[House Report 108-148]
[From the U.S. Government Publishing Office]
108th Congress Report
HOUSE OF REPRESENTATIVES
1st Session 108-148
======================================================================
PROVIDING FOR CONSIDERATION OF H.R. 1115, CLASS ACTION FAIRNESS ACT OF
2003
_______
June 11, 2003.--Referred to the House Calendar and ordered to be
printed
_______
Ms. Pryce of Ohio, from the Committee on Rules, submitted the following
R E P O R T
[To accompany H. Res. 269]
The Committee on Rules, having had under consideration
House Resolution 269, by a nonrecord vote, report the same to
the House with the recommendation that the resolution be
adopted.
SUMMARY OF PROVISIONS OF THE RESOLUTION
The resolution provides for consideration of H.R. 1115, the
Class Action Fairness Act of 2003, under a structured rule. The
rule provides one hour of general debate equally divided and
controlled by the chairman and ranking minority member of the
Committee on the Judiciary.
The rule provides that the amendment in the nature of a
substitute recommended by the Committee on the Judicary now
printed in the bill shall be considered as an original bill for
the purpose of amendment and shall be considered as read. The
rule waives all points of order against the amendment in the
nature of a substitute recommended by the Committee on the
Judiciary. The rule makes in order only those amendments
printed in this report, and provides that those amendments may
be offered only in the order printed in this report, may be
offered only by a Member designated in this report, shall be
considered as read, shall be debatable for the time specified
in this report equally divided and controlled by the proponent
and an opponent, shall not be subject to amendment, and shall
not be subject to a demand for a division of the question in
the House or in the Committee of the Whole. The rule waives all
points of order against the amendments printed in this report.
The rule provides one motion to recommit with or without
instructions.
COMMITTEE VOTES
Pursuant to clause 3(b) of House rule XIII the results of
each record vote on an amendment or motion to report, together
with the names of those voting for and against, are printed
below:
Rules Committee Record Vote No. 105
Date: June 11, 2003.
Measure: H.R. 1115--Class Action Fairness Act of 2003.
Motion by: Mr. Frost.
Summary of motion: To report an open rule.
Results: Defeated 4 to 7.
Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay;
Hastings (WA)--Nay; Myrick--Nay; Sessions--Nay; Frost--Yea;
Slaughter--Yea; McGovern--Yea; Hastings (FL)--Yea; Dreier--Nay.
Rules Committee Record Vote No. 106
Date: June 11, 2003.
Measure: H.R. 1115--Class Action Fairness Act of 2003.
Motion by: Mrs. Slaughter.
Summary of motion: To make in order the amendment offered
by Representative Delahunt, which strikes section 6 of the bill
which provides for: (a) the immediate appeal of district court
rulings granting or denying a motion for class certification;
and (b) a stay of discovery and other proceedings while the
appeal is pending.
Results: Defeated 4 to 7.
Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay;
Hastings (WA)--Nay; Myrick--Nay; Sessions--Nay; Frost--Yea;
Slaughter--Yea; McGovern--Yea; Hastings (FL)--Yea; Dreier--Nay.
Rules Committee Record Vote No. 107
Date: June 11, 2003.
Measure: H.R. 1115--Class Action Fairness Act of 2003.
Motion by: Mr. Hastings of Florida.
Summary of motion: To make in order the amendment offered
by Representative Conyers, which strikes section 8 of H.R. 1115
and adds a provision to change the effective date of the bill
to on or after the date of enactment.
Results: Defeated 4 to 8.
Vote by Members: Goss--Nay; Linder--Nay; Pryce--Nay;
Hastings (WA)--Nay; Myrick--Nay; Sessions--Nay; Reynolds--Nay;
Frost--Yea; Slaughter--Yea; McGovern--Yea; Hastings (FL)--Yea;
Dreier--Nay.
SUMMARY OF AMENDMENTS MADE IN ORDER UNDER THE RULE
1. Sensenbrenner/Boucher/Goodlatte/Moran (VA)/Dooley/
Stenholm/Terry: Slightly broadens the category of class action
cases that would remain in state court in two ways. First, this
amendment raises the aggregate amount in controversy required
for federal court jurisdiction from $2 million to $5 million.
Second, it allow federal courts discretion to return intrastate
class actions in which local law governs to state courts after
weighting five factors to determine if the case is
appropriately of a local character. This discretion would come
into play when between one-third and two-thirds of the
plaintiffs are citizens of the same state as the primary
defendants. If less than one-third are citizens of the same
state, the case would automatically be eligible for federal
court jurisdiction under the new diversity rules in this bill.
