[Congressional Record Volume 151, Number 12 (Tuesday, February 8, 2005)]
[Senate]
[Pages S1076-S1086]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                   CLASS ACTION FAIRNESS ACT OF 2005

  The PRESIDING OFFICER. Under the previous order, the Senate will 
resume consideration of S. 5, which the clerk will report.
  The bill clerk read as follows:

       A bill (S. 5) 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.

  The PRESIDING OFFICER. The Senator from Pennsylvania.
  Mr. SPECTER. Mr. President, as the Presiding Officer has noted, we 
are continuing consideration of class action reform. Yesterday, we had 
opening statements, which I led off as chairman of the Judiciary 
Committee, and the ranking member, Senator Leahy, made his opening 
statement. Senator Hatch spoke. We will be going to an amendment this 
morning by Senator Durbin on mass actions.
  The class action bill has as its central focus to prevent judge 
shopping to various States and even counties where courts and judges 
have a prejudicial predisposition on cases. The issue of diversity of 
citizenship has been created in the Federal courts to eliminate 
favoritism. When diversity jurisdiction was established, it was 
undertaken in the context of the claimant from one State, 
illustratively, Virginia coming to Pennsylvania, and the concern there 
was there might be some favoritism for the local resident in 
Pennsylvania. So the jurisdictional amount, when I was in the practice 
of law, was $3,000. It is now $75,000 which would put the case in the 
Federal court where there would be more objectivity. That is what they 
are trying to do here, to eliminate judge shopping.
  If the cases which stay in the State court have two-thirds of the 
class from that State, it would go into the Federal court. If one-third 
or less is not from the State--in the one-third to two-third range--it 
would be the discretion of the judge.
  As I said yesterday, there is, as far as I am concerned, a very 
important purpose here: to put cases in the Federal court to avoid 
forum shopping and judge shopping.
  With respect to the substantive law, it is my view that the 
substantive law ought not to be altered. I commented briefly on the 
Bingaman amendment yesterday where I think it is important that the 
Federal judges who have the cases would have the discretion to apply 
State law. But that will be taken up sometime when we debate the matter 
later.
  I want to yield now to Senator McConnell for leadership time or time 
as he may choose.
  Mr. McCONNELL. Mr. President, I thank the chairman of the Judiciary 
Committee.
  I rise to speak about a case that I believe perfectly illustrates 
some of the problems with our current class action system. This case 
is, unfortunately, not at all unique. These outrageous decisions happen 
all too frequently. The bill currently under consideration will help 
fix some of these problems.
  I have a chart. It is kind of hard to see. Basically, it is a letter 
that a member of my staff recently got. It included a check. The check 
is made payable to a member of my staff who received it in the mail. On 
the check's ``Pay to the Order of'' line, I have covered up the name of 
the staffer so she may remain anonymous.
  I also obscured the name of the defendant in this case. Plaintiffs' 
lawyers have already soaked them once, and I do not want to give them 
the opportunity to do it again. I would hate to see others able to sue 
the company because they heard the company settled at least one class 
action lawsuit.
  Along with this settlement check, my staffer received a letter which 
says in part:

       You have been identified as a member of the class of . . . 
     customers who are eligible for a refund under the terms of a 
     settlement agreement reached in a class-action lawsuit . . . 
     The enclosed check includes any refunds for which you were 
     eligible.

  Imagine her excitement. As you know, Senate staffers are certainly 
not the highest paid people in town. So this woman on my staff told me 
she was, indeed, thrilled to anticipate what she might be receiving. 
And then she looked at the enclosed check to see just how big her 
windfall was. It was a whopping 32 cents. That is right, she received a 
check made out to her in the amount of 32 cents. I guess it goes 
without saying that she was a little bit disappointed to find out her 
newfound riches had disappeared already.
  Do not misunderstand me. I am not suggesting my staffer deserved a 
bigger settlement check. In fact, she told me she had no complaint 
against the defendant, and she never asked to be a part of the lawsuit. 
Apparently, she just happened to be a customer of the company that was 
sued, and it was determined that she theoretically could bring a claim 
against the defendant. So she became a member of ``a class'' who was 
due a settlement.
  If this does not precisely illustrate the absurdity of the current 
class action epidemic in this country, I do not know what does. To 
demonstrate just how far out of whack the system is, let's start with 
the letter notifying my staffer that she was a member of a class action 
lawsuit and had been awarded a settlement.
  This letter and check arrived via the U.S. mail. The last time I 
checked, it cost 37 cents to send an envelope through the U.S. mail. 
The settlement check is only for 32 cents. You can probably see where I 
am headed with this. It cost the defendant in a class action suit 37 
cents to send a settlement check worth 32 cents. I don't have the 
expertise in economics like my good friend and our former colleague 
Senator Gramm of Texas, but I can tell you, forcing a defendant to 
spend 37 cents to send somebody a 32-cent check does not make much 
economic sense, and it certainly defies common sense.
  Let me point out the most disturbing element about this lawsuit. My 
staffer researched this case, and it may be of interest to all of our 
colleagues to note that the unwitting plaintiff received 32 cents in 
compensation from this class action lawsuit, and her lawyers pocketed 
in excess of $7 million--$7 million. All in all, not a bad settlement 
if you happen to be a plaintiff's lawyer rather than a plaintiff.

  And in case you think my staffer received an unusually low settlement 
in this litigation, let me quote from the letter accompanying the 
settlement check:

       At the time of the settlement, we estimated that the 
     average [refund] would be less than $1--

  The average refund would be less than a dollar--

     for each eligible [plaintiff]. That estimate proved correct.

  So you see, while the settlement was being arranged, it was clear 
each plaintiff on average would receive less than $1. It was clear that 
each plaintiff would receive less than $1. Yet the plaintiffs' lawyers 
still rake in more than $7 million.
  My colleagues may also be interested to know how much the defendant 
was forced to spend defending the lawsuit. Knowing the extent of the 
defense costs is instructive in demonstrating how unjust these abusive 
suits can be. So we asked the defendant how much it spent defending 
this suit that provided each plaintiff with pennies and the lawyers 
with millions. Perhaps not surprisingly, the defendant was not willing 
to discuss the matter. You see, the defendant told us that if it were 
readily known just how much they spent defending the suit, then that 
information would almost certainly be used against them in the future. 
The defendant feared that if their defense costs were known, then 
another opportunistic plaintiff's lawyer would file another one of 
these predatory suits, and then that lawyer would offer to settle for 
just slightly less than the millions he knew it would cost the 
defendant to defend the suit.
  This case illustrates how plaintiffs' lawyers exploit and abuse 
defendants under the current system. Can there be any doubt that the 
current class action system is in need of repair? When the lawyers get 
more than $7 million and the plaintiff gets a check for 32 cents, 
something is terribly wrong. When defendants fear to disclose how much 
they spend fighting these ridiculous suits because to do so would 
invite even more litigation, something is terribly wrong. Justice is 
supposed to be distributed fairly. This is clearly not a fair way to 
distribute justice.
  By passing this legislation, we are not going to end every 32-cent 
award to

[[Page S1077]]

