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Cyrus Dugger

The Top Seven Bad Things About the Class Action “Fairness” Act

Have you heard of the Class Action Fairness Act of 2005? This recently enacted bill is affecting the ability of everyone to get compensation for large-scale harm done to them by corporations. Without the ability to bring class action lawsuits, millions of people would be forced to litigate their claim as individuals. If a company mass produces an unsafe defective product, a class action lawsuit is what allows that company to be effectively held accountable by all the individuals exposed to the product.

Surprisingly, the Class Action Fairness Act of 2005 was passed by Congress in an attempt to make it harder for class action lawsuits to be approved by the nation's courts.

Our recently released Congressional Scorecard reviews this bill. I'd like to talk about the bill's pitfalls and shortsightedness by way of some "top" lists:

The Single Stupidest Thing About CAFA

1. A report by the Federal Judicial Center actually shows no significant difference in the rate of certification of class actions in federal and state court. State courts certified 20% and federal courts certified 22% of the class actions brought before them which were evaluated in the study. If this study is accurate, and state and federal courts treat class actions similarly, then pushing most class actions to federal court will not increase the quality (or result) of the review of class actions, but it will only serve to increase the wait time for those with legitimate claims.

The Top Seven Bad Things About the Class Action "Fairness" Act:

1. The worst thing about this act is that it is a corporate bill with just enough dressing to get some democrats to sign onto it. The problem is that the dressing used to do so is mostly duplicative of pre-existing safeguards under Federal Rule 23, and is not worth the passage of a pro-corporation bill.

2. Legislation that does little more that make tobacco analysts happy cannot be a good thing for the average American. As stated by a Smith Barney tobacco analyst in an email to clients "The Senate just passed a bill 72-26 which is designed to funnel class-action suits with plaintiffs in different states out of state courts and into the federal court system, which is typically much less sympathetic to such litigation. The practical effect of the change could be that many cases will never be heard given how overburdened federal judges are, which might help limit the number of cases."

3. The federal courts do not have any more space for an additional caseload, let alone an increased class action caseload. This act transfers most class actions from state court to federal court. Those who should know have stated that the federal courts just don't have the space.

I also criticized Congress and the president for their propensity to enact more and more legislation which brings more and more cases into the Federal court system. This criticism received virtually no public attention. . . If Congress enacts and the President signs new laws, allowing more cases to be brought into the Federal courts, just filling the vacancies will not be enough. We need additional judgeships - Former Chief Justice Rehnquist

The Judiciary has neither the financial nor personnel resources to cover these new workload requirements - Leonidas Ralph Mecham, Director of the Administrative Office, in a letter to President Bush

Federal courts lost the services of about 1,350 employees in fiscal year 2004 as a result of budget constraints, face sharply increasing rental payments to the General Services Administration, and are finding it very difficult to cope with the effects of their existing caseloads this fiscal year, let alone this new, additional workload. - Leonidas Ralph Mecham, Director of the Administrative Office, in a letter to President Bush


4. The change in law means that more lawsuits based purely on state law will be decided by federal judges. Increasing the amount of state law cases decided by federal judges creates confusion in the judicial system. When federal judges analyze state law, they may come to a different conclusion than the State Supreme Court actually reaches when it later considers the same issue.

5. A purported reason for the act is to stop forum shopping. Forum shopping in state courts allows a greater variety of choices because there are more state courts available to chose from when deciding where to litigate. However, forum shopping is endemic to the judicial system as a whole. Even within the federal system, litigators strategize as to the forum's demographics and/or which in which circuit to litigate their claims.

6. One underlying reason advanced for the bill is that local state judges should not be deciding issues of national importance or impact. But why should a federal judge, perhaps sitting just across the street from the State Supreme Court, be any more qualified to do so? The question becomes even more difficult when (as is the case here) the federal judge who is purportedly more qualified to decide a national issue will be interpreting state law.

7. Duplicative lawsuits of the same class action filed in different states are a legitimate concern. Sometimes lawyers will file duplicative lawsuits in order to shop judges or beat others to the courtroom. However, a better means of dealing with this concern is by way of the correct, or even stricter, application of existing legal precedent under Phillips Petroleum v. Shutts, 472 US 797 (1985).

For a comprehensive review of the Class Action Fairness Act of 2005 checkout Public Citizen's report.

Cross-Posted from DMIBlog

If you are interested in learning more about CAFA of 2005, or would like to partner with DMI in our support of the civil justice system, email Cyrus @ cdugger@drummajorinstitute.org.

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Posted at 10:37 AM, Jun 27, 2006 in Civil Justice | Class Action | Class Action "Fairness" Act
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