequately considering whether a class action would be fair to all 
class members. In some instances, class lawyers manipulate pleadings to 
avoid removal of the lawsuit to the federal courts. To do this, lawyers 
may claim that their clients suffered under $75,000 in damages so that 
the Federal threshold isn't triggered, even though their clients may 
have suffered an even greater injury. Class lawyers also sometimes 
defeat the complete diversity requirement by ensuring that at least one 
named class member is from the same state as a defendant, even if every 
other class member is from a different state.
  The Class Action Fairness Act of 2003 will go a long way toward 
ending some of these abuses. This modest bill carefully fixes the more 
egregious problems with the class action system, while preserving class 
action lawsuits as an important tool which brings representation to the 
unrepresented.
  First, our bill requires that notice of proposed settlements in all 
class actions, as well as all class notices, must be in clear, easily 
understood English and must include all material settlement terms, 
including amount and source of attorneys' fees. The notices most 
plaintiffs receive are written in small print and confusing legal 
jargon. In fact, a lawyer testified before my Subcommittee that even he 
could not understand the notice he received as a plaintiff in a class 
action lawsuit. Since plaintiffs are giving up their right to sue, it 
is imperative that they understand what they are doing and the 
ramifications of their actions.

  Second, our bill requires that State attorneys general be notified of 
any proposed class settlement that would affect residents of their 
States. The notice would give a State attorney general the opportunity 
to object if the settlement terms are unfair to consumers.
  Third, our bill disallows bounty payments to lead plaintiffs so 
lawyers looking for victims can't promise them unwarranted payoffs to 
be their excuse

[[Page S1874]]

for filing suit. It also prevents settlements that discriminate based 
on geography, so that one plaintiff doesn't receive more money just 
because he lives near the courthouse.
  Fourth, our bill requires that courts scrutinize settlements where 
the plaintiffs get only coupons or non-cash awards, and the lawyers get 
money. The courts are required to make a written finding that the 
settlement is fair and reasonable for class members. A court will still 
be able to find that a non-cash settlement, like in the case of 
injunctive relief banning some type of bad conduct, is fair and 
reasonable. But courts would be able to throw out sham settlements 
where the lawyers get big paychecks but the plaintiffs get nothing but 
coupons.
  Finally, our bill allows more class action lawsuits to be removed 
from state court to federal court, either by a defendant or an unnamed 
class member. A class action would qualify for federal jurisdiction if 
the total damages exceed $2,000,000 and parties include citizens from 
multiple States. Currently, class lawyers can avoid removal if 
individual claims are for $75,000 or less, even if hundreds of millions 
of dollars in total are at stake, or if just one class member is from 
the same State as a defendant. But if a case really belongs in state 
court because it's a State-law question or the substantial majority of 
class members and defendants are in-State, the case will stay in state 
court.
  We need class action reform badly. Both plaintiffs and defendants are 
calling for change in this area. The Class Action Fairness Act of 2003 
is a good, modest bill that will help curb the many problems that have 
plagued the class action system.
  This bill will remove the conflict of interest that lawyers face in 
class action lawsuits, and will ensure the fair settlement of these 
cases. This bill will preserve the process, but put a stop to the more 
egregious abuses. I urge all my colleagues to join Senators Kohl, 
Hatch, Carper, Specter, Chafee, Lugar, Miller and I in supporting this 
important legislation.
  Mr. President I ask unanimous consent that the text of the bill be 
printed in the Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                 S. 274

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CONTENTS.

       (a) Short Title.--This Act may be cited as the ``Class 
     Action Fairness Act of 2003''.
       (b) Reference.--Whenever in this Act reference is made to 
     an amendment to, or repeal of, a section or other provision, 
     the reference shall be considered to be made to a section or 
     other provision of title 28, United States Code.
       (c) Table of Contents.--The table of contents for this Act 
     is as follows:

 Sec. 1. Short title; reference; table of contents.
 Sec. 2. Findings and purposes.
 Sec. 3. Consumer class action bill of rights and improved procedures 
              for interstate class actions.
 Sec. 4. Federal district court jurisdiction for interstate class 
              actions.
 Sec. 5. Removal of interstate class actions to Federal district court.
 Sec. 6. Report on class action settlements.
 Sec. 7. Effective date.

