[Congressional Record Volume 151, Number 12 (Tuesday, February 8, 2005)]
[Senate]
[Pages S1086-S1110]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
CLASS ACTION FAIRNESS ACT OF 2005--Resumed
The PRESIDING OFFICER. The Senator from Pennsylvania is recognized.
Mr. SPECTER. Mr. President, it had been announced earlier that the
Senator from Illinois, Mr. Durbin, would be offering an amendment on
class action, so we will await his arrival. In the interim, I will
yield to my distinguished colleague from Utah, Senator Hatch, who has
some comments and who will be managing the bill this afternoon.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, what is the parliamentary state of affairs?
The PRESIDING OFFICER. S. 5 is before the Senate.
Mr. HATCH. Have no amendments been presented?
The PRESIDING OFFICER. Not yet.
Mr. HATCH. I ask the distinguished Senator from Massachusetts if he
is prepared to submit an amendment. If he is, I would be happy to yield
to him instead of making my comments.
The PRESIDING OFFICER. The Senator from Massachusetts.
Mr. KENNEDY. I am going to send an amendment to the desk.
Mr. President, it is wrong to include civil rights in wage-and-hour
cases in this bill. Families across the country are struggling to make
ends meet. They work hard, play by the rules, and expect fair treatment
in return, but they often don't get it.
Unfair discrimination can lead to the loss of a job or the denial of
a job. It can keep them from having health insurance or obtaining
decent housing. It can deprive their children of a good education. We
can't turn a blind eye to that enormous problem. Those who engage in
illegal discrimination must be held accountable.
That is why I am offering this amendment--to protect working families
and victims of discrimination. Hard-working Americans deserve a fair
day in court. Class actions protect us all by preventing systematic
discrimination.
Attorneys general from 15 States--California, Illinois, Iowa,
Kentucky, Maine, Maryland, Massachusetts, Minnesota, New Jersey, New
Mexico, New York, Oklahoma, Oregon, Vermont, and West Virginia--oppose
the inclusion of civil rights in wage-and-hour cases in the bill. The
problems that supporters of the bill say they want to fix don't even
rise in civil rights and labor cases. No one has cited any civil rights
or labor cases as an example of abuses in class action cases under the
current law.
During the discussion of this bill in the Judiciary Committee and on
the floor last year and during the committee's discussion last week, no
one identified any need to fix civil rights or labor class actions.
``If it ain't broke, Congress shouldn't try to fix it.''
There is no good reason to include these cases in this bill, but
there is an
[[Page S1087]]
excellent reason not to include them. This bill will harm victims of
civil rights and labor law abuses by delaying their cases and making it
much more difficult and much more expensive for them to obtain the
justice they deserve. It may even discourage many from seeking any
relief at all.
That is not what this bill was meant to do. We were told this bill
was about cases in which individuals from across the country receive
relief in State courts for relatively minor violations--sometimes
getting just a coupon or a few dollars in a case they didn't even know
about while a few elite attorneys receive more megadollar fees. Civil
rights and wage-and-hour class action suits are not about minor
violations. They are about serious, sometimes devastating harm to
people who have been treated unfairly and are seeking their day in
court; people such as Mary Singleton, a long-term employee at a
scientific laboratory in California who joined a gender discrimination
class action after her employer refused to give her and other female
employees equal pay for equal work. Ms. Singleton and her coworkers
filed their case in State court because State law provided greater
protection against gender discrimination and retaliation and because
the Federal court rules would have placed additional limits on
discovery.
This bill would also harm people such as Georgie Hartwig who spent 6
years working at a national discount retailer in Colville, WA. For
years, Ms. Hartwig and her fellow workers were forced to work off the
clock, skipping breaks and lunch, but not being paid for their time.
Now she is fighting, along with 40,000 coworkers, to get the wages they
have earned. This bill was not supposed to make it harder for people
such as Ms. Hartwig to get justice.
We were also told this bill would not shift cases to Federal courts
unless they truly involve national issues, while State cases would
remain in State court. The bill's actual effects are quite different.
It does not just affect cases where the events affect people in
multiple States; under this bill, a corporate defendant with
headquarters outside the State can move State class action cases,
including civil rights cases and worker right cases, into Federal
court, even if all the underlying facts in the case happened in a
single State. Think about that. If 100 workers in Alabama sue their
employer under Alabama law for job discrimination that occurred in
Alabama, this bill says the employer can drag their case into Federal
court if the employer happens to be incorporated in Delaware. That
makes no sense.
The bill would also apply to cases that seek justice for other
strictly local events such as environmental damage. That is not what
this amendment is about. This problem, which is affecting us now in
Massachusetts, illustrates the fact that this bill is not just about
truly national cases, as supporters keep insisting.
A case now pending in a Massachusetts State court illustrates how the
bill deprives local citizens of access to their own State courts when
they become innocent victims of widespread pollution occurring in their
hometowns.
In April 2003 an oil barge ran aground on Buzzard's Bay off the coast
of New Bedford, MA, spilling 98,000 gallons of oil into the bay and
polluting almost 90 miles of beaches and sensitive tidal marshes in the
area. Homeowners filed a class action suit in State court asking for
compensation for the damage to their property. One of the defendants,
Bouchard Transportation Company, has already been convicted of criminal
negligence in causing the spill. The defendant companies are from out
of State. Even though the case occurred entirely under Massachusetts
laws, if the current bill, the proposed bill, had been in effect when
the case was filed, this case could be removed to Federal court even
though all the victims are full-time Massachusetts residents and
seeking relief in Massachusetts courts under Massachusetts laws.
Because this bill is not retroactive, the case will not be affected
by this bill, but with the passage of this act, similar future cases,
properly brought in the courts of the State where the harm occurs, can
be removed to the Federal courts. As a result, the victims will often
be confronted by class action certification procedures more onerous
than those in their State courts. They will face delays from congested
Federal dockets. They will have to travel greater distances from their
homes to the courthouse. The procedural changes in this bill seem
abstract, but they will have a devastating consequence for real people.
First and foremost, it reduces each State's power to protect its own
citizens and enforce its own laws. Moving these cases to Federal court
will often end them for all practical purposes. Federal courts may
decide they do not meet the Federal rules for class certification. Even
if the cases are not dismissed, plaintiffs forced into Federal court on
State law claims have the decks stacked against them in Federal court
because Federal courts take the narrowest possible view in interpreting
State laws. The First and Seventh Circuits ruled in interpreting State
laws Federal courts must take the view that narrows liability. State
judges should be the ones who interpret State laws, not Federal ``big
brother.''
Often State laws have greater protections than Federal laws. That is
the genius of our Federal system. Many States have stronger minimum
wage laws and greater overtime protections than Federal law. Fourteen
States and the District of Columbia have a higher minimum wage than the
Federal standard. Twenty states have overtime laws that give workers
greater protection than the Federal Fair Labor Standards Act. Over 20
States have child labor laws that are more protective than Federal
child labor laws.
At a time when the administration is bent on undermining overtime at
the Federal level, State law protections are more important than ever.
States are also pioneers in protecting civil rights. Many States,
such as California, Minnesota, New Jersey, New York, Rhode Island,
Washington, and West Virginia, have greater protections for persons
with disabilities than the Federal Americans With Disabilities Act.
States are also in the forefront of protecting against discrimination
based on family status or citizenship.
A majority of States prohibits genetic discrimination in the
workplace, a new and troubling form of discrimination where the Federal
Government has been too slow to respond. Our proposal, to prohibit
genetic discrimination under Federal law, passed 95-0 in the Senate,
but it stalled in the House. When States act ahead of the Federal
Government to provide greater rights for their citizens, State courts
should be allowed to interpret their own laws. State courts, not
Federal courts, have the expertise in exerting the will of the State
legislature and they should have the right to do so.
We all know what is going on. We should call this bill the ``Class
Action Hypocrisy Act of 2005.'' Our colleagues love to proclaim States
rights when Congress tries to expand the rights of law in all 50
States, but they do not hesitate to override States rights to help
their business friends. This bill is a windfall for guilty corporate
offenders. It even allows repeat offenders to drag State cases into
Federal court and allows them to spend months litigating whether the
case belongs there. If the Federal court decides that the case does not
fit the narrow rules set by the bill and should be sent back to State
court, that will cause another delay because the employer can appeal
the decision. Delay is a serious problem today in many Federal trial
courts across the country.
Paul Jones, an employee of Goodyear Tire Company in Ohio, found that
out the hard way. He and other workers in their fifties filed an age
discrimination case in the State court in Akron. All they wanted was to
be judged by their ability, not their age. His attorney said, We file
our class action lawsuits in the Ohio State court system because it is
our experience these cases move much more rapidly in the State court
than they would if filed in the Federal court system. The difference in
the amount of time it takes to adjudicate a State court age
discrimination case compared to a Federal court case may be as much as
2 years. No wonder the corporate defendants are salivating over this
opportunity to escape the liability for their wrongs.
Paul Jones had a State law claim in State court, but his employer
tried to have it dismissed based on Federal court rulings that certain
types of arguments in age discriminations were invalid. The State court
rejected that argument. It held that Mr. Jones could
[[Page S1088]]
proceed with his claim based on the disparate impact analysis,
something Ohio's Federal courts did not allow. But a Federal court
would have been much more likely to go along with the idea because
Federal courts read the State law narrowly.
The delay from moving State cases to Federal court would be
particularly harmful for low-wage workers who have no resources to fall
back on when litigation expenses start to mount.
A letter by David Luna, Flora Gonzales, and dozens of coworkers who
were housekeepers, cooks, and waiters at two luxury hotels in Los
Angeles, makes the point. Their heavy workloads forced them to work
through their meals and breaks.
They write:
[A]s cooks we . . . struggle to meet the hotel's 30 minute
room service guarantee, yet we work through our own 30 minute
meal breaks on an almost daily basis.
These workers are working to recover wages they own, but the
corporate defendants have been trying to slow down the case by removing
it to Federal court. The harm of such delays is very real to these
workers, as they so poignantly described:
For some, delays in getting your day in court may be only
an inconvenience. But we are modestly paid workers with
physically demanding jobs. For us, delays mean that we must
continue to work without breaks, our work days are harder
than they should be, and we must wait longer to be paid the
extra wages we have earned.
If this bill passes, big corporations will have free rein to use
procedural maneuvers to delay these cases and deny these workers their
day in court. Why should we make it harder for those workers to get
their claims decided?
Abuses by large companies are widespread. Right now, class action
cases are proceeding in State courts in Massachusetts, Minnesota, and
California for hundreds of thousands of low-wage workers who were
required by Wal-Mart to work extra hours ``off the clock'' without
being paid for their extra time. It is wrong for Congress to side with
the big guy.
These men and women deserve to recover their lost wages to pay their
rent, pay their medical bills, and put food on the table. The longer
they wait for justice, the heavier the burden on these workers and
their families. And the Senate is about to tell them to take a hike? It
is outrageous.
Supporters of the bill talk a lot about fairness. We hear that word
again and again. It has even been put into the title of the class
action bill. Labeling it ``fair'' does not make it fair.
Fair does not mean punishing those who are mistreated on the job.
Fairness does not mean making it harder for honest working men and
women to obtain justice when they have been cheated out of their wages.
It does not mean denying victims of discrimination their day in court
under the laws of their State.
It is wrong for Congress to side with corporate abusers and tell the
victims of discrimination and unfair practices they cannot count on
their own State courts to give them the justice they deserve. But that
is what this bill is all about. At the very least, we should exclude
civil rights and labor cases from its harsh provisions. I urge my
colleagues on both sides of the aisle to support this amendment to
protect these basic civil rights of hard-working Americans in
communities across the country.
Mr. President, I received many letters from working Americans and
victims of discrimination who support this amendment. I ask unanimous
consent to have some of these letters printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
Hon. Dianne Feinstein,
U.S. Senate, Washington, DC
Hon. Edward M. Kennedy,
U.S. Senate, Washington, DC
Dear Senators: We are writing to share our concerns about
the Class Action Fairness Act, which would force workers with
claims under state wage and hour laws to bring their suits in
federal courts. Based on our own experience in trying to
enforce state law labor protections in a class action
lawsuit, we urge you to work to exclude wage and hour class
action cases from this bill.
We work at the Century Plaza and the St. Regis Hotels, two
luxury hotels in Los Angeles, California. We are
housekeepers, cooks, room service waiters, bartenders,
servers, mini bar restockers, valets, or work at other hourly
jobs. We are employed by Starwood Hotels & Resorts Worldwide,
Inc., which manages and operates these hotels.
Under California law, employees must be allowed two paid
ten minute rest breaks and one half-hour unpaid meal break
every shift. If employees cannot take their break, they are
supposed to be paid an extra hour's wages.
At the Century Plaza and the St. Regis, workers are
routinely unable to take meal and rest breaks either because
no one is scheduled to relieve us or because our workload is
so heavy that we cannot take the time off. We believe that
Starwood has sought to boost profits by increasing our
workloads and by reducing staff, which means we cannot stop
working long enough to take our breaks.
For example, cooks in the Century Plaza room service
department struggle to meet the hotel's 30 minute room
service guarantee, yet we work through our own 30 minute meal
breaks on an almost daily basis. Housekeepers at both hotels
face quotas of up to 15 luxury rooms per day. Each room must
be spotlessly cleaned and restocked, with towels and linens
changed, carpeting vacuumed, and bathrooms left sparkling. We
spend our entire shifts rushing to meet the hotel's high
standards and often cannot rest until the end of our shifts.
A Los Angeles Times article concerning the inability of
housekeepers to take their breaks is attached for your
reference.
Last fall, we filed a class action in California superior
court seeking to enforce the state's laws regarding meal and
rest breaks. By now, we expected to have completed initial
hearings and be well on our way to preparing for our trial.
But because our employer has moved our case to federal court
and is trying to have it dismissed, we have been forced to
endure delays.
For some, delays in getting your day in court may only be
an inconvenience. But we are modestly paid workers with
physically demanding jobs. For us, delays mean that we must
continue to work without breaks, our work days are harder
than they should be, and we must wait longer to be paid the
extra wages we have earned. As our situation shows, delays
are a significant burden to those seeking basic rights and a
fair day's wage for a fair day of work. We urge you to work
to keep state wage and hour class action cases in state
court, where they belong.
Sincerely,
(Signed by 85 employees)
____
Mary F. Singleton,
Truchas, New Mexico, February 2, 2005.
Attn: Judiciary Committee
Re Federal Class Action Legislation
Hon. Edward M. Kennedy,
U.S. Senate, Russell Senate Office Building, Washington, DC
Dear Senator Kennedy: I am writing because I understand
that Congress is considering legislation which might place
certain limitations on class action lawsuits and require that
many class actions be filed in federal court. As a woman who
was the lead plaintiff and class representative in a gender
discrimination lawsuit against a major employer in state
court, I am concerned that such legislation will limit the
ability of victims of discrimination and civil rights
violations to adequately redress their grievances. I urge you
to do what you can to preserve the rights of state citizens
to pursue class action cases in their own state.
As a long term career employee of a large scientific
research laboratory in California, I tried for many years to
convince management to evaluate its compensation and
promotional practices and take steps to correct long-standing
and widespread disparities in salaries and promotions between
men and women at the institution. When these efforts
ultimately proved to be unsuccessful, five colleagues and I
reluctantly decided that the only way that the civil rights
of women at the organization would ever be addressed was
through litigation. We retained counsel and filed a class
action in state court, alleging violations of anti-
discrimination law on behalf of ourselves and approximately
3,000 female co-workers.
My understanding from our attorneys was that we could have
filed our case in federal or state court, since both have
laws against employment discrimination. After considering the
options, we decided to file in state court because we felt
that it would provide a better opportunity to fairly and
fully present our case. Among other things, because of the
size and nature of the organization, we knew our employer
would try to make the case very complicated, and that a
considerable amount of ``discovery'' would be necessary,
including a number of depositions. Our understanding was that
the state court procedures would offer more flexibility in
this regard, allowing our attorneys a fair opportunity to
obtain the information necessary to present our case on
behalf of the class.
In addition, we wanted to include claims based upon state
laws because, in some respects, they provide stronger
protection against discrimination and retaliation. Although
we knew that we could include state law claims in a federal
court lawsuit, our understanding is that federal courts may
not be as familiar with state laws and may not be willing to
interpret state law as opposed to rigidly apply past
interpretations.
Yours very truly,
Mary F. Singleton
[[Page S1089]]
____
Law Office of John C. Davis,
Tallahassee, Florida, January 14, 2005.
Re: Proposed Legislation Federalizing Class Actions
Hon. Edward M. Kennedy,
U.S. Senate, Russell Senate Office Building, Washington, DC.
Dear Senator Kennedy: I am a lawyer working in the Florida
panhandle doing employment and civil rights cases. I am class
counsel along with Wes Pittman of Panama City in a certified
class action against the Florida Department of Corrections
brought by a class of hard working women who are health care
providers and non-security personnel in the corrections
systems. They daily serve the citizens of Florida by
providing health care and other essential services to
inmates. As a condition of their employment they have been
subjected to unrelenting sexual harassment by certain male
inmates. The Department has known of this for years and can
stop the harassment, but has ignored and belittled their
plight.
The Circuit Court in Washington County, Florida, certified
this case as a class action and the Florida First District
Court of Appeal affirmed that certification because they saw
the injustice suffered daily by these courageous women. The
case is reported at Rudolph v. Department of Corrections,
2002 WL 32182165, aff'd, 855 So.2d 59 (F1a. 1st DCA 2003).
The lower court's opinion, which is published on Westlaw,
describes in detail the facts of the case.
This case cried out for class action treatment because that
is the only way to effect the kinds of change that will get
the attention of the Department of Corrections. Individual
cases rarely if ever effect change beyond the circumstances
of the individual bringing the case. They are usually settled
confidentially.
We filed this case is state court, however, because it
would have had little chance in the federal court. The
federal courts in Florida would not certify the case because
of what can only be viewed as a profound hostility to these
kinds of cases by the Eleventh Circuit Court of Appeals.
Thus, absent a state court class action, there is simply no
way that all of the individuals affected by the Department's
practices would ever get relief.
Permitting employers to remove class actions like this to
the federal courts will effectively deny any opportunity for
the kind of systemic relief that results in real change. The
irony that the interests driving this ill-conceived
legislation are usually states' rights proponents shouldn't
be lost on anyone. State courts are as well suited, if not
better suited, to adjudicate these controversies.
This legislation will not promote justice and will upset
the federal-state balance. If the legislation cannot be
defeated in its entirely at the very least an exception to it
should be made for civil rights and employment litigation. I
strongly urge you to do all you can to defeat the legislation
and continue to fight for the rights of working Americans.
Please do not hesitate to call me if I can do anything to
help.
Sincerely,
John C. Davis.
____
State of New York,
Office of the Attorney General,
Albany, New York, February 7, 2005
Hon. Bill Frist,
U.S. Senate, Dirksen Senate Office Building, Washington, DC.
Hon. Harry Reid, Minority Leader,
U.S. Senate, Hart Senate Office Building, Washington, DC.
Dear Mr. Majority Leader and Mr. Minority Leader: On behalf
of the Attorneys General of California, Illinois, Iowa,
Kentucky, Maine, Maryland, Massachusetts, Minnesota, New
Jersey, New Mexico, New York, Oklahoma, Oregon, Vermont, and
West Virginia, we are writing in opposition to S. 5, the so-
called ``Class Action Fairness Act,'' which will be debated
today and is scheduled to be voted on this week. Despite
improvements over similar legislation considered in prior
years, we believe S. 5 still unduly limits the right of
individuals to seek redress for corporate wrongdoing in their
state courts. We therefore strongly recommend that this
legislation not be enacted in its present form.
As you know, under S. 5, almost all class actions brought
by private individuals in state court based on state law
claims would be removed to federal court, and, as explained
below, many of these cases may not be able to continue as
class actions. We are concerned with such a limitation on the
availability of the class action device because, particularly
in these times of tightening state budgets, class actions
provide an important ``private attorney general'' supplement
to the efforts of state Attorneys General to prosecute
violations of state consumer protection, civil rights, labor,
public health and environmental laws.