plaintiffs and multimillion dollar award to lawyers, but we certainly 
can curb a great deal of this nonsense.
  I know some of my friends on the other side of the aisle will 
complain this bill will sound the death knell for class actions in 
State court. Nothing could be further from the truth. This is an 
important piece of legislation, but it is also a moderate and 
reasonable piece of legislation.
  Frankly, I liked the original version, but we are where we are today, 
and I will talk more about that in a moment. The bill on the floor is 
the product of not one, not two, but three carefully crafted 
compromises. Not one, not two, but three carefully crafted compromises. 
These carefully crafted compromises have us to a point where we can 
enact meaningful reform that respects the ability of States to 
adjudicate local controversies as class actions while allowing Federal 
courts to decide truly national class actions.
  The House, frankly, would prefer a stronger bill, and so would I. I 
like the original bill that stalled out at 59 votes last year. But the 
House also understands that the legislation on the floor is a good 
bill.
  Therefore, the House is prepared to take this up and pass it without 
amendment, assuming that our carefully crafted compromise is itself not 
compromised on the Senate floor.
  I had an opportunity to talk to Majority Leader Tom DeLay this 
morning and he reiterated the statement that he and Chairman Jim 
Sensenbrenner made last Friday and it is this: If this bill is passed 
without amendment in the Senate, the House will take it up immediately, 
pass it, and send it to the President for signature. If it is altered 
in any way, the House will then follow the regular order and maybe 
sometime during this Congress we will get a class action bill.
  Frankly, in my judgment, those who are skeptical of this bill would 
be better off with this compromise version than having the House go 
through the regular order, in which case they would probably pass a 
bill much different from this compromise. We would ultimately have a 
conference and in all likelihood, out of that conference might come a 
bill more like the one we had last year, which stalled out at 59 votes.
  So I would say that for those who are not terribly enthusiastic about 
this compromise, it could get a lot worse from their point of view. 
This compromise is one that people who have worked on this bill for 
years are willing to take, and so our challenge is to keep it clean, to 
defeat the amendments that would slow down the process and prevent this 
important piece of tort reform legislation from getting to the 
President for an early signature. So that is where we are.
  We have a marvelous opportunity to demonstrate at the beginning of 
this Congress that we are indeed going to be able to accomplish some 
important things on a bipartisan basis. This compromise bill appears to 
have at least 62 Senators who are for it. Let us hold it together. Let 
us keep it as it is and demonstrate to the American public that we can 
work together on a bipartisan basis and pass important legislation for 
our country.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Pennsylvania.
  Mr. SPECTER. Mr. President, the next Senator to seek recognition is 
Senator Dodd. I am informed Senator Lott will be coming to the floor 
shortly to speak, and that soon thereafter Senator Durbin will offer 
his amendment. It is now 11:18. That should take the time for floor 
action until the hour of 12:30 when we are scheduled under a previous 
order to recess for the party caucuses. So I now yield to Senator Dodd.
  The PRESIDING OFFICER. The Senator from Connecticut.
  Mr. DODD. Mr. President, I begin by thanking our colleague from 
Pennsylvania for his leadership on this issue as the new chairman of 
the Senate Judiciary Committee, and also to commend our colleague from 
Vermont, Senator Leahy, the ranking Democrat on the committee. Despite 
their differences on this legislation, we are debating this bill 
because the managers have gone through the committee process and have 
produced a product for the consideration of the full Senate. I am 
pleased this bill is finally before us once again. It has been a year 
and a half since we last considered this legislation.
  I also commend the two leaders, Senators Frist and Daschle, for 
working as early as the fall of 2003 to try and craft a compromise. 
Senator Reid of Nevada has picked up on this and I want to particularly 
commend Senator Reid. He has some strong reservations about this bill, 
as many of our colleagues do, but he has arranged, as the Democratic 
leader can, for this matter to come forward. Certainly all of my 
colleagues are fully aware that a determined minority can pretty much 
stop anything from happening, but the Senator from Nevada, despite his 
reservations about this legislation, has worked through the process 
with the distinguished majority leader.
  The chairman of the committee, the ranking member, and those who are 
interested in this bill are trying to move this matter forward. So I 
would not want to begin my comments without commending the leaders, but 
particularly the Democratic leader, my leader, for putting in the time 
and effort to see to it that this matter dealing with class action be a 
part of the Senate debate.
  The legislation has had a rather long and torturous history, going 
back a number of years. I am not going to recite at length that 
history. I will only note that several of our colleagues deserve to be 
acknowledged for their long and steady persistence in bringing the 
Senate to this point. Those Senators include Senator Grassley of Iowa, 
Senator Kohl of Wisconsin, Senator Hatch of Utah, and Senator Feinstein 
of California. They have worked on the Judiciary Committee, in a very 
strong bipartisan fashion, to try and bring this matter up.
  I also want to highlight and mention Senator Carper of Delaware who 
has been tireless in his support for this effort. Senator McConnell as 
well has worked on this issue. Senator Landrieu, and Senator Schumer, I 
should mention as well, as a member of the Judiciary Committee, have 
also been a part of an effort to try and come up with a bill that could 
enjoy broad-based support.
  I mentioned Senators Specter and Leahy at the outset of my remarks as 
the chairman and ranking member who also worked well together to bring 
us to this point. I want to point out to my colleagues, of course, as 
someone who was very much involved in the negotiations back in the fall 
of 2003, that when the cloture motion failed, as pointed out by the 
Senator from Kentucky, within a few moments of that vote this Senator 
rose and offered to the majority at that point a willingness to sit 
down that day in fact to try and work out differences that would allow 
for this bill to go forward.
  The distinguished majority leader accepted that offer and we 
immediately began a process to put this bill together. In fact, several 
of us sent a letter at that time to Senator Frist. The letter was sent 
by myself, Senator Landrieu, Senator Schumer, and Senator Bingaman, 
outlining four areas that we thought if we could be accommodated in 
these areas the bill could go forward in a bipartisan fashion.
  I ask unanimous consent that the letter dated November 14, 2003, from 
three of my colleagues and me to Senator Frist be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                                  U.S. Senate,

                                Washington, DC, November 14, 2003.
     Hon. Bill Frist,
     Senate Majority Leader,
     U.S. Capitol, Washington, DC.
       Dear Majority Leader Frist: We agree with the fundamental 
     principle of the pending class action legislation that would 
     permit removal of national class actions to federal court. 
     Under current law, there have been a number of instances of 
     unjustified forum-shopping and other abuses of the legal 
     process. We are committed to helping to reform the law to 
     ensure fair adjudication for all Americans. To that end, we 
     are writing to outline the policies that need to be addressed 
     in order to move the Senate toward a bill that can pass 
     before Congress adjourns for the year.
       While we support the general thrust of S. 1751, there are 
     some instances where the legislation goes beyond the scope of 
     what we believe must be addressed. It is our view that we are 
     very close to having a bill that we can support and if we can 
     satisfactorily address each of the following issues, we can 
     move forward quickly with you to pass a reform bill.
       Based upon our understanding of the issues that have been 
     discussed by you and the

[[Page S1078]]

     Democratic Leader, we believe that most of our concerns are 
     readily solvable [while a narrow subset may require some 
     further negotiation to resolve.]
       We believe more consideration must be given to the formula 
     for federal removal. We agree that many types of cases are 
     best considered in federal court. At the same time, we would 
     not want the Senate to fashion rules that permit the removal 
     of cases that are truly single-state cases which are 
     appropriately considered in state court. Additionally, we 
     should permit federal court judges to consider a set of 
     factors that includes both state and federal concerns when 
     determining whether a case in the ``middlethird'' of the 
     current formula should be removed.
       Mass tort actions that are not brought as class actions 
     should be removed from the bill. The bill passed by the 
     Judiciary Committee did not contain this language. We 
     understand that the peculiarities of state law in two states 
     may need to be addressed. However, the current mass tort 
     standard is much broader than necessary to address issues 
     raised by two of the fifty states. We want to write a rule 
     that is as precise as possible--in this case, by encompassing 
     actions that are truly class actions, while at the same time 
     excluding any cases that are not.
       There are several places in the bill that pre-empt current 
     law or allow for significant deviation from standard 
     practice. This has the effect of encouraging manipulation or 
     abuse by either side, and should not be allowed in reform 
     legislation. The current version of the removal provision 
     permits removal at any time, even during trial. This includes 
     a potential ``merry-go-round effect'' of repeated removal and 
     remand between state and federal courts. Additionally, the 
     underlying bill does not specify when the court would measure 
     the plaintiff class and it creates a new appellate review of 
     remand orders.
       In many cases, plaintiffs, who take the risk of coming 
     forward, should be able to be compensated for that risk. The 
     bill currently requires their recovery to be precisely the 
     same as all other members of the class. Different risks and 
     different damages in civil rights and other claims, should 
     receive different compensation, upon approval of the trial 
     judge.
       Lastly, the underlying bill simply restates current law in 
     requiring judges to review coupon settlements. Given the 
     clear problems that have been raised with abusive coupon 
     settlements, we believe it is imperative to include stronger 
     provisions that the attorneys' fees to the actual coupons 
     redeemed.
       While time is short in this session, there is no reason why 
     the Senate cannot consider this legislation in a bi-partisan 
     spirit. If we indeed reach agreement, it is critical that the 
     agreement be honored as the bill moves forward--both in and 
     beyond the Senate. We are prepared to work with you toward 
     that end and we look forward to hearing from you soon as 
     possible as to how we can best move this legislation forward.
           Sincerely,
     Mary L. Landrieu.
     Charles Schumer.
     Christopher J. Dodd.
     Jeff Bingaman.

  Mr. DODD. As a result of that letter, we went through several days of 
negotiations on this bill. The four areas that we sought changes in the 
bill are the following: Removal of formula including the definition of 
mass torts; the so-called merry-go-round problem in the bill; coupon 
settlements; and fair compensation for named plaintiffs. Those are the 
four areas we identified in the November 14 letter. As a result of our 
negotiations, we came back with 12 improvements in this bill, agreed to 
by myself, Senators Frist, Grassley, Hatch, Kohl, Landrieu, and 
Schumer.
  I ask unanimous consent that the list of the 12 changes that was a 
result of that negotiation be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

Summary of Changes to S. 1751 as Agreed to by Senators Frist, Grassley, 
            Hatch, Kohl, Carper, Dodd, Landrieu, and Schumer


          The Compromise Improves Coupon Settlement Procedures

       S. 1751 would have continued to allow coupon settlements 
     even though only a small percentage of coupons are actually 
     redeemed by class members in many cases.
       The compromise proposal requires that attorneys fees be 
     based either on (a) the proportionate value of coupons 
     actually redeemed by class members or (b) the hours actually 
     billed in prosecuting the class action. The compromise 
     proposal also adds a provision permitting federal courts to 
     require that settlement agreements provide for charitable 
     distribution of unclaimed coupon values.


 The Compromise Eliminates the So-called Bounty Prohibition in S. 1751

       S. 1751 would have prevented civil rights and consumer 
     plaintiffs from being compensated for the particular 
     hardships they endure as a result of initiating and pursuing 
     litigation.
       The compromise deletes the so-called ``bounty provision'' 
     in S. 1751, thereby allowing plaintiffs to receive special 
     relief for enduring special hardships as class members.


  The Compromise Eliminates the Potential for Notification Burden and 
                               Confusion

       S. 1751 would have created a complicated set of 
     unnecessarily burdensome notice requirements for notice to 
     potential class members. The compromise eliminates this 
     unnecessary burden and preserves current federal law related 
     to class notification.