      SEC. 2. FINDINGS AND PURPOSES.

       (a) Findings.--Congress finds the following:
       (1) Class action lawsuits are an important and valuable 
     part of the legal system when they permit the fair and 
     efficient resolution of legitimate claims of numerous parties 
     by allowing the claims to be aggregated into a single action 
     against a defendant that has allegedly caused harm.
       (2) Over the past decade, there have been abuses of the 
     class action device that have--
       (A) harmed class members with legitimate claims and 
     defendants that have acted responsibly;
       (B) adversely affected interstate commerce; and
       (C) undermined public respect for our judicial system.
       (3) Class members often receive little or no benefit from 
     class actions, and are sometimes harmed, such as where--
       (A) counsel are awarded large fees, while leaving class 
     members with coupons or other awards of little or no value;
       (B) unjustified awards are made to certain plaintiffs at 
     the expense of other class members; and
       (C) confusing notices are published that prevent class 
     members from being able to fully understand and effectively 
     exercise their rights.
       (4) Abuses in class actions undermine the national judicial 
     system, the free flow of interstate commerce, and the concept 
     of diversity jurisdiction as intended by the framers of the 
     United States Constitution, in that State and local courts 
     are--
       (A) keeping cases of national importance out of Federal 
     court;
       (B) sometimes acting in ways that demonstrate bias against 
     out-of-State defendants; and
       (C) making judgments that impose their view of the law on 
     other States and bind the rights of the residents of those 
     States.
       (b) Purposes.--The purposes of this Act are to--
       (1) assure fair and prompt recoveries for class members 
     with legitimate claims;
       (2) restore the intent of the framers of the United States 
     Constitution by providing for Federal court consideration of 
     interstate cases of national importance under diversity 
     jurisdiction; and
       (3) benefit society by encouraging innovation and lowering 
     consumer prices.

      SEC. 3. CONSUMER CLASS ACTION BILL OF RIGHTS AND IMPROVED 
                   PROCEDURES FOR INTERSTATE CLASS ACTIONS.

       (a) In General.--Part V is amended by inserting after 
     chapter 113 the following:

                      ``CHAPTER 114--CLASS ACTIONS

``Sec.
``1711. Definitions.
``1712. Judicial scrutiny of coupon and other noncash settlements.
``1713. Protection against loss by class members.
``1714. Protection against discrimination based on geographic location.
``1715. Prohibition on the payment of bounties.
``1716. Clearer and simpler settlement information.
``1717. Notifications to appropriate Federal and State officials.

     ``Sec. 1711. Definitions

       ``In this chapter:
       ``(1) Class.--The term `class' means all of the class 
     members in a class action.
       ``(2) Class action.--The term `class action' means any 
     civil action filed in a district court of the United States 
     under rule 23 of the Federal Rules of Civil Procedure or any 
     civil action that is removed to a district court of the 
     United States that was originally filed under a State statute 
     or rule of judicial procedure authorizing an action to be 
     brought by 1 or more representatives as a class action.
       ``(3) Class counsel.--The term `class counsel' means the 
     persons who serve as the attorneys for the class members in a 
     proposed or certified class action.
       ``(4) Class members.--The term `class members' means the 
     persons (named or unnamed) who fall within the definition of 
     the proposed or certified class in a class action.
       ``(5) Plaintiff class action.--The term `plaintiff class 
     action' means a class action in which class members are 
     plaintiffs.
       ``(6) Proposed settlement.--The term `proposed settlement' 
     means an agreement regarding a class action that is subject 
     to court approval and that, if approved, would be binding on 
     some or all class members.

     ``Sec. 1712. Judicial scrutiny of coupon and other noncash 
       settlements

       ``The court may approve a proposed settlement under which 
     the class members would receive noncash benefits or would 
     otherwise be required to expend funds in order to obtain part 
     or all of the proposed benefits only after a hearing to 
     determine whether, and making a written finding that, the 
     settlement is fair, reasonable, and adequate for class 
     members.

