Class-action bill passes in Congress
The
House passed legislation that would send class-action suits to federal court
rather than state court in order to reduce frivolous lawsuits.
Bloomberg News
Congress handed
President Bush the first legislative victory of his second term, approving a
bill to curtail class-action lawsuits against companies by moving most of them
from state to federal court.
The House passed legislation today that will
make it harder for trial lawyers to file claims in such jurisdictions as
Madison County, Illinois, that are known as havens for plaintiffs seeking large
judgments. Judges would be required to hold hearings to assess the fairness of
settlements, and settlements would be banned if they result in a net loss to
consumers by giving lawyers most of the money.
The Senate passed the legislation last week by
a vote of 72-26. Today's House vote was 279-149. Bush said he would sign it
after the House sends him the measure. The legislation doesn't affect pending
lawsuits, only those filed after the bill becomes law.
''The speed with which this
bill passed both houses of Congress this session is a testament to the glaring
need for class-action reform,'' President Tom Donohue of the U.S. Chamber of
Commerce said in a statement. ``This is a landmark victory in our fight to
restore fairness and balance to our courts.''
A coalition of companies
including Ford Motor Co., Intel Corp., Pfizer Inc. and insurers Allstate Corp.
and Hartford Financial Services Group Inc. lobbied Congress for an overhaul to
cut legal costs. The U.S. Chamber of Commerce spearheaded efforts by businesses
to win passage of the class-action bill.
''This bill is an important step forward in
our efforts to reform the litigation system and to continue creating jobs and
growing our economy,'' Bush said in a statement.
The legislation topped his agenda for curbing
what he has called ''frivolous lawsuits'' that ''drive up the cost of doing
business.'' He also wants Congress to cap noneconomic damages for medical
malpractice and compensate asbestos-exposure victims from a $140 billion trust
fund aimed at ending lawsuits that have bankrupted more than 70 companies.
''We're going to push hard
on this next set of issues, after we're done celebrating,'' said Stan Anderson,
executive vice president of the Chamber of Commerce. He said passage of the
class- action limits ``is going to create some momentum for further activity.''
Marsha Rabiteau, assistant general counsel for
Hartford Financial, said the new law will save money by reducing ''abusive
litigation,'' providing more funds for job growth and research and development.
Mike Mueller, head of a nationwide
class-action team at Akin Gump Strauss Hauer & Feld LLP, predicted that
plaintiffs' lawyers will challenge the new law as an unconstitutional expansion
of federal power. ''It is a substantial change in the power of federal courts
to hear cases based solely on state laws,'' Mueller said in a statement.
Under the bill approved today, most
class-action lawsuits seeking at least $5 million would be transferred to
federal court. Federal judges apply stricter rules before allowing consumers to
band together to seek damages for fraud or defective products.