Likewise, if more than two-thirds are citizens of the same
state, the case would not be subject to the new rules in this
bill and would remain in state court. (10 minutes)
2. Jackson-Lee: Prevents domestic corporations from not
being subject to the jurisdiction of U.S. Federal Courts, and
liability in class action lawsuits filed in Federal Courts,
through mergers or repatriations with foreign companies. (10
minutes)
3. Lofgren/Linda Sanchez: Preserves the ability of local
prosecutors to enforce state antitrust and consumer protection
laws in state courts. (10 minutes)
4. Sandlin/Conyers: Amendment in the Nature of a
Substitute. Strikes everything after the enacting clause and
inserts the following:
Section 1 of the amendment contains a short title,
reference, and table of contents.
Section 2 of the amendment establishes improved procedures
for certain class actions, including provisions for the use of
coupon settlements, court approval of settlements, sealing of
class action documents, and interlocutory appeals.
Section 3 of the amendment enacts the recommendations of
the United States Judicial Conference with respect to notice to
class members.
Section 4 of the amendment establishes a state court multi-
district litigation panel for class actions. The panel allows
for the consolidation of class actions pending in different
state courts for pretrial proceedings.
Section 5 of the amendment authorizes the National Center
for State Courts to develop and implement a procedure by which
state courts or the state court multi-district litigation panel
may transfer certain class actions to federal court. (20
minutes)
TEXT OF AMENDMENTS MADE IN ORDER UNDER THE RULE
1. An Amendment To Be Offered by Representative Sensenbrenner of
Wisconsin, or His Designee, Debatable for 10 Minutes
In section 1332(d) of title 28, United States Code, as
proposed to be inserted by section 4(a)(2) of the bill--
(1) in paragraph (2), strike ``$2,000,000'' and
insert ``$5,000,000'';
(2) redesignate paragraphs (4) through (9) as
paragraphs (5) through (10), respectively;
(3) strike paragraph (3) and insert the following:
``(3) A district court may, in the interests of justice,
decline to exercise jurisdiction under paragraph (2) 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 based on consideration
of the following factors:
``(A) Whether the claims asserted involve matters of
national or interstate interest.
``(B) Whether the claims asserted will be governed by
laws other than those of the State in which the action
was originally filed.
``(C) In the case of a class action originally filed
in a State court, whether the class action has been
pleaded in a manner that seeks to avoid Federal
jurisdiction.
``(D) Whether the number of citizens of the State in
which the action was originally filed in all proposed
plaintiff classes in the aggregate is substantially
larger than the number of citizens from any other
State, and the citizenship of the other members of the
proposed class is dispersed among a substantial number
of States.
``(E) Whether 1 or more class actions asserting the
same or similar claims on behalf of the same or other
persons have been or may be filed.
``(4) Paragraph (2) shall not apply to 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 100.'';
(4) in paragraph (5), as so redesignated, strike
``$2,000,000'' and insert ``$5,000,000''; and
(5) in paragraph (10), as so redesignated--
(A) in the third sentence, strike
``paragraphs (3) and (6)'' and insert
``paragraph (7)''; and
(B) in the last sentence, strike ``(6)'' and
insert ``(7)''.
2. An Amendment To Be Offered by Representative Jackson-Lee of Texas,
or Her Designee, Debatable for 10 Minutes
In section 1332(d) of title 28, United States Code, as
proposed to be inserted by section 4(a)(2) of the bill--
(1) in paragraph (9), strike the quotation marks and
second period at the end; and
(2) add after paragraph (9) the following:
``(10)(A) For purposes of this subsection and section 1453 of
this title, a foreign corporation which acquires a domestic
corporation in a corporate repatriation transaction shall be
treated as being incorporated in the State under whose laws the
acquired domestic corporation was organized.
``(B) In this paragraph, the term `corporate repatriation
transaction' means any transaction in which--
``(i) a foreign corporation acquires substantially
all of the properties held by a domestic corporation;
``(ii) shareholders of the domestic corporation, upon
such acquisition, are the beneficial owners of
securities in the foreign corporation that are entitled
to 50 percent or more of the votes on any issue
requiring shareholder approval; and
``(iii) the foreign corporation does not have
substantial business activities (when compared to the
total business activities of the corporate affiliated
group) in the foreign country in which the foreign
corporation is organized.''.