We recognize that some class action lawsuits in both state
and federal courts have resulted in only minimal benefits to
class members, despite the award of substantial attorneys'
fees. While we support targeted effort to prevent such abuses
and preserve the integrity of the class action mechanism, we
believe S. 5 goes too far. By fundamentally altering the
basic principles of federalism, S. 5, if enacted in its
present form, would result in far greater harm than good. It
therefore is not surprising that organizations such as AARP,
AFL-CIO, Consumer Federation of America, Consumers Union,
Leadership Conference on Civil Rights, NAACP and Public
Citizen all oppose this legislation in its present form.
1. Class Actions Should Not Be ``Federalized''
S. 5 would vastly expand federal diversity jurisdiction,
and thereby would result in most class actions being filed in
or removed to federal court. This transfer of jurisdiction in
cases raising questions of state law will inappropriately
usurp the primary role of state courts in developing their
own state tort and contract laws, and will impair their
ability to establish consistent interpretations of those
laws. There is no compelling need or empirical support for
such a sweeping change in our long-established system for
adjudicating state law issues. In fact, by transferring most
state court class actions to an already overburdened federal
court system, this bill will delay (if not deny) justice to
substantial numbers of injured citizens. Moreover, S. 5 is
fundamentally flawed because under this legislation, most
class actions brought against a defendant who is not a
``citizen'' of the state will be removed to federal court, no
matter how substantial a presence the defendant has in the
state or how much harm the defendant has caused in the state.
2. Clarification Is Needed That S. 5 Does Not Apply to State
Attorney General Actions
State Attorneys General frequently investigate and bring
actions against defendants who have caused harm to our
citizens, usually pursuant to the Attorney General's parens
patriae authority under our respective state consumer
protection and antitrust statutes. In some instances, such
actions have been brought with the Attorney General acting as
the class representative for the consumers of the state. We
are concerned that certain provisions of S. 5 might be
misinterpreted to impede the ability of the Attorneys General
to bring such actions, thereby interfering with one means of
protecting our citizens from unlawful activity and its
resulting harm. That Attorney General enforcement actions
should proceed unimpeded is important to all our
constituents, but most significantly to our senior citizens
living on fixed incomes and the working poor. S. 5 therefore
should be amended to clarify that it does not apply to
actions brought by any State Attorney General on behalf of
his or her respective state or its citizens. We understand
that Senator Pryor will be offering an amendment on this
issue, and we urge that it be adopted.
3. Many Multi-State Class Actions Cannot Be Brought in
Federal Court
Another significant problem with S. 5 is that many federal
courts have refused to certify multi-state class actions
because the court would be required to apply the laws of
different jurisdictions to different plaintiffs--even if the
laws of those jurisdictions are very similar. Thus, cases
commenced as state class actions and then removed to federal
court may not be able to be continued as class actions in
federal court.
In theory, injured plaintiffs in each state could bring a
separate class action lawsuit in federal court, but that
defeats one of the main purposes of class actions, which is
to conserve judicial resources. Moreover, while the
population of some states may be large enough to warrant a
separate class action involving only residents of those
states, it is very unlikely that similar lawsuits will be
brought on behalf of the residents of many smaller states.
This problem should be addressed by allowing federal courts
to certify nationwide class actions to the full extent of
their constitutional power--either by applying one State's
law with sufficient ties to the underlying claims in the
case, or by ensuring that a Federal judge does not deny
certification on the sole ground that the laws of more
than one State would apply to the action. We understand
that Senator Jeff Bingaman will be proposing an amendment
to address this problem, and that amendment should be
adopted.
4. Civil Rights and Labor Cases Should Be Exempted
Proponents of S. 5 point to allegedly ``collusive''
consumer class action settlements in which plaintiffs'
attorneys received substantial fee awards, while the class
members merely received ``coupons'' towards the purchase of
other goods sold by defendants. Accordingly, this ``reform''
should apply only to consumer class actions. Class action
treatment provides a particularly important mechanism for
adjudicating the claims of low-wage workers and victims of
discrimination, and there is no apparent need to place
limitations on these types of actions. Senator Kennedy
reportedly will offer an amendment on this issue, which also
should be adopted.
5. The Notification Provisions Are Misguided
S. 5 requires that Federal and State regulators, and in
many cases State Attorneys General, be notified of proposed
class action settlements, and be provided with copies of the
complaint, class notice, proposed settlement and other
materials. Apparently this provision is intended to protect
against ``collusive'' settlements between defendants and
plaintiffs' counsel, but those materials would be unlikely to
reveal evidence of collusion, and thus would provide little
or no basis for objecting to the settlement. Without clear
authority in the legislation to more closely examine
defendants on issues bearing on the fairness of the proposed
settlement (particularly out-of-State defendants over whom
subpoena authority may in some circumstances
[[Page S1090]]
be limited), the notification provision lacks meaning. Class
members could be misled into believing that their interests
are being protected by their government representatives,
simply because the notice was sent to the Attorney General of
the United States, State Attorneys General and other Federal
and State regulators.
Equal access to the American system of justice is a
foundation of our democracy. S. 5 would effect a sweeping
reordering of our Nation's system of justice that will
disenfranchise individual citizens from obtaining redress for
harm, and thereby impede efforts against egregious corporate
wrongdoing. Although we fully support the goal of preventing
abusive class action settlements, and would be willing to
provide assistance in your effort to implement necessary
reforms, we are likewise committed to maintaining our Federal
system of justice and safeguarding the interests of the
public. For these reasons, we oppose S. 5 in its present
form.
Sincerely,
Eliot Spitzer, Attorney General of the State of New York.
Bill Lockyer, Attorney General of the State of California.
Tom Miller, Attorney General of the State of Iowa.
G. Steven Rowe, Attorney General of the State of Maine.
Tom Reilly, Attorney General of the State of Massachusetts.
Patricia A. Madrid, Attorney General of the State of New
Mexico.
W.A. Drew Edmondson, Attorney General of the State of
Oklahoma.
Lisa Madigan, Attorney General of the State of Illinois.
Gregory D. Stumbo, Attorney General of the State of
Kentucky.
J. Joseph Curran, Jr., Attorney General of the State of
Maryland.
Mike Hatch, Attorney General of the State of Minnesota.
Hardy Myers, Attorney General of the State of Oregon.
William H. Sorrell, Attorney General of the State of
Vermont.
Darrell McGraw, Attorney General of the State of West
Virginia.
Mr. KENNEDY. Mr. President, I would like to anticipate some of the
arguments that may be made by those who question whether cases based on
truly local events would really be affected by the class action bill.
Some have claimed that the bill will bring only national multi-State
cases into Federal court, where they belong. They say it doesn't affect
purely State cases, because it keeps class actions in State court if
plaintiffs live in the same State as the defendant.
But in reality, the bill will move many State law cases to Federal
court even if the people bringing the suit all live in the same State,
and were hurt by a company doing business in that State. This is
because the bill lets a case stay in State court only if the defendant
is a ``citizen'' of the same State as the plaintiffs who brought the
case, and companies are citizens of the State where they were
incorporated, regardless of where they do business. As a result,
plaintiffs who live in one State who file a case against a company with
many offices in that State, would not be able to keep their case in
State court if the company is incorporated somewhere else.
To show the scale of this problem, let's look at the figures. More
than 308,000 companies are incorporated in Delaware, including 60
percent of Fortune 500 firms and 50 percent of the corporations listed
on the New York Stock Exchange. Most of these companies also do
business in many other States. But plaintiffs in those other States
will not be able to file State cases against these companies without
being dragged into Federal court. That violates the principle of simple
fairness.
The bill lets corporations stay in State court when it's to their
advantage. Businesses will still have their day in State court. But
corporate employees whose civil or labor rights have been violated will
be denied the same access.
Some have suggested that my amendment is not necessary because
Federal courts have traditionally been protectors of civil rights.
It is true that our Federal courts perform the important job of
protecting rights under Federal law and the U.S. Constitution. And my
amendment will still allow those claims to be heard in Federal court.
But in cases involving State civil rights or wage and hour laws, State
courts should make these decisions. When States step ahead of the
Federal government to give their citizens greater protection than
Federal law--as several States have done in the area of genetic
discrimination of discrimination based on marital status--State, not
Federal courts, should interpret those laws. That is what my amendment
would ensure.
The PRESIDING OFFICER. The Senator from Utah.
Mr. HATCH. Mr. President, I listened carefully to my friend and
colleague from Massachusetts, and I do think he has a few things wrong.
For instance, if the vast majority of the people bringing the suit are
Massachusetts citizens, under this bill they have a right to bring it
in State court, if they want to, although most civil rights cases are
brought in Federal court because these are 14th amendment cases.
I remember years ago arguing on this floor on these issues, and, of
course, the distinguished Senator from Massachusetts and others wanted
these cases brought to the Federal courts because they were so afraid
some of the State courts would not do justice in civil rights cases.
They were right. They wanted them in Federal court. I do not blame
them.
The Federal courts are made up of judges who are nominated and
confirmed for life. Because of that, they should not have any political
forces that would take them away from doing justice. In all honesty,
nothing in this bill would stop Massachusetts classes made up wholly of
Massachusetts citizens or even a majority of Massachusetts citizens
from bringing these cases in State court, if they want.
One reason the Federal courts are so clogged is because of a wide
variety of cases that are now being brought in Federal court, partly
caused by people on both sides of the aisle. But there is no question
Federal courts are not only good courts, by and large they are
basically fair courts. And by and large they are basically very
sophisticated courts. And by and large they apply, in these particular
cases, the laws of the States in which the suits are brought--I might
add, unless there are reasons from the Federal standpoint in applying
otherwise.
Now, there is nothing in this bill that stops legitimate cases from
proceeding. There is nothing in this bill that takes consumer rights
away. There is nothing in this bill that will not give consumers or
those who are injured a day in court. There is a lot in this bill to
prevent some of the phony approaches that are taken by some in the
legal profession who should be ashamed of themselves. This bill
corrects those kinds of injustices, those kinds of excesses, those
kinds of problems.
I urge my colleagues to vote against this carve-out amendment offered
by my distinguished friend from Massachusetts, Senator Kennedy.
This amendment excludes from the bill's existing jurisdictional
provisions those class actions involving civil rights violations and
class actions involving wage-hour disputes. But before I address the
imprudence of carving out these types of cases, I would like to make it
perfectly clear, as I think I have up to now, that S. 5 in no way
impairs the substantive rights of litigants to bring, among other
claims, civil rights and wage-hour claims. Some opponents of this bill
seem ready to conveniently gloss over this critical fact in their
efforts to pass bad information about what this bill does.
S. 5 is procedural in nature and simply moves larger interstate class
actions to the appropriate forum where they belong in the first place:
in Federal court. These class actions often involve the most money,
parties from different States, and issues that transcend State lines.
Yet by the same token, the bill preserves States rights to adjudicate
truly local disputes on behalf of their citizens.
Now, those are facts. This bill does not take any rights away from
anybody. But what we are trying to do is stop the forum shopping; in
other words, finding jurisdictions that will render outrageous verdicts
that basically benefit the attorneys, the lawyers, not the people for
whom they are suing.
Well, let me say, first, an affirmative exclusion of civil rights
cases from Federal jurisdiction runs counter to the bedrock principles
of encouraging our Federal courts to adjudicate civil rights disputes.
I remember, in days gone by, there was a demand that these cases be in
Federal court because they are courts of primary jurisdiction under the
Constitution and because, as a general rule, more justice was done.
[[Page S1091]]
I think this principle speaks for itself when you look at the
plethora of Federal civil rights statutes extending protections against
employment, housing, race, and gender discrimination. That is just to
name a few. Indeed, the Federal courts' involvement with civil rights
is so pervasive that Federal courts routinely hear claims brought under
State civil rights laws. This is not unusual.
The Federal judiciary's extensive involvement in civil rights matters
has also led to favorable results for civil rights litigants. Honest
litigants are not going to lose in Federal court. It is just that
simple. And they are probably more greatly protected because there is
naturally less politics in Federal court.
Federal courts have a long record of certifying discrimination class
actions and approving generous settlements in most of these cases.
Take, for instance, the recent Home Depot gender discrimination
settlement which paid class members somewhere in the neighborhood of
$65 million or the $192 million Coca-Cola race discrimination
settlement in which each class member was guaranteed a recovery of at
least $38,000 in cold hard cash. And, of course, there is the recent
Federal court certification of the largest civil rights class action in
U.S. history involving 1.6 million former and current female employees
of Wal-Mart.
These are successful, proven results that belie any claim that
Federal courts are somehow hostile to civil rights actions. In fact, it
is laughable to now say that we have to have these in State courts when
all these years we have been working hard to get these cases to Federal
court so they would be adjudicated more fairly.
Some of those who support a civil rights carve-out also contend the
Federal courts are overworked and incapable of handling such matters,
that the State courts are better equipped. Give me a break. We have
heard this concern raised repeatedly from opponents of this bill who
apparently believe that if they say it enough times, the proposition
may somehow turn out to be true and, at the very least, to minimize the
significant deficiencies in our State courts. These critics claim that
it takes 5 years to get a class action to trial in Federal courts. But
do they have the raw data to back these claims? Of course, they don't.
In reality, the median time for final disposition of a civil claim
filed in Federal court is 9.3 months, and the median time to trial in a
civil matter in Federal court is 22.5 months. Moreover, what some of
the critics hide is the fact that the State courts have experienced a
much more rapid growth in civil filings than have the Federal courts.
Civil filings in State trial courts of general jurisdiction have
increased 21 percent since 1984, and there are delays in many State
courts on civil actions that are longer than they are in Federal court.
As for filings in some of the more notable magnet State court
jurisdictions, let's look at some of the figures. Just look at this
chart. The number of class actions filed in State courts have
skyrocketed in State courts under current law. Take Palm Beach County,
FL. It has gone up 35 percent between 1998 and 2000. In Jefferson
County, TX, a notorious jackpot jurisdiction, it has gone up 82
percent. In Madison County, IL, another notorious jackpot
jurisdiction--in other words, a jurisdiction where defendants don't
have a chance because of politics and moneys donated to judges from the
trial lawyers in that particular jurisdiction, primarily--over 5,000
percent between 1998 and 2003. Why? Because it is a county that is out
of whack. If the plaintiffs' attorneys can get cases in Madison County,
they are going to get big verdicts, outrageous verdicts for people who
aren't even sick, people who don't even have problems in some cases.
The overall increase in State courts is 1,315 percent. So don't use
that argument. If you add the fact that State courts are almost always
courts of general jurisdiction where they hear matters ranging from
traffic violations to domestic disputes, I think you get a pretty clear
picture of what our State courts are faced with in terms of workload.
As a final point, I would like to note that the Judiciary Committee
soundly defeated this very amendment of the distinguished Senator from
Massachusetts during markup last Congress. We reported the bill in a
bipartisan 13-to-5 vote in this Congress. The committee voted against
the civil rights carve-out on a solid bipartisan basis and understood
the inherent problems with this amendment. This amendment lost footing
in committee and should not gain traction here.
The second carve-out excludes wage and hour or timesharing claims
from the bill. These are actions brought by employees against their
employers for violating wage and hour restrictions imposed under
applicable labor laws. While these actions are certainly important for
working Americans, there is no principled basis to exclude them from
this bill, not one principled reason.
Again, let me be clear about S. 5. This bill in no way affects the
substantive rights of these workers to seek redress for these wage and
hour claims. In other words, employees who bring wage and hour claims
against their employers will still have the exact same rights they do
now if this bill is enacted. The only way the bill could possibly
affect these cases is by moving them to Federal court. But what the
proponents of this amendment overlook is that if a wage and hour case
meets the interstate criteria of the bill, then there is absolutely no
reason to exclude them from Federal court. It makes no difference if
the case involves a defective product, a false advertising claim, or a
breach of warranty. If the class action lawsuit involves parties from
different States and involves a large amount in controversy, regardless
of whether the claims are predicated on State law, then the case should
be heard in Federal court. This is why we have diversity jurisdiction
in the first place, and it is certainly what the Founding Fathers had
in mind when they drafted our Constitution.
I urge my colleagues to vote against this amendment. It establishes
bad policy and is nothing more than yet another attempt to weaken the
bill. This amendment, including all other carve-outs, for that matter,
also flies in the face of the bipartisan compromise that is now
embodied in S. 5. I intend to honor this compromise and encourage my
colleagues to do the same.
Let me just say, it is unseemly to claim that the Federal courts are
not as good as the State courts. And it is even worse to claim that the
Federal courts should not have jurisdiction in these matters. The fact
is, we have provided through the Feinstein amendment language that
permits certain cases to be in State courts. But when they get to the
size of the 100 or more in a class and over $5 million, these cases
have to be brought in Federal court. And the reason is because of these
jackpot jurisdictions that I have been pointing out that really do not
do justice and are not fair.
Earlier, the distinguished Senator from Illinois was talking about
how few cases are filed in Madison County, IL. What he doesn't tell you
is that the minute the lawyers start talking about a class action and
they send a demand letter, the companies know they are dead if the case
is brought in Madison County, IL. No matter how right they may be, they
are dead because the judges in that particular jurisdiction are in the
pockets of the local lawyers with whom the out-of-State lawyers who
have these class actions align themselves in order to go in there and
get these outrageous verdicts that would not be obtained in any fair
court of law.
So what do the companies do? They have no choice. They will settle
for what they estimate the defense costs to be because why should they
take a chance on jackpot justice? And it then becomes, in the eyes of
many, a broken system of extortion, extortion by attorneys, extortion
by the judges over companies that probably have little or nothing to do
with Madison County, IL, but because of the current system, wind up
there, either getting staggered with unjust judgments or doing what
prudence tells them they have to do, and that is paying whatever they
estimate the defense costs to be to get rid of the lawyers. It comes as
close to legal extortion as anything I have seen.
That is what we are trying to solve here. It doesn't take away
anybody's rights. It just means they will have to prove their case in
Federal courts. And Federal courts are very competent courts. Judges
are appointed for life. They are less political, although every
[[Page S1092]]
once in a while you see some politicization of Federal court, but
nothing like these jackpot justice jurisdictions that are constantly
used by some of these unscrupulous lawyers to get outrageous verdicts
so they can collect great big fees.
Yesterday, we talked about coupon settlements--the lawyers get huge
fees and the person winds up with a $5 coupon that is meaningless. That
doesn't mean that some of these cases are not valid, but they could
just as easily be won in Federal court, if they are valid, as they can
in State courts, but not as easily as in these jackpot justice
jurisdictions where justice is denied. We can throw around big
corporations all we want, but businesses in this country are not all
big and, even if they are, they deserve to be treated justly.
That is what our court system should be doing. It should not
discriminate against them because they are large corporations. If they
are fair and right, they should be treated just as fairly and rightly
as anybody else.
We have come close on this bill now a number of times, very close. In
November of 2003, we struck a deal that gave the Class Action Fairness
Act the requisite number of votes to pass even if the bill was
filibustered. We got the votes, guaranteed up to 62. It was a
bipartisan compromise that allowed us to reach this commonsense
agreement. Believe me, this compromise does not satisfy everybody or,
for that matter, doesn't satisfy anybody.
The fact is, it is what it is--a bipartisan compromise. If I would be
permitted to write the bill the way I think it should be done, I think
it would be perfect, and others in this body would feel the same way.
But we have worked out this bipartisan compromise and we need to stick
with it.
Senator Cornyn explained this morning why he believes the bill should
go further in correcting abuses in the current system, and he explained
how he would fix some of these problems legally. He is not wrong, by
the way. He also said he would not advance these amendments at this
time because he understands the complex dynamics in arriving at the
compromise bill. We have been at this for the last 6 years. That is how
long we have tried to get this bill through. This bill is not perfect,
by any stretch of the imagination. No bill is around here, because we
have to work with 535 Members of Congress. Depending on your
perspective, this bill either gave away too much or not enough.