     ``Sec. 1713. Protection against loss by class members

       ``The court may approve a proposed settlement under which 
     any class member is obligated to pay sums to class counsel 
     that would result in a net loss to the class member only if 
     the court makes a written finding that nonmonetary benefits 
     to the class member substantially outweigh the monetary loss.

     ``Sec. 1714. Protection against discrimination based on 
       geographic location

       ``The court may not approve a proposed settlement that 
     provides for the payment of greater sums to some class 
     members than to others solely on the basis that the class 
     members to whom the greater sums are to be paid are located 
     in closer geographic proximity to the court.

     ``Sec. 1715. Prohibition on the payment of bounties

       ``(a) In General.--The court may not approve a proposed 
     settlement that provides for the payment of a greater share 
     of the award to a class representative serving on behalf of a 
     class, on the basis of the formula for distribution to all 
     other class members, than that awarded to the other class 
     members.
       ``(b) Rule of Construction.--The limitation in subsection 
     (a) shall not be construed to prohibit a payment approved by 
     the court for reasonable time or costs that a person was 
     required to expend in fulfilling the obligations of that 
     person as a class representative.

     ``Sec. 1716. Clearer and simpler settlement information

       ``(a) Plain English Requirements.--Any court with 
     jurisdiction over a plaintiff class action shall require that 
     any written notice concerning a proposed settlement of the 
     class action provided to the class through

[[Page S1875]]

     the mail or publication in printed media contain--
       ``(1) at the beginning of such notice, a statement in 18-
     point or greater bold type, stating `LEGAL NOTICE: YOU ARE A 
     PLAINTIFF IN A CLASS ACTION LAWSUIT AND YOUR LEGAL RIGHTS ARE 
     AFFECTED BY THE SETTLEMENT DESCRIBED IN THIS NOTICE.';
       ``(2) a short summary written in plain, easily understood 
     language, describing--
       ``(A) the subject matter of the class action;
       ``(B) the members of the class;
       ``(C) the legal consequences of being a member of the class 
     action;
       ``(D) if the notice is informing class members of a 
     proposed settlement agreement--
       ``(i) the benefits that will accrue to the class due to the 
     settlement;
       ``(ii) the rights that class members will lose or waive 
     through the settlement;
       ``(iii) obligations that will be imposed on the defendants 
     by the settlement;
       ``(iv) the dollar amount of any attorney's fee class 
     counsel will be seeking, or if not possible, a good faith 
     estimate of the dollar amount of any attorney's fee class 
     counsel will be seeking; and
       ``(v) an explanation of how any attorney's fee will be 
     calculated and funded; and
       ``(E) any other material matter.
       ``(b) Tabular Format.--Any court with jurisdiction over a 
     plaintiff class action shall require that the information 
     described in subsection (a)--
       ``(1) be placed in a conspicuous and prominent location on 
     the notice;
       ``(2) contain clear and concise headings for each item of 
     information; and
       ``(3) provide a clear and concise form for stating each 
     item of information required to be disclosed under each 
     heading.
       ``(c) Television or Radio Notice.--Any notice provided 
     through television or radio (including transmissions by cable 
     or satellite) to inform the class members in a class action 
     of the right of each member to be excluded from a class 
     action or a proposed settlement, if such right exists, shall, 
     in plain, easily understood language--
       ``(1) describe the persons who may potentially become class 
     members in the class action; and
       ``(2) explain that the failure of a class member to 
     exercise his or her right to be excluded from a class action 
     will result in the person's inclusion in the class action.