3. An Amendment To Be Offered by Representative Lofgren of California,
or Her Designee, Debatable for 10 Minutes
In section 1332(d)(9) of title 28, United States Code, as
proposed to be inserted by section 4(a)(2) of the bill--
(1) in the first sentence, strike ``if--'' and all
that follows through ``(B) monetary relief'' and insert
``if monetary relief--'';
(2) strike ``The provisions of paragraphs (3) and
(6)'' and all that follows through ``subparagraph
(A).''; and
(3) in the last sentence, strike ``subparagraph (B)''
and insert ``this paragraph''.
4. An Amendment To Be Offered by Representative Sandlin of Texas, or
His Designee, Debatable for 20 Minutes
Strike all after the enacting clause and insert the
following:
SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Class Action
Improvement Act of 2003''.
(b) Reference.--Whenever in this Act reference is made to an
amendment to a section or other provision, the reference shall
be considered to be made to a section or other provision of
title 28, United States Code.
(c) Table of Contents.--The table of contents for this Act is
as follows:
Sec. 1. Short title; reference; table of contents.
Sec. 2. Improved procedures for certain interstate class actions.
Sec. 3. Establishment of State Court Multidistrict Litigation Panel.
Sec. 4. Establishment of procedure for transferring certain actions to
Federal court.
Sec. 5. Best practices study.
SEC. 2. IMPROVED PROCEDURES FOR CERTAIN CLASS ACTIONS.
(a) In General.--Part V is amended by inserting after chapter
113 the following:
``CHAPTER 114--CLASS ACTIONS
``Sec.
``1711. Coupons and other noncash settlements.
``1712. Protection against loss by class member.
``1713. Protection against discrimination based on geographic location.
``1714. Additional requirements.
``1715. Protecting the integrity of the courts.
``1716. Interlocutory appeals.
``1717. Definitions.''.
``Sec. 1711. Coupons and other noncash settlements
``(a) Contingent Fees.--If a proposed settlement in a class
action provides for an award of a noncash benefit to a class
member, and the attorney's fee to be paid to class counsel is
based upon a portion of the recovery, then the attorney's fee
shall be based on the value of the noncash benefit that is
redeemed.
``(b) Other Attorney's Fee Awards.--If a proposed settlement
in a class action includes a noncash benefit to a class member,
and a portion of the recovery is not used to determine the
attorney's fee to be paid to class counsel, then the attorney's
fee shall be based upon the actual amount of time class counsel
expended working on the action. Any attorney's fee under this
subsection shall be subject to approval by the court. Nothing
in this subsection shall be construed to prohibit application
of a lodestar with a multiplier method of determining
attorney's fees whenever appropriate under applicable law.
``(c) Settlement Valuation Expertise.--In a class action
involving the awarding of noncash benefits, the court may in
its discretion, upon the motion of a party, receive expert
testimony from a witness qualified to provide information on
the actual value of the settlement.
``Sec. 1712. Protection against loss by class members
``The court may approve a proposed settlement under which any
class member is obligated to pay sums to class counsel that
would result in a net loss to the class member only if the
court first makes a written finding that nonmonetary benefits
to the class member outweigh the monetary loss.
``Sec. 1713. Protection against discrimination based on geographic
location
``The court may not approve a proposed settlement that
provides for the payment of greater sums to some class members
than to others solely on the basis that the class members to
whom the greater sums are to be paid are located in closer
geographic proximity to the court.
``Sec. 1714. Additional requirements
``(a) Settlements.--The court may not approve a proposed
settlement of a class action unless the court determines that--
``(1) the settlement is fair, reasonable, and
adequate to the plaintiff class; and
``(2) the settlement applies only to claims with
respect to which the plaintiff class was authorized to
represent class members.
``(b) Notice to Defendants.--The court in a class action
shall require that, before the class is certified, defendants
receive notice of the action and be given an opportunity to
respond to the complaint.
``(c) Blocking Removal.--A defendant in a class action may
not elect to block removal of the action to Federal court that
is sought by other defendants if the court finds that
plaintiffs named the defendant solely for purposes of blocking
such removal.