The fact is, this bill is just about right and it is time to get it
done. We know we should get it done. A supermajority of those in this
body should get it done. But nearly a year and a half after we struck a
deal to get it done, a series of amendments are still being offered
that would scuttle this bill and, unfortunately, the amendment by the
Senator from Massachusetts happens to be one of them. Let us get down
to the brass tacks. It is rug-cutting time. If any amendments upset the
essential compromises that have been negotiated over a long period of
time, this bill will not become law. The purpose of these amendments is
not to improve the bill but to destroy it. The House of Representatives
will not agree--they have made it super clear--to a bill that includes
amendments that gut this bill's modest and reasonable reforms. I have
to say I don't blame them. They have seen this process for the last 6
years. The American people have waited for this reform for far too
long. I should remind my colleagues that if we fail our constituents at
this time, the memory of the American people is a long one.
I will speak today about a number of amendments that will likely be
offered. In my opinion, and in the opinion of those most familiar with
the bill, these amendments are poison pills, and everybody knows it.
These amendments were not part of our discussions with Senators
Schumer, Dodd, and Landrieu that resulted in the current bipartisan
legislation. I don't mean to limit it to them. There were a whole raft
of Senators on both sides of the aisle.
I will repeat that for emphasis. We had a deal. None of these
amendments were part of this deal. What happened to the days when a
deal was a deal? These amendments are quite literally being offered at
the eleventh hour and I think for a purpose other than to improve the
bill.
Let's be honest about it. Consumers, plaintiffs, and others who have
rights are not going to be foreclosed from vindicating their right in a
court of law. It is just that they are not going to be able to take
these cases--and certainly outrageous cases--to these jackpot justice
jurisdictions where justice is denied any longer--except under some
loophole exceptions in this bill. But the vast majority of the problems
should be solved by this bill. There are a lot of people out there who
have been very badly mistreated because of the current broken tort
process, who are praying we will be able to get this bill through.
Let me make this clear. If we add one of these amendments, I think
the bill is dead again, even though it has had 62 prime sponsors--
people who will automatically vote for this bill and who understand the
game here is to get a bill out that will do some justice in this
country and stop some of the jackpot justice that has been going on.
I don't mean to denigrate anybody's amendment, but let's be fair and
make it clear that this bill does not take away rights. This bill
enhances rights for both sides, and not just for plaintiffs but also
for defendants. So fairness in the tort system will be brought back to
the forefront. In the case of civil rights and wage-and-hour disputes,
look, for years we have argued they should be in Federal court. Now,
all of a sudden, they don't want them in Federal court. All you can do
is surmise: why is that? I think everybody knows why.
I yield the floor.
The PRESIDING OFFICER. The Senator from Alabama is recognized.
Mr. SESSIONS. Mr. President, it is always a pleasure for me to hear
Senator Hatch discuss legal issues. He has had great experience with
them over the years, in the long time he has served on the Judiciary
Committee and as a lawyer in his own right. I think he summed up the
situation we are in and I thank him for doing so.
Actually, I believe that those who are seeking class action reform
have been very generous in reaching out to people who had some doubts
to try to gain their votes in support, to make sure no one is hurt in
any unfair way through the passing of this legislation. We are now at a
point where the time has come for us to pass class action reform.
I do not believe, and have never believed, we should be in the
business of eliminating class actions. They are not a bad thing in
themselves. Class actions, in fact, serve an important purpose. In many
instances, they are the only viable form of relief, where an individual
has claims that are so small it would not be economically feasible for
an attorney to take an individual's case; but maybe thousands of people
have been unfairly treated in the same manner and an attorney can bring
one case and everybody can be compensated and the system can work very
effectively. That is the whole theory behind class actions. It has
always been a good process under certain circumstances, but we have
always known it could also be abused. For the most part, I think
Federal courts have done a good job handling those cases. Many State
courts have done a good job of handling those cases, but is now a
pattern by which some attorneys have learned to pick and choose States,
even counties, where there may be only one judge, and they know how
that judge thinks about these cases, and they file the class action
lawsuit there. The fact is that most nationwide class actions can be
filed anyplace in America--it makes sense that lawyers, therefore,
chose to find the most favorable forum they can find in the entire
United States. That is selective choice of forum. There are other
problems that arise with class actions, problems which have been around
for a long time. We have come to understand them and we need to do
something about it. We can do something about it. It is the right thing
to do. It will improve our system of justice.
The Class Action Fairness Act does not close doors to class action
plaintiffs; rather it opens doors to fairness in this entire process. I
agree with those who have said that the bill does not go far enough. I
think there are going to be many opportunities for clever attorneys to
draft complaints and conduct their litigation in a way that would avoid
being covered by this
[[Page S1093]]
act, when in fact they ought to be covered by this act. Senator Cornyn
has made a number of those suggestions, and I have made some of those
suggestions. But the perfect, as they say, can be the enemy of the
good.
An agreement has been reached that people feel comfortable with. I
have been prepared not to offer a lot of amendments so we can get this
bill to final passage and quick approval and end the years and years
and years of debate on this matter that we know we ought to deal with.
As you look about and review what you hear and see who is making
comments on it, some of the things your read on the issue appeal to
you. Let me tell you about a Washington Post editorial I read a few
years ago that summed it up the class action issue quite well.
Politically, the Washington Post is a Democratic paper, a liberal
newspaper. But their editorial writers made some very important points
that I agree with. They said this:
Congress' first priority in the world of civil lawsuits
should be to change the rules of class actions.
In other words, of all of the problems we have in litigation, the one
this Congress ought to deal with first is class action lawsuits.
When working properly, class actions are an important
component of the American legal system, one that allows
efficient court consideration of numerous identical claims
against the same defendant.
In practice, no component of the legal system is more prone
to abuse.
Their analysis is that there is no component of the American legal
system more prone to abuse than class actions.
For unlike normal lawyers who are retained by people who
actually feel wronged, class counsel, having alleged that a
product deficiency caused some small monetary damage to some
discernible group of people, largely appoint themselves.
In other words, a lot of people have difficulties, and the class
action lawyer may discover what he thinks is a wrong. Then he appoints
himself to be the righter of that wrong. Then he goes out and
identifies a class. He does not talk to the individual clients, as
lawyers do in a normal situation; he appoints himself to take on these
cases.
The clients may not even be dissatisfied with the goods and
services they bought.
They may not be unhappy at all.
But unless they opt out of a class whose existence they may
be unaware, they become plaintiffs anyway.
I heard a Senator recently say he was involved in a class action, and
the person who was being sued was a friend, and he did not even know he
was involved.
Continuing to quote:
Class actions present almost infinite venue shopping.
Infinite venue shopping, that is what I was saying. We have had
lawsuits filed in Alabama. We have seen identical lawsuits filed in
Mississippi. We have seen them filed in Madison County, IL. Why?
Because a plaintiff in a large action that involves people throughout
the United States under current law can choose their place to file the
lawsuit. When they get an appeal, it goes to the State of Illinois,
Mississippi, or Alabama's appellate courts, their supreme court, for
final review. That is a legitimate concern and a matter that impacts
people throughout the United States.
National class actions can be filed just about anywhere,
and they are disproportionately brought in a handful of State
courts whose judges get elected with lawyers' money.
This is the Washington Post I am quoting. It is the same thing
Senator Hatch indicated earlier. It is the reality, unfortunately.
These judges effectively become regulators of the products
and services produced elsewhere--
Not even in their county or State--
and sold throughout the Nation. And when cases are settled,
the clients get token payments while the lawyers get enormous
fees.
I am continuing to quote from the Washington Post:
This is not justice. It is an extortion racket that only
Congress can fix.
That is, unfortunately, the sad truth too often.
Some years later now, Senator Frist has made this Class Action
Fairness Act his first civil lawsuit priority. I know there are some
who see this bill as a moving train and they would like to add this or
that provision as a caboose to that train, but I hope we will exercise
restraint and pass a clean bill without amendments.
I know some have legitimate concerns and others want to put on poison
pills. They want to adopt amendments that will cause so much
controversy that it can end up killing the entire bill. In my view,
anything that does not make this bill stronger is a poison pill. We do
not need to, and must not, weaken this bill in any way. I have seen
very few amendments that are being offered that will make it stronger.
I believe in America's legal system. The Senator from Florida, the
Presiding Officer, believes in our legal system. He believes in the
right of people to sue in court and have redress for all and has given
a lot of his professional life to that cause. But for the most part, we
do have outstanding judges on Federal and State benches. They manage
their dockets well and rule justly. There are some problems, however,
that Congress must resolve. The class action problem is certainly one
of them.
To the extent possible, I believe that the courts have reached a
limit on what they can do through judicial interpretations to resolve
the issue. There was a time when ``drive-by'' class action
certifications were par for the course, and class actions were
certified without notice being given to the defendant even. Those
times, have been eliminated for the most part by judicial ruling, in
part, I believe, because of the Supreme Court decision in the Amchem
case where the Court made clear that even in conditional
certifications, rigorous analysis is required to certify a class and
must be conducted.
This ruling had far-reaching implications and limited the ability of
plaintiff lawyers and the defendant companies to engage in collusion to
the detriment of whom? The class. Don't you think in these odd cases
where the lawyer does not even know the members of the class he
represents that ethical concerns are implicated? The situation simply
is this: You sue a big company, you allege lots of problems, you talk
with their lawyers, and a wink and a nod occurs and you say: We will
give coupons to the people I am alleging to be victims, but you have to
compensate me as a lawyer for all this time I have spent in it; how
about $10 million?
The defendants go back and say: If we pay the lawyer $10 million and
we pay the coupons to these people--most of them will never use them--
this will get us out of the lawsuit. Yes, it is too much money to pay
the lawyer, but we will get it over with. Let's do it.
Who is looking out for the class members, the people in whose name
the lawsuit was brought? The answer is no one.
These problems, unfortunately, are not currently subject to being
settled by the courts or handled by the courts. I believe this
legislation will take a strong step toward fixing that kind of problem.
There are some who will argue that reform is not needed and this
legislation is even unfair. Let me ask this: Is it fair to be a member
of a lawsuit of which you are unaware and do not even know you are a
party to it? Is it fair to receive a coupon settlement that basically
requires you to do business with a company that presumably cheated you
in the first place? Is it fair to lose money even though you prevail in
the underlying lawsuit? And there have been instances--cases such as
the infamous Bank of Boston case--where plaintiffs, not even knowing
they are a member of the lawsuit, have had their bank accounts debited
to pay for their portion of the attorney's fees--sometimes their
portion of the attorney's fees is much more than the small coupon or
monetary amount they received as part of the settlement. That is simply
not right.
These questions of fairness represent the current status of many
class action lawsuits. In my view, there is nothing fair about the
answers we just mentioned. When we approved modifications to rule 23
not too long ago, one of the primary goals was to ``assure adequate
representation of class members who have not participated in shaping
the settlement.'' After all, if the settlement is going to bind the
class member, it would seem they should not only be adequately
represented, but they
[[Page S1094]]
would be aware of the terms of that settlement and the compromises that
were involved in making the settlement. We can achieve fairness and
several other logical goals such as that with this Class Action
Fairness Act.
That class actions are beneficial is not in doubt. They serve to the
benefit of America by limiting the number of times you have to try the
same issues in separate places, in differ courts with different judges.
They serve the interests of consistency and finality by avoiding
inconsistent outcomes in separate trials where the cases revolve around
identical claims. They are to serve the interests of the class members,
however, but that is, in fact, not the outcome of too many of these
cases and therefore we need to reform this system.
So what we would strive to do with this legislation is to make the
plaintiffs the real beneficiaries of such a lawsuit. It will provide
protections to class members, such as limiting the ability to award
coupon settlements and preventing class members from being harmed
twice, once by the defendant company, and the second time by class
action settlement.
I believe we can make some great progress with this legislation if we
keep it clean. I hope we can exercise restraint and that we can do just
that.
Some have said Federal Government has no business with these
lawsuits. As a person who does believe that States have constitutional
rights and they have presumptions that cause us in Congress to be
reluctant to violate either explicit constitutional requirements or to
violate maybe presumptions or indications or contemplations of the
Constitution, I am extremely cautious about expanding federal
jurisdiction in Constitutionally questionable ways. But I do not
believe this bill expands federal jurisdiction in any way that is
Constitutionally questionable. I would like to read what the
Constitution says about diversity and where a case of this kind should
be tried. Article III, section 2 of the Constitution, talks about the
power of Federal courts and what their jurisdiction is. This is the
power given to Federal courts by the U.S. Constitution at the beginning
of our Republic. It states: ``The judicial Power shall extend to all
Cases, in Law and Equity, arising under this Constitution''--disputes
of the Constitution--``the Laws of the United States . . .''--involving
laws that we passed explicitly in Congress to Controversies to which
the United States shall be a party; to Controversies between two or
more States; between a State and Citizens of another State; between
Citizens of different States . . .''
So our Founding Fathers thought seriously about this and stated in
the Constitution that if there is a lawsuit filed between people from
different States, there needs to be a neutral forum in which to try the
case. If there is a person from Alabama and a person from Massachusetts
suing one another, the person from Massachusetts might not feel
comfortable being tried in Alabama, and the person from Alabama might
not feel comfortable being tried in Massachusetts. That is what they
put it in there for.
The home State plaintiff would always want to choose a more favorable
forum. Perhaps he would choose his own State, would he not? That is
what our Founding Fathers were concerned about.
In football, we call it ``home cooking.'' The Founders sought to
prevent ``home cooking'' of lawsuits by putting Federal jurisdictional
rules into the Constitution for these kinds of cases. Cases involving
citizens of different States were intended from the beginning to be
tried in Federal court where judges are not elected but serve lifetime
appointments and are answerable to the U.S. Supreme Court, not to any
one State court. That is the theory and it is important.
There are counties in Alabama where I personally know all the judges.
I go to church with some of them. So if I am going to sue somebody, I
am likely to choose a place where I would have the man who is in my
church supper club try my case. Well, maybe they will strike him for
cause, but what about his brother, who could also be a judge? My friend
who is a judge might say to his brother: Jeff is a good boy, make sure
you give him a fair trial. Whether we like it or not, these kinds of
things are reality, and that is what the Founders had in mind when they
wrote the Constitution. That is why when there is a group of plaintiffs
being represented by a lawyer that may not even know their names, this
lawyer is going to look around and try to file the case where he thinks
he can have the best chance of success.
As a matter of fact, I do not even dispute him or her making that
choice. That is what lawyers are paid to do, to find the best place to
file the lawsuit.
That is taught in law school. They ask, well, where do you want to
file a lawsuit?
Well, I think it would be better to file in Federal court.
Then one is taught to study the case and justify filing it in Federal
court. Or maybe a lawyer thinks it is better for his client to file it
in State court. Lawyers are taught they should file the case where it
is best for their client. I do not blame the lawyers. They are using
the law as we have now configured it.
I say it is our responsibility to look at the judicial system. If we
love it and care about it, respect it, and want it to be better, we
will continue to look at the legal system, and if the legal system has
a problem, it is our duty to examine how to fix it.
We have spent years now determining how to fix class action problems.
We have a bipartisan coalition in this Senate that has come together
and is prepared to support this legislation. I say let us do it. Let us
observe how the system is working. From that observation, we can
realize that it can be made better. Let us step up to the plate and fix
it.
I thank the Chair and the Senator from Utah. It is a pleasure to work
with him, Senator Grassley, and Senator Specter, who have all worked so
hard on this legislation.
The PRESIDING OFFICER. The Senator from Utah is recognized.
Mr. HATCH. Mr. President, I notice the distinguished Senator from
Wisconsin is in the Chamber, but I would like to make a few more
remarks if he does not feel too badly about it.
I support this bill. I have been working on it for 6 years. It is a
grand compromise. We have Democrats and Republicans. It is bipartisan.
It is not perfect, but it is as good as we can do and it will do an
awful lot of good.
The evidence is clear and undeniable; the well-documented abuse of
the class action litigation device too often ends up victimizing
plaintiffs, the very people that class actions are supposed to benefit.
These abuses cheat millions of consumers who unwittingly have their
legal rights adjudicated in local courts thousands of miles away. They
deny the due process rights of defendants who are relentlessly hauled
into a handful of small county courts where the playing field is
unfairly tilted in favor of the personal injury bar, the plaintiffs'
bar.
If that were not enough, class action abuses are eroding public
confidence in our civil justice system. When abuses do occur in the
class action system, the public can ultimately pay dearly through
spiraling prices, lost jobs, and even bankrupt companies.
I have been listening to arguments from the other side, but to give
the class action problem some perspective, I want to consider just the
effect of this litigation in one locale, Madison County, IL. There we
find a case study in rampant misconduct within the class action system,
its corrupting effect on the courts, and the desperate need for reform.
This small county in the southwestern part of that State provides all
the evidence necessary to convince anyone that the legal system is
currently being exploited by shameless and self-seeking plaintiffs'
lawyers. Madison County, IL is a rural county. I imagine it is the type
of county where maybe Abraham Lincoln first got his start as a young
lawyer and an advocate for justice.
In some notes perhaps taken in preparation for a law lecture around
1850, Lincoln set the ideal for his profession, a profession practiced
by many in this Chamber, including myself.
No. 1, ``Discourage litigation . . . Point out how . . . the nominal
winner is often a real loser--in fees, expenses, and waste of time.''
No. 2, ``Never stir up litigation. A worse man can scarcely be found
than one who does this. Who can be more
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nearly a fiend than he who habitually overhauls the register of deeds
in search of defective titles, whereon to stir up strife, and put money
in his pocket? A moral tone ought to be infused into the profession
which should drive such men out of it.''
And No. 3, ``An exorbitant fee should never be claimed.''
These words were uttered during a time when being a lawyer
automatically carried with it a title of honor, integrity, and trust.
Unfortunately, Lincoln's words no longer carry much meaning for some
of the lawyers who have descended on Madison County. In the land of
Lincoln, the rule of law has too often been corrupted almost beyond
recognition by self-interested plaintiffs' lawyers and seemingly pliant
public officials. Some unscrupulous personal injury attorneys go forum
shopping to find friendly jurisdictions. Certainly Madison County, IL
is one of them.
Then some judges in those jurisdictions, some of whom are compromised
by campaign contributions from the very same law firms arguing in their
courtrooms, sometimes certify these cases with the proverbial rubber
stamp, even though they are not worthy of being certified.
Finally, sympathetic local juries trying out-of-State corporations
have sometimes bestowed unjustified and sometimes outrageous awards.
This pattern of behavior is not only an affront to the due process
rights of defendants, but it breeds disrespect for the rule of law
itself.
I have heard colleagues on the other side of the aisle say, `Well,
these are big corporations.' First, they aren't all big corporations,
and second, even if they were, they still deserve fair treatment, due
process, and an impartial justice system.
And make no mistake about it. These suits are not free. We all pay
for them. The American consumer pays for the costs of these class
actions.
The courthouse in Madison County, IL is what scholars now describe as
a magnet court. Always on the lookout to find suitable venues for
enriching themselves, entrepreneurial plaintiffs' attorneys--many of
whom practice in the field of personal injury--are sucked into its
orbit. The numbers alone tell the story. Over the last 5 years the
number of class actions filed in the county has increased by 5,000
percent.
Let me repeat that so that astronomical figure can sink in. A 5,000-
percent increase. It almost defies logic that so many national class
actions are being brought in this small rural county.
In 1998, there were only two class actions filed in this county. In
2000, that number rose to 39. In 2001, there were 43 new class actions.
One year later, the bridges leading to the riches of Madison County
were clogged with carpetbagging lawyers as word hit the street that the
local court there was giving away money as though it was Christmas
morning. Enterprising plaintiffs' lawyers looking to make a quick buck
knew Madison County was the place for business.
In 2004, 77 class action suits were filed. In 2003, there were
another 106. Between 1998 and 2003, the number of class actions in the
county rose from 2 to 106 per year. In the last 4 years, the lawyers
who flocked to Madison County succeeded in having the following cases
certified.
