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In a typical settlement, in an Illinois state court class action, cable television customers received no compensation whatsoever for allegedly excessive billing. The cable operator did agree to change some billing practices, but all of the cash settlement — $5.6 million — went to the plaintiffs’ lawyers.
In another notorious settlement, the plaintiff class members had a debit posted to their accounts in a proceeding against mortgage lenders. They were actually worse off than if the case had not been filed, and their lawyers received $8.5 million.
The most egregious cases have been steered to friendly state courts, where certain elected judges routinely certify as class actions almost all the cases that are filed. Sometimes the class certification order is entered before the defendant is served with notice of the suit and has an opportunity to defend himself.
National Cases Get Heard in State Court
These cases involve large national corporate defendants, and the plaintiffs live across the country. The cases are truly national in scope, but instead of being filed in federal court where they belong, the cases are frequently filed in a handful of state courts where favored treatment of the lawyers’ demands is virtually assured.
Class action filings in these “magnet” state courts have increased by more than 1,000%. In rural Madison County, IL, the number of class actions grows dramatically every year, even though the parties don’t live there and the cases have no special relationship to that county or state.
How can this abuse occur? Unfortunately, our justice system allows it.
A Rule With Nonsensical Results
Under current law, a federal court has so-called “diversity” jurisdiction over a case only if all of the plaintiffs live in different states from the defendants and each plaintiff’s claim is at least $75,000. If even one plaintiff is from the same state as a defendant, the case gets sent back to state court.
This rule leads to a nonsensical result. Federal courts have jurisdiction over a slip-and-fall case by a Virginia plaintiff in a Maryland convenience store — as long as the plaintiff alleges damages amounting to $75,001. But at the same time, a $70 million case with 1,000 plaintiffs from all 50 states, involving laws from multiple jurisdictions, winds up in a state court in Madison County, IL.
Surely, the framers did not have these tortured consequences in mind. In fact, if Congress were starting anew to define what kinds of cases should be included within the scope of Article III's federal court “diversity” jurisdiction, large-scale interstate class actions would certainly top the list. Those cases typically involve the largest amounts in contention, the most people and the most substantial effects on interstate commerce.
Only Congress Can End This 'Extortion Racket'
The Class Action Fairness Act (H.R. 1115), of which I am an original co-sponsor, would correct this anomaly by allowing class actions to be litigated in federal court as long as the class members collectively seek $2 million and as long as the case is truly national in nature. If the center of gravity of the case is local, it would remain in the state court. The measure is entirely consistent with traditional principles of federalism.
It is also important to stress that this bill is not “tort reform,” but more accurately, “court reform.” Unlike tort reform efforts, the bill does not cap damages; it does not eliminate joint and several liability; and it does not limit attorney’s fees. It does nothing to change the substantive rights of injured parties or the substantive liability of corporate wrongdoers. And it doesn’t limit the availability of class actions, which do serve a valid purpose in vindicating rights.
The bill simply reforms court procedures, to allow for truly national cases to be heard by federal judges, who are used to handling complex litigation, and who routinely apply the laws of different states (as is necessary in this sort of litigation).
The Washington Post recently decried the current system, saying, “This is not justice. It is an extortion racket that only Congress can fix.”
Congress can fix this problem with H.R. 1115. The bill is the best chance to enact meaningful “court reform” to ensure that consumers no longer get taken for a ride.
EDITOR'S NOTE: The House on June 12 passed H.R. 1115 by a vote of 253-170. Before the House vote, NAHB sent a letter to the full House in support of the measure. A companion bill, S. 274, is pending in the Senate. To read this legislation, click here, and enter the bill number in the box at the upper left.
Rick Boucher is the Democratic U.S. representative from the 9th District in Southwest Virginia.
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If you own a cell phone, have automobile insurance or use long-distance telephone service, you’re a plaintiff in a lawsuit — and you probably don’t even know it.