``Sec. 1715. Protecting the integrity of the courts
``(a) Open Records.--No order, opinion, or record of the
court in a class action, including a record obtained through
discovery, whether or not formally filed with the court, may be
sealed or made subject to a protective order unless the court
finds--
``(1) that the sealing or protective order is
narrowly tailored and necessary to protect the
confidentiality of a particular trade or business
secret of one or more of the settling parties and is in
the public interest; or
``(2) that--
``(A) the sealing or protective order is
narrowly tailored, consistent with the
protection of public health and safety, and is
in the public interest; and
``(B) if the action by the court would
prevent the disclosure of information,
disclosing the information is clearly
outweighed by a specific and substantial
interest in maintaining the confidentiality of
such information.
``(b) Destruction of Documents Prohibited.--All parties
filing or receiving service of a class action shall maintain
all documents, including those in electronic format, related to
the subject matter of the class action. Any person who
knowingly alters, destroys, mutilates, conceals, or falsifies
any record, document, or tangible object with the intent to
impede, obstruct, or influence the outcome of a class action
shall be fined not more than $5,000 for each record, document,
or object destroyed, imprisoned not more than 5 years, or both.
``Sec. 1716. Interlocutory appeals
``A court of appeals may in its discretion permit an appeal
from an order of a district court granting or denying class
action certification under Rule 23 of the Federal Rules of
Civil Procedure if application is made to the court within 10
days after entry of the order. An appeal does not stay
proceedings in the district court unless the district court or
the court of appeals so orders.
``Sec. 1717. Definitions
``In this chapter--
``(1) Class action.--The term `class action' means--
``(A) any civil action filed in a district
court of the United States pursuant to Rule 23
of the Federal Rules of Civil Procedure; and
``(B) any civil action that is removed to a
district court of the United States that was
originally filed pursuant to a State statute or
rule of judicial procedure authorizing an
action to be brought by one or more
representatives on behalf of a class;
``(2) Class counsel.--The term `class counsel' means
the persons who serve as the attorneys for the class
members in a proposed or certified class action.
``(3) Class members.--The term `class members' means
the persons who fall within the definition of the
proposed or certified class in a class action.
``(4) Proposed settlement.--The term `proposed
settlement' means an agreement that resolves any or all
claims in a class action, that is subject to court
approval, and that, if approved, would be binding on
each class member, except to the extent that a class
member has requested to be excluded from the class
action.
(b) Technical and Conforming Amendment.--The table of
chapters for part V is amended by inserting after the item
relating to chapter 113 the following:
``114. Class Actions.............................................1711''.
SEC. 3. ENACTMENT OF JUDICIAL CONFERENCE RECOMMENDATIONS.
Notwithstanding any other provision of law, the amendments to
Rule 23 of the Federal Rules of Civil Procedure, relating to
notice to members of a class, which are embraced by the order
entered by the Supreme Court of the United States on March 27,
2003, shall take effect on the date of the enactment of this
Act or on December 1, 2003 (as specified in that order),
whichever occurs first.
SEC. 4. ESTABLISHMENT OF STATE COURT MULTIDISTRICT LITIGATION PANEL.
(a) Creation of Multidistrict Litigation Panel.--The National
Center for State Courts is authorized to develop and implement,
in coordination with the Conference of Chief Judges, a State
court multidistrict litigation panel for class actions, to be
called the ``State Court Panel on Multidistrict Litigation'',
in accordance with the following:
(1) Consolidation of class actions.--The SCPML shall
allow State court judges, or parties with class actions
pending in State courts, to seek to consolidate within
one State court for pretrial proceedings related class
actions pending in different States. No pending class
action may be consolidated without the approval of the
State court judge handling the pending action.
(2) For pretrial proceedings.--When class actions
involving one or more common questions of fact are
pending in the courts of different States, such actions
may be transferred, with permission of the court, to
any of these State courts for coordinated or
consolidated pretrial proceedings. Such transfers shall
be made by the SCPML upon its determination that
transfers for such proceedings will be for the
convenience of the parties and witnesses and will
promote the just and efficient conduct of such actions.
Each action so transferred shall be remanded by the
SCPML at or before the conclusion of such pretrial
proceedings to the State court from which it was
transferred unless it has been previously terminated,
except that the SCPML may separate any claim, cross-
claim, counter-claim, or third-party claim and remand
any such claim before the remainder of the action is
remanded.
(3) Judicial assignments.--Coordinated or
consolidated pretrial proceedings under paragraph (2)
shall be conducted by a judge or judges to whom such
actions are assigned by the SCPML. With the consent of
the transferee court or courts, such actions may be
assigned by the SCPML to a judge or judges from any
relevant State court. The judge or judges to whom such
actions are assigned and the members of the SCPML may
exercise the powers of a trial court judge of any of
the relevant State courts for the purpose of conducting
pretrial depositions in such coordinated or
consolidated pretrial proceedings.