All Sprint customers in the entire Nation who have ever been
disconnected on a cell phone call. That is a class action in Madison
County.
Every Roto-Rooter customer in the country whose drains might have
been repaired by a nonlicensed plumber.
All consumers who purchased limited edition Barbie dolls that were
later allegedly offered for a lower price elsewhere.
These are just three examples of the abuses that are going on.
I know my friend from Illinois, the minority whip, Senator Durbin, is
understandably protective about the state of affairs in Madison County.
He points out that while many class actions are filed in Madison
County, few are certified. It does not take a lot of cases like the
ones I talked about to create an environment that encourages cases that
are marginal at best. Through their increased filings, class action
attorneys tell us a great deal of what we need to know about Madison
County. That many of these cases are settled upon filing or even before
they are filed tells us a lot. A demand letter from a class action
attorney with a Madison County address is a dreaded piece of
correspondence for any company or any defendant. If these types of
cases were not such a drain on our economy, it would almost be easy to
laugh at some of these cases.
We question the efficiency and fairness of a small county courthouse
in Illinois adjudicating cases against national companies involving
various State and Federal regulations and involving millions, if not
billions, of dollars in settlements where neither the majority of
plaintiffs nor the defendants are typically residents of the county.
These locally elected judges, with the close assistance of interested
plaintiffs' attorneys, in effect set policy for the entire Nation,
defying the principles of self-government on which our Federal system
is based.
This situation is a colossal mess, and a few plaintiffs' lawyers are
exploiting it to the hilt, and giving all of us who love the practice
of law a bad name.
The same five firms appeared as counsel in 45 of all cases filed
between 1999 and 2000. Of the 66 firms appearing in these cases, 56 of
them--85 percent--had office addresses outside of Madison County.
In this small county, with a population of only 259,000, there are
somehow more mesothelioma claims from asbestos exposure than in all of
New York City with its population of better than 8 million. One nine-
member firm with an office in Madison County claims to handle more
mesothelioma cases than any firm in the country.
Who benefits from all of this litigation? One Madison County judge
approved a $350 million settlement against AT&T and Lucent for
allegedly billing customers who leased telephones at an unfair rate.
What did the lawyers get? Forty-four lawyers from four firms will split
$80 million for legal fees and $4 million for expenses. And the
customers? They actually lost money. After their legal fees, the
average class member got hit for $6.49.
Think about that.
Lincoln's principles are a distant memory in Madison County. The
Washington Post succinctly described the situation. ``Having invented a
client, the lawyers also get to choose a court. Under the current
absurd rules, national class actions can be filed in just about any
court in the country.''
And those lawyers often pick Madison County. They are picking it
because it is what some call a magic jurisdiction.
Let me refer to this chart, called ``Magic Jurisdictions.'' This is
Dickie Scruggs, one of the best plaintiffs' lawyers in the country, a
man I have great respect for. But in a luncheon talk on the asbestos
situation at a panel discussion at the Prudential Securities Financial
Research and Regulatory Conference on May 9, 2002, he had this to say.
This is Dickie Scruggs. You can believe him. This man understands the
litigation field. He is a billionaire from practicing law. He said:
What I call the ``Magic Jurisdictions'' is where the
judiciary is elected with verdict money. The trial lawyers
have established relationships with the judges that are
elected. They are State court judges. They are populists.
They have large populations of voters who are in on the deal.
They are getting their piece, in many cases. And so it's a
political force in their jurisdiction and it's almost
impossible to get a fair trial if you are a defendant in some
of these places. The plaintiff lawyer walks in there and
writes the number on the blackboard, and the first juror
meets the last one coming out the door with that amount of
money. The cases are not won in the courtroom. They're won
on the back roads long before the case goes to trial. Any
lawyer fresh out of law school can walk in there and win
the case, so it doesn't matter what the evidence or the
law is.
That is one of the leading plaintiffs' lawyers in the country. He was
honest enough to call it the way it is in Madison County. Madison
County is not the only jackpot jurisdiction, but I am concentrating on
it since the distinguished Senator from Illinois has focused his
remarks on our criticism of this jurisdiction.
Dickie Scruggs is a fine lawyer. I have said that. I worked with him
on the tobacco settlement. He and Mississippi Attorney General Mike
Moore did a good job for their clients and the American public. I am
very familiar with what they did. I am familiar with the Castano Group
as well, which
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risked millions of dollars to bring the tobacco suits. They had an
entire multifloor building filled with documents they accumulated at
the cost of millions of dollars to make their case in the tobacco
suits.
Dickie Scruggs is a fine lawyer. So is Mike Moore. So are the Castano
Group lawyers.
Having said that, there is a reason the Super Bowl is held at a
neutral site. It is clear that Madison County is not a neutral site.
When it comes to class action defendants trying a class action case in
Madison County, it is like shooting fish in a barrel.
Dickie Scruggs is simply too good of a lawyer to need any unfair
advantage and that goes for the vast majority of plaintiffs' attorneys
in our country. But there are a minority of lawyers who are causing the
vast majority of our problems.
What makes for a magical jurisdiction? In a magic jurisdiction, the
supposedly objective judges and jury, all stand to gain from a
settlement. Madison County, as the Chicago Tribune notes, is a jackpot
jurisdiction where local newspapers ``sport advertisements looking for
the local plaintiff that can provide a convenient excuse to file.''
Some have concluded that this choice of venue might have something to
do with the fact that in recent years the elected judges of the circuit
court of Madison County have received at least three-quarters of their
campaign funding from the lawyers who appear before them in these class
action suits. In a simpler time, the State court would only certify a
class if there was a substantial local connection. Some of the judges
in Madison County have created an environment where a lifelong resident
of Washington State, who worked in Washington, was allegedly exposed to
asbestos in Washington, never received medical treatment in Illinois,
and had no witnesses in Illinois to testify in his behalf, actually
thought it was worth a shot to bring suit in a strange town halfway
across the country. What was his connection to Madison County? He
vacationed in Illinois for 10 days with his family nearly 50 years ago.
In this case, the court did the right thing and refused to certify
this man's claim. But that a lawyer would even consider bringing it
shows how far gone Madison County is. So far, the Illinois Supreme
Court has taken the extraordinary step of rebuking it. As legal ethics
professor Susan Koniak of Boston University School of Law explains:
Madison County judges are infamous for approving anything
put before them, however unfair to the class or suggestive of
collusion that is.
This is not justice. This is a travesty. The St. Louis Post-Dispatch,
one of this Nation's great newspapers, has followed this epidemic of
litigation closely. They describe the run on the Madison County
courthouse as resembling ``gleeful shoppers mobbing a going out of
business sale.''
Due process itself is corrupted by this circus. What is going on in
Madison County too closely resembles legalized extortion in the eyes of
many observers. The deck is stacked against these companies hauled to
Illinois to answer these charges. The cases are sometimes heard on an
expedited basis. Under these pressures they are typically given an
offer they cannot refuse. Once the class is certified, they feel
compelled to settle, regardless of the merits of the case. The risk of
loss is simply too high. They do not even have to wait until the class
is certified. They know that in most cases the class will be certified
by the judges of Madison County. A simple demand causes many companies
to say, `let's buy out of this for the lowest price we can, even though
we do not owe them a dime. We will just settle for the attorney's
fees.' These settlements are to the detriment of legitimate claims.
The class never has to be certified. No self-respecting lawyer will
want to try a case in a county where the deck is totally stacked
against his client. And so they settle.
Let us be clear, these are not truly local disputes.
S. 5 does nothing to remove local disputes from local courts. The
suits we are talking about in Madison County and other jackpot
jurisdictions are on behalf of nationwide classes of clients against
corporations that do business in every State. Madison County is not
chosen as the venue because of its quaint scenery. It is chosen because
defendants in these class actions often do not get a fair shake in
Madison County.
This is not a triumph of federalism and local decisionmaking. It is
the evisceration of federalism and fairness. A bedrock principle of our
federal system is that states are largely free to regulate their own
particular affairs. To allow one State, in effect, to legislate for
another is to violate an important principle of self-government that
this country is built upon. Madison County has been flooded with class
action claims and now the Nation is drowning in them. This is a classic
case for Federal intervention. In fact, this is a case study for the
type of intervention in Federal affairs the Constitution was meant to
allow.
What happens in Madison County affects the whole country. The
overwhelming majority of class actions filed in Madison County are
nationwide lawsuits in which 99 percent of the class members live
outside the county. As a result, decisions reached in Madison County
courts affect consumers all over the country and the county's elected
judges effectively set national policies on important commercial
issues.
There is a place for personal injury law in the American justice
system. I understand that. I am an attorney. I have tried many cases. I
know that there is a legitimate and honest place for personal injury
suits in our civil justice system. Americans have a sacred right to
take their case to court when they are harmed by a person or product.
Yet this right is seriously undermined by a seriously compromised class
action regime. To help rescue it, we need to enact this reform. Today's
lawyers do not take cases that come to them. They invent cases. They
behave more like entrepreneurs than counsel, trying to find an issue
and income stream before they find a plaintiff. They act like
businessmen--the CEOs of Trial Lawyers, Incorporated.
The problem is that their business plan makes hash out of our system
of impartial justice. It simply defies belief that county courts are
the proper venue for multijurisdictional litigation. Some of the
plaintiffs' bar have put a ``pay the lawyer first'' business model in
motion in Madison County. First, find sympathetic judges. Then bankroll
their campaigns. And to seal the deal, move the case through the system
so fast that the defendants do not always get a fair opportunity to
fully investigate the claim. Justice does demand fairness, but our
system of decentralized class action litigation is fundamentally unfair
to defendants, plaintiffs, and the average American who ends up footing
the bill for the unjustified billion-dollar settlements.
If this were a board game, it would be ``Class Action Monopoly.''
Start at `Go', and come up with an idea for a lawsuit. Find a named
plaintiff to pay off. Make allegations, no proof needed. Get out of
rule 23, the Federal rule 23, free. Convince your magnet State court
judge to certify the ``class.'' File copycat lawsuits in State courts
all over the country. Sue as many companies in as many States possible
even if they have no connection to the State.
Who gets the money? In the Columbia House case, $5 million for
lawyers, discount coupons for plaintiffs. In the Blockbuster case,
$9.25 million for lawyers, free movie coupons for plaintiffs. In the
Bank of Boston case, $8.5 million for lawyers; some claimants even had
to pay themselves.
But ``What happens to me?'' Your employer takes a hit, maybe lays you
off. Your health and car insurance premiums go up. And we are all
familiar with that. The lawyers win, you lose. This game gets pretty
old, pretty quick. But this is this jackpot monopoly system we have in
Madison County, and a whole bunch of jackpot jurisdictions in this
country.
Now, the Class Action Fairness Act is an important but modest reform.
It does not deprive substantive legal rights to any American. All it
does is make it easier to put these national cases where they belong,
and that is in our Federal courts.
According to one study, 98 of the 113 class actions filed in Madison
County from 1998 to early 2002 could have been moved to Federal court
under this legislation. Justice demands that we act. We cannot play
around with this any more. Those who are injured will get
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their day in court, but it will be Federal court, with sophisticated
judges who are appointed for life, who have no reason to be unfair. By
voting for S. 5, we will help make sure they get it in a court where
justice can be dispensed.
I yield the floor to the distinguished Senator from Wisconsin.
The PRESIDING OFFICER. The Senator from Wisconsin is recognized.
Mr. FEINGOLD. Mr. President, I thank the Senator from Utah.
Mr. President, I oppose the Class Action Fairness Act, S. 5.
Notwithstanding its title, I do not think this bill is fair. I do not
think it is fair to citizens who are injured by corporate wrongdoers
and are entitled to prompt and fair resolution of their claims in a
court of law. I do not think it is fair to our State courts, which are
treated by this bill as if they cannot be trusted to issue fair
judgments in cases brought before them. And I do not think it is fair
to State legislatures, which are entitled to have the laws that they
pass to protect their citizens interpreted and applied by their own
courts. This bill is not only misnamed, it is bad policy, and I do
think it should be defeated.
Make no mistake, by loosening the requirements for Federal diversity
jurisdiction over class actions, S. 5 will result in nearly all class
actions being removed to Federal court. This is a radical change in our
Federal system of justice. We have 50 States in this country, each with
its own laws and courts. State courts are an integral part of our
system of justice. They have worked well for our entire history. It is
hard to imagine why this Senate, which includes many professed
defenders of federalism and the prerogatives of State courts and State
lawmakers, would support such a wholesale stripping of jurisdiction
from the States over class actions. By removing these actions from
State court, Congress would shift adjudication away from State
lawmakers and State judges towards Federal judges, who are often not as
familiar with the nuances of State law. In my opinion, the need for
such a radical step has not been demonstrated.
Actually, the leaders of the Federal and State judiciary agree. I
don't know if it has taken a position on this particular bill, but the
Judicial Conference of the United States has opposed legislation like
S. 5 that would remove most class actions from State to Federal court.
Federal judges don't particularly like diversity jurisdiction cases.
They certainly are not in favor of legislation that would bring many
more large, complicated civil cases brought under State law to their
courts. And the Board of Directors of the Conference of State Chief
Court Justices expresses quite well the concerns of State judges about
this bill. Its letter states:
Absent hard evidence of the inability of the state judicial
systems to hear and fairly decide class actions brought in
state courts, we do not believe such a procedure [transfer of
class actions to federal court] is warranted. . . . Our
position is not new and it is consistent with the position of
our counterparts in the federal judicial system.
Class actions are an extremely important tool in our system of
justice. They allow plaintiffs with very small claims to band together
to seek redress. Lawsuits are expensive. Without the opportunity to
pursue a class action, an individual plaintiff often simply cannot
afford his or her day in court. But through a class action, justice can
be done and compensation for real injuries can be obtained.
Yes, I do agree, there are abuses in some class action suits. Some of
the most disturbing have to do with class action settlements that offer
only discount coupons to the members of the class and a big payoff to
the plaintiffs' lawyers. I am pleased that the issue of discount
coupons is addressed in the bill, because the bill we considered in
October 2003 did nothing about that problem. The bill now requires that
contingency fees in coupon settlements will be based on coupons
redeemed, not coupons issued. Attorney's fees will also be determined
by reasonable time spent on a case and will be subject to court
approval. The bill also allows a court to require that a portion of
unclaimed coupons be given to one or more charitable organizations
agreed to by the parties. I do agree, these are all good changes, but
they do not change my view that the bill, as a whole, unfairly
interferes with the States' administration of justice.
I appreciate that the supporters of S. 5 modified the new diversity
jurisdiction rules for class actions in an effort to allow plaintiffs
in State class actions more opportunities to remain in State court.
Under the new bill, a district court must decline jurisdiction if two-
thirds of the plaintiffs and the primary defendants are from the State
where the action was filed, and there is at least one defendant who is
a citizen of that State from whom significant relief is sought and
whose alleged conduct forms a significant basis for the claims asserted
by the proposed class. In addition, the principal injuries resulting
from the alleged conduct of each defendant must have occurred in the
State in which the action was originally filed.
These criteria are an improvement on the underlying bill. But the
jurisdictional requirements for class actions to remain in State courts
are still too burdensome. Under the new language, for example, a class
action brought by Wisconsin citizens against a Delaware-based company
for selling a bad insurance policy would probably be removed to Federal
court even if Wisconsin-based agents were involved in selling the
policies.
In addition, the new bill provides that district courts can only
decline jurisdiction if during the 3-year period preceding the filing
of the action no other similar class action has been filed against any
of the defendants even if the case is filed on behalf of other
plaintiffs. Thus, the filing of a class action in one State court may
lead to the successful removal of a similar case filed in another State
on behalf of plaintiffs in that State. If a defendant is engaging in
conduct in number of different States that violates the separate laws
of those States, why shouldn't that defendant be held accountable in
different State courts under different state laws? Do we really need
the Federal courts to get involved in these State law cases?
The bottom line is that this bill still sends the majority of class
actions to Federal court. The proponents of this bill have chosen a
remedy that goes far beyond the alleged problem.
Furthermore, under S. 5, many cases that are not class actions at all
are included in the definition of ``mass action,'' a new term coined by
this bill. S. 5 simply requires that the plaintiffs be seeking damages
of more than $75,000 for the case to be considered a mass action and,
therefore, removable to Federal court. This provision unfairly limits
State court authority to manage its docket and to consolidate claims in
order to more efficiently dispense justice.
A particularly troubling result of this bill will be an increase in
the workload of the Federal courts. We all know these courts are
already overloaded. In the 2004 Year End Report on the Federal
Judiciary, for example, Chief Justice Rehnquist reported that the
current budget crisis in the Federal judiciary has forced courts to
impose hiring freezes, furloughs, and reductions in force. He noted
that there is a dire need for additional federal judgeships to deal
with the Federal courts' ever-increasing caseload. The Congress has led
the way in bringing more and more litigation to the Federal courts,
particularly criminal cases. Criminal cases, of course, take precedence
in the Federal courts because of the Speedy Trial Act. So if you look
at this bill in the context, the net result of removing virtually all
class actions, civil cases, of course, to Federal court will be to
delay those cases.
There is an old saying with which everyone is familiar: ``justice
delayed is justice denied.'' I hope my colleagues will think about that
aphorism before voting for this bill. Let's think about the real world
of Federal court litigation and the very real possibility that long
procedural delays in overloaded Federal courts will mean that
legitimate claims may never be heard. My colleagues who support this
bill tend to dismiss these arguments. They say that the Federal courts
will offer adequate redress for legitimate claims, that they will
faithfully apply State laws. I certainly hope they are right because
this bill seems to be headed for enactment. But if they are wrong,
citizens and consumers will be the ones who suffer.
One little-noticed aspect of this bill illustrates the possibilities
for delay
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that the bill provides, even to defendants who are not entitled to have
a case removed to Federal court under the bill's relaxed diversity
jurisdiction standards.
Under current law, if a Federal court decides that a removed case
should be remanded, or returned, to State court, that decision is
generally not appealable. It would be different under this bill, if it
becomes law. This bill allows defendants to immediately appeal a
decision by a Federal district court that a case does not qualify for
removal to Federal court and should be remanded to State court.
Fortunately, the revised bill now requires such appeals to be decided
promptly. It does not, however, do anything about the fact that the
lower court may take months or even years to make a decision on the
motion to remand. That means that a plaintiff class that is entitled,
even under this bill, to have a case heard by a State court may still
have to endure years of delay while its remand motion is pending in the
Federal district court. Where is the ``fairness'' in that? I plan to
offer an amendment to address that problem, and I certainly hope the
bill's sponsors and supporters will give it serious consideration.
When I offered this amendment in the Judiciary Committee, I learned
that a number of the supporters of the bill recognize the importance of
the issue that my amendment raises. The chairman of the Judiciary
Committee indicated that he would take a serious look at it and see if
there is an accommodation that can be reached. So I did not seek a vote
in committee on the amendment. I stand ready to negotiate on this issue
and I hope there will be a serious effort here to reach agreement.
We have heard a lot of talk on this floor about the need to pass this
bill without amendment--without any amendment at all--to protect some
kind of ``delicate balance'' with the House and with the corporate
supporters of the bill like the Chamber of Commerce. I ask my
colleagues who support this bill, why would you not support a
reasonable amendment that will make this bill fairer to plaintiffs who
bring cases that under the bill's own terms should remain in State
court? Please don't let this so-called delicate balance override your
duty as legislators to do what is right.
It is important to remember that this debate is not about resolving
questions of Federal law in the Federal courts. Federal question of
jurisdiction already exists for that. Any case involving a Federal
statute can be removed to Federal court under current law. This bill
takes cases that are brought in State court solely under State laws
passed by State legislatures and throws them into Federal court. This
bill is about making it more time-consuming and more costly for
citizens of a State to get the redress that their elected
representatives have decided they are entitled to if the laws of their
State are violated.
Diversity jurisdiction in cases between citizens of different States
has been with us for our entire history as a nation. Article III,
section 2 of the Constitution provides: ``The judicial Power shall
extend . . . to Controversies between Citizens of different States.''