        The Compromise Provides For Greater Judicial Discretion

       S. 1751 included several factors to be considered by 
     district courts in deciding whether to exercise jurisdiction 
     over class action in which between one-third and two-thirds 
     of the proposed class members and all primary defendants are 
     citizens of the same state.
       The compromise provides for broader discretion by 
     authorizing federal courts to consider any ``distinct'' nexus 
     between (a) the forum where the action was brought and (b) 
     the class members, the alleged harm, or the defendants. The 
     proposal also limits a court's authority to base federal 
     jurisdiction on the existence of similar class actions filed 
     in other states by disallowing consideration of other cases 
     that are more than three years old.


        The Compromise Expands the Local Class Action Exception

       S. 1751 established an exception to prevent removal of a 
     class action to federal court when 2/3 of the p1aintiffs are 
     from the state where the action was brought and the ``primary 
     defendants'' are also from that state (the Feinstein 
     formula). The compromise retains the Feinstein formula and 
     creates a second exception that allows cases to remain in 
     state court if: (1) more than 2/3 of class members are 
     citizens of the forum state; (2) there is at least one in-
     state defendant from whom significant relief is sought and 
     who contributed significantly to the alleged harm; (3) the 
     principal injuries happened within the state where the action 
     was filed; and (4) no other class action asserting the same 
     or similar factual allegations against any of the defendants 
     on behalf of the same or other persons has been filed during 
     the preceding three years.


 The Compromise Creates a Bright Line For Determining Class Composition

       S. 1751 was silent on when class composition could be 
     measured and arguably would have allowed class composition to 
     be challenged at any time during the life of the case. The 
     compromise clarifies that citizenship of proposed class 
     members is to be determined on the date plaintiffs filed the 
     original complaint, or if there is no federal jurisdiction 
     over the first complaint, when plaintiffs serve an amended 
     complaint or other paper indicating the existence of federal 
     jurisdiction.


        The Compromise Eliminates the ``Merry-Go-Round'' Problem

       S. 1751 would have required federal courts to dismiss class 
     actions if the court determined that the case did not meet 
     Rule 23 requirements. The compromise eliminates the dismissal 
     requirement, giving federal courts discretion to handle Ru1e 
     23-ineligible cases appropriately. Potentially meritorious 
     suits will thus not be automatically dismissed simply because 
     they fail to comply with the class certification requirements 
     of Rule 23.


           The Compromise Improves Treatment of Mass Actions

       S. 1751 would have treated all mass actions involving over 
     100 claimants as if they were class actions. The compromise 
     makes several changes to treat mass actions more like 
     individual cases than like class actions when appropriate.
       The compromise changes the jurisdictional amount 
     requirement. Federal jurisdiction shall only exist over those 
     persons whose claims satisfy the normal diversity 
     jurisdictional amount requirement for individual actions 
     under current law (presently $75,000).
       The compromise expands the ``single sudden accident'' 
     exception so that federal jurisdiction shall not exist over 
     mass actions in which all claims arise from any ``event or 
     occurrence'' that happened in the state where the action was 
     filed and that allegedly resulted in injuries in that state 
     or in a contiguous state. The proposal also added a provision 
     clarifying that there is no federal jurisdiction under the 
     mass action provision for claims that have been consolidated 
     solely for pretrial purposes.


  The Compromise Eliminates the Potential For Abusive Plaintiff Class 
                                Removals

       S. 1751 would have changed current law by allowing any 
     plaintiff class member to remove a case to federal court even 
     if all other class members wanted the case to remain in state 
     court. The compromise retains current law--allowing 
     individual plaintiffs to opt out of class actions, but not 
     allowing them to force entire classes into federal court.


 The Compromise Eliminates the Potential for Abusive Appeals of Remand 
                                 Orders

       S. 1751 would have allowed defendants to seek unlimited 
     appellate review of federal court orders remanding cases to 
     state courts. If a defendant requested an appeal, the federal 
     courts would have been required to hear the appeal and the 
     appeals could have taken months or even years to complete.
       The compromise makes two improvements: (1) grants the 
     federal courts discretion to refuse to hear an appeal if the 
     appeal is not in the interest of justice; (2) Establishes 
     tight deadlines for completion of any appeals

[[Page S1079]]

     so that no case can be delayed more than 77 days, unless all 
     parties agree to a longer period.


The Compromise Preserves the Rulemaking Authority of Supreme Court and 
                          Judicial Conference

       The compromise clarifies that nothing in the bill restricts 
     the authority of the Judicial Conference and Supreme Court to 
     implement new rules relating to class actions.


                   The Compromise Is Not Retroactive

       Unlike the House bill, the compromise will not 
     retroactively change the rules governing jurisdiction over 
     class actions.

  Mr. DODD. I will not go through and name each one of them. Some of 
them are rather arcane but nevertheless important provisions of this 
bill, the point being that we were prepared basically in the fall of 
2003 to go forward.
  We were notified at that point that the first item of business in 
January of 2004, more than a year ago, would be the class action reform 
bill. Well, here we are in February of 2005 finally getting to this 
matter. There was a prepared bipartisan bill over a year ago on class 
action and we are now dealing with exactly the same bill. As the 
Senator from Kentucky pointed out, he would have preferred the House 
bill, the bill that was not approved when the cloture motion was held, 
and reluctantly is supporting this bill.
  There are those of us who could not have supported the House bill or 
the version that came up in the Senate earlier, but we have worked very 
hard to put this compromise together over a year ago. So we could have 
dealt with this a long time ago, but nonetheless we are here today and 
that is the good news.
  I am heartened that the other body has agreed to accept this version 
if it goes unamended over the next day or so during the debate and 
consideration of this legislation. I am hopeful that will be the case.
  Very briefly, I will go through what we have achieved. As I 
mentioned, following the vote Senator Frist asked myself and others, 
including my good friend from Delaware who is on the floor today, to 
enter into discussions with him and other Members to explore whether 
there might be some ways of building greater support for this bill. 
Senators Schumer and Landrieu joined in writing a letter to the 
majority leader, which I have put into the Record already, in which we 
laid out the four areas of our concerns. We subsequently entered into 
those negotiations among our four offices. Senators Grassley, Kohl, 
Hatch, and Carper played very important roles in that consideration. 
Those negotiations were very productive. We reached significant 
agreement not on the four original areas of concern but on eight others 
as well. That point deserves special emphasis. We went into the 
negotiations seeking improvement on four issues. We emerged with 
significant changes on 12 issues.
  The result is a bill that is now before this body. In my view, it is 
very fair and balanced, rather modest legislation that addresses a 
number of well documented shortcomings in our Nation's class action 
system. It shows what we can accomplish in the Senate when we work 
together in a bipartisan fashion. As with all good compromises, this 
bill is entirely satisfactory to no one and in some respects 
unsatisfactory to everyone.
  There are those who will say this bill does not go nearly far enough 
in rectifying the shortcomings of the class action system in our 
country. On the other hand, there are those who believe that the sky is 
falling, that the bill severely impairs the ability of people to gain 
access to our courts. In my judgment, claims of both sides are vastly 
overstated. One of the reasons why I believe this is so is that the 
people on both sides of the legislation, proponents and opponents 
alike, agree our compromise has made this bill better. It targets more 
precisely those problems in need of reform and addresses them in an 
appropriate and effective manner.
  We will no doubt discuss those problems in more detail in the coming 
hours, but allow me to briefly mention two of them. Perhaps the central 
problem addressed by the compromise is the forum shopping issue. 
Article III of the Federal Constitution sets forth the circumstances 
under which cases may be heard in Federal court. Article 2 of Article 
III extends Federal jurisdiction to suits ``between citizens of 
different States.'' These are known as diversity cases. The Framers had 
two separate but related reasons for allowing Federal courts to hear 
cases between citizens of different States.

  Very simply, one was to prevent the possibility that the courts of 
one State would discriminate against the citizens of another State. The 
second reason was to prevent the possibility that the courts of one 
State would discriminate against interstate business and thereby impede 
interstate commerce. Over the years, however, class action rules have 
been interpreted in such a way that plaintiffs' lawyers have been able 
to keep class actions out of Federal court, even those that are 
precisely the kind of cases for which diversity jurisdiction was 
created, because of their interstate character. They do this by adding 
named plaintiffs or defendants solely based on their State of 
citizenship in order to defeat the diversity requirement.
  Alternatively, they allege an amount in controversy that does not 
trigger the $75,000 threshold for removing cases to Federal court. The 
result is frequently an absurd one. A slip-and-fall case in which a 
plaintiff alleges, say, $76,000 in damages can end up in Federal court. 
At the same time, a case involving millions of plaintiffs from multiple 
States and billions of dollars in alleged damages is heard in State 
court, just because no plaintiff claims more than $75,000 in damages or 
because at least one defendant is from the same State of at least one 
plaintiff.
  Section four of the bill modifies these diversity rules to allow 
Federal courts to hear diversity cases that have a strong interstate 
character. In particular, it allows Federal jurisdiction if the amount 
in controversy alleged by all plaintiffs exceeds $5 million and if any 
member of the plaintiff class is a citizen of a different State than 
any defendant. At the same time, the bill creates careful exceptions 
that allow cases to remain in State courts where those cases are 
primarily intrastate actions that lack national implications.
  The legislation attempts to bring diversity rules more in line with 
the original purpose of Federal diversity jurisdiction. Cases that are 
interstate in nature because they involve citizens of multiple States 
and interstate commerce may be heard in Federal courts. Cases that are 
not interstate in nature remain in State courts.
  A second problem the compromise addresses is the so-called coupon 
settlements. As our colleagues may know, a growing number of class 
action cases involves these type of settlements. In a typical coupon 
settlement, class members receive only a promotional coupon to reduce 
the cost of a defendant's products while the lawyers for the class 
action receive a rather large fee that is disproportionate to any 
client benefit.
  For instance, in one case a soft drink company was sued for 
improperly adding sweeteners in apple juice. The company agreed to 
settle the case. The settlement required it to distribute to customers 
a 50-percent coupon off the purchase of apple juice. Meanwhile, class 
counsel received $1.5 million in cash.
  I have no problem with attorneys earning a fee for their services. In 
fact, the compromise bill places no caps at all on attorney fees, 
although there were those who wanted to do that.
  But what is particularly disturbing about these coupon settlements is 
class members typically redeem only a small portion of the coupons 
awarded. In fact, over the years only 10 or 20 percent of coupons were 
actually redeemed. Yet the attorneys are paid regardless of how many 
coupons are cashed in.
  In effect, there is a negative incentive for counsel for both 
plaintiffs and defendants to enter into such settlements. Counsel for 
the plaintiff is paid their fee regardless of the percentage of coupons 
redeemed. At the same time, counsel for the defendants know they are 
likely to pay in redeemed coupons only a fraction of what they would 
pay if they paid cash to settle a case. Meanwhile, the actual class 
members--the ones who have actually been aggrieved--receive a benefit 
of little or no value at all.
  Our compromise takes several steps to remove this negative incentive 
to enter into coupon settlements. Most importantly, it states that an 
attorney's fee incurred to obtain a coupon

