[Congressional Record (Bound Edition), Volume 150 (2004), Part 11]
[Senate]
[Pages 14488-14491]
[From the U.S. Government Publishing Office, www.gpo.gov]




                       CLASS ACTION FAIRNESS ACT

  Mr. CARPER. Mr. President, over the course of the next several days, 
a number of unkind things are likely to be said about class action 
lawsuits, usually by people who do not support this legislation which 
is before us.
  I simply suggest that some of the criticism we are going to hear is 
merited, but, quite frankly, some of it is not. The legal process that 
we call class action can be traced back to the old English courts of 
chancery.
  Despite the criticism leveled at class action lawsuits today, these 
lawsuits frequently have served a public good. They have proven a 
powerful weapon against unscrupulous or reckless businesses, 
discouraging those businesses from selling dangerous products or from 
cheating customers.
  Class action lawsuits reduce the likelihood that rogue companies can 
harm thousands of innocent people, confident in the belief that none of 
those people could ever afford to hold those companies accountable in 
court for their misdeeds.
  There are many examples over time where the bad guys were caught in 
the act, where they were taken to court and where they were ordered to 
pay up.
  The film ``Erin Brockovich'' tells a story about one such time. Not 
long ago I picked up a video at Blockbuster of the film starring Julie 
Roberts in the title role that some of us may have seen. The film tells 
the story of how one woman convinced hundreds of people residing in a 
place called Hinkley, CA, to join in a lawsuit. Together, they sued a 
utility company that was making people sick by polluting their water 
supply. Erin Brockovich's leadership won damages of $333 million for 
the victims of that pollution. That true story is just one example of 
the good that class action litigation can accomplish.
  While I will not take the time this evening to talk about those other 
examples, let me say there are plenty of them. Unfortunately, though, 
there are also a growing number of examples that are not as uplifting 
or not as inspiring as the tale told in ``Erin Brockovich.''
  Let me mention several of those, too. Ironically, one of them also 
involves Blockbuster. That company was sued over its policy of charging 
customers

[[Page 14489]]