This is the constitutional basis for giving the Federal courts
diversity jurisdiction over cases that involved only questions of State
law.
The very first Judiciary Act, passed in 1789, gave the Federal courts
jurisdiction over civil suits between citizens of different States
where over $500 was at issue. In 1806, in the case of Strawbridge v.
Curtiss, the Supreme Court held that this act required complete
diversity between the parties. In all other instances, the Court said,
a case based on State law should be heard by the State courts. So this
bill before us changes a nearly 200-year-old practice in this country
of preserving the Federal courts for cases involving Federal law or
where no defendant is from the State of any plaintiff in a case
involving only State law.
Why is such a drastic step necessary? Why do we need to prevent State
courts from interpreting and applying their own State laws in cases of
any size or significance? One frequent argument is that businesses
cannot get a fair day in court because of renegade State court judges.
Yet, there really is no evidence to back up these claims. Of the 3,141
counties, parishes, and boroughs in the State court systems of the
United States, the so-called American Tort Reform Association could
only identify nine jurisdictions that they consider ``unfair'' to
defendants. Four other jurisdictions were declared as ``dishonorable
mentions.'' But, the association only provided data on two of these
jurisdictions--Madison County, IL, which the Senator from Utah was
talking about, and St. Clair County, IL. The Senator from Utah cited
statistics of increases in class action filings up through 2003. Yet in
Madison County, the villain in the story told by the Senator from Utah,
the number of class action filings has decreased by 30 percent between
2003 and 2004. So defendants have decided that State judges are unfair
in two jurisdictions out of 3,000, but how does this constitute a
crisis? The answer is simple there isn't one.
Another argument we hear is that the trial lawyers are extracting
huge and unjustified settlements in State courts, which has become a
drag on the economy. We also hear that plaintiffs' lawyers are taking
the lion's share of judgments or settlements to the detriment of
consumers. But a recent empirical study contradicts these arguments.
Theodore Eisenberg of Cornell Law School and Geoffrey Miller of NYU Law
School recently published the first empirical study of class action
settlements. Their conclusions, which are based on data from 1993-2002,
may surprise some of the supporters of this bill.
First, the study found that attorneys' fees in class action
settlements are significantly below the standard 33 percent contingency
fee charged in personal injury cases. The average class action
attorney's fee is actually 21.9 percent. In addition, the attorneys'
fees awarded in class action settlements in Federal court are actually
higher than in State court settlements. Attorney fees as a percent of
class recovery were found to be between 1 and 6 percentage points
higher in Federal court class actions than in State court class
actions.
A final finding of the study is that there has been no appreciable
increase in either the amount of settlements or the amount of
attorneys' fees awarded in class actions over the past 10 years. The
study, therefore, indicates that there is no crisis here, no explosion
of huge judgments, no huge fleecing of consumers by their lawyers. This
bill is a solution in search of a problem. It is a great piece of
legislation for wrongdoers who would like to put off their day of
reckoning by moving cases to courts that are less convenient, slower,
and more expensive for those who have been wronged. It is a bad bill
for consumers, for State legislatures, and for State courts.
This bill seems not to be about class action abuses, but about
getting cases into Federal court where it takes longer and is more
expensive for plaintiffs to get a judgment. The cumulative effect of
this bill is to severely limit State court authority and ultimately
limit victims' access to prompt justice. Despite improvements made
since the last time the Senate considered this bill, the bill will
still place significant barriers for consumers who want to have their
cases heard in State court. Remand orders are still appealable, and the
mass tort definition does not protect State courts' authority to
consolidate cases and manage their dockets more efficiently. All the
elements outlined in the bill before us will result in the erosion of
State court authority and the delay of justice for our citizens.
Therefore, I cannot support this unfair ``Class Action Fairness Act''
bill.
I yield the floor.
The PRESIDING OFFICER. The Senator from Wisconsin.
Mr. KOHL. Mr. President, I rise today in support of the Class Action
Fairness Act of 2005. This legislation addresses the continuing
problems in class action litigation, particularly unfair and abusive
settlements that shortchange consumers across America.
The time for this bill has come. We have worked very closely on a
bipartisan basis with Senator Grassley, Senator Carper, and Senator
Hatch for several Congresses and, more recently with Senators
Feinstein, Dodd, Schumer, and Landrieu. Without this close cooperation
and tremendous effort, we would not be on the verge of passing class
action reform. Finally, Senators Frist and Reid deserve praise for
crafting a fair process for the consideration of this legislation.
[[Page S1099]]
Class action cases are an important part of our justice system
because they enable people who have been harmed in similar ways to
pursue claims collectively that would otherwise be too expensive to
bring individually. When these cases proceed as intended, injured
parties are able to successfully pursue lawsuits in cases involving
defective products or employment discrimination, or other wrongs, and
recover fair damages.
Unfortunately, the system does not always work as it should. In fact,
consumers are frequently getting the short end of the stick in class
action cases, recovering only coupons or pocket change while their
lawyers reap millions. Too often, the class action system is being
taken advantage of to the detriment of consumers and others who have
been harmed. The Washington Post put it clearly:
No portion of the American civil justice system is more of
a mess than the world of class actions.
Our bill addresses the problem in a few straightforward ways. First,
the bill helps consumers by guaranteeing that they receive a better
understanding of their rights and responsibilities in a class action
lawsuit. Our bill includes a class action consumer bill of rights to
limit coupon cases and other unfair settlements.
Second, this bill provides that state attorneys general are notified
of proposed class action settlements. This encourages a neutral third
party to weigh in on whether a settlement is fair for the plaintiffs
and to alert the court if they do not believe that it is.
Finally, we allow some class action lawsuits to be removed to Federal
court. As we all know, some are concerned about this provision. Yet,
moving some class action cases to Federal court is only common sense.
When a problem affects people in many States or involves a national
problem, it is only fitting that the case be heard in Federal court.
We took special care during the course of our negotiations to ensure
that the appropriate courts heard the right cases. This bill has never
been an effort to either stop class action cases or send them all to
the Federal courts. Rather, those cases that primarily involve people
from only one State will remain in that State's court. These changes
will ensure that class action cases are handled efficiently and in the
appropriate venues and that no case that has merit will be turned away.
Stories of nightmare class action settlements that affect consumers
around the country are all too frequent. For example, a suit against
Blockbuster video in Texas yielded dollar off coupons for future video
rentals for the plaintiffs while their attorneys collected $9.25
million. In California State court, a class of 40 million consumers
received $13 rebates on their next purchase of a computer or monitor--
in other words they had to purchase hundreds of dollars more of the
defendants' product to redeem the coupons. In essence, the plaintiffs
received nothing, while their attorneys took almost $6 million in legal
fees. We could list many more examples of abuses in State court, but
let me discuss just one more case that is almost too strange to
believe.
I am speaking about the notorious Bank of Boston class action suit
and the outrageous case of Martha Preston from Baraboo, WI. She was an
unnamed class member of a lawsuit in Alabama State court against her
mortgage company that ended in a settlement. The settlement was a bad
joke. She received $4 and change in the lawsuit, while her attorneys
pocketed $8 million.
Yet the huge sums that her attorneys received were not the worst of
the story. Soon after receiving her $4, Ms. Preston discovered that her
lawyers took $80, twenty times her recovery, from her escrow account to
help pay their fees. Naturally shocked, she and the other plaintiffs
sued the lawyers who quickly turned around and sued her in Alabama, a
State she had never visited, for $25 million. Not only was she $75
poorer for her class action experience, but she also had to defend
herself against a $25 million suit by the very people who took
advantage of her in the first place.
The class action process is clearly in serious need of reform.
Comprehensive studies support this position. For example, a study on
the class action problem by the Manhattan Institute finds that class
action cases are being brought disproportionately in a few State courts
so that the plaintiffs' lawyers may take advantage of those specific
courts that have relaxed class action rules.
A RAND study offered three primary explanations for why national
class action cases should be in Federal court. ``First, Federal judges
scrutinize class action allegations more strictly than State judges . .
. Second, State judges may not have adequate resources to oversee and
manage class actions with a national scope. Finally, if a single judge
is to be charged with deciding what law will apply in a multistate
class action, it is more appropriate that this take place in Federal
court than in State court.
Our bill attempts to follow these recommendations and ensure that
cases with a national scope are heard in Federal court. All the while,
cases that are primarily of a single state interest remain in State
court under our bill. Let me emphasize the limited scope of this
legislation. We do not close the courthouse door to any class action.
We do not deny reasonable fees for class lawyers. We do not cause undue
delays for these cases. And we do not mandate that every class action
be brought in Federal court. Instead, we simply promote closer and
fairer scrutiny of class actions and class settlements.
Right now, people across the country can be dragged into lawsuits
unaware of their rights and unarmed on the legal battlefield. What our
bill does is give back to regular people their rights and
representation. This measure may not stop all abuses, but it moves us
forward. It will help ensure that unsuspecting people like Martha
Preston don't get ripped off.
Mr. President, we believe this is a moderate approach to correct the
worst abuses, while preserving the benefits of class actions. The bill
represents a finely crafted compromise. We believe it will make a
difference. We urge its passage.
I suggest the absence of a quorum.
The PRESIDING OFFICER (Mr. Burr). The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. DURBIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DURBIN. Mr. President, I was on the floor of the Senate earlier
preparing to offer an amendment, and I lost my voice. There was
cheering in the galleries, but I have decided to soldier on and try to
present this amendment again. I will try to abbreviate any remarks to
spare the audience from what may be a painful process for them.
We are considering the Class Action Fairness Act of 2005. I have
listened to some of the speeches on the Senate floor. Senator Lott of
Mississippi said: Do not be confused. This is not tort reform, this is
court reform. I thought that was an interesting comment because there
has been some concern over whether this class action change would
affect a body of lawsuits known as mass torts--in other words, the
types of class actions that relate to physical injuries that are common
to mass tort cases.
Section 4(a) of S. 5 talks about ``mass actions,'' a different term
altogether. It requires mass actions be treated the same as class
actions under the bill. The big question is whether that kind of
lawsuit will be taken out of a State court and put into a Federal
court. As I mentioned in my earlier remarks, Federal courts are not
friendly to class actions. They are very strict in those that they
would consider, and then they are very limited in their scope of
liabilities. The business interests that are pushing for this change in
the law know that if they can get these lawsuits into a Federal court,
they are less likely to be found liable. That is what this whole debate
is all about.
I have tried to take a close look at the mass actions section of this
class action bill and ask how it would apply to a mass tort situation.
Mass torts are large-scale personal injury cases resulting from
accidents, environmental disasters, or dangerous drugs that are widely
sold. The asbestos exposure situation we will be considering this year
is another example of a mass tort.
These personal injury claims are usually based on State laws, and
almost
[[Page S1100]]
every State has established rules of procedure allowing their State
courts to customize the needs of their litigants in these complex
cases. I am afraid if S. 5 becomes law, the so-called mass action
provision will preempt all of these State procedures and take them out
of State courts.
The supporters of the bill claim that mass actions are not the same
as mass torts and that they have no desire to affect mass tort cases. I
know that is their position, but it is not what their bill says. If the
goal is to federalize all State personal injury cases, supporters
should be open about it and say it publicly.
I am sure the U.S. Chamber of Commerce, the American Tort Reform
Association, all the business and insurance groups that support this
bill would like to see all cases sent to Federal court. I knew from my
years in practice in downstate Illinois, that Federal courts were more
conservative than State courts.
But even these groups do not believe they can be that lucky with this
bill. Instead, they came to us and said: No, our bill is very narrow,
it only deals with class actions and not all cases. When I take a look
at section 4, though, I am concerned about it. It sounds an awful lot
like mass torts. Here is how they describe it. Section 4(A) defines it:
. . . any civil action . . . in which monetary relief claims
of 100 or more persons are proposed to be tried jointly on
the ground that the plaintiffs' claims involve common
questions of law or fact . . .
I am sure for anyone who has been patient enough to follow this
debate this is a little confusing, so let me try by an example to give
an idea of what is at stake in changing this law.
Everybody in America knows that in late September 2004, Merck & Co.,
a pharmaceutical giant, pulled its blockbuster pain medication Vioxx
off the market. The largest prescription drug recall in history
occurred as a result of a new study that showed that Vioxx doubled the
risk of heart attack and stroke in some patients. With annual sales of
$2.5 billion, Vioxx was one of the most successful new drugs ever. It
was one of a new class of drugs called COX-2 inhibitors.
Some 20 million Americans took Vioxx in the 5\1/2\ years it was sold,
but we don't know how many thousands had heart attacks and strokes that
could have been attributed to this drug.
Since the discovery of the dangers of Vioxx, hundreds of cases from
all over the country have been filed against Merck, and we can
anticipate thousands more.
I would say as a former trial lawyer who served as both defense
counsel in some cases and plaintiff's counsel in others, this is a
pretty serious situation for Merck, and they know it. They have
conceded the fact that the drug was dangerous. They took it off the
market. Having taken it off the market, it is understandable that some
who were injured are going to seek just compensation.
Let us look at a few cases. Let us take the case of Janet Huggins,
which is just one of hundreds of similar cases working their way
through the court system today.
Mrs. Huggins of Tennessee was a 39-year-old woman who died of a
sudden heart attack after taking Vioxx. She was the mother of a 9-year-
old son. When she was diagnosed with the early onset of rheumatoid
arthritis, Vioxx was prescribed. She had no former cardiac problems or
family history. According to her medical records, Mrs. Huggins was in,
otherwise, excellent health.
But on September 25, 2004, she died of a sudden heart attack--less
than a month after she started taking Vioxx. She was buried on the very
day in September that Merck took Vioxx off the market.
On October 28, 2004, her husband Monty filed a claim against Merck in
the Superior Court of New Jersey, Atlantic City Division. Why New
Jersey? This couple is from Tennessee. Because that is the State where
Merck is headquartered.
In an interview on ``60 Minutes,'' Mr. Huggins said: ``I believe my
wife would be here'' if Merck had decided to take Vioxx off the market
just 1 month earlier.
Then there was Richard ``Dickie'' Irvin of Florida, who was a 53-
year-old former football coach, and president of the athletic booster
association.
He had received his college football scholarship and was inducted
into the school's football hall of fame. He went on to play in the
Canadian League Football until suffering a career-ending injury.
In addition to coaching, he worked at a family-owned seafood shop
where he was constantly moving crates of seafood. He rarely went to see
a doctor and had no major medical problems.
In April 2001, Mr. Irvin was prescribed Vioxx for his football knee
injury from years ago. Approximately 23 days after he began taking
Vioxx, Mr. Irvin died from a sudden, unexpected heart attack. An
autopsy revealed that his heart attack was caused by a sudden blood
clot. This is the exact type of injury that has been associated with
Vioxx use.
Mr. Irvin and his wife of 31 years had four children and three
grandchildren.
John Newton of Texas, father of two, took Vioxx for osteoarthritis.
On April 1, 2003, without warning, he began coughing violently and
within minutes was coughing up blood. Before emergency medical services
could be called, he collapsed in the arms of his 17-year-old son and
died.
It was later determined that Mr. Newton died of a blood clot in his
lung. He had no prior history of blood clots, or pulmonary disease. The
cases go on and on in State after State.
Some of these cases such as the one brought by Mrs. Huggins' family
have already been filed against Merck. Others are in the works.
But if the victims of Vioxx file suit in New Jersey, because that is
where Merck is headquartered, their cases are automatically sent to the
State's special mass torts court.
New Jersey is one of those States where the legislature established
specialized courts to handle certain types of cases. The courts in New
Jersey have the authority to combine cases. They can consolidate cases.
That seems reasonable, when you consider all of the people who will be
suing Merck in New Jersey, where they are headquartered, from all over
the United States with similar situations as the ones I just described.
What is so outrageous about having a lot of State-based personal
injury claims filed separately which are then consolidated as the New
Jersey courts can do by their own motion?
But under the mass action language of S. 5, their case and all other
similar Vioxx cases will be taken out of the New Jersey special court
and removed to a Federal court to be treated like a class action.
Why? If you take a look at the language in S. 5, the fact pattern
fits nicely under the definition of a ``mass action'' to remove the
case to Federal court, while at the same time none of the exemptions
apply to keep Vioxx cases in State court.
So understand, for those who are arguing that this law we are
considering is simply a case of changing jurisdictions in courts and
stopping righteous lawyers from filing class action lawsuits, that it
is much more.
For Merck, this law is the answer to a prayer. They will take their
case out of the State court into a Federal court as a class action,
which is less likely to certify the class even though the series of
mass tort cases were not even filed as a class action.
That is why I am offering this amendment. My amendment would make two
small, narrow, and common sense changes.
First, it would allow State courts to continue to consolidate these
individual personal injury cases on their own motion without losing
jurisdiction to a federal court under S. 5.
Second, it would also allow courts that consolidate cases not just
for pretrial but all the way through trial or settlement to retain
their jurisdiction and not lose it to a Federal court.
My amendment provides parity in the litigation process because one of
the exceptions to the mass action definition in S. 5 already provides
for defendants to consolidate cases without losing jurisdiction to a
Federal court. I think it is important for the court--in addition to
the defendant--to have this right as well.
I also think it is important for courts to be able to schedule their
own calendar of cases without having to worry whether they would lose
jurisdiction over their consolidated cases at certain
[[Page S1101]]
phases of litigation. They should not be limited ``solely'' to the
pretrial proceedings.
These two small changes will ensure that mass tort cases involving
personal injury claims that are not intended to be affected by S. 5 can
continue to remain in State courts throughout the duration of the
proceeding. The supporters of this bill claim that is their intent, and
I want to make sure the language in S. 5 reflects this purpose.
Amendment No. 3
(Purpose: To preserve State court procedures for handling mass
actions)
Mr. DURBIN. Mr. President, I send the amendment to the desk.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from Illinois [Mr. Durbin] proposes an
amendment numbered 3.
Mr. DURBIN. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
On page 20, before the semicolon at the end of line 23,
insert ``or by the court sua sponte''.
On page 21, line 5, strike ``solely''.
Mr. DURBIN. Mr. President, I yield the floor.
The PRESIDING OFFICER. The Senator from Tennessee is recognized.
(The remarks of Mr. Alexander pertaining to the submission of S. Res.
44 are printed in today's Record under ``Submitted Resolutions.'')
The PRESIDING OFFICER. The Senator from Washington.
Mrs. MURRAY. Mr. President, this afternoon the Senate is debating a
class action lawsuit bill. This afternoon in Detroit, President Bush
said:
Congress needs to pass meaningful class action and asbestos
legal reform this year.
My response is, before we pass something, we better understand how it
will affect the rights and the lives of everyday, average Americans.
Unfortunately, the bill before the Senate will unfairly tip the
scales of justice against average citizens. It will give big businesses
even more power to avoid responsibility for their actions and it will
delay justice for many victims who deserve justice.
We do not have to look very far to see why average citizens need
access to courts. Look at this morning's newspaper from Seattle, WA. It
reports that the Federal Government indicted the W.R. Grace Company for
knowingly sickening workers and residents of Libby, MT, where hundreds
of people have died from asbestos exposure. The indictment charges that
the company officials knew of the dangers to workers in the community
and created a conspiracy to hide those dangers.
I hope these indictments will bring a small measure of justice to the
thousands of people who have suffered in Libby and around the country.
These people worked hard. They provided for their families. But the
company they worked for knowingly poisoned them and then covered it up.
The Federal Government is finally going after the company and the
executives who made the decisions that put workers and the entire
community at risk.
Here is the story from today's Seattle P-I:
Grace indicted in asbestos deaths. Mine Company and seven
executives face criminal charges.
Mr. President, I ask unanimous consent that the entire article be
printed in the Record after my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mrs. MURRAY. Mr. President, the story of what happened in Libby, MT,
is heartbreaking.
Years ago, when I first heard what happened there, I began a campaign
to ban asbestos and to protect its victims. In June of 2002, I
testified at a hearing about Libby before the Senate Subcommittee on
Superfund, Toxics, Risk, and Waste Management. The people of Libby, MT,
have been waiting for this day for a very long time.