     ``Sec. 1717. Notifications to appropriate Federal and State 
       officials

       ``(a) Definitions.--
       ``(1) Appropriate federal official.--In this section, the 
     term `appropriate Federal official' means--
       ``(A) the Attorney General of the United States; or
       ``(B) in any case in which the defendant is a Federal 
     depository institution, a State depository institution, a 
     depository institution holding company, a foreign bank, or a 
     nondepository institution subsidiary of the foregoing (as 
     such terms are defined in section 3 of the Federal Deposit 
     Insurance Act (12 U.S.C. 1813)), the person who has the 
     primary Federal regulatory or supervisory responsibility with 
     respect to the defendant, if some or all of the matters 
     alleged in the class action are subject to regulation or 
     supervision by that person.
       ``(2) Appropriate state official.--In this section, the 
     term `appropriate State official' means the person in the 
     State who has the primary regulatory or supervisory 
     responsibility with respect to the defendant, or who licenses 
     or otherwise authorizes the defendant to conduct business in 
     the State, if some or all of the matters alleged in the class 
     action are subject to regulation by that person. If there is 
     no primary regulator, supervisor, or licensing authority, or 
     the matters alleged in the class action are not subject to 
     regulation or supervision by that person, then the 
     appropriate State official shall be the State attorney 
     general.
       ``(b) In General.--Not later than 10 days after a proposed 
     settlement of a class action is filed in court, each 
     defendant that is participating in the proposed settlement 
     shall serve upon the appropriate State official of each State 
     in which a class member resides and the appropriate Federal 
     official, a notice of the proposed settlement consisting of--
       ``(1) a copy of the complaint and any materials filed with 
     the complaint and any amended complaints (except such 
     materials shall not be required to be served if such 
     materials are made electronically available through the 
     Internet and such service includes notice of how to 
     electronically access such material);
       ``(2) notice of any scheduled judicial hearing in the class 
     action;
       ``(3) any proposed or final notification to class members 
     of--
       ``(A)(i) the members' rights to request exclusion from the 
     class action; or
       ``(ii) if no right to request exclusion exists, a statement 
     that no such right exists; and
       ``(B) a proposed settlement of a class action;
       ``(4) any proposed or final class action settlement;
       ``(5) any settlement or other agreement contemporaneously 
     made between class counsel and counsel for the defendants;
       ``(6) any final judgment or notice of dismissal;
       ``(7)(A) if feasible, the names of class members who reside 
     in each State and the estimated proportionate share of the 
     claims of such members to the entire settlement to that 
     State's appropriate State official; or
       ``(B) if the provision of information under subparagraph 
     (A) is not feasible, a reasonable estimate of the number of 
     class members residing in each State and the estimated 
     proportionate share of the claims of such members to the 
     entire settlement; and
       ``(8) any written judicial opinion relating to the 
     materials described under subparagraphs (3) through (6).
       ``(c) Depository Institutions Notification.--
       ``(1) Federal and other depository institutions.--In any 
     case in which the defendant is a Federal depository 
     institution, a depository institution holding company, a 
     foreign bank, or a non-depository institution subsidiary of 
     the foregoing, the notice requirements of this section are 
     satisfied by serving the notice required under subsection (b) 
     upon the person who has the primary Federal regulatory or 
     supervisory responsibility with respect to the defendant, if 
     some or all of the matters alleged in the class action are 
     subject to regulation or supervision by that person.
       ``(2) State depository institutions.--In any case in which 
     the defendant is a State depository institution (as that term 
     is defined in section 3 of the Federal Deposit Insurance Act 
     (12 U.S.C. 1813)), the notice requirements of this section 
     are satisfied by serving the notice required under subsection 
     (b) upon the State bank supervisor (as that term is defined 
     in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 
     1813)) of the State in which the defendant is incorporated or 
     chartered, if some or all of the matters alleged in the class 
     action are subject to regulation or supervision by that 
     person, and upon the appropriate Federal official.
       ``(d) Final Approval.--An order giving final approval of a 
     proposed settlement may not be issued earlier than 90 days 
     after the later of the dates on which the appropriate Federal 
     official and the appropriate State official are served with 
     the notice required under subsection (b).
       ``(e) Noncompliance if Notice Not Provided.--
       ``(1) In general.--A class member may refuse to comply with 
     and may choose not to be bound by a settlement agreement or 
     consent decree in a class action if the class member 
     demonstrates that the notice required under subsection (b) 
     has not been provided.
       ``(2) Limitation.--A class member may not refuse to comply 
     with or to be bound by a settlement agreement or consent 
     decree under paragraph (1) if the notice required under 
     subsection (b) was directed to the appropriate Federal 
     official and to either the State attorney general or the 
     person that has primary regulatory, supervisory, or licensing 
     authority over the defendant.
       ``(3) Application of rights.--The rights created by this 
     subsection shall apply only to class members or any person 
     acting on a class member's behalf, and shall not be construed 
     to limit any other rights affecting a class member's 
     participation in the settlement.
       ``(f) Rule of Construction.--Nothing in this section shall 
     be construed to expand the authority of, or impose any 
     obligations, duties, or responsibilities upon, Federal or 
     State officials.''.
       (b) Technical and Conforming Amendment.--The table of 
     chapters for part V is amended by inserting after the item 
     relating to chapter 113 the following:

``114. Class Actions........................................1711''.....

      SEC. 4. FEDERAL DISTRICT COURT JURISDICTION FOR INTERSTATE 
                   CLASS ACTIONS.

       (a) Application of Federal Diversity Jurisdiction.--Section 
     1332 is amended--
       (1) by redesignating subsection (d) as subsection (e); and
       (2) by inserting after subsection (c) the following:
       ``(d)(1) In this subsection--
       ``(A) the term `class' means all of the class members in a 
     class action;
       ``(B) the term `class action' means any civil action filed 
     under rule 23 of the Federal Rules of Civil Procedure or 
     similar State statute or rule of judicial procedure 
     authorizing an action to be brought by 1 or more 
     representative persons as a class action;
       ``(C) the term `class certification order' means an order 
     issued by a court approving the treatment of some or all 
     aspects of a civil action as a class action; and
       ``(D) the term `class members' means the persons (named or 
     unnamed) who fall within the definition of the proposed or 
     certified class in a class action.
       ``(2) The district courts shall have original jurisdiction 
     of any civil action in which the matter in controversy 
     exceeds the sum or value of $2,000,000, exclusive of interest 
     and costs, and is a class action in which--
       ``(A) any member of a class of plaintiffs is a citizen of a 
     State different from any defendant;
       ``(B) any member of a class of plaintiffs is a foreign 
     state or a citizen or subject of a foreign state and any 
     defendant is a citizen of a State; or
       ``(C) any member of a class of plaintiffs is a citizen of a 
     State and any defendant is a foreign state or a citizen or 
     subject of a foreign state.
       ``(3) Paragraph (2) shall not apply to any civil action in 
     which--
       ``(A)(i) the substantial majority of the members of the 
     proposed plaintiff class and the primary defendants are 
     citizens of the State in which the action was originally 
     filed; and

[[Page S1876]]