[[Page S1080]]

settlement can only be paid in proportion to the percentage of coupons 
actually redeemed. For example, if an attorney's fee for obtaining a 
coupon settlement is $5 million but only one-fifth of the coupons are 
actually redeemed, the attorney can only recover one-fifth of his or 
her fee--roughly $1 million.
  In addition, the bill requires that a judge may not approve a coupon 
settlement until he or she conducts a hearing to determine whether 
settlement terms are fair, reasonable, and adequate for class members.
  There are other provisions of the bill that are also important.
  In the interest of time--I see my colleague from Mississippi also 
wants to speak before our colleague from Illinois offers the first 
amendment--I will defer discussing them in detail at this hour. 
However, to reinforce my central argument that this is a reasonable, 
modest piece of legislation, it is worth mentioning what the bill does 
not do.
  First, it does not apply retroactively, despite those who wanted it 
to. A case filed before the date of enactment will be unaffected by any 
provision of this legislation.
  Second, this legislation does not distinguish in any way or alter a 
pending case.
  Third, it does not in any way alter substantive law or otherwise 
affect any individual's right to seek equitable and monetary relief.
  Fourth, in does not in any way limit damages, including punitive 
damages.
  Fifth, it does not cap attorney fees.
  These are all matters that some people wanted to include in the bill.
  And, it also does not impose more rigorous pleading requirements of 
evidentiary burdens of proof.
  As some of our colleagues have said, this legislation is actually 
more court reform than tort reform. Candidly, I think they are more 
right than wrong about that. This is more court reform than tort 
reform. It stands in very sharp contrast to some of the other 
legislation considered by the Senate in the last Congress. That 
includes the Energy bill, which extinguished pending and future suits 
against makers of MTBE, a highly toxic substance that pollutes ground 
water.
  It also includes legislation that shielded gunmakers and gun dealers 
from many types of lawsuits.
  Incredibly, we were about to adopt legislation that would completely 
exclude an entire industry even when there was complete negligence on 
their behalf of being sued. I suggested when we were about to adopt 
those bills that Members think about talking about tort reform. Those 
matters cause this Senator deep concern, despite the fact I represent 
the largest gun producers in the United States. I cannot imagine my 
insurance companies getting a deal as the gun manufacturers were about 
to get. Nonetheless, those bills died, as they should have, in my 
opinion.
  The legislation before the Senate today does not close the courthouse 
door to a single citizen in this country. Maybe that citizen will end 
up in Federal court rather than State court, but no citizen will lose 
the sacred right in America to seek redress or grievance in a court of 
law.
  When this compromise was written 15 months ago, it was said that it 
was critical that this bill be honored as the bill moves forward--both 
within and beyond the Senate. I continue to believe that to be the 
case.
  In the words of the Senator from Kentucky earlier today, as well as 
statements made by Speaker Hastert, this Member is assured that, in 
fact, the agreements will be kept. In fact, I had a conversation with 
the staff of Mr. Sensenbrenner, chairman of the House Judiciary 
Committee, who reinforced the notion that if we adopt this bill as it 
presently reads, then there will no changes in the House and they will 
accept the Senate language. That is good news for those of us who have 
worked on this compromise.
  Certainly, this is not a perfect bill. No bill is. We all know that, 
but I think it strikes a careful balance between remedying the 
shortcomings and retaining the strengths of current class action 
practice in this country.
  Obviously, the bill is not yet through the Senate. But the consent 
agreement entered into by the two leaders is an auspicious beginning to 
preserving the balance.
  Let me, once again, reiterate my thanks to Senator Reid of Nevada, 
the distinguished Democratic leader, and for Senator Frist entering 
into that agreement which allows us to have this debate, and for all 
relevant and germane amendments to be considered to this legislation. 
Certainly, that is the way it ought to be done.
  Moreover, I note that the leadership of the other body has indicated 
its willingness to respect the balance that this bill strikes, as well. 
That, too, is a positive development.
  I stand in strong support of this legislation. I think it is a good 
compromise. It is not a perfect one. I know my colleagues may offer 
some amendments that I might have been attracted to under different 
circumstances which I may support, but when you try to reach agreement 
here, it is not easy. And when you do, I think it is worthy of support, 
particularly when those agreements cover as much territory as we did 
during the compromise efforts 15 months ago.
  As I mentioned at the outset, there were four proposals with which we 
ended the negotiations. Those four proposals were adopted, and eight 
others were added during that negotiation.
  I commend again the leader. I commend Senators Specter and Leahy for 
their efforts, and I look forward to this bill passing the Senate and 
being adopted by the House and going to the President for his 
signature.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Mississippi.
  Mr. LOTT. Mr. President, I rise today in strong support of the Class 
Action Fairness Act of 2005.
  Before he leaves the floor, I thank the Senator from Connecticut, Mr. 
Dodd, for his comments and for his leadership in this area. He has been 
steadfast. He has been involved in the process of moving this bill 
forward. A process which involves some give and take and some 
compromise.
  Surprise, surprise. That is the legislative process. This is not a 
perfect bill, as he noted. It is not one that I particularly like. I 
would like to make it a lot stronger, but it is a major step forward.
  I thank Senator Dodd, and other Senators. Senator Carper has been 
involved in that process, and colleagues on this side of the aisle.
  I am pleased that the first substantive bill of the year is one that 
truly has a chance to make a huge difference in this country, and it is 
a bipartisan effort. It is one that I predict, when we go through the 
amendment process and get to the end, will have a large vote in 
support. I will not be surprised if it gets 70 votes. I hope for that. 
That would be a positive step.
  If we can hold the line on amendments that may be offered--some that 
I would be attracted to, some that Senators such as Senator Dodd would 
be attracted to--but we worked out an agreement. We should brush back 
those amendments, discourage a whole raft of amendments being 
contemplated, and complete our work. The House has indicated they will 
accept this product--the compromise we came up with. When was the last 
time you heard of that even being possible?
  But they have reaffirmed just in the last few days that, yes, if we 
can complete it the way it is presently structured, they will take it 
up, pass our bill, and send it to the President. That would be a good 
way to start this year.
  I thank colleagues on both sides of the aisle for the work that has 
been done.
  Senator Hatch is here managing the legislation. He has worked on this 
long and hard, including last year when we had an opportunity that 
slipped away from us for a variety of reasons. It was tough last year 
to get much of anything done with all of us preoccupied with the 
Presidential campaign and our Senate campaigns and the House races. 
There is no use going back and rehashing why we didn't get it 
completed. We didn't get the job done. But we can do it now.
  I thank Senator Hatch for the work he has done on this bill over the 
years, and Senator Specter for getting it out of the Judiciary 
Committee in good order. I thank Senator Grassley for his usual dogged 
determination to not give up on an issue, and he continues to press not 
only this but the bankruptcy reform issues.
  I am thankful for the way we are starting off this year. I thank the 
leadership for working out an agreement to

[[Page S1081]]

bring this bill to the floor. We could very well have had a filibuster. 
But Senator Frist, working with Senator Reid, has indicated we are not 
going to get into that morass. We are going to step up to this issue, 
we are going to address it and debate it, and we are going to get 
results. I think that is good.
  I believe the American people want us to complete action on this 
legislation and pass the bipartisan compromise this week, if at all 
possible.
  There is no reason for this to be dragged out over a long period of 
time. We know there are a few amendments that are going to be offered. 
We will debate them. Let us vote and get to the conclusion of this 
process in the Senate, and send it to the House so they can take it up.
  Why do we need this bill?
  Some people would say we have the greatest judicial and jurisprudence 
system in the world. Things are working fine. Let us just leave it 
alone.
  I don't believe things are exactly working just fine. Every system 
over a period of time needs some adjustment, and if abuses begin to 
occur, we must step up and stop them.