This indictment tells companies that they are responsible for their
decisions and that human lives are more important than profits. The
indictment sends a message that if you are putting workers and
consumers at risk, if you try to hide the dangers, you will be
prosecuted because at the end of the day, this is not about profits, it
is about people.
It is about people such as Gayla Benefield, whom I met last summer.
Gayla's father worked at W.R. Grace's vermiculite mine and mill in
Libby, MT, from 1954 to 1973. Her father died of asbestosis in 1974.
Gayla's mother never worked in that mine, but she was exposed to
asbestos fibers on her husband's work clothes. Gayla's mother died of
asbestosis in 1996. Gayla herself was exposed to asbestos fibers. Why?
Because she hugged her dad when he came home from work. And then, in
December of 2001, Gayla and her husband David both were diagnosed with
lung abnormalities.
In all, about 37 people in Gayla's family have signs of asbestos
disease, and only three ever worked in that mine.
Now, as my colleagues know, for the past 4 years, I have been
speaking about the dangers of asbestos and the need to ban it in this
country. I have stood up for victims and their families. I have
introduced legislation to protect workers, educate the public, and
improve research and treatment.
Last year, when Congress considered an inadequate trust fund bill, I
stood up for the asbestos victims and voted against it. We still have a
lot of work to do to take care of the current victims and to prevent
future deaths. That is one of the reasons I am so personally concerned
about the class action bill that is now before the Senate.
The bill allows companies to move class action lawsuits from State
jurisdiction to Federal jurisdiction. That could delay justice for
years. In many cases, victims have already been waiting a long time for
their day in court. If their cases are moved to Federal court, they
will essentially have to start all over at the bottom of the pile. That
is because Federal courts already have a massive backlog of cases. It
is one of the reasons the Federal bench opposes this bill.
If class action lawsuits are dumped on to our Federal courts, they
will fall to the bottom of the list of priorities. Even if they work
their way up to the top of the docket after many years, they will not
be resolved quickly because they are such complicated cases.
The bill that is before the Senate now could add years to the amount
of time it takes to resolve a case. Unfortunately, asbestos victims do
not have time on their side. Once a person is diagnosed with
mesothelioma, they usually have only about 6 to 18 months to live. So
if companies know, they can just play legal games, they can just wait
it out, just move the case and hold things up until the victim dies. If
that happens, there is no justice.
For someone with the death sentence of an asbestos disease, justice
delayed is justice denied. That is why Congress should reject this
class action bill.
There are other ways this bill could deny justice. Companies could
just wait until a victim's medical bills or lost wages are so high that
the victim is forced into an unfair settlement. Once again, that is
because this bill tips the scales of justice against average Americans.
I have focused on asbestos victims, but this class action bill would
affect many more types of victims. Anyone with a class action lawsuit
could find themselves pushed into Federal court at the bottom of the
list. Congress should not delay and deny justice for victims.
As for asbestos victims, we still have a lot of work to do. Each year
in this country 10,000 Americans die from asbestos disease--10,000
Americans. The first thing we need to do is ban the production and
importation of asbestos in the United States. Do you know that each
year in this country we put asbestos into 3,000 consumer products,
products that you buy at the store regularly? Hair dryers, floor tile,
and automobile brakes--we put asbestos in them in this country today.
If we know this is deadly, we should stop putting it in consumer
products in America.
Again, later this year, I am going to reintroduce my Ban Asbestos in
America Act. The first year I introduced it, we only had four
cosponsors. Last session, we had 14. We also made progress, including
my ban in the asbestos liability legislation that was considered by the
Judiciary Committee. My ban is also included in Senator Specter's most
recent version of that bill.
But we also need to help victims by investing in mesothelioma
research
[[Page S1102]]
and treatment. And we need to boost awareness of how consumers--that is
all of us--and workers can protect themselves.
Today, up to 35 million homes, businesses, and schools have the
deadly Zonolite insulation in their attics. People need to know about
the danger so they can protect themselves, so they do not go up in
their attic and do their work unknowingly exposing themselves to
asbestos.
Many employees are still in danger--from construction workers to auto
mechanics. And let's not forget that many asbestos victims were exposed
to asbestos when they served our country in the military. About 32
percent of asbestos victims happen to be Navy veterans. Many of them
worked in the Bremerton Shipyard in my home State of Washington.
The dangers of asbestos are not just limited to Libby, MT, or to
military communities; they are everywhere. This Congress needs to
address them the right way. Congress should make sure asbestos victims
can get the justice they deserve. That is why I will vote against this
class action bill. And that is why I am going to continue to fight to
ban asbestos and to help the victims in this country.
Mr. President, I yield the floor.
Exhibit 1
[From the Seattle Post-Intelligencer, Feb. 8, 2005]
W.R. Grace Indicted in Libby Asbestos Deaths
Mine company and seven executives face criminal charges
(By Andrew Schneider)
Missoula, Mont.--W.R. Grace & Co. and seven of its current
or former executives have been indicted on federal charges
that they knowingly put their workers and the public in
danger through exposure to vermiculite ore contaminated with
asbestos from the company's mine in from Libby, Mont.
Hundreds of miners, their family members and townsfolk have
died and at least 1,200 have been sickened from exposure to
the asbestos-containing ore. The health effects also threaten
workers, their families and residents everywhere the ore was
shipped, including Seattle, and people living in millions of
homes nationwide where it was used as insulation.
Yesterday, on the steps of the county courthouse here, U.S.
Attorney Bill Mercer announced the 10-count indictment,
alleging conspiracy, knowing endangerment, obstruction of
justice and wire fraud.
``A human and environmental tragedy has occurred,'' he
said. ``This prosecution seeks to hold Grace and its
executives responsible.''
``This is one of the most significant criminal indictments
for environmental crime in our history,'' said Lori Hanson,
special agent in charge of the Environmental Protection
Agency's environmental crime section in Denver.
In a statement released for Grace by a public-relations
firm, the company ``categorically denies any criminal
wrongdoing.''
Grace criticized the government for releasing the
indictment before providing a copy to the company. ``We are
surprised by the government's methods and disappointed by its
determination to bring these allegations. . . . We look
forward to setting the record straight.''
Federal environmental officials began examining the hazards
in Libby after Nov. 19, 1999, when the Seattle Post-
Intelligencer began publishing a series of stories about what
the government has called ``the nation's biggest
environmental disaster.'' Within three days of the P-I's
first report, an EPA emergency team arrived in the tiny
northwestern Montana town.
Present at the announcement yesterday were Libby victims
Lester and Norita Skramstad and Gayla Benefield.
Lester Skramstad has asbestosis, as does his wife, Norita,
and two of their children. He spoke softly but forcefully,
struggling for breath to launch his words into the wind on a
blustery winter afternoon. ``I've waited a long time for
this,'' he said. ``It's a great day to be alive.''
If found guilty, the individual defendants face from five
to 15 years in prison on each count, which for some of the
executives could be as much as 70 years.
Grace could be fined up to twice the profits from its
alleged criminal acts or twice the losses suffered by
victims. According to the indictments, Grace made more than
$140 million in after-tax profits from the Libby mine, which
would mean a fine of up to $280 million. Alternatively, the
court could fine the company twice what it computes the loss
to be from more than a thousand Libby victims. In addition,
the court could order restitution for the victims.
``This criminal indictment is intended to send a clear
message: We will pursue corporations and senior managers who
knowingly disregard environmental laws and jeopardize the
health and welfare of workers and the public,'' said Thomas
Skinner, EPA's acting assistant administrator for
enforcement, yesterday.
The executives charged are Alan Stringer, formerly general
manager of the Libby mine and Grace's representative during
the government's Superfund cleanup; Henry Eschenbach,
formerly director of health, safety and toxicology in Grace's
industrial chemical group; Jack Wolter, formerly Grace vice
president and general manager of its construction products
division; Bill McCaig, also formerly general manager of the
mine; Robert Bettacchi, formerly president of the
construction products division and senior vice president of
Grace; O. Mario Favorito, former Grace general counsel; and
Robert Walsh, formerly a Grace senior vice president.
The 49-page indictment accuses Grace of knowingly releasing
asbestos into the air, placing miners, their families and
townspeople at risk, and of defrauding the government by
obstructing the efforts of various agencies including the
EPA, increasing profits and avoiding liability for damages by
doing so.
P-I's Investigation
Tens of thousands of pages of internal Grace documents and
court papers were the basis of scores of stories in the P-1
on Libby and the deadly ore that Grace shipped throughout the
world. Those documents show years of extensive communication
among Grace's top health, marketing and legal managers and
mine officials in Libby about concealing the danger of
asbestos in the ore and consumer products that were made from
it.
They discussed methods to keep federal investigators from
studying the health of the miners, the potential harm to
Grace sales if asbestos warnings were posted on its products,
and the effort to mask the hazard of working with the
contaminated ore.
``The prosecution cannot eliminate the death and disease in
Libby,'' said John Heberling, a lawyer with McGarvey,
Heberling, Sullivan and McGarvey. ``But there is comfort in
the hope that criminal convictions will say to corporate
America . . . managers will be held criminally accountable if
they lie and deny and watch workers die.''
For years, the Kalispell, Mont., firm has been fighting for
damages from Grace on behalf of the families of the dead and
the dying from Libby.
Mine's huge production
Opened in 1913, the mine is six miles from Libby. Grace
bought it in 1963 and closed it in 1990. In its heyday, the
mine produced 80 percent of the world's vermiculite. The
company still operates smaller vermiculite mines in South
Carolina.
Vermiculite, a mineral similar to mica, expands when heated
into featherweight pieces that have been used commercially
for decades in attic and wall insulation, wallboard,
fireproofing, and plant nursery and forestry products. It was
also used in scores of consumer products, such as lawn and
garden supplies and cat litter.
Exposure to the tremolite asbestos fibers, which
contaminate the vermiculite ore, has caused hundreds of cases
of asbestosis, lung cancer and mesothelioma in Libby and an
untold number at hundreds of other sites across North America
where the ore was processed.
Criminal investigators and lawyers from the EPA, the
Internal Revenue Service and the U.S. Attorney's offices in
Montana often put in 12- to 15-hour days while preparing the
case.
Investigators and lawyers from the Justice Department and
the EPA's headquarters also assisted. The haste was required
because prosecutors were up against a five-year statute of
limitation, based on the arrival of the first federal team in
Libby after the P-1 stories. They gained a three-month
extension of that limitation.
A troubled past
The EPA said that over the years it had filed several
complaints against Grace over the company's environmental
practices. The only previous criminal charge against the
Columbia, Md.-based corporation was in the mid-'80s. Grace
was indicted on two counts of lying to the agency about the
quantity of hazardous material used in its packaging plant in
Woburn, Mass. In 1988, the company pleaded guilty to one
count and was fined $10,000, the maximum at that time. The
charges were brought after Grace and another company were
sued after being accused of illegally dumping toxic
chemicals, contaminating two wells and, some believe,
resulting in the deaths of five children from leukemia. Grace
paid the families $8 million to settle the suits. The book
and movie ``A Civil Action'' were based on the Woburn case.
Grace, which produces construction materials, building
materials and packaging, filed for Chapter 11 bankruptcy
protection in 2001 because of the ``sharply increasing number
of asbestos claims,'' Paul Norris, Grace's chairman and CEO,
said at the time.
May 2002, the Justice Department intervened in Grace's
bankruptcy, the first time it had entered such a case,
alleging that before Grace filed for Chapter 11, it concealed
money in new companies it bought. Justice Department lawyers
said Grace's action was a ``fraudulent transfer'' of money to
protect itself from civil suits.
In November of that year, just before the trial was to
begin, the St. Louis Post-Dispatch reported that the
companies returned almost $1 billion to the bankruptcy judges
holding Grace's assets. Grace is far from out of business.
Norris said the company has annual sales of about $2 billion,
more than 6,000
[[Page S1103]]
employees and operations in nearly 40 countries.
Mercer refused comment on whether there would be more
indictments from other locations where Grace had operations.
Hanson said she had been discussing the investigation with
her counterparts in EPA regions throughout the country.
Libby victim Benefield said yesterday that as she watched
the announcement of the indictments, her thoughts were with
her parents, Perley and Margaret Vatland, both of whom died
of asbestosis. She wore on her coat a costume-jewelry pin her
mother, who sold Avon products, bought from Avon for herself.
``Somewhere today they're smiling,'' she said, fingering
the pin. ``I just know it.''
online
Read Uncivil Action, the P-O's award-winning coverage of
the deadly legacy of asbestos mining, beginning with a
November 1999 story about hundreds dead or dying in Libby,
Mont.
Mrs. MURRAY. I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. GRASSLEY. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GRASSLEY. Mr. President, we are in our second day of debate on
the important Class Action Fairness Act of 2005. Because of my
responsibilities as chairman of the Senate Finance Committee, I have
not had a chance to participate in the debate of a bill that I have
been the sponsor of going back to the 105th Congress. It is a pleasure
for me to participate and anticipate the passage of this legislation.
It is about time that the Senate gets this bill done and gets it to
the President. Of course, I am very pleased that Majority Leader Frist
sees this as an important enough issue to move so early in the 109th
Congress. I also thank Chairman Specter, as new chairman of the Senate
Judiciary Committee, for getting this class action bill through
committee so very quickly. I hope we can move expeditiously with few or
no amendments, pass this bill, and have the President sign it, which we
are sure he will.
My colleagues will recall that in the 108th Congress, Senator Frist
brought the class action fairness bill to the floor in October 2003,
but we were not able to proceed to the bill. We lost the vote on
cloture on the motion to proceed by just a one-vote margin; in other
words, 50 votes as opposed to the 60-vote supermajority that cloture
takes.
After that vote, I worked with Senator Hatch, who was then chairman
of the Judiciary Committee, and our lead Democratic cosponsors,
Senators Kohl and Carper, to modify the bill to address concerns that
were raised by three Senators and maybe others, but I remember
specifically Senators Dodd, Landrieu, and Schumer. Then we reintroduced
the Class Action Fairness Act in February 2004 as a new bill with a new
number, S. 2062. It contained the compromise language that we worked
out with Senators Dodd, Landrieu, and Schumer. Senator Frist then
attempted to bring up the bill last July. Unfortunately, we were once
again denied the ability to close debate on the bill, and we lost,
again, a cloture vote. This was because Senators wanted to offer
nongermane amendments--amendments, as you know, Mr. President, that
have absolutely nothing to do with the subject matter of the underlying
bill. This was particularly disappointing to me after all of the hard
work we had done to reach an acceptable compromise with several
Democrats. We could have passed the bill in the 108th Congress, but raw
politics got in the way.
Now is the time to get this bill done. We have reintroduced the
language contained in last year's bill, a compromise worked out with
Senators Dodd, Landrieu, and Schumer. That is what is now before us in
S. 5, the very same bill. We made no changes to last year's bipartisan
compromise. So I hope we can stop having politics interfere with this
bill and pass what is a relatively modest bill that will help reform a
class action regime that has gotten to be very bad, which ends up most
of the time serving no one except the lawyers who bring these class
action suits.
I would like to give some background on the need for this very
important legislation. Everyone has heard about the abuses going on
with the current class action system. These problems undermine the
rights of both plaintiffs and defendants. Class members often do not
understand what their rights are in a class action suit, while the
class action lawyers drive the lawsuits and the settlements. Class
members cannot understand what the court and the settlement notices say
because they are in very small type and written in hard-to-understand
legalese. So class members often do not understand their rights and
they don't understand the consequences of their actions with respect to
the class action lawsuit in which they are invited to participate.
Moreover, many class action settlements only benefit the lawyers,
with little or nothing going to the class members. We are all familiar
with the class action settlements where the plaintiffs got coupons of
little value, or maybe no value, and the lawyers got all of the money
available in the settlement agreement. So what is the point of bringing
a lawsuit? I thought it was to find redress for the plaintiffs and not
to benefit the lawyers who bring the case. But that is what happens
many times now in these class action lawsuits. The lawyers drive those
cases, not the individuals who allegedly have been injured. The lawyers
are the ones who get the millions and millions of dollars in fees while
the people who allegedly have been injured get worthless coupons.
In addition, the current class action rules are such that the
majority of large nationwide class actions are allowed to proceed to
State court when they are clearly the kinds of cases that should be
decided in Federal Court. The U.S. Constitution provides that cases
involving citizens of two different States and an amount of controversy
of $75,000 can be heard in Federal Court. However, the law has been
interpreted in such a way that class action lawsuits; that is, cases
involving large sums of money, citizens of many different States, and
issues of national concern, have been restricted to State courts even
though they have national consequences. Crafty lawyers game the system.
Crafty lawyers file these large class actions in certain courts. They
are shopping for magnet State courts, and they are able to keep them
there.
For example, in Madison County, IL, the most notorious class action
magnet State court, which has been called a ``judicial hellhole,''
class action filings have jumped from 77 in 2002 to 106 in 2003. I
understand that Madison County has had an increase of over 5,000
percent in the number of class action filings since 1998. That surely
says something. Clearly, the judges there are playing somewhat fast and
loose with the class action rules when they are deciding whether to
certify a class action lawsuit. So unscrupulous lawyers are gaming the
present rules to steer their class action cases to these certain
preferred State courts, such as Madison County, IL, where judges are
quick to certify classes, quick to approve settlements, with little
regard to the class members' interests or the parties' due process
rights. Of course, that is the reason for this legislation. We need to
do something about this kind of abuse of the judicial process.
Class action lawsuits at least should have the opportunity to be
heard in Federal court because usually they are the cases that involve
the most amount of money, citizens from all across the country, and
issues of nationwide concern. Why should a State county court be
deciding these kinds of class action cases that impact people all
across the country? Of course, that just doesn't make sense to me;
hence, the authorship of this legislation. I hope it doesn't make sense
to at least a majority of my colleagues.
Both the House and Senate held numerous hearings on this legislation
and on other kinds of class action abuse. We heard about class lawyers
manipulating case pleadings to avoid removal of a class action lawsuit
to Federal court, where it should be, claiming that their clients
suffered under $75,000 in damages in order to avoid the Federal
jurisdictional amount threshold.
We heard about class lawyers crafting lawsuits in such a way to
defeat the complete diversity requirement by ensuring that at least one
named class member was from the same State as one of the defendants
even if every other class member was from one of the other 49 States.
[[Page S1104]]
We heard about attorneys who filed the same class action lawsuit in
dozens of State courts all across the country in a race to see which
judge would certify the fastest and the broadest of class.
We heard about class action lawyers entering into collusive
settlements with defendant attorneys which were not in the best
interest of class members.
These are only a few of the gamesmanship tactics lawyers like to
utilize to bring down the entire class action legal system. The bottom
line is that many of these class actions are just plain frivolous
lawsuits that are cooked up by the lawyers to make a quick buck, with
little or no benefit to the class members who the lawyers are supposed
to be representing.
Out-of-control frivolous filings are a real drag on the economy. Many
a good business is being hurt by this frivolous litigation cost.
Unfortunately, the current class action rules are contributing to the
cost of business all across America, and it particularly hits small
business because it is the small business that gets caught up in the
class action web without the resources to fight.
Too many frivolous lawsuits are being filed. Too many good companies
and consumers are having to pay for this lawyer greed. Make no mistake
about it, there is a real impact on the bottom line for many of these
companies and, to some extent, on the economy as a whole. They have to
eat this increased litigation cost or else it is farmed out to
consumers, such as you and me, and this is all in the form of higher
prices for goods and services we buy.
This is unacceptable, and we need to do something about this. We need
to restore some commonsense reform to our legal system. We need to
restore common sense to the class action system. We should pass this
bill.
I now wish to say something about class action lawsuits. They can be
a very good tool for many plaintiffs with the same claims to band
together to seek redress from a company that has wronged them. I am not
against the use of class action lawsuits, and neither are other
supporters of this bill. We are not here to put a stop to the class
action tool.