       ``(ii) the claims asserted therein will be governed 
     primarily by the laws of the State in which the action was 
     originally filed;
       ``(B) the primary defendants are States, State officials, 
     or other governmental entities against whom the district 
     court may be foreclosed from ordering relief; or
       ``(C) the number of members of all proposed plaintiff 
     classes in the aggregate is less than 100.
       ``(4) In any class action, the claims of the individual 
     class members shall be aggregated to determine whether the 
     matter in controversy exceeds the sum or value of $2,000,000, 
     exclusive of interest and costs.
       ``(5) This subsection shall apply to any class action 
     before or after the entry of a class certification order by 
     the court with respect to that action.
       ``(6)(A) A district court shall dismiss any civil action 
     that is subject to the jurisdiction of the court solely under 
     this subsection if the court determines the action may not 
     proceed as a class action based on a failure to satisfy the 
     prerequisites of rule 23 of the Federal Rules of Civil 
     Procedure.
       ``(B) Nothing in subparagraph (A) shall prohibit plaintiffs 
     from filing an amended class action in Federal court or 
     filing an action in State court, except that any such action 
     filed in State court may be removed to the appropriate 
     district court if it is an action of which the district 
     courts of the United States have original jurisdiction.
       ``(C) In any action that is dismissed under this paragraph 
     and is filed by any of the original named plaintiffs therein 
     in the same State court venue in which the dismissed action 
     was originally filed, the limitations periods on all 
     reasserted claims shall be deemed tolled for the period 
     during which the dismissed class action was pending. The 
     limitations periods on any claims that were asserted in a 
     class action dismissed under this paragraph that are 
     subsequently asserted in an individual action shall be deemed 
     tolled for the period during which the dismissed action was 
     pending.
       ``(7) Paragraph (2) shall not apply to any class action 
     that solely involves a claim--
       ``(A) concerning a covered security as defined under 
     16(f)(3) of the Securities Act of 1933 and section 
     28(f)(5)(E) of the Securities Exchange Act of 1934;
       ``(B) that relates to the internal affairs or governance of 
     a corporation or other form of business enterprise and that 
     arises under or by virtue of the laws of the State in which 
     such corporation or business enterprise is incorporated or 
     organized; or
       ``(C) that relates to the rights, duties (including 
     fiduciary duties), and obligations relating to or created by 
     or pursuant to any security (as defined under section 2(a)(1) 
     of the Securities Act of 1933 and the regulations issued 
     thereunder).
       ``(8) For purposes of this subsection and section 1453 of 
     this title, an unincorporated association shall be deemed to 
     be a citizen of the State where it has its principal place of 
     business and the State under whose laws it is organized.
       ``(9)(A) For purposes of this section and section 1453 of 
     this title, a civil action that is not otherwise a class 
     action as defined in paragraph (1)(B) shall nevertheless be 
     deemed a class action if--
       ``(i) the named plaintiff purports to act for the interests 
     of its members (who are not named parties to the action) or 
     for the interests of the general public, seeks a remedy of 
     damages, restitution, disgorgement, or any other form of 
     monetary relief, and is not a State attorney general; or
       ``(ii) monetary relief claims in the action are proposed to 
     be tried jointly in any respect with the claims of 100 or 
     more other persons on the ground that the claims involve 
     common questions of law or fact.
       ``(B)(i) In any civil action described under subparagraph 
     (A)(ii), the persons who allegedly were injured shall be 
     treated as members of a proposed plaintiff class and the 
     monetary relief that is sought shall be treated as the claims 
     of individual class members.
       ``(ii) Paragraphs (3) and (6) of this subsection and 
     subsections (b)(2) and (d) of section 1453 shall not apply to 
     any civil action described under subparagraph (A)(i).
       ``(iii) Paragraph (6) of this subsection, and subsections 
     (b)(2) and (d) of section 1453 shall not apply to any civil 
     action described under subparagraph (A)(ii).''.
       (b) Conforming Amendments.--
       (1) Section 1335 (a)(1) is amended by inserting ``(a) or 
     (d)'' after ``1332''.
       (2) Section 1603 (b)(3) is amended by striking ``(d)'' and 
     inserting ``(e)''.

      SEC. 5. REMOVAL OF INTERSTATE CLASS ACTIONS TO FEDERAL 
                   DISTRICT COURT.

       (a) In General.--Chapter 89 is amended by adding after 
     section 1452 the following:

     ``Sec. 1453. Removal of class actions

       ``(a) Definitions.--In this section, the terms `class', 
     `class action', `class certification order', and `class 
     member' shall have the meanings given such terms under 
     section 1332(d)(1).
       ``(b) In General.--A class action may be removed to a 
     district court of the United States in accordance with this 
     chapter, without regard to whether any defendant is a citizen 
     of the State in which the action is brought, except that such 
     action may be removed--
       ``(1) by any defendant without the consent of all 
     defendants; or
       ``(2) by any plaintiff class member who is not a named or 
     representative class member without the consent of all 
     members of such class.
       ``(c) When Removable.--This section shall apply to any 
     class action before or after the entry of a class 
     certification order in the action.
       ``(d) Procedure for Removal.--Section 1446 relating to a 
     defendant removing a case shall apply to a plaintiff removing 
     a case under this section, except that in the application of 
     subsection (b) of such section the requirement relating to 
     the 30-day filing period shall be met if a plaintiff class 
     member files notice of removal within 30 days after receipt 
     by such class member, through service or otherwise, of the 
     initial written notice of the class action.
       ``(e) Review of Orders Remanding Class Actions to State 
     Courts.--Section 1447 shall apply to any removal of a case 
     under this section, except that notwithstanding section 
     1447(d), an order remanding a class action to the State court 
     from which it was removed shall be reviewable by appeal or 
     otherwise.
       ``(f) Exception.--This section shall not apply to any class 
     action that solely involves--
       ``(1) a claim concerning a covered security as defined 
     under section 16(f)(3) of the Securities Act of 1933 and 
     section 28(f)(5)(E) of the Securities Exchange Act of 1934;
       ``(2) a claim that relates to the internal affairs or 
     governance of a corporation or other form of business 
     enterprise and arises under or by virtue of the laws of the 
     State in which such corporation or business enterprise is 
     incorporated or organized; or
       ``(3) a claim that relates to the rights, duties (including 
     fiduciary duties), and obligations relating to or created by 
     or pursuant to any security (as defined under section 2(a)(1) 
     of the Securities Act of 1933 and the regulations issued 
     thereunder).''.
       (b) Removal Limitation.--Section 1446(b) is amended in the 
     second sentence by inserting ``(a)'' after ``section 1332''.
       (c) Technical and Conforming Amendments.--The table of 
     sections for chapter 89 is amended by adding after the item 
     relating to section 1452 the following:

``1453. Removal of class actions.''.

     SEC. 6. REPORT ON CLASS ACTION SETTLEMENTS.

       (a) In General.--Not later than 12 months after the date of 
     enactment of this Act, the Judicial Conference of the United 
     States, with the assistance of the Director of the Federal 
     Judicial Center and the Director of the Administrative Office 
     of the United States Courts, shall prepare and transmit to 
     the Committees on the Judiciary of the Senate and the House 
     of Representatives a report on class action settlements.
       (b) Content.--The report under subsection (a) shall 
     contain--
       (1) recommendations on the best practices that courts can 
     use to ensure that proposed class action settlements are fair 
     to the class members that the settlements are supposed to 
     benefit;
       (2) recommendations on the best practices that courts can 
     use to ensure that--
       (A) the fees and expenses awarded to counsel in connection 
     with a class action settlement appropriately reflect the 
     extent to which counsel succeeded in obtaining full redress 
     for the injuries alleged and the time, expense, and risk that 
     counsel devoted to the litigation; and
       (B) the class members on whose behalf the settlement is 
     proposed are the primary beneficiaries of the settlement; and
       (3) the actions that the Judicial Conference of the United 
     States has taken and intends to take toward having the 
     Federal judiciary implement any or all of the recommendations 
     contained in the report.
       (c) Authority of Federal Courts.--Nothing in this section 
     shall be construed to alter the authority of the Federal 
     courts to supervise attorneys' fees.

     SEC. 7. EFFECTIVE DATE.

       The amendments made by this Act shall apply to any civil 
     action commenced on or after the date of enactment of this 
     Act.
  Mr. HATCH. Mr. President, today I rise to introduce, along with my 
colleagues Senators Grassley and Kohl, S. 274, the ``Class Action 
Fairness Act of 2003.''
  Over the past decade, it has become clear that abuses of the class 
action system have reached epidemic levels. In recent years, it has 
become equally clear that the ultimate victims of this epidemic are 
poorly-represented class members and individual consumers throughout 
the Nation. The Class Action Fairness Act of 2003 represents a modest, 
measured effort to remedy the plague of abuses, inconsistencies, and 
inefficiencies that infest our current system of class action 
litigation.
  It is essential that we address the abuses that are running rampant 
in our current class action litigation system. Frequently, plaintiff 
class members are not adequately informed of their rights or of the 
terms and practical implications of a proposed settlement. Too often 
judges approve settlements that primarily benefit the class counsel, 
rather than the class members. There are numerous examples of 
settlements where class members receive little or nothing, while 
attorneys receive millions of dollars in fees. Multiple class

