Class-action Suits Shifted

TORT REFORM

New law will move many of these large lawsuits into federal courts

On Feb. 18, President George W. Bush signed a bill that will shift most large class-action lawsuits involving plaintiffs from different states into federal courts. Earlier this month, the bill--the Class Action Fairness Act of 2005--sailed easily through the House and Senate.

This is a major legislative victory for the President, who gave the issue high priority during his reelection campaign, and for business groups, such as the American Chemistry Council and the U.S. Chamber of Commerce, that have lobbied strongly for such a bill since 1997. However, some consumer and public health organizations opposed the legislation.

Under the new law, a class-action lawsuit cannot be moved into federal court if the total amount of money in dispute is less than $5 million, if the number of plaintiffs is fewer than 100, or if more than two-thirds of the plaintiffs are citizens of the state in which the lawsuit was filed.

Supporters say the bill is necessary because lawyers have taken advantage of the court system by filing frivolous lawsuits in friendly state jurisdictions where they are likely to get large payouts. They also claim that lawyers sometimes threaten companies with class-action lawsuits to obtain quick settlements. "This bill assures that most large, multistate class-action lawsuits are heard in federal court before a fair and impartial judge," says Don Evans, ACC deputy general counsel.

Public Citizen President Joan Claybrook strongly disagrees. The new law means that "many class-action lawsuits will not be heard in either state courts or federal courts," she says, because federal courts are already overcrowded.