I certainly know my friend and original cosponsor of this bill,
Senator Kohl, feels the same as I do. People who have been injured
should be able to sue companies that do not follow the law. Our problem
is many class actions are not proceeding in the way they were
originally intended.
Our problem is many of these lawsuits are not fair and violate the
due process rights of both plaintiffs as well as defendants.
Our problem is many times these lawsuits are not helping the class
members at all. They are an effective tool for lawyers to make a big,
easy buck.
Our problem is these kinds of suits should have an opportunity to be
heard in Federal court, not stuck in a magnet court in a county that
has no connection whatsoever to the case. That is why Senator Kohl and
I joined forces several Congresses ago--this is the fifth Congress this
bill has been around for us to try to do something about this
situation. That is a period of 8 years past and 10 years including this
Congress--to do something about the problems we were seeing and about
the runaway abuses.
The Class Action Fairness Act will address some of the more egregious
problems with the class action system while preserving class action
lawsuits as a very important tool which brings representation to the
unrepresented.
Let me underscore for my colleagues that S. 5 is a very delicate
compromise. As my colleagues already know, this bill has gone through
many changes to accommodate Democratic Senators, much to the
frustration of some of my Republican colleagues who think we have gone
too far.
I worked in good faith with these colleagues on the other side of the
aisle to bring people together and to address valid concerns to
increase support for this bill, most importantly to, hopefully, have 60
votes on board, the supermajority it takes to bring a halt to debate,
to get to finality, to get this bill passed, to get it to the House
where we are told it will pass if we do not change it, and go to the
President very quickly.
I did not think then that we needed to make any changes to the class
action bill that was originally introduced several Congresses ago, but
as compromise is often necessary in this process if I wanted to move
the class action bill forward, I did my best to listen to the issues
raised and to make modifications to the bill where there was room for
that compromise.
Nevertheless, with all the compromises we cut, S. 5 still retains the
goal we set out to achieve: to fix some of the most egregious problems
we are seeing in the class action system and to provide a more
legitimate forum for nationwide class action lawsuits.
The deal that was struck is a very carefully crafted compromise that
does not need to be modified any further. So I am asking my colleagues
to withhold the offering of amendments to avoid disrupting the balance
we have achieved.
My colleagues should not be fooled. The amendments that are going to
be offered are an attempt to weaken or gut the bill. Some amendments
may sound reasonable, but they pose a problem in the other body. Other
amendments may sound good, but they do not have anything to do with
class action reform. Other amendments are, plain and simple, poison
pills.
We have worked far too long and we have worked far too hard to have
this bill come down because folks are misled into supporting an
amendment that in reality perpetuates the problem and preserves the
status quo.
We have worked far too long and too hard to have this bill delayed
and complicated with amendments that the House will never accept.
We have also worked far too long and far too hard to have this bill
bogged down by amendments that are not critical to the core purpose of
the legislation.
So then let's get this bill past the finish line, not create more
hurdles and obstacles. I ask my colleagues to vote against the
amendments and keep the bill clean. How often do we in this body, the
Senate of the United States, have the respect the House is giving us by
saying if this bill is not changed any more, they will buy it the way
it is? That happens once in a decade. We ought to take advantage of it.
I would like to highlight, before I sit down, some of the changes we
made to the bill to increase support for this bill since Senator Kohl
and I introduced the first Class Action Fairness Act in the 105th
Congress, now 8 years ago.
The bill, as was originally introduced, did several things. It
required that notice of proposed settlements in all class actions, as
well as all class notices, be in clear, easily understood English and
include all material settlements, including amounts and sources of
attorney's fees. Since plaintiffs give up their right to sue, they need
to understand the ramifications of their actions and should not have to
hire another attorney to find out what these notices mean.
Then our bill required that State attorneys general or other
responsible State government officials be notified of any proposed
class settlement that would affect the residents of their States. We
included this provision to help protect class members because such
notice would provide State officials with an opportunity to object if
the settlement terms are unfair to their citizens.
Our bill also required that courts closely scrutinize class action
settlements where the plaintiffs only receive coupons or noncash awards
while the lawyers get the bulk of the money.
It required the Judicial Conference to report back to the Congress on
the best practices in class action cases and how to best ensure
fairness of these class action settlements.
Finally, the bill allowed more class action lawsuits to be removed
from State court to Federal court. The bill eliminated the complete
diversity rule for class action cases but left in State courts those
class actions with fewer than 100 plaintiffs, class actions that
involve less than $5 million, and class actions in which a State
government entity is the primary defendant.
Our bill still does many of these things, but we have made a number
of modifications to get this bipartisan support.
In the Judiciary Committee in the 108th Congress, we incorporated
Senator Feinstein's amendment which would leave in State court class
action
[[Page S1105]]
cases brought against a company in its home State where at least two-
thirds or more of the class members are also residents of that State.
We also incorporated changes to address issues raised by Senator
Specter relative to how mass actions would be treated under this bill.
In our negotiations and outside the committee with Senators Schumer,
Dodd, and Landrieu, we made numerous changes, so I will only mention a
few of the more important compromises we reached.
For example, we made changes to the coupon settlement provisions in
the bill providing that attorney's fees must be based either on the
value of the coupons actually redeemed by class members or the hours
actually billed in prosecuting the case. We deleted for these Senators
the bounties provision because of a concern that it would harm civil
rights plaintiffs.
We deleted provisions in the bill that dealt with specific notice
requirements because the Judicial Conference had already approved
similar notice arrangements to the Federal Rules of Civil Procedure.
To address questions about the merry-go-round issue, we eliminated a
provision dealing with the dismissal of cases that fail to meet rule 23
requirements so that existing law applies.
We deleted a provision allowing plaintiff class action members to
remove class actions to Federal court because of gaming concerns. We
placed reasonable time limits on the appellate review of remand orders
in the bill. We clarified that citizenship of proposed class members is
to be determined on the date the plaintiff filed the original complaint
or when plaintiffs amend the complaint.
We made further modifications to the Feinstein compromise already
referred to and to the mass action language Senator Specter was
concerned about. We clarified that nothing in the bill restricts the
authority of the Judicial Conference to promulgate rules with respect
to class actions.
Finally, we drafted a new what is called local class action
exception, which would allow class members to remain in State court if,
one, more than two-thirds of the class members are citizens of this
forum State; two, there is at least one in-State defendant from whom
significant relief is sought by members of the class and whose conduct
forms a significant basis for the plaintiffs' claims; three, the
principal injuries resulting from the alleged conduct or related
conduct of each defendant were incurred in the State where the action
was originally filed; and, four and lastly, 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 3 years.
We did all of this to ensure that truly local class action cases,
such as a plant explosion or some other localized event, would be able
to stay in State court. So we have made significant concessions to get
our Democratic colleagues on board this Class Action Fairness Act. Of
course, some of my Republican colleagues feel we have made too many
compromises. But these folks on the other side of the aisle have been
telling us that they are ready to support the bill and get it passed,
so the time has come that hopefully no more politics are played, that
we get down to business and we get this bill done. It is time to make
real progress on a class of lawsuits that has become burdensome for
business, not beneficial to the plaintiffs, and enriching of attorneys.
If we do that--and we do that when we pass this bill--again I want to
remind my colleagues that we have crafted a carefully balanced bill
that consists of a number of compromises and some would say too many
compromises. I think we have done a pretty good job of addressing
legitimate concerns with the bill and I am hopeful we will not see a
lot of amendments to disrupt this compromise. I am hopeful my
colleagues will join me and vote against all killer amendments that gut
or weaken the bill. I am hopeful my colleagues will join me and vote
against poison-pill amendments that the House will never accept.
All of these amendments need to be defeated because we should send a
clean bill to the House. All of our hard work on forging a bipartisan
compromise bill should not go down the drain.
The bottom line is this class action reform is badly needed. Both
plaintiffs and defendants alike are calling for change. The Class
Action Fairness Act will help curb the many problems that have plagued
the class action system. S. 5 will increase class members' protection
and ensure the approval of fair settlements. It will allow nationwide
class actions to be heard in a proper forum, the Federal courts, but
keep primarily State class actions where they belong, in State court.
It will preserve the process but put a stop to the more egregious
abuses. It will also put a stop to the frivolous lawsuits that are a
drag on the economy.
Now that we have worked together on a very delicate compromise, we
should be able to get this bipartisan bill done without changes.
I see another person who has worked very hard on this bill has come
to the Chamber and that is Senator Carper of Delaware. There is no
person who has been more determined to get this bill passed and get it
passed in a bipartisan way, and I appreciate very much the cooperation
he has given us over the last year but, more importantly, in a time
when I have been involved with a lot of issues other than class action,
he has kept me focused on this bill that I want to get passed, and he
has helped me get the job done. I thank Senator Carper as well as other
Democrats who have helped in this process.
I yield the floor.
The PRESIDING OFFICER. The Senator from Delaware.
Mr. CARPER. Mr. President, before Senator Grassley leaves the floor,
I simply want to say how much I have enjoyed and appreciated the
opportunity to work with him on this issue. If we go back 7 years when
this idea first took legislative form and look at the changes that have
occurred over each of the last three or four Congresses, they have been
dramatic.
My goal, and I believe it is a goal many of us share who support the
legislation, is to make sure that when what I term little people are
harmed by the actions of big companies or small companies, those little
people have a chance to aggregate together and be made whole. I think
we agree on that principle.
We want to make sure the companies that do something that is wrong or
that are contemplating an action or behavior that is inappropriate or
wrong, that they know if they get caught, they will pay a price, and
class actions can help catch them at that and make sure they are put on
notice. I think that is a principle on which we all agree.
A third principle is to make sure the defendant companies, if they
are called on the carpet, can go to a court where they have a fair
chance of defending themselves and presenting their case.
The last one is to try to do all of this in the context of not
needlessly overburdening the Federal judiciary.
It is tough to balance all of those different principles, but I think
on the legislation the Senator has authored and that some of us have
been privileged to work with the Senator to help shape, we have come
close to realizing those principles.
I wanted to say a special thanks to the Senator for his willingness
to work with people on both sides of the aisle, to hear us out, to hear
our ideas, and be willing to accept a number of the ideas we have put
forward. My hope is at the end of this week we will have passed that
legislation. It is a delicate compromise and balance and, God willing,
our friends in the House of Representatives will accept that and the
President will sign it into law.
I thank the Senator.
Mr. GRASSLEY. I thank my colleague from Delaware, and I suggest the
absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The bill clerk proceeded to call the roll.
Mr. DORGAN. Mr. President, I ask unanimous consent that the order for
the quorum call be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. DORGAN. Mr. President, I ask unanimous consent that I be able to
speak for as much time as I consume in morning business.
The PRESIDING OFFICER. Without objection, it is so ordered.
[[Page S1106]]
The Tax Code
Mr. DORGAN. Mr. President, something is happening in our Tax Code
that very few people understand, and I wanted to call it to their
attention.
There is something going on called repatriation, which is a $2 word
that probably people won't understand. But I want to explain it.
Repatriation is a process by which U.S. companies that have moved
some operations overseas, begun to manufacture and sell products
overseas and made income overseas, are able to bring their profits back
into this country.
When an American corporation makes a profit as a result of selling
overseas, or producing overseas--we have something in this country
called deferral in our tax law. It says you can defer paying taxes on
your foreign profits as long as you don't bring them back into this
country. But when you bring them back--which is called repatriation--
then you must pay taxes like everybody else does.
Let's take Huffy bicycle company, for example. The Huffy bicycle
company made bicycles for almost 100 years in this country. They sold
them in Wal-Mart, Sears, and Kmart. Huffy then shut down their plants
in the United States, and got rid of their workers. Today Huffy
bicycles are still sold in the United States but they are made in China
for roughly 30 cents or 40 cents an hour labor by people who work 7
days a week, 10 to 12 hours a day. The company decided they should
actually manufacture their bicycles in China and presumably make more
money.
What happens to that income? We have a perverse and insidious
provision in our tax law that says, shut your manufacturing plant, move
those jobs overseas, and we will give you a deal. You don't have to pay
taxes on the profits that you once made in the United States when you
made that bicycle or the Radio Flyer little red wagon, which is now
made in China, or the Newton cookies, but now earn on the same products
made overseas until you bring those profits back to the United States.
Only then do you have to pay taxes. That is the deal.
Whenever companies defer their tax obligation, they understand that
when they repatriate the income to the U.S., they are going to have to
pay taxes. But they got a special deal, as is always the case, it
seems.
Last year a bill was passed with a tiny, little provision which was
very controversial. I opposed the provision, but it got passed. The
special deal is that the repatriation of income back into this country
now by companies that earned that income overseas--in some cases by
moving their American jobs overseas--now get to pay taxes at the 5\1/4\
percent tax rate.
What prompts me to come to the floor to talk about this, despite the
fact I opposed this last year, was a New York Times article that says,
``Hitting the Tax Break Jackpot.''
Let me quote a part of it.
When Congress passed a one-time tax break on foreign
profits last fall, lawmakers said their main purpose was to
encourage American companies to build new operations and hire
more workers here at home. But as corporations are gearing up
to bring tens of billions of dollars back to the United
States this year, adding jobs is far from their highest
priority. Indeed, some companies say they might end up
cutting their workforces here in the U.S.
Hewlett-Packard, which has accumulated $14 billion in
profits and lobbied intensely for the tax break, announced
January 10 that it would continue to reduce its workforce
this year. That would come on top of more than 25,000 jobs
eliminated during the previous 3 years.
We have a provision in tax law now that says to these companies that
have earned this money overseas, you deferred taxes on them previously,
now you are going to bring them back. We encouraged them to bring them
back. And, by the way, while all the other American people are working
and paying income taxes--and, yes, those at the bottom of the ladder
who pay income taxes pay the lowest rate of 10 percent but it is 10
percent, 15 percent, up to 35 percent, despite the fact everybody else
is going to pay a higher rate of taxes--you repatriate those profits,
and we will allow you to pay an income tax rate of 5\1/4\ percent.
There was a Governor of Texas named Ma Ferguson. Ma Ferguson became
Governor of Texas, I believe, when her husband died. As Governor of
Texas, Ma Ferguson got involved in a very controversial issue dealing
with some sort of initiative in Texas about English only. She held a
press conference. She held up a Bible. She said: If English is good
enough for Jesus, it is good enough for Texas.
She didn't quite understand, I guess.
But the good enough concept is something we all talk about here. If
the 5\1/4\ percent income tax rate is good enough for the biggest
corporations in this country that have moved jobs overseas, and now
bring profits back and get to pay 5\1/4\ percent, why is it not good
enough for the Olsens, Johnsons, and the Larsens? Those are names from
my hometown. Why is it not good enough for the people living down the
street, or up the block, or on the farm who may pay multiples of this
tax rate?
Let me show a chart. These companies aren't doing anything wrong.
These companies are simply going to benefit handsomely from what this
Congress did for them--to say to them: By the way, we will give you a
very special deal. This is Exxon Mobil, IBM, Hewlett-Packard, Pepsi-
Cola, and so on--unpatriated foreign earnings totaling tens of billions
of dollars. And they get to pay income taxes at 5\1/4\ percent. That
sounds like a sales tax, doesn't it? That sounds like a sales tax and
not an income tax. But do average folks get to pay an income tax at
5\1/4\? No. Nobody else does.
It kind of reminds me Tom Paxton's old song. He seemed to be able to
say it in kind of a simple way. He got all excited--this folksinger--
when the Congress gave a big, old loan to Chrysler Corporation. So he
wrote a song saying, ``I'm Changing My Name to Chrysler.''
Oh the price of gold is rising out of sight, and the dollar
is in sorry shape tonight, what a dollar used to get us now
won't get a head of lettuce. No the economic forecast isn't
bright.
He says:
I'm changing my name to Chrysler. I am going down to
Washington, DC, I will tell some power broker, ``What you did
for Iacocca would be perfectly acceptable to me.''
Maybe he would want to write a couple more verses. Maybe he would
like to pay income taxes at 5\1/4\ percent. Maybe every citizen of my
home State of North Dakota would like to be able to pay a 5\1/4\
percent income tax rate.
If it is good enough for Exxon Mobil, why isn't it good enough for my
citizens, or good enough for all the citizens of this country?
This was done last year with very little debate; just stuck in a big
old bill and says it is going to create jobs. Let us give a special
deal to some big old economic interests. Nobody will care and nobody
will know.
Now we see the result--hitting the tax break jackpot. Those who are
going to get the biggest benefits as a result of the generosity which I
think has probably not ever been given before. All of these companies
expected that the profits they earned overseas would be taxed at the
regular tax rate when they brought the profits back. That is what they
were told. That is what the deal was. That is what the deferral was in
the Tax Code.
Guess what. They got a big old fat tax break unlike any that is given
to any other American citizen. They get to pay 5.25 percent.
By the way, they boast that they would be creating jobs and that now
appears not to be true. Some of the same companies that moved their
American jobs overseas to boost foreign profits now get a special deal
back home to pay lower taxes than virtually any other American citizen.
Congress ought to hang its head and maybe Tom Paxton ought to write
another song: If it is good enough for Hewlett-Packard and good enough
for Exxon Mobil, it ought to be good enough for constituents who live
up the block and down the street and on the farm in this country.
Enough about that. These things happen behind closed doors with
little debate and great complexity and people do not understand.
Somehow at the end of the day it is always kind of the cake and crumbs
approach to public policy: The big interests get the cake; the little
folks get the crumbs and hope everyone is happy and nobody debates too
much about it.
Social Security
There is a lot of this influence in the Social Security debate. I
will talk for a moment about that. I also will talk about the budget
that was offered yesterday. The Social Security debate is
[[Page S1107]]
an example of this strange approach to public policy.
Social Security was created in 1935. The first monthly benefit was
paid in 1940. Social Security has lifted tens of millions of senior
citizens out of poverty. Fifty percent of America's elderly were living
in poverty when Social Security was enacted. Today it is less than 10
percent.
The fact is, Social Security works. It has been a Godsend for a lot
of people who reach retirement age. Social Security is the one
dependable source of income they know will be there. It is the social
insurance that they have paid for over all the years when they worked.
Social Security includes not only old-age retirement benefits but also
provides disability and survivor benefits. It is the one piece of that
social insurance that workers knew would be there, and it has always
been there.
Now, in 1983, a commission said, when the baby boomers retire, they
will hit the retirement rolls like a tidal wave.
After the Second World War, the soldiers came home. We have all seen
the pictures. We beat back the oppression of Hitler and Nazism. What a
wonderful time. There was a great outpouring of romance and affection
when the soldiers got home. We had the biggest baby crop in the history
of the world. We had a lot of babies. Those GIs came home; they had
families; they raised families; they built schools; they created jobs;
they went to college on the GI bill. They built this country.
There comes a time, then, when the baby boomers will retire and we
have a strain on the Social Security system. So we decided to save for
that. This year, for example, we collected Social Security taxes from
worker paychecks--$151 billion more than needed to pay out current
Social Security benefits. We are doing that every year. This will help
grow Social Security trust assets to over $5 trillion by 2018.
The President said the other night something that is not right or not
accurate. He said, in the year 2018, the Social Security system will be
paying out more than it takes in. That is just flat wrong. Our
colleague, Daniel Patrick Moynihan, once said everyone is entitled to
their own opinion but not everyone is entitled to their own set of
facts.
In the year 2018, the Social Security system will be taking in taxes
from paychecks as well as a substantial amount of interest that will
exist on the Treasury bonds that have been accruing over these many
years in the Social Security trust. This interest, along with the tax
collected from paychecks, will far exceed that which is necessary to be
paid out. It is the year 2042 or 2052, according to either the Social
Security actuaries or the Congressional Budget Office, where we hit the
point we can no longer pay full benefits. It is not bankrupt at that
point, but unless we make some adjustment, we cannot pay full benefits.
The President's proposal for private accounts, however, anticipates a
level of investment return on private accounts that, if realized, means
the economic growth in the country would put Social Security in a
position where it would not have a problem at all for the long term.
With that kind of economic growth as projected by the President, there
will be no problem in Social Security. It will meet its obligations
over the long term.