  Over the past decade, we have seen a dramatic rise in the number of 
interstate class actions being filed in State courts, particularly in 
what are called magnet jurisdictions. I regret to say, and acknowledge, 
my State is one of the worst abusers. To the credit of our State 
legislature and our Governor, Haley Barbour, last year in Mississippi 
we passed tort reform legislation. We have gone from being the center 
of jackpot justice to being a State that has been praised by legal 
journals and the Wall Street Journal as having stepped up to the issue 
and dealt with it in a responsible way. They now describe my State in 
this way: Mississippi, open for business.
  Prior to tort reform though, businesses, industry, manufacturers, 
drugstores, etc. would not come to Mississippi to do business. They 
were not coming to my State, one of the poorest States in the Nation, 
because of the abuses that have been occurring in the legal system.
  But now, we have done our part in Mississippi. We still need to do 
more, but this is a Federal interstate problem and we in Congress are 
going to have to help address it.
  Courts where the class action mechanism is routinely and egregiously 
abused have been proliferating. In many instances we know the 
plaintiffs get little or nothing, and the lawyers have gotten massive 
fees. I can cite example after example in my State where awards have 
been de minimus or nothing. Jefferson County, MS, in my State is one of 
the worst, most abused magnet jurisdictions in the country. Far too 
often innocent local business men and women are joined as defendants in 
controversies to which they were merely innocent bystanders, all 
because plaintiffs' lawyers wanted to file the case in Jefferson County 
for the purpose of getting a bigger fee. Often, the cases have no other 
relationship to that county or to my State other than this is a good 
place to go. This is unconscionable. We have an obligation to our 
constituents to put a stop to it.
  Before going any further, it is important we take note of the title 
of this legislation: Class Action Fairness Act. This is not just some 
random title that Senator Grassley or others came up with. The whole 
point of the bill is to make the class action mechanism fair for all 
involved.
  Some of my colleagues will argue today, I am sure, that the system is 
already fair. I ask, Is it fair for the plaintiffs in a class action 
suit to receive nothing, literally nothing, when the lawyers 
representing them receive $19 million? The citation is Shields et al. 
v. Bridgestone/Firestone, Inc. et al.
  That is an actual case. Is it fair for the claims of residents of 
Mississippi, Washington, or Maine to be decided according to Illinois 
State law? Of course not. These are just two of the many reasons we 
need class action fairness, and we need it now.
  Our Nation's judicial system was designed to be the fairest in the 
world for all litigation, and we have gotten away from that. These 
abuses have called into question the very fairness of our whole system. 
It is imperative we act to close these loopholes that have allowed this 
process to fail in the way that it has.
  Before I talk about the specifics of what this bill does, let me take 
a minute to emphasize a few things the bill does not do. We will hear 
these allegations over the next few days, I am sure. This bill is not a 
tort reform bill, it is a court reform bill. This bill does not alter 
in any way substantive law. There may be some here who would want to 
debate that. However, I made that point at a meeting earlier today and 
I have gone back and checked it with experts. That is an accurate 
statement.
  Contrary to the scare tactics of the plaintiffs' lawyers, this bill 
does not affect an individual's right to seek redress or damages 
through the court, and it does not in any way limit damages, either 
punitive or compensatory.

  What does it do? First, it expands the jurisdiction of Federal courts 
over large interstate class actions. Clearly, that is a Federal 
jurisdictional issue and one we have a right and a real need to get 
into.
  Let's be clear. We are only talking about those cases in which the 
aggregate amount in controversy exceeds $5 million, in which there are 
at least 100 plaintiffs, and in which any plaintiff is a citizen of a 
different State from any defendant. This makes basic sense. Where you 
have more than 100 class members and where parties to the litigation 
are from different States, the Federal courts should have jurisdiction. 
This provides fundamental fairness for all involved. The Framers of our 
Constitution were concerned about ensuring fairness in cases like this, 
worried that State courts could be biased in favor of a home State 
party versus another party who was a resident of a different State. 
That is the very reason for a Federal diversity jurisdiction.
  It only makes sense that we close the loopholes that a growing number 
are abusing and exploiting with the result of creating a system that is 
having a huge impact in terms of dollar amounts and business and 
economic development.
  It is also important to note that this bill does not apply to every 
class action, only those meeting certain criteria. It is not going to 
result in our Federal courts being overwhelmed by a large number of 
class actions. We will hear that accusation this week. And it will not 
move all class actions to Federal court. In fact, it leaves in State 
courts a significant number of class actions. It reserves for State 
courts those cases in which all plaintiffs and defendants are residents 
of the same State. It reserves for State court those class actions with 
less than 100 plaintiffs. Likewise, class actions involving an amount 
in controversy of less than $5 million would remain in the State court 
as would class actions in which a State government entity is the 
primary defendant.
  As a part of the compromise worked out with Senator Feinstein last 
year, class actions that are brought against a company in its home 
State and in which two-thirds or more of the class members are also 
residents of that State would remain in State court.
  Finally, State courts would retain jurisdiction over class actions 
involving local controversies where at least two-thirds of the class 
members and one real defendant are residents of the State where the 
action is brought. This bill reserves these cases for State court 
because it is the right thing to do.
  There are other provisions of importance in this bill, including a 
consumer class action bill of rights. As many know, part of this 
section represents a compromise worked out by Senators Schumer, Dodd, 
and Landrieu last year. Notably, it places limitations on contingency 
awards for attorneys in coupon settlement cases. By basing these 
contingency fees on the value of the coupons that are actually 
redeemed, or the amount of time expended by the attorney, it provides 
for a far greater protection for plaintiff class members. This 
provision takes a big step toward addressing the grossly inequitable 
fee awards to attorneys when class members end up with a coupon.
  Additionally, by requiring the judge to make a written finding that 
the benefits to class members substantially outweigh the monetary loss 
from a settlement, the bill provides an added layer of protection for 
class members who will suffer a net monetary loss as a result of 
payment of attorney's fees.

[[Page S1082]]

  Do not get me wrong. I went to law school. I practiced law for a 
while. Yes, I was on the defense side of the ledger most of the time. 
But I have to admit reluctantly that my brother-in-law--I am really not 
related to him by blood; he married my wife's sister--is one of the, 
shall we say more famous lawyers in this country, Richard Scruggs. He 
has brought a lot of lawsuits I don't like. On occasion he actually 
makes a point with some of those lawsuits. I don't want to put him out 
of business, but I want some reasonable restraint on how these class 
action suits have been abused. He has not been one of the ones who 
actually wound up having abused lawsuits in the courts, as he winds up 
getting settlements most of the time.
  I understand both sides of this equation. I certainly do not want to 
take away people's right to sue--individuals or even class actions, 
when they are really a class. That is not what has been happening. 
There has been an effort to dredge up clients, and it has led to the 
next area I will talk about, mass actions.
  There is language in this bill dealing with mass actions. I 
understand there may be an effort later today or this week to change 
this section with an amendment that I understand may be offered. But it 
is vital that we retain the mass action section of the bill without an 
amendment so that we don't open the door for lawyers to make an end run 
around what we are trying to do with class actions in this bill.
  The mass action section was specifically included to prevent 
plaintiffs' lawyers from making this end run. It will ensure that class 
action-like cases are covered by the bill's jurisdictional provisions 
even if the cases are not pleaded as class actions.

  The amendment that we are hearing may be offered later today is a 
little sleight of hand. This is a case where you argue that you're only 
changing one word but, in reality, you fundamentally alter what happens 
with regard to these mass actions. There are a few States, such as my 
State--which do not provide a class action device. In those States, 
plaintiffs' lawyers often bring together hundreds, sometimes thousands 
of plaintiffs to try their claims jointly without having to meet the 
class action requirements, and often the claims of the multiple 
plaintiffs have little to do with each other. There was an instance in 
my State where you had more plaintiffs in one of these mass actions 
than you had people in the county, more than the residents in the 
county. Under the mass action provision, defendants will be able to 
remove these mass actions to Federal court under the same circumstances 
in which they will be able to remove class actions. However, a Federal 
court would only exercise jurisdiction over those claims meeting the 
$75,000 minimum threshold. To be clear, in order for a Federal court to 
take jurisdiction over a mass action, under this bill there must be 
more than 100 plaintiffs, minimal diversity must exist, and the total 
amount in controversy must exceed $5 million. In other words, the same 
safeguards that apply to removal of class actions would apply to mass 
actions.
  Mass actions cannot be removed to Federal court if they fall into one 
of four categories: One, if all the claims arise out of an event or 
occurrence that happened in the State where the action was filed and 
that resulted in injuries only in that State or contiguous States. That 
makes sense. The second exception would be, if it is the defendants who 
seek to have the claims joined for trial; third, if the claims are 
asserted on behalf of the general public pursuant to a State statute; 
and, lastly, if the claims have been consolidated or coordinated for 
pretrial purposes only.
  Some of my colleagues will oppose this mass actions provision and 
will want to gut it by making an effort to confuse mass actions with 
mass torts. I realize we are kind of getting into a legalese 
discussion, but words make a difference when you are considering a bill 
such as this. I am very concerned that the real motive is to render 
this provision meaningless, thereby creating a loophole for the trial 
lawyers to basically get a class action by another name.
  Mass torts and mass actions are not the same. The phrase ``mass 
torts'' refers to a situation in which many persons are injured by the 
same underlying cause, such as a single explosion, a series of events, 
or exposure to a particular product. In contrast, the phrase ``mass 
action'' refers to a specific type of lawsuit in which a large number 
of plaintiffs seek to have all their claims adjudicated in one combined 
trial. Mass actions are basically disguised class actions.
  If we enact the amendment that we are hearing may be offered to alter 
the mass action section, if we do not keep the mass action section 
intact, we will be knowingly creating a loophole that would undermine 
our whole effort in getting some responsible reform.
  I also understand there is another amendment that will be offered, 
and it has been referred to as the choice of law amendment. That has a 
good sound, choice of law. To me, that is another word for shopping 
around to find the best forum, once again, with no relation to where 
the incident occurred or where the plaintiffs live, or the defendants, 
or anything.
  I have spoken to several of my colleagues about this amendment in the 
last week or two, and some of them have even said to me: Don't you 
think we should include this amendment? My answer is no. This is a bad 
amendment. In my opinion, it is a poison pill. If we accept this choice 
of law amendment, basically the plaintiffs' lawyers can go to Federal 
court and say: OK, it is in Federal court, but we want to look at 
this State law, that State law, or another State law, depending on 
which one suits our particular cause the best. If this amendment is 
offered and passes, we would certainly have to go to conference then 
with the House. It would delay our efforts to get a final bill. And if 
we could not come up with a solution in conference that did not include 
this amendment, we would not get a bill.