(4) Composition of scpml.--The SCPML shall consist of
nine judges designated from time to time by the CCJ, no
two of whom shall be from the same State. The
concurrence of five members shall be necessary to any
action by the SCPML. The members of the SCPML shall
each serve for a term of three years. The CCJ is urged
to develop a system to ensure that States from varying
regions and States of different sizes are equitably
represented on the SCPML.
(5) Establishment of rules.--The SCPML may prescribe
procedural rules for the conduct of its business not
inconsistent with Federal law and the Federal Rules of
Civil Procedure, including rules establishing
procedures for initiating the transfer of a class
action under this section, providing notice to all
affected parties, determining whether such transfer
shall be made, issuing orders either directing or
denying such transfer, and providing notice of and
appealing any order of the SCPML under this section.
(b) Authorization.--There are authorized to be appropriated
to the National Center for State Courts for the establishment
and administration of the State Court Panel on Multidistrict
Litigation $1,000,000 for fiscal year 2004 and such sums as may
be necessary for fiscal year 2005 and thereafter.
(c) Definitions.--In this section:
(1) Class action.--The term ``class action'' means
any civil action that--
(A) is brought in a State court pursuant to a
State statute or rule of judicial procedure
authorizing an action be brought by one or more
representatives on behalf of a class; and
(B) is not removed to a court of the United
States.
(2) CCJ.--The term ``CCJ'' means the Conference of
Chief Justices.
(3) NCSC.--The term ``NCSC'' means the National
Centers for State Courts.
(4) SCPML.--The term ``SCPML'' means the State Court
Panel on Multidistrict Litigation established pursuant
to subsection (b).
SEC. 5. ESTABLISHMENT OF PROCEDURE FOR TRANSFERRING CERTAIN ACTIONS TO
FEDERAL COURT.
(a) Establishment of Procedure.--The National Center for
State Courts is authorized to develop and implement, in
coordination with the Conference of Chief Judges, a procedure
by which the applicable State court or the SCMPL shall have the
authority to transfer a class action to the appropriate Federal
court if the matter in controversy of the civil action exceeds
the sum or value of $5,000,000, exclusive of interest and
costs, and is a class action in which--
(1) any member of a class of plaintiffs is a citizen
of a State different from any defendant;
(2) any member of a class of plaintiffs is a foreign
state or a citizen or subject of a foreign state and
any defendant is a citizen of a State; or
(3) any member of a class of plaintiffs is a citizen
of a State and any defendant is a foreign state or a
citizen or subject of a foreign state.
(b) Discretion to Decline to Transfer Jurisdiction.--The
applicable State court or the SCMPL may, in the interests of
justice, decline to transfer jurisdiction under subsection (a)
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,
based on consideration of the following factors:
(A) Whether the claims asserted involve matters of
national or interstate interest.
(B) Whether the claims asserted will be governed by
laws other than those of the State in which the action
was originally filed.
(C) Whether the class action has been pleaded in a
manner that seeks to avoid Federal jurisdiction.
(D) Whether the number of citizens of the State in
which the action was originally filed in all proposed
plaintiff classes in the aggregate is substantially
larger than the number of citizens from any other
State, and the citizenship of the other members of the
proposed class is dispersed among a substantial number
of States.
(E) Whether one or more class actions asserting the
same or similar claims on behalf of the same or other
persons have been or may be filed.
(c) Cases in Which Jurisdiction May Not Be Transferred.--The
applicable State court or the SCMPL shall not transfer
jurisdiction under subsection (a) over a 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 100.
(d) Jurisdiction of Federal Courts.--Any Federal court to
which a class action is transferred under subsection (a) shall
have, and exercise, jurisdiction of the case.
(e) Definitions.--In this section, the terms ``class action''
and ``SCMPL'' have the meanings given those terms in section 4.
SEC. 6. BEST PRACTICES STUDY.
The National Center for State Courts is authorized and
requested to--
(1) conduct a study for the purpose of identifying
problems that arise in the litigation of State class
actions;
(2) develop recommendations on ways to address the
problems so identified; and
(3) report to the Congress, within 1 year after the
date of the enactment of this Act, on the results of
such study and recommendations.