But we have a circumstance now where the President and Administration
official say Social Security is in crisis, it is bankrupt, it is flat
bust, depending on whom you listen to. The purpose of using that
language is to convince people there is a very serious problem here.
There may need to be some adjustments because people are living longer,
better, and healthier lives. But there is not a crisis that justifies
taking the Social Security system apart, which is what the President
proposes to do.
He proposes several things, none of which he talks about but all of
which are part of his plan: First, borrow a great deal of money, from
$1 to $3 trillion. Second, change the indexing in Social Security and
cut benefits. Under his plan, you are borrowing money, cutting
benefits, investing the borrowed money in the stock market, and hoping
in the end it comes out all right.
All the indications I have seen, whether from the Congressional
Budget Office or the Brookings Institution or others, say that workers
will come out further behind, not ahead, as a result of this plan.
The question, What should we do, is answered, we preserve, protect,
and strengthen Social Security. This program works. It is probably true
that almost none of those who are proposing these changes--borrowing
money and putting it in private accounts and taking the Social Security
system apart--will ever have to worry about Social Security. Almost all
of them will have sufficient assets to not be too worried about Social
Security for themselves. But there are a lot of people in this country
who do worry about Social Security. It has always been there and can
always be there as part of the social insurance that represents the
foundation of retirement security.
Retirement security has two parts. One part is the guaranteed
insurance on which we pay premiums in the form of taxes every month
from our paychecks. That is always there. The second part in retirement
security is private investments, 401(k)s, IRAs, and others. I support
that. I believe we ought to do even more to incentivize private
investments. But we should do that without taking apart the Social
Security Program.
The Budget
Now, finally, I mention the budget. The budget offered yesterday is a
budget that has a great many controversial issues. All Members would
agree we have the largest deficits in the history of this country. This
country is way off track in fiscal policy. It needs to be put on track.
It is not just fiscal policy. Fiscal and trade policy, between them,
contributed somewhere between $1 to $1.2 trillion in debt just in the
last year. That is unsustainable. You cannot continue to do that.
The trade deficit we will know on Thursday of this week, but the
trade deficit is somewhere around $600 to $700 billion--just in the
past year. The fiscal policy budget deficit is somewhere around $560
billion. This country cannot continue it do this. It is off track.
We have to put it on track.
The budget that was offered yesterday claims that we will have a
budget deficit this year of roughly $427 billion. The fact is that
figure takes the Social Security tax money we are supposed to be
putting into Social Security and uses it to make the deficit look
smaller. The real budget deficit for the current year is expected to be
about $587 billion, and although that is the real deficit, that does
not include the costs of Iraq, Afghanistan, and prosecuting the war
because the President does not include that in the budget. Why? Because
he says we do not know what it will cost despite the fact we have known
for a long while it is costing at least $5 billion a month. He is now
saying, I want you to approve an extra $80 billion in emergency
funding. So we have roughly a $580 billion out-of-balance budget that
does not even include the extra money that is necessary that the
President knows he will ask Congress to spend on Iraq and Afghanistan
and the military budget.
You could get a much better grip on what all this costs by taking a
look at the numbers in his proposed budget dealing with gross debt. He
is proposing about a $677 billion increase in gross federal debt next
year versus this year. So that is the real measure of how much we are
spending that we do not have--a $677 billion increase in gross debt.
Now, we know we have to tighten our belt. There are some things in
the budget I agree with, some I do not. I do not agree that, for
example, we ought to shut down Amtrak except for the east coast. That
is what the President wants to do. I do not support that. I think rail
passenger service strengthens this country and it is good for this
country.
I do not agree that we should cut back on Indian tribal colleges. It
is the one step up and out of poverty and toward hope and opportunity
that has been remarkably successful. I could go through a list of
things where I might disagree.
On the spending side, I do not agree with the President that we ought
to begin building earth-penetrating, bunker-busting, designer nuclear
weapons. What on Earth is that about? Spending money to build more
nuclear weapons? Bunker busters? I do not understand that. Not only is
it the wrong
[[Page S1108]]
message for the world, it is spending money we do not have on things we
do not need.
Let me give you an example of a little program in this budget that we
have spent almost $200 million on over the years. It is Television
Marti. It is this country deciding to send television signals to the
Cuban people to tell them how good things are outside of Cuba. Well, I
visited Cuba. The Cuban people know how good things are outside of
Cuba. That is why they try to escape Cuba.
It is interesting, we spend all this money on Television Marti to
broadcast into Cuba. We do it through Aerostat balloons, and now we do
it with a sophisticated C-130 airplane, which is very expensive. And
guess what. No Cubans see the television broadcasts. Oh, we broadcast.
We have expensive studios and expensive people, and we have balloons,
and we have airplanes, and we broadcast these television signals to the
Cuban people. And the President wants to double the money for it,
despite the fact that all those signals are jammed and the people do
not see the broadcasts. I do not understand that.
What on Earth could they be thinking about? They are going to double
funding for the broadcasting signals into Cuba that are jammed and that
the Cuban people cannot see. In fact, one of the reasons he wants to
double funding is he wants to buy another airplane for this program. So
you talk about waste, it is unbelievable.
I think the most important point to make about the budget, however,
is it is time for Republicans and Democrats, for the President and the
Congress, to level with the American people. We have a fiscal policy
that is reckless, is way out of control and is completely
unsustainable. You cannot spend $677 billion that you do not have--not
next year, not last year, not the year after next. You cannot have a
trade deficit that is wildly out of balance. And you cannot have a Tax
Code that incentivizes shutting down American factories and sending
American jobs overseas. You cannot keep doing these things.
There are some who take a look at this place, and they see a bunch of
windbags in blue suits, I suppose. They think we just talk, and
occasionally, when the lights go out, we pass something like a 5.25
percent special tax break for the biggest economic interests.
The American people deserve for us to be serious about fiscal policy,
about trade policy and about tax policy, and for us to begin to put
together a plan to put this country back on track. It is not all the
fault of one side or the other. But if both sides do not pull in the
right direction, this country cannot provide economic health and
opportunity and growth in the future.
What is happening in this country no one on this floor recognizes
because no one in the Senate has lost a job because of outsourcing; no
one here has lost a job because their plant was closed.
Let me again say, as I conclude, the people who worked for Huffy
Bicycles know what that is like. The people who worked for Schwinn
Bicycles know what that is like. The people who worked for Fig Newton
know what that is like. The people who worked for Levi Strauss know
what that is like. The people who made T-shirts and shorts for Fruit of
the Loom know exactly what that is like. They all lost their jobs
because they cannot compete with people who are willing to work for 30
cents an hour overseas. The employers have found a billion people on
this Earth who are willing to do it. And they will not only work for 30
cents an hour, you can put them in factories and dump sewage and dump
chemicals into the air and water. You can work them 7 days a week, and
if they decide to create a union, you can fire all of them, just like
that.
If this country does not get serious about stemming the outmigration
of jobs and about stemming the hemorrhaging of red ink in international
trade in our trade deficit and dealing with our fiscal policy and
budget deficit, our economic future is not going to be a bright future.
We have far too much promise as a country to let this happen to us.
We need leadership, yes, from the White House, and from Congress, to
deal with serious things in a serious way. I hope that happens soon. I
want to be a part of a group that is bipartisan that says let's put
this country back on track. But I see precious little evidence of
bipartisanship these days. The minute you stand and talk about the
facts, all of a sudden you are being excessively partisan, and the
White House comes after you; to wit, the story yesterday about the RNC
and what they have decided to do with respect to Senator Reid.
Well, there is a lot at stake in this Congress and this President
getting it right for a change: on budgets, on trade, on taxes. And I,
for one, hope we can begin a serious discussion about serious issues in
the days ahead and give people some hope that their future will be a
brighter and better future.
Mr. President, I yield the floor.
The PRESIDING OFFICER (Mr. Thune). The Senator from Kansas.
Mr. BROWNBACK. Mr. President, I rise to speak about the Class Action
Fairness Act. It is the pending business before the body today. I want
to spend a few minutes talking about this bill and talking about it in
the context of some of the issues that the prior speaker has spoken
about, the Senator from North Dakota, whom I have worked with on a
number of issues over time. We agree on some issues; we disagree on
some. We hopefully are going to be able to work together on a number of
these issues.
I view this bill as a chance for us to grow the economy, as a chance
for us to do something to create jobs and opportunities. We may
disagree on what are the various issues and what we need to do to
create those jobs, to address issues for people who have lost work in a
certain area, and to create them in another area. But what we are
dealing with in this class action reform bill, this Class Action
Fairness Act--I serve on the Judiciary Committee; we passed this bill
out on a bipartisan vote in the Judiciary Committee--is to try to deal
with the legal system that is putting too much burden on business so
that it cannot create jobs here, and so then those jobs and economic
opportunities go somewhere else.
It was a bipartisan vote coming through the Judiciary Committee. If
you look at the membership on that committee, you can see these are
dedicated people from both sides of the aisle. But they look at this
issue, and they say, here is a chance for us to reform a system, create
growth and opportunity, create fairness within the country, within the
system.
That is the overall way we ought to be going. That is what we ought
to be doing. That is why this is one of the lead substantive bills
coming from the Senate right now. That is why we are hopeful of keeping
it amendment free, so we can get it through the House, passed, and on
to the President, so the American people can see some product, and they
can see us dealing with a problem that they believe is there: too much
litigation, litigation where it is not fair, litigation in ways that
tend to help lawyers more than helping people--lawyers are people, but
tending to help the lawyers who are bringing the case more than the
people who are supposed to be attracted and dealt with in the case and
in the class.
The prior speaker spoke about a number of different problems we have.
The budget deficit, clearly that is an issue. Clearly that is a problem
for the country. Clearly, that is something the President puts down a
mark to try to correct. I think the President is right on moving to cut
the deficit in half in 5 years. I think we need to go further and
balance in 7 years.
Now, you say, well, wait a minute, how are you going to do that? We
have done it before. We do it the same way the next time that we did it
the last time; that is, you get the economy growing and sustain that
growth in the economy. It kicks off a lot of receipts that way. Right
now the economy is growing. It has started to move again. We have had
some lethargic times, but it is growing, it is moving, it is creating
jobs, and that creates receipts at the Government level--Federal,
State, and local. That is starting to happen.
The second piece of that equation is you have to restrain your growth
of Federal spending. As your receipts go up, you cannot spend it at the
same rate. You have to spend it at a slower rate. That is what the
President is trying to do with this budget. He is saying, OK, if we can
get this type of growth, we will have a slower rate of
[[Page S1109]]
growth in the spending areas. You have to spend it in more prioritized
areas.
Clearly, the war on terrorism, homeland defense, key areas, and
several others the President has identified, that is how we are going
to get at the deficit. I don't agree with the whole budget document put
forward. I do agree with the structure of the plan, that we get the
deficit cut in half in five and, as I say, I believe we need to get it
balanced in seven, so we can hand it over to the next generation in a
balanced situation.
One plug I want to put in is, a number of us put forward a bill
previously to create an overall commission within the Federal
Government to identify programs that maybe have accomplished their
purposes and we need to go on and do something differently and zero out
programs and to identify those that have accomplished their mission or
are wasteful Government spending and propose to the Congress to zero
them out, and then the commission give the Congress one vote on a whole
package of bills. Maybe it is 53 total programs that need to be, maybe
it is 253 that need to be eliminated. Give the Congress one vote to
eliminate all of them, keep them all, unamendable, and by that means
then us starting to cut at some of the wasteful spending, which we do,
which takes place.
We used this sort of structured program to get at our military bases
where we had too many bases around the country, and we used this to get
fewer bases and to get those bases the needed resources to serve our
troops. I want to use the same model throughout the Federal Government.
That is the way we can get at the budget.
The previous speaker also spoke about Social Security. One of the
problems he identified and that has been spoken about is that we run a
surplus in Social Security and then that is spent in Government and
then you borrow against the Federal Government for that. One of the
beauties of creating personal accounts in Social Security is the
Government can't spend that money. That is then the money of the
individual, and there is actually something there, instead of this
Government borrowing on one hand off of the Social Security account and
on another hand. So that when we get to about 2013, we are no longer
running a surplus in Social Security, we are running a deficit. And
then the Government has to borrow in other places to pay Social
Security.
That is not a good situation. That is an untenable situation. That is
not the sort of country or structure we want to turn over to our kids.
That is why this need to look at personal accounts, so that the money
is not spent, the money is safe. We get a higher rate of return. We get
a rate of return on these funds.
But our business at hand today is on the Class Action Fairness Act.
This bill needs to pass. I believe it will pass. I believe it will pass
with a substantial bipartisan vote. And the reason it will pass is we
need this to reform this portion of our legal system.
Class action lawsuits allow plaintiffs whose injuries might not be
worth enough to justify bringing individual suits to combine their
claims into one lawsuit against a common defendant. That is the nature
of a class action. It is to try to create a more efficient and
equitable distribution. Class actions are a valuable part of the legal
system. However, some trial lawyers have found a weakness in the
current system and developed a class action practice devoted to finding
opportunities to, in some cases, extract payments from American
businesses.
Currently in diversity cases, where plaintiffs reside in different
States, trial lawyers can forum shop. That means they can go to a place
where they think they will get a better jury, they think they will get
better treatment rather than fair treatment, or a setting where the
parties actually reside. Once a class action is certified, they can
force businesses into paying expensive settlements, so it becomes an
extractive process that way.
Due to this abuse in the system, injured plaintiffs are not getting
the recourse they are supposed to get through class actions. It is
documented that the legal system returns less than 50 cents on the
dollar to the people it is established to help and only 22 cents to
compensate for economic losses. Although injured plaintiffs are
receiving little of value in class action settlements, unfortunately,
we are seeing in too many cases trial lawyers obtaining large
windfalls.
I will give a couple of examples. One well-known example is the 2001
case against Blockbuster. Customers alleged they were charged excessive
late fees for video rentals and received $1 coupons for the next trip
to the video store, while their attorneys received over $9 million.
That is a lot of videos.
Similarly, in Shields v. Bridgestone/Firestone, a 2003 suit was filed
for customers who had Firestone tires that were among those the
Government investigated or recalled but who did not suffer any personal
injury or property damage. After a Federal appeals court rejected class
certification, they rejected certifying that this was a class, both
sides negotiated a settlement which has received preliminary approval
of a Texas State court. Under the agreement, the company is to redesign
certain tires, a move already under way, irrespective of the lawsuit,
and to develop a 3-year consumer education and awareness campaign. But
the members of the class, the actual members of the class, the
plaintiffs, received nothing. However, if the court gives final
approval, the lawyers will get $19 million.
Over the past decade, class action lawsuits have grown by over 1,000
percent nationwide, spurring a mass of these kinds of hasty, unjust
settlements. This is because even if the class certification ruling is
unmerited or even unconstitutional, it often cannot be appealed until
after an expensive trial on the merits of the case. Facing the cost of
litigation often forces defendants to settle out of court with sizable
payments, even when the defendant will likely prevail under the law.
These settlements have come to be known as a form of traditional
blackmail and are problematic to all Americans because they make trial
lawyers rich while imposing increased costs on the economy, causing
lower wages and higher prices for consumers. They also create an
environment of unpredictable litigation costs and serve to chill the
investment, entrepreneurship, and the capital needed for job creation.
In short, class action abuse shortchanges true victims while severely
damaging the economic engines in this country.
That is not to say all class actions are wrong, and this bill doesn't
impact legitimate class actions. It basically deals with the issue of
forum shopping. Class actions are still going to be brought. They still
will be brought. They still need to be brought in this country. But you
take away this issue, particularly this issue on forum shopping.
In response to the growing crisis in class actions, Senator Grassley
has authored the Class Action Fairness Act. It is a moderate,
bipartisan approach that addresses the most serious of the class action
abuses by allowing more large interstate class actions to be heard in
Federal courts and by implementing a consumer class action bill of
rights that protects consumers from some of the most egregious abuses
in class action practice today.
The bill is the result of a bipartisan compromise reached with
Senators Dodd, Landrieu, and Schumer in the last session of Congress
that narrowed the group of cases that would be removable to Federal
court and added a Democratic provision put forward by the Democratic
Members to build attorney's fees in coupon settlement cases. It is
important to remember that this bill is merely court procedure reform
that will go a long way to end abusive forum shopping.
S. 5 does not alter substantive law at all or otherwise affect any
injured individual's right to seek redress or to obtain damages. It
does not limit damages, including punitive damages. It does not limit
those. It does not impose stricter pleading requirements. Rather, the
Federal courts will continue to apply the appropriate State or States'
laws in adjudicating a class action suit.
Some of the critics of this legislation have stated that S. 5 will
move all class actions to the Federal courts, which will become
clogged, resulting in a windfall for corporate defendants. The facts do
not support this allegation.
First, while S. 5 does expand Federal court jurisdiction over class
action, the bill is drafted to ensure that truly local disputes will
continue to be litigated in State court. Most notably, the bill will
[[Page S1110]]
leave in State court class actions in which the plaintiffs and
defendants are all residents of the same State, class actions with
fewer than 100 plaintiffs, class actions that involve less than $5
million, shareholder class actions alleging breaches of fiduciary duty,
any class action in which a State government entity is a primary
defendant, and any class actions brought against a company in its home
State in which two-thirds or more of the class members are also
residents of that State.
Secondly, the average State court judge is assigned three times as
many cases as his or her Federal counterparts. State court judges are
assigned, on average, about 1,500 new cases each year. For example, in
California, the average judge was assigned 1,501 cases in 2001. In
Florida, the average was 2,210. In New Jersey, the average was 2,620.
In Texas, it was a little over 1,600 cases. In contrast, each Federal
court judge was assigned an average of 518 new cases during the 12-
month period ending September 30, 2002.
The exponential growth of State court class action filings over the
last decade has added to the workload problem of State court judges
who, in many cases, unlike their Federal counterparts, do not have a
number of law clerks, magistrate judges, or special masters to help
with particularly time-consuming tasks involving supervising complex
cases. Since many State courts or tribunals of general jurisdiction
hear all sorts of cases, from traffic violations, to divorces, to
felonies, judges who are distracted by class actions do not have enough
time to focus on providing basic legal services for the community that
they serve.
Finally, recent surveys have shown that the majority of class actions
in many jurisdictions would remain in State court under this bill. As
far as those cases that could be heard in Federal court under S. 5,
many of them involve copycat class actions filed in different
jurisdictions, which Federal judges can consolidate under one judge.
Therefore, moving more class actions to Federal court would actually
reduce the burden for everyone.
Ultimately, this bill will allow claims with merit to go forward
while preventing judicial blackmail. That has become, unfortunately,
something involved in our judiciary today.
I urge my colleagues to vote a clean class action bill out of the
Senate, to vote against any amendments that would dilute the bill and
stop us from moving this reform forward, and that would help in job
creation in the United States. This is a small measure. I think we
should do more, but it is an appropriate measure. It moves us in the
right direction. It helps in the creation of jobs in the United States
and in litigation reform, which we desperately need in this country.
These sort of bipartisan, modest steps, while they won't have perhaps
as big a positive impact as we would like them to have, will have a
positive impact on the judicial system and in helping us to reform
that. That is something we need to do. We need to move forward on the
budget deficit, we need to move forward to make sure we have a true
trust fund in Social Security, and we need to move forward in
litigation reform. All these are positive steps for our future. I hope
we can continue, as with this bill, to work it forward on a bipartisan
basis.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. DURBIN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 3, As Modified
Mr. DURBIN. Mr. President, earlier I offered an amendment at the desk
which needs to be modified. I ask that the amendment, under the rules,
be modified accordingly to reflect the pages and lines of the bill.
The PRESIDING OFFICER. The amendment is so modified.
The modification is as follows:
On page 21, before the semicolon at the end of line 2,
insert ``or by the court sua sponte''.
On page 21, line 9, strike ``solely''.
Mr. DURBIN. Thank you, Mr. President.
I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. BROWNBACK. Mr. President, I ask unanimous consent that the order
for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
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