  So the phrase ``choice of law'' does sound nice, but the amendment 
actually would alter very fundamental legal principles. It would 
require Federal courts to apply one State's laws when adjudicating a 
nationwide class action. Here is what that means. If a nationwide class 
action is brought against a Mississippi company, the judge would be 
forced, under this amendment, to choose one State's law to apply to the 
whole country. The Mississippi company, which typically conducts 
business in Mississippi in compliance with Mississippi law and Federal 
law, would not necessarily have the protection of Mississippi law. Even 
though the Mississippi law, with which the company complied, differed 
from, for example, Nebraska law, the judge could potentially choose to 
apply Nebraska law.
  So believe me, the proponents of this amendment know exactly what 
they are doing. If it were adopted, it would perpetuate the forum 
shopping that has been going on in recent years that has led to one of 
many areas of abuse.
  Let me conclude because I know others want to speak. We want to get 
the process started. It is a compromise bill. It is not perfect. There 
will be different points of view. I have worked in this area for many 
years. I have heard all the arguments. I have heard those arguments on 
the floor of the Senate, in committee rooms, and at the family dinner 
table.
  I want people to be able to get justice and redress. But I do not see 
how anybody can argue that there has not been abuse in the area of 
class actions and in mass actions. It has certainly been abusive in my 
own State. What disgusts me the most is the lawyers it has made 
superwealthy while the claimants got almost nothing. We can do better. 
This legislation will lead to a better solution.
  I yield the floor, Mr. President.
  The PRESIDING OFFICER (Mr. Martinez). The Senator from Illinois.
  Mr. DURBIN. Mr. President, I say to those of you who are following 
the Senate in action, welcome to our first substantive bill. That is 
right, this is the first substantive bill that we are considering. Some 
might conclude, if it is the first, it must be a very high priority.
  Does it have to do with health care in America, the increasing costs 
of health care for families and businesses and individuals? No.
  Does it have to do with education in America, how to improve our 
schools so we can compete in the 21st century? No.

[[Page S1083]]

  It must be the Federal Transportation bill then. We know we need 
that. We are 2 years late in passing that bill, and we need the money 
spent in America to build our infrastructure. Is this the Federal 
Transportation bill? No.
  No, it does not have anything to do with health care or education or 
transportation, despite the fact that every Senator in this Chamber, 
when they go back to their States and meet with their people, hears 
about those issues.
  Senator, what are you going to do about the cost of health insurance? 
It is killing my business. Senator, what are you going to do about the 
President's No Child Left Behind, an unfunded Federal mandate? We are 
having trouble with our school districts back in Illinois and Utah and 
other places. What are you going to do about that? Senator, when are 
you going to pass the Federal Transportation bill? We need to improve 
our highways in Illinois.
  Those are the comments we hear. But, no, when it comes to the very 
first bill, the highest priority of the Republican leadership in this 
Congress, we are going to deal with what they have characterized as a 
litigation crisis.
  Richard Milhous Nixon, former President of the United States, wrote a 
famous book during his public career entitled: ``My Six Crises.'' Well, 
if you pay close attention to the Bush administration, you will find 
that they are way beyond six crises. They have told us we had a 
national security crisis that required the invasion of Iraq; an 
economic crisis which required tax cuts for the wealthiest people in 
America; a vacancy crisis in the Federal courts, despite the fact that 
this Senate had approved 204 of the President's 214 judges he sent to 
us. We were told we had a moral crisis requiring constitutional 
amendments. And just last week, the President has told us we have a 
Social Security crisis.
  It is hard to keep up with this White House and all their crises. And 
here today, we are told we have a litigation crisis and a sense of 
urgency to deal with this bill. Yet the facts do not back it up.
  According to the Administrative Office of the U.S. Courts, which is a 
part of the Federal judiciary, tort actions in Federal district courts 
from 2002 to 2003 dropped by 28 percent.
  Over the last 5 years, Federal civil filings have not only decreased 
by 8 percent, the percentage of civil filings that are personal injury 
cases has declined to a mere 18.2 percent of the total docket.
  The same thing is happening at the State level. So the statistics 
tell us we are not seeing an onslaught of more and more cases. Just the 
opposite is true; that is, in cases filed by individuals.
  The study also took a look to find out what American businesses were 
doing--American businesses suing other businesses. It turns out 
American businesses were 3 to 5 times more likely to file lawsuits than 
individuals.
  For example, in Mississippi, the State of the Senator previously 
addressing the Chamber and one of the States often criticized by tort 
reform advocates, Public Citizen found that businesses were more than 
five times more likely to file suits than individuals. In that State, 
there were 45,891 business lawsuits filed compared to 7,959 lawsuits by 
individuals. You sure wouldn't know it listening to the comments on the 
floor about a litigation crisis.
  Along comes the self-styled group called the American Tort Reform 
Association. I think if you lift the lid on the American Tort Reform 
Association, you will find a lot of the big business interests in 
America. They have come forward and decided that they are going to call 
certain areas of America judicial hellholes. For example, their 2004 
report labeled the entire State of West Virginia as the No. 4 judicial 
hellhole in America. Why? The report states that in one county, Roane 
County, WV, which in its first 150 years never had a class action 
lawsuit, actually had two class action lawsuits filed in a year and a 
half--two in a year and a half, the No. 4 judicial hellhole in America.
  Here is another exaggeration by the same group: the No. 6 judicial 
hellhole in America, Orleans Parish, LA. According to the report from 
the American Tort Reform Association, a strong proponent of this bill, 
this county earned the title because ``plaintiffs attorneys are turning 
mold into gold'' by representing a class of government attorneys 
working in buildings containing toxic mold which caused health 
problems. How many class action lawsuits were filed in Orleans Parish 
to make them a judicial hellhole? One.
  The Senator from Mississippi spoke a few minutes earlier about abuses 
in his own State. Take a look at what happened in the State of 
Mississippi. In 2002 and 2003, this same American Tort Reform 
Association listed Mississippi, its 22nd judicial district, as a 
judicial hellhole. In 2004, it didn't make the list. Why? Because the 
State actually received five pages of praise from the same group for 
changing its State's laws to deal with class action lawsuits. This 
Mississippi judicial hellhole became an object of praise and admiration 
when they fixed their own problem at the State level.
  I can't avoid the topic of judicial hellholes without speaking for a 
moment about Madison County, IL. The President was so upset about 
Madison County, IL, that he flew to Collinsville a couple weeks ago to 
criticize their court system. Let's take a look at Madison County in 
terms of real numbers.
  In 2004, Madison County ranked No. 1 by the American Tort Reform 
Association as the worst judicial hellhole in America. So what do we 
find about the class action lawsuits that were filed in Madison County? 
Of the class action lawsuits filed in 2002, four were certified to go 
forward. All the rest of them languished and did not. Four cases in 
2002 went forward. But surely if they are a judicial hellhole, it got 
worse. But it didn't. In 2003, only one class action lawsuit was 
certified. One. What happened in 2004? Not a single class action 
lawsuit has been certified. So when you hear these exaggerations on the 
floor about judicial hellholes and all of these class action lawsuits, 
it turns out that the No. 1 example of a judicial hellhole--Madison 
County, IL--had no class action lawsuits that were certified in 2004.
  We know what this is all about. We should get down to the basics. Why 
is the U.S. Chamber of Commerce spending over $1 billion to lobby us to 
pass this bill? This is the largest amount of money ever recorded for 
lobbying activities and the first time that lobbying spending has 
passed the $1 billion mark. Why is it so important? According to 
Senator Lott and others, it is just a simple thing. We are going to 
take class action lawsuits out of State courts and put them in Federal 
courts. What is the matter with that? Federal courts are supposed to 
represent the Nation. These class action lawsuits have plaintiffs from 
all over the country. It seems reasonable.
  If that is all there is to it, why would these business interests 
spend such an inordinately large sum of money to lobby us to pass it? 
Because they know, as we know who have practiced law, that Federal 
courts are unfriendly to class actions. Federal courts are less likely, 
by their own rulings, to certify a class. In other words, a class of 
plaintiffs files a lawsuit in Federal court, it is less likely it will 
go forward. That is what this is all about. It isn't about class action 
fairness; this is the class action moratorium act.
  Also, Federal law favors less liability in case after case. Federal 
law discourages Federal judges from providing remedies under State 
laws. So the business interests that want to move these cases from 
State court to Federal court understand what it is all about. Fewer 
cases will survive. Those that do will pay less. That is what their 
goal is. That is why they have spent this enormous amount of money 
lobbying Congress.
  Listen to what the business interests say about the Class Action 
Fairness Act before us:

       It would simply allow Federal courts to more easily hear 
     large national class action lawsuits affecting consumers all 
     over the country.

