[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.

                                
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