[[Page S1877]]

action suits asserting the same claims on behalf of the same plaintiffs 
are routinely filed in different State courts, causing judicial 
inefficiencies and encouraging collusive settlement behavior. And State 
courts are more frequently certifying national classes leading to 
rulings that infringe upon or conflict with the established laws and 
policies of other states.
  Despite the mountains of evidence demonstrating the drastically 
increasing harms caused by class action abuses, I am sure that some 
will attempt to deny the existence of any problem at all. Others will 
try to confuse the issue with spurious claims that proposed reforms 
would somehow disadvantage victims with legitimate claims or further 
worsen class action abuses. Others may even contend that past 
legislative reforms have contributed to recent financial debacles and 
that the proposed reforms will encourage more. Such claims are nothing 
more than red herrings intended to divert the debate from the real 
issues.
  In this regard let me emphasize a few points regarding S. 274. First, 
this bill does not seek to eliminate State court class action 
litigation. Class action suits brought in State courts have proven in 
many contexts to be an effective and desirable tool for protecting 
civil and consumer rights. Nor do the reforms we will discuss today in 
any way diminish the rights or practical ability of victims to band 
together to pursue their claims against large corporations. In fact, we 
have included several consumer protection provisions in our legislation 
that I feel strongly will substantially improve plaintiffs' chances of 
achieving a fair result in any settlement proposal.
  There are three key components to S. 274. First, the bill implements 
consumer protections against abusive settlements by: No. 1. requiring 
simplified notices that explain to class members the terms of proposed 
class action settlements and their rights with respect to the proposed 
settlement in ``plain English''; No. 2. enhancing judicial scrutiny of 
coupon settlements; No. 3. providing a standard for judicial approval 
of settlements that would result in a net monetary loss to plaintiffs; 
No. 4. prohibiting ``bounties'' to class representatives; and No. 5. 
prohibiting settlements that favor class members based upon geographic 
proximity to the courthouse.
  Second, the bill requires that notice of class action settlements be 
sent to appropriate State and Federal authorities to provide them with 
sufficient information to determine whether the settlement is in the 
best interest of the citizens they represent.
  Finally, the bill amends the diversity-of-citizenship jurisdiction 
statute to allow large interstate class actions to be adjudicated in 
Federal court by granting jurisdiction in class actions where there is 
``minimal diversity'' and the aggregate amount in controversy among all 
class members exceeds $2 million.
  Although some critics have argued that this amendment to diversity 
jurisdiction somehow violates the principles of federalism or is 
inconsistent with the Constitution, I fully agree with Mr. Walter 
Dellinger, former Solicitor General, who testified at our Judiciary 
Committee hearing last fall, that it is ``difficult to understand any 
objection to the goal of bringing to the federal court cases of genuine 
national importance that fall clearly within the jurisdiction conferred 
on those courts by Article III of the Constitution.''
  Last, I would like to express my appreciation to the many individuals 
who have shared with me the details of their experiences with class 
action litigation. In particular, I am grateful to those victims of 
various abuses of the current system who have come forward and told 
their stories in the hope that something positive might come out of 
their terrible experiences.
  Among those who have come forward is Irene Taylor of Tyler, TX, who 
was bilked out of approximately $20,000 in a telemarketing scam that 
defrauded senior citizens out of more than $200 million. In a class 
action brought in Madison County, IL, the attorneys purportedly 
representing Mrs. Taylor negotiated a proposed settlement which will 
exclude her from any recovery whatsoever.
  Martha Preston of Baraboo, WI, provides another excellent example. 
Ms. Preston was involved in the famous BancBoston case, brought in 
Alabama State court, which involved the bank's failure to post interest 
to mortgage escrow accounts in a prompt manner. Although Ms. Preston 
did receive a settlement of about $4, approximately $95 was deducted 
from her account to help pay the class counsel's legal fees of $8.5 
million. Notably, Ms. Preston testified before my committee 5 years ago 
asking us to stop these abusive class action lawsuits, but it appears 
that, at least thus far, her plea has not been heard.
  I urge my colleagues to support this modest effort to reform the 
abuses in the current system, abuses that are actually hurting those 
the system is supposed to help.
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