  How harmless. Yet they spent $1 billion lobbying to pass this bill as 
the first bill of this Congress--before health care, before education, 
before the Federal transportation bill. They know, as we do, that class 
action lawsuits in Federal court are much less likely to survive.
  Let me give an example, because the problem with talking about class 
actions is most people listening say: What in the world is he talking 
about?

[[Page S1084]]

Is this a class in school or class of people? Who are you referring to? 
Let me give a concrete example.
  Charles and Jenny Will live in Granite City, IL, which happens to be 
in Madison County. They are an older couple. They live in a small blue 
and white wood-frame house. Their main source of income is Social 
Security. They are nice people. I am proud to have them as my 
constituents. On their walls hang pictures of their kids and the Last 
Supper.
  Mr. Will has 3 years of Active-Duty service in the U.S. Navy and a 
sign in his front yard that he proudly put there saying ``support our 
troops.'' He is 71 years old. He is on oxygen, but he moves around 
pretty well. He has had some major heart problems, including triple 
bypass in 1989, and problems with his leg where the doctors had to 
remove a vein for surgery.
  Mr. Will is taking nitro tablets and about 15 different medications 
daily, two of which are insulin. He was, unfortunately, diagnosed with 
diabetes 20 years ago, and he has very few complications--thank 
goodness--but it seems to have affected his vision, which is not very 
good.
  Mr. Will was prescribed the drug Rezulin by his doctor. He remembers 
it because the drug was real expensive. He told the doctor he couldn't 
afford it, so his doctor gave Mr. Will a bunch of samples to take home. 
Rezulin, a drug prescribed for the treatment of type 2 diabetes, became 
available in the U.S. in 1997. Warner-Lambert marketed this drug as 
``safe as a placebo''--in other words, as safe as a sugar pill.
  Three years after Rezulin came to market, the FDA asked Warner-
Lambert to voluntarily remove the drug from the market as they started 
noting too high an incidence of liver failure and deadly side effects. 
Mr. Will was subsequently taken off Rezulin and prescribed a safer 
treatment.
  A class action lawsuit was filed in Illinois to protect people living 
there like Mr. Will. The case alleged that Warner-Lambert violated the 
New Jersey consumer fraud statute by pricing the drug much more in 
excess of the price that the drug would have been but for Warner-
Lambert's concealment of the drug's deadly side effects.
  This theory is supported by the major insurance companies.
  Last year, the case was certified by the State court as a class 
action. But it was turned down in Federal Court. That is the problem we 
are running into.
  Mr. President, I have an amendment I am going to offer. I think I 
will wait until after lunch to do that. The Senator from Texas is here 
and wishes to speak. We have about 20 minutes remaining.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from Texas is recognized.
  Mr. CORNYN. I will speak generally about the issue of class action 
reform contained in S. 5, because I believe the American civil justice 
system is, in many ways, at a crossroads. We have an opportunity to 
choose between taking a path toward greater freedom and responsibility, 
or heading down a path that encourages lawsuit abuse and cripples our 
ability to compete in a global economy. Now is the time, I believe--
actually it is past time--to enact the reforms necessary to ensure 
America's competitiveness in the 21st century.
  I am struck, as I listen to the critics of this bill, many of whom 
are the same people who complain about the fact that American jobs are 
being sent offshore to places like India, China, and elsewhere, when 
one of the very causes of the damage to America's global 
competitiveness is our civil justice system.
  I think people of good faith and good will agree that the goal of our 
civil justice system ought to be getting people who are truly injured 
as a result of the fault of another fair compensation. But I think 
also, being objective about this issue and some of the examples of 
abuses that we have seen, we know too often that this goal is not being 
met in the current environment. We see lawsuit abuse particularly in 
the class action area and also in the asbestos area. This abuse is 
having a damaging impact on our economy. In the asbestos area, we see 
people who are sick are getting pennies on the dollar in compensation 
because people who are not sick are getting ahead of them in line, 
resulting in bankruptcies which have destroyed jobs and pensions for 
American workers.
  So it is unthinkable to me that anyone could stand here on the Senate 
floor and claim there is nothing wrong. That seems to be a common theme 
these days, whether we are talking about Social Security or lawsuit 
reform, or a variety of subjects. But the truth is that the facts 
clearly indicate otherwise.
  As the continued spread of democracy and capitalism take root in 
countries throughout the world, and as modern travel and information 
technology bring our world closer together, there is no question that 
the health of America's economy is influenced by the free flow of goods 
and services in international markets.
  It is a simple fact of life: We live in a global marketplace, where 
we do not just compete with businesses across the street, but with ones 
on the other side of the world. Our economic strength and ability to 
compete now depends on our willingness to confront the burdens that 
prevent growth, discourage innovation, and ultimately cost Americans 
their jobs.
  It is unthinkable to me that anyone can claim a system that 
compensates people who truly are injured as a result of the fault of 
another so poorly, but makes a handful of lawyers rich, doesn't need to 
be fixed. But the system--particularly in the class action area--is 
fraught with abuse. I will not detail all of those abuses, since they 
have been addressed earlier. But one of the most classic cases is the 
coupon settlement. It reminds me of an old country and western song, 
where the lawyers get the goldmine and the consumers get the shaft.
  We have all seen the numbers relating to the cost of our broken civil 
justice system. According to one estimate, the cost of the tort system 
in 2003 totaled more than $245 billion, or 2.2 percent of the gross 
domestic product. That amounts to a tort tax on every American citizen 
of approximately $845 a year.
  The percentage of our economy that is devoted to tort law and 
resolution of claims through our tort system is far greater than any 
other industrialized country. In Britain, for example, the entire tort 
system--attorneys' fees, settlement costs, jury awards, and 
administrative costs--costs less as a percentage of GDP than America's 
plaintiffs' lawyers gross for themselves alone.
  This level of stress on the economy and on our civil justice system 
itself is unacceptable. But it hasn't always been that way. Class 
actions, prior to significant rule changes in the 1960s and 1970s were 
not, as they are today, largely a sport for a handful of aggressive 
personal injury lawyers to pursue abusive litigation and junk lawsuits. 
Take, for example, the change in 1966, from a system where class 
members were required to ``opt in'' to a system, where now they are 
required to ``opt out.'' By 1971, four times as many class actions were 
being filed than had been in 1966. In other words, from 1966 to 1971, 
we saw four times the number of class actions brought.
  Since that time, recoveries have skyrocketed. This chart behind me 
reflects the growth I mentioned a moment ago. You can see that from 
1973 to 1975 there were relatively few class action lawsuits and 
relatively modest recoveries. But they have obviously ballooned and 
appear to be getting bigger year by year.
  The problems we increasingly experience with abusive class action 
lawsuits call for a significant overhaul of our civil justice system 
and particularly our rules providing for the resolution of mass tort 
litigation.
  I must tell you that the bill we have before us today is clearly a 
modest reform. It amounts to an improvement over the status quo, but it 
doesn't begin to approach the comprehensive solution America needs.
  As it stands, S. 5 provides two primary improvements: It allows 
removal of a greater number of class action lawsuits from State court 
to Federal court, and it requires judges to carefully review all coupon 
settlements and limit attorneys' fees paid in those settlements to the 
value actually received by class members.
  These two reforms--as modest as they are--are important and will 
certainly offer fair but desperately needed

[[Page S1085]]