for overdue rentals. The result was that plaintiffs, of which I may 
unknowingly have been one, will get two free movie rentals and a 
dollar-off coupon. Meanwhile, attorneys received more than $9 million 
in fees and expenses.
  Let me also mention Poland Spring. Poland Spring, if you are not 
aware of it, is a bottled water company. They were sued a couple of 
years ago in a place called Kane County, IL. Allegedly, the company's 
water was not pure and did not come from a spring. During the course of 
litigation, Poland Spring settled. The consumers alleging that they had 
spent their money on a product they did not actually receive were not 
compensated. Instead, they were awarded coupons which they could apply 
toward the purchase of the same Poland Spring water of which they 
originally weren't happy. The attorneys who negotiated the settlement 
on their behalf meanwhile were awarded $1.35 million. Poland Spring 
itself admitted no wrongdoing and has no plans, at least to my 
knowledge, to change the way they bottle and market their water.
  Here is another one: General Mills was sued because an unapproved 
food additive apparently was used in some oats that were used to make 
Cheerios. Although I am told there was no evidence of customer injury, 
a settlement was reached in the class action lawsuit. It provided for 
$1.75 million in fees for the plaintiffs' attorneys. The plaintiffs? 
They received a coupon for more Cheerios.
  In another class action suit involving Chase Manhattan Bank, 
plaintiffs' attorneys collected, I am told, over $4 million. The 
plaintiffs? They could collect 33 cents apiece if they were willing to 
pony up the money for a postage stamp.
  With the next one, I think it may actually get worse. In a different 
class action lawsuit against the Bank of Boston over escrow accounts, 
plaintiffs apparently didn't win a dime. In fact, their accounts were 
debited to help pay attorneys' fees of $8.5 million.
  Let me mention just one more. A couple of years ago, Intel was taken 
into court in I believe Madison County, IL, for asserting that the 
company's Pentium IV chips were faster than the company's Pentium III 
chips.
  Let me say that I have no idea which chip is faster. I do have a 
hunch, though, that the Madison County Courthouse probably isn't the 
best forum in which to make that determination. For that matter, 
neither were any of the other local courts in which the previous five 
cases that I have mentioned here were brought.
  Don't get me wrong. Class action lawsuits are still being brought for 
noble purposes that none of us would question for a minute. Last month, 
in fact, a class of 1.6 million current and former female Wal-Mart 
employees alleging gender discrimination at that company were certified 
as a class. Ironically, I believe it was in a Federal court in 
California.
  There is a growing phenomena, however, that is troubling, at least to 
me and I suspect to other fairminded people, including, I would be 
willing to bet, a number of plaintiffs' attorneys. We have witnessed 
the emergence in different parts of America of something called magnet 
courts. Oftentimes, they are county courts with locally elected judges 
and a reputation for verdicts that can put the fear of God in companies 
when cases are filed in one of them. Once a plaintiffs' class is 
certified in one of those courts, the companies generally realize that 
their goose is about to be cooked and the work of reaching a settlement 
begins in earnest.
  The attorneys who in many cases assembled the plaintiff class of 
aggrieved consumers from across the country oftentimes make out pretty 
well in those settlements. As you might imagine from the examples I 
have cited above, the people those attorneys represent sometimes do 
not.
  Those who are supporting the legislation before the Senate this 
evening do so in the belief somebody needs to do something about the 
growing trend toward forum shopping we are witnessing around the 
country.
  In addition, somebody needs to do so while preserving access to the 
courts when people are harmed. My colleagues, that somebody is us.
  The legislation before the Senate tonight, the Class Action Fairness 
Act, does not get rid of class action lawsuits. And it should not. For 
years, they have been an efficient way for small and large groups of 
consumers who have been harmed or shortchanged by some product or 
service to pursue legislation against the company, when those consumers 
lack the wherewithal to pursue justice on their own.
  What the legislation now before the Senate seeks to do is ensure 
class action lawsuits that are national in scope are decided in Federal 
courts. When the bulk of plaintiffs comes from across America, a 
decision can have an impact on all or most of the 50 States. Federal 
judges, not State, not county judges, should hear those cases more 
often than not.
  These issues are not new. They have been the subject of a number of 
congressional hearings over the years. These issues have been debated 
and voted on in the relevant committees in both the House and the 
Senate. These issues have been debated in the U.S. House of 
Representatives and last year the House approved and sent to the Senate 
a bill that sought to address the concerns we are raising this evening.
  The Senate Judiciary Committee reported out a more balanced bill, I 
believe, than the one we received from the House last year. That Senate 
bill was further improved through bipartisan negotiations last fall 
after efforts to proceed to class action fell one vote short in the 
Senate.
  It will come as no surprise that not everyone likes the measure 
before the Senate this evening. As is often the case with highly 
contentious issues, some would say this bill goes too far. Frankly, 
there are others who say it does not go far enough. The latter contend, 
for example, this is not real tort reform. They are right. It is court 
reform. It attempts to close the gaping loophole in Federal law.
  That loophole allows the plaintiffs from one State to be tried in a 
State or county court of another State on matters that have national 
implications. That loophole also allows those cases to be heard by 
judges who are locally elected and whose elections and reelections are 
supported at least in part by some of the very same plaintiffs' 
attorneys bringing cases before those judges against out-of-State 
defendants.
  Let me take a moment or two to be clear about what this bill does and 
does not do. This legislation does not limit the damages that can be 
awarded in class action lawsuits. It does not eliminate punitive 
damages. It does not mention joint and several liability. In fact, even 
if this bill is adopted, a majority of class action lawsuits will still 
be heard in State courts. For example, cases with fewer than 100 
plaintiffs will be heard in State courts. The same holds true for cases 
involving less than $5 million, as well as for cases where two-thirds 
or more of the plaintiffs are from the same State as the defendant.
  Federal judges would also have the discretion to keep cases in State 
courts where as few as one-third of the plaintiffs are from the same 
State as the defendants.
  That is not all. This bill includes what we call a local controversy 
exception. That local controversy exception will leave in State court 
class actions with multiple defendants as long as one of the primary 
defendants is local. That provision is intended to ensure State courts 
can continue to preside over local controversies even though plaintiffs 
may name an out-of-State defendant, such as a parent company.
  This bill is an improvement, at least in my judgment, over the House 
bill in some other ways, too. The House bill is retroactive. The Senate 
bill is not. The House bill allows defendants to file appeals of class 
certifications that would unnecessarily delay a plaintiff's day in 
court. The Senate bill does not. The House bill allows defendants to 
have multiple bites out of the apple and continue to appeal decisions 
by judges to keep cases in State court. The Senate bill does not.
  Unlike the House bill, the measure before the Senate allows lead 
plaintiffs, especially those in civil rights

