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Tort Reform Receives Swift Congressional Approval and President's Signature

House passage last Thursday of legislation to rein in class action lawsuits in state courts received a thumbs-up from NAHB, which noted that the measure will curb the number of frivolous lawsuits that have needlessly cost the business community billions of dollars annually and harmed housing affordability.

“This bill addresses the ongoing abuses in multi-state class action cases, such as forum shopping, where lawyers actively seek out local judges and juries who have the reputation for handing out huge damage awards for plaintiffs,” said NAHB President David Wilson.

S. 5, the “Class Action Fairness Act of 2005,” cleared the House by a wide bipartisan margin of 279 to 149. The legislation is identical to the Senate version passed earlier this month. President Bush signed the measure into law last Friday.

Prior to the Feb. 17 vote, NAHB sent a letter to every House member urging its passage and stating that the association was designating this bill as a key vote because of its significance to the housing industry.

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The legislation will move class action lawsuits into federal court when the total amount in dispute exceeds $5 million, and when any plaintiff and the defendant live in different states.

“Because class action cases usually are heard in sympathetic state courts, defendants who are fearful of losing the case and facing potentially large damage awards are likely to settle out of court rather than risk a trial. This means that most class action cases are usually settled before a court even hears the merits of the case,” said Wilson.

“This legislation resolves this problem by shifting class action cases to federal courts, which tend to be more objective in their decisions than state courts,” he added, noting that the measure protects defendants from undue pressure to settle while providing proper safeguards for plaintiffs.

To read the legislation, click here, and enter S. 5 in the box at the upper left.

For more information, e-mail Michael Strauss at NAHB, or call him at 800-368-5242 x8252.
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