relief for State courts which are experiencing firsthand the explosion 
of class action litigation. It will also provide for greater fairness 
for defendants who are currently being dragged into ``magnet 
jurisdictions,'' and it will provide greater fairness for class members 
who are oftentimes receiving pennies on the dollar, while class counsel 
get rich.
  Yet, as much of an improvement as this bill is, it falls short of the 
ideal. To be effective and fair, I believe class actions and other mass 
tort litigation require three things: A level playing field; 
transparency, so consumers can have complete, fair, and accurate 
information; and a clear relationship between class members and their 
lawyers.
  First, a level playing field depends on a fair class certification 
process. As the current occupant of the chair knows, almost all class 
actions settle if certified. The main event in class action lawsuits is 
the certification process because ultimately, once certified, most 
defendants feel as if they have no choice but to settle because even a 
small risk of an adverse judgment, given the large number of class 
members, can lead to a ruinous result. They are forced to try to settle 
the case on the best terms they can.
  Where there is no right to an immediate interlocutory appeal of class 
certification and stay on discovery, class certification can cause 
settlements that far exceed the case's value on the merits because of 
the extortionate effect of the certification process and the threat it 
brings to the very livelihood, not to mention the financial life, of 
the defendant involved.
  States, such as my home State of Texas, have also embraced limits on 
appeal bonds. Too often in large class action lawsuits, the judgment 
can be so large that the defendant cannot, in effect, buy an appeal 
bond with which to appeal the case and correct an erroneous ruling 
below. So the defendant is forced to settle because they cannot afford 
to appeal--again, not based on the merits, but based on the way class 
action lawsuits are structured, without a right to interlocutory 
appeal.
  The second step toward an effective system, I believe, is information 
flow. Class actions require that adequate information be available both 
for the sake of the process itself and for policymakers, like us, to 
analyze. It is hard for us to do our job when it comes to class action 
reform or civil justice reform when some of the information--much of 
the information--is simply hidden from public view. Class members 
should be fully advised of all aspects of their case, and we should 
require that certain relevant information about all class action 
settlements be collected and published centrally for examination and 
review by analysts and policymakers.
  Just as in Government, when it comes to class actions, people deserve 
to know what is going on, particularly if it is their case.
  The final step, and the most important one to me, is maintaining the 
proper relationship between the class members and their attorney. As 
the occupant of the chair, the Presiding Officer, knows, this is a 
particularly tough issue when it comes to class counsel who may have 
one real client, the class representative, with whom they deal but, in 
reality, class counsel calls the shots and runs the case. Class members 
may not even know they are involved in a lawsuit until they receive a 
notice of settlement and perhaps, as we heard, a coupon worth pennies 
on the dollar. The opportunity for abuse of that important fiduciary 
relationship between the lawyer and the client is very important to 
address.
  I believe one solution would be to allow members of the class to opt 
in instead of opting out because, indeed, in a country that says we do 
not promote litigation, although we certainly give fair access to 
courts, it just does not make much sense to me to say to the consumers: 
You can be a plaintiff in a lawsuit, you can actually be a party to a 
lawsuit and not even know about it until the lawsuit is over, which is 
what happens today.
  Consumers should not have to learn that they are members of a class 
action lawsuit by receiving a check for $2.38 in the mail and then find 
out in the morning paper that the lawyers who purported to represent 
them just collected $5 million. The cases and examples go on and on.
  It should also go without saying that the attorneys should be paid at 
a level commensurate with the work before them, not based on strictly a 
contingency fee which may, indeed, allow huge financial rewards for 
relatively modest work actually being done.

  I hope those listening, if there are any listening to my comments, 
understand my concerns that this modest legislation does not go far 
enough to remove the scandal of litigation abuse that too often plagues 
our civil justice system and the American economy. I hope they 
understand my reservations do not indicate I am not for this bill 
because, indeed, I am. I believe S. 5 is an important first step in 
reform and an important step in the right direction.
  In conclusion, because I know there are others who want to speak, 
there will be attempts to offer amendments to this bill. I know Senator 
Durbin, but for the loss of his voice, would have been the first to 
offer his amendment. I am told Senator Kennedy will be here shortly to 
do the same, but as everyone knows who has followed this bill--
certainly Senator Carper who has been an advocate for class action 
reform for some time, knows--the compromise reflected by S. 5 is a very 
fragile one, and it essentially depends on no amendments being made to 
the bill or agreed to the bill. If that happens, it is likely the bill 
will go promptly to the House where they will pass it, and it will go 
to the President's desk, and we will have an early victory for the 
American people in this important area. But there are a number of 
amendments that will be offered which, in essence, are poison pills, 
that if agreed to will completely destroy any opportunity we have for 
this modest reform.
  I have my own amendments that I filed, if others are offered and 
agreed to, which I believe are important to move the bill in the 
direction where I think it ought to go. But the truth is, I am 
refraining from urging those amendments at this time because I think 
this fragile compromise, as modest as it is, does represent real reform 
in moving the bill in the right direction.
  Here again, as the Washington Post editorial on August 27, 2001, 
points out:

       No portion of the American civil justice system is more of 
     a mess than the world of class action. None is in more 
     desperate need of policymakers' attention.

  That was in 2001, and certainly the situation has not changed today.
  I am baffled by those who want to whistle past the graveyard and act 
as if there is nothing wrong and that everything is just hunky-dory 
when it comes to class action reform. I believe the American people 
expect that the civil justice system will operate in their best 
interest, not in the best interest of a handful of lawyers.
  I am confident the damage that is being done to American 
competitiveness is killing jobs that would be created in the United 
States but for the fact that people do not want to subject themselves 
to an out-of-control class action system. So, instead, jobs are being 
created in other countries across the world where they do not have 
those same concerns.
  This is clearly an area that cries out for reform. It is one that is 
long past due.
  I congratulate Senator Carper and others on that side of the aisle 
who have worked so carefully to try to craft this fragile compromise. 
But I want my colleagues to understand--and I think they all do; I 
think we all do--that any amendments to this bill will doom it. So I 
urge all of my colleagues to vote against any and all amendments; 
indeed, even ones that I may like but which I know will have the 
ultimate effect of killing the bill. I think it is better to save those 
for another day and another time rather than have the prospect of this 
bill going down in flames.
  Mr. President, I appreciate the time and yield the floor.
  The PRESIDING OFFICER. The Senator from Delaware is recognized.
  Mr. CARPER. Mr. President, I understand that under the previous 
order, the Senate will stand in recess at 12:30 p.m. for our weekly 
caucus luncheons. I ask unanimous consent, notwithstanding that 
unanimous consent agreement, to proceed for 5 minutes.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. CARPER. Mr. President, before Senator Cornyn leaves the floor, I

[[Page S1086]]

thank him for his kind words, and I am pleased that we are at the point 
where we are on this legislation this week. I look forward to both 
sides exercising constraint--we cannot let the perfect be the enemy of 
the good--and pass the good legislation that has been introduced and 
debated this week, with the understanding the House will accept it and 
the President will sign it into law.
  We heard a fair amount already about the ills of class action 
lawsuits. Class action lawsuits, in and of themselves, are not a bad 
thing. Class action lawsuits give little people who are harmed, in some 
cases by companies, the opportunity--maybe not harmed in a way that the 
consumers, the little people, lose their eye, arm, leg, or life, but 
they suffer some kind of harm.
  The idea behind class action lawsuits is to say when little people 
are harmed by big companies or others that those people can band 
together and present their grievances to an appropriate court, State or 
Federal, and for the people who are harmed to be made whole.
  At the same time, it is important that when the plaintiffs are 
bringing a class action lawsuit against a defendant from another State, 
that the case be heard in a court where both sides can get a fair 
shake, the plaintiffs as well as the defendant.
  If we go back over a couple hundred centuries in this country, we 
ended up with a law that the Congress passed that said if we have a 
defendant from one State and plaintiffs from another State, it is not 
fair to the defendant to have the case necessarily heard in the home of 
the plaintiffs. Someone may have dragged the defendant in across the 
State lines and put them in a courthouse or courtroom where there is a 
bias toward the local plaintiffs who brought the case against the 
defendant from another State, and in an effort to try to make sure that 
we are fair to both parties, those who are bringing the accusations and 
those who are defending against them, we have the Federal courts which 
were established in many cases to resolve those kinds of issues.
  Unfortunately, we have seen an abuse of some class action lawsuits in 
recent years which led the Congress to begin debating this issue and 
considering legislation to address these abuses starting in, I want to 
say 1997, 7 years ago. The original problem that was discovered or was 
pointed out is this: There seems to be a growing prevalence of 
plaintiffs' attorneys who are forum shopping in State or local courts 
where the plaintiff class may have an inordinate advantage against the 
defendant. I will not go into the examples today, but there are any 
number of instances where one can see forum shopping has gone on, a 
State or a county courthouse has certified a class, agreed to hear a 
case, and it sets up a situation where the defendant company or the 
defendant knows they are going to have a hard time getting a fair shake 
in that courthouse. As a result, the defendant will agree to a 
settlement with the plaintiffs' attorneys. The settlement may richly 
reward the plaintiffs' attorneys for bringing the case, the defendant 
may cut their losses, but the folks on whose behalf the litigation was 
brought in the first place, those who allegedly are harmed, in many 
instances get little or nothing for their harm. That is not a fair 
situation. It is not fair to the little people on whose behalf the case 
has been brought. It is arguably not fair to the defendant because they 
are in a courtroom where they do not have a fair chance to defend 
themselves. It can be fixed, and it ought to be fixed.
  The legislation before us today will not end the practice of class 
action lawsuits being litigated and decided in State courts. I believe 
the majority of class action lawsuits, even if this legislation is 
passed, which I am encouraged that it will, will still continue to be 
held in State courts, and they should be. We will have the opportunity 
to explain why that is true later on.
  Before my 5 minutes expires, I conclude with this: There are any 
number of people on both sides of the aisle who would like to offer 
amendments to this bill. We have been working for 7 years to try to 
pass something that the House, the Senate, and the President will agree 
to. The time has come. To the extent that we make a change, whether it 
is in a Republican amendment or a Democratic amendment that might be 
offered, if we make a change, we invite the other side to retaliate and 
to offer their amendments and perhaps to adopt their amendments. For 
those of us who want to see this bill passed, I believe this 
legislation is about the fairest balance we are going to get, and I 
would encourage us to support it. We should consider and debate the 
amendments but in the end turn those amendments down.
  I look forward to debating each of those amendments, and I hope in 
the end we can accomplish three things with this legislation: No. 1, 
make sure that where small people are harmed in a modest way, they have 
the opportunity to be made whole; No. 2, make sure that the defendants 
who are pulled into court on these class action lawsuits have a 
reasonable chance of getting a fair shake; and lastly, I am not 
interested in overburdening Federal judges. I think most of this 
litigation should remain in State court. I believe the compromise we 
have struck will do that. Those are our three goals, and I look forward 
to the debate that is going to follow.

                          ____________________