[[Page 14490]]

cases, to receive a greater payment that is reflective of the higher 
and riskier profile they have assumed.
  Other provisions have been adopted as well. In settlements where 
coupons were awarded to plaintiffs, the fees to their attorneys are 
linked directly under this bill to the coupons that are actually 
redeemed, not just issued. In addition, Federal judges may direct that 
the value of unredeemed coupons be donated to charity.
  These and other changes have caused several of our colleagues, 
especially on our side of the aisle, who had previously opposed class 
action legislation, to support the bill that is before the Senate 
tonight.
  But Members of the legislative branch are not the only ones who 
apparently have had a change of heart. Back in 1999, the Federal 
judiciary registered its opposition to a previous version of the Class 
Action Fairness Act through a letter the judicial conference sent to 
Henry Hyde who was then the chairman of the House Judiciary Committee. 
And why? Largely because Federal judges fear the bill could well flood 
Federal courts with class action cases that otherwise would be heard in 
State or in local courts. Today, that view has changed as the 
legislation has undergone some of the changes we have been talking 
about this evening.
  The Federal judiciary no longer opposes class action reform. I invite 
my colleagues to read those views for themselves. They are contained in 
this letter from the Judicial Conference which I hold in my hand.
  Mr. President, I ask unanimous consent this letter be printed in the 
Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                                        Judicial Conference of the


                                                 United States

                                   Washington, DC, April 25, 2003.
     Hon. Patrick J. Leahy,
     Ranking Member, Committee on the Judiciary, U.S. Senate, 
         Dirksen Senate Office Building, Washington, DC.
       Dear Senator Leahy: Thank you for your letters of April 9, 
     2003, and April 11, 2003. In those letters, you requested 
     that the Judicial Conference provide the Senate Judiciary 
     Committee with legislative language implementing the Judicial 
     Conference's March 2003 recommendations on class-action 
     litigation and the views of the Conference on S. 274, the 
     ``Class Action Fairness Act of 2003,'' as reported by the 
     Senate Judiciary Committee on April 11, 2003.
       As you know, at its March 18, 2003, session, the Judicial 
     Conference adopted the following resolution:
       That the Judicial Conference recognize that the use of 
     minimal diversity of citizenship may be appropriate to the 
     maintenance of significant multi-state class action 
     litigation in the federal courts, while continuing to oppose 
     class action legislation that contains jurisdictional 
     provisions that are similar to those in the bills introduced 
     in the 106th and 107th Congresses. If Congress determines 
     that certain class actions should be brought within the 
     original and removal jurisdiction of the federal courts on 
     the basis of minimal diversity of citizenship and an 
     aggregation of claims, Congress should be encouraged to 
     include sufficient limitations and threshold requirements so 
     that the federal courts are not unduly burdened and states' 
     jurisdiction over in-state class actions is left undisturbed, 
     such as by employing provisions to raise the jurisdictional 
     threshold and to fashion exceptions to such jurisdiction that 
     would preserve a role for the state courts in the handling of 
     in-state class actions. Such exceptions for in-state class 
     actions may appropriately include such factors as whether 
     substantially all members of the class are citizens of a 
     single state, the relationship of the defendants to the forum 
     state, or whether the claims arise from death, personal 
     injury, or physical property damage within the state. 
     Further, the Conference should continue to explore additional 
     approaches to the consolidation and coordination of 
     overlapping or duplicative class actions that do not unduly 
     intrude on state courts or burden federal courts.
       S. 274, as reported by the Senate Judiciary Committee, 
     generally provides for federal jurisdiction of a class action 
     based on minimal diversity of citizenship if the matter in 
     controversy exceeds the sum of $5 million, exclusive of 
     interest and costs. (S. 274 as introduced established a $2 
     million minimum amount in controversy.) The bill also now 
     permits a federal district court, in the interests of 
     justice, to decline to exercise jurisdiction over a class 
     action in which greater than one-third but less than two-
     thirds of the members of all proposed plaintiff classes in 
     the aggregate and the primary defendants are citizens of the 
     state in which the action was originally filed. The court 
     would be required to consider five specified factors when 
     exercising this discretion. (This discretionary provision was 
     not included in the bill as introduced.)
       In addition, S. 274 as reported provides that the federal 
     district courts shall not have original jurisdiction over any 
     class action in which: (A) two-thirds or more of the members 
     of all proposed plaintiff classes in the aggregate and the 
     primary defendants are citizens of the state in which the 
     action was originally filed; (B) the primary defendants are 
     states, state officials, or other governmental entities 
     against whom the district court may be foreclosed from 
     ordering relief; or (C) the number of members of all proposed 
     plaintiff classes in the aggregate is less than one hundred. 
     As introduced, the second and third exceptions were the same, 
     but the first one originally precluded federal jurisdiction 
     where ``the substantial majority of the members of the 
     proposed plaintiff class and the primary defendants are 
     citizens of the State in which the action was originally 
     filed'' and ``the claims asserted therein will be governed 
     primarily by the laws of'' that state. The replacement 
     language in essence substitutes a numerical ratio for 
     ``substantial majority'' and eliminates the choice-of-law 
     requirement.
       We are grateful that Congress is working to resolve the 
     serious problems generated by overlapping and competing class 
     actions. The Judicial Conference ``recognizes that the use of 
     minimal diversity of citizenship may be appropriate to the 
     maintenance of significant multi-state class action 
     litigation in the federal courts.'' At the same time, the 
     Judicial Conference does not support the removal of all state 
     law class actions into federal court. Appropriate legislation 
     should ``include sufficient limitations and threshold 
     requirements so that federal courts are not unduly burdened 
     and states' jurisdiction over in-state class actions is left 
     undisturbed.'' Finding the right balance between these 
     objectives and articulating that balance in legislative 
     language implicate important policy choices.
       Any minimal-diversity bill will result in certain cases 
     being litigated in federal court that would not previously 
     have been subject to federal jurisdiction. The effects of 
     this transfer should be assessed in determining the 
     appropriateness of various limitations on the availability of 
     minimal diversity jurisdiction.
       Certain kinds of cases would seem to be inherently ``state-
     court'' cases--cases in which a particular state's interest 
     in the litigation is so substantial that federal court 
     jurisdiction ought not be available. At the same time, 
     significant multi-state class actions would seem to be 
     appropriate candidates for removal to federal court.
       The Judicial Conference's resolution deliberately avoided 
     specific legislative language, out of deference to Congress's 
     judgment and the political process. These issues implicate 
     fundamental interests and relationships that are political in 
     nature and are peculiarly within Congress's province. 
     Notwithstanding this general view, we can, however, confirm 
     that the conference has no objection to proposals: (1) to 
     increase the threshold jurisdictional amount in controversy 
     for federal minimal diversity jurisdiction: (2) to increase 
     the number of all proposed plaintiff class members required 
     for maintenance of a federal minimal-diversity class action; 
     and (3) to confer upon the assigned district judge the 
     discretion to decline to exercise jurisdiction over a 
     minimal-diversity federal class action if whatever criteria 
     imposed by the statute are satisfied. Finally, the Conference 
     continues to encourage Congress to ensure that any 
     legislation that is crafted does not ``unduly intrude on 
     state courts or burden federal courts.''
       We thank you for your efforts in this most complex area of 
     jurisdiction and public policy.
           Sincerely,
                                            Leonidas Ralph Mecham,
                                                        Secretary.

  Mr. CARPER. The pages who are still here tonight would agree I may 
have talked at least long enough for one evening.
  As I prepare to wrap up, let me acknowledge that the impact of class 
action lawsuits on our Nation's business climate may not be as harmful 
as some of our business interests contend. In some cases, they may 
actually overstate the harm class actions have done.
  Having said that, a balance still needs to be found in today's system 
that is respectful on the one hand of the right to seek redress for 
wrongdoing by corporations while preserving a reasonable measure of 
fairness for business interests, too.
  Patti Waldmeir, who writes on legal issues for the Financial Times, 
summed it up in her column last month with these words:

       The class-action lawsuit was meant to be a vehicle for 
     democracy in the U.S., a way to level the playing field 
     between the powerless and powerful by allowing individuals to 
     band together to sue big corporations.


[[Page 14491]]


  I believe the bill before us does strike the balance that is needed. 
I am pleased to say that view is reflected on the editorial pages of 
scores of newspapers across America: from the Chicago Tribune, to the 
St. Louis Post Dispatch, the Des Moines Register, the Christian Science 
Monitor, the Buffalo News, the Baltimore Sun, the Hartford Courant, 
Newsday, the Omaha World-Herald, the Oregonian, the Orlando Sentinel, 
the Providence Journal, the Santa Fe New Mexican, and, yes, even the 
Washington Post.
  Let me conclude my remarks this evening with these words from the 
editorial pages of the Washington Post in endorsing the Class Action 
Fairness Act. These are their words:

       It would ensure that cases with implications for national 
     policies get decided by a court system accountable to the 
     whole country. This is not, as opponents have cast it, an 
     attack on the right to sue or a liability shield for 
     corporate wrongdoing. It is a modest step to rein in a system 
     that too often simply taxes corporations--irrespective of 
     whether they have done anything wrong--and uses that money to 
     pay lawyers who provided no services to anyone. Such a system 
     does not deserve the Senate's protection for yet another 
     Congress.

  Their words, not mine. But to those words let me simply add: Amen.
  With that, Mr. President, I yield back my time.

                          ____________________