Bill Targeting Class Actions, MDLs Sent to House

By Perry Cooper

Is new, sweeping class action legislation headed to the House floor a common-sense way to make the litigation device more efficient? Or is it a wrecking ball designed to keep plaintiffs out of court?

Those are the arguments from defense and plaintiffs’ attorneys for and against the 2017 Fairness in Class Action Litigation Act ( H.R. 985), which was approved 19 to 12 by the House Judiciary Committee late Feb. 15.

Committee chairman Bob Goodlatte (R-Va.) introduced the legislation Feb. 9. No hearings were held before the committee voted on the bill.

The bill includes language from a previous proposal targeting class actions where, defense attorneys say, not all class members are injured. The earlier version passed the House in Jan. 2016 but stalled in the Senate.

The new bill adds provisions to reach nearly every corner of class action and complex litigation practice. They include tightening up class certification requirements, capping or delaying distribution of fees to class counsel, requiring the disclosure of litigation financing, and tying the reporting of settlement data to plaintiffs’ lawyers’ fees.

It also includes new mandates on plaintiffs in consolidated multidistrict litigation proceedings in federal court.

The measure is expected to pass the House easily, largely along party lines, but its fate is uncertain in the Senate.

Supporters: Much-Needed Reform

Supporters of the bill say it isn’t designed to be pro-defendant or pro-plaintiff. They argue the bill will make the class action system more efficient and ensure that injured people are compensated.

“Most of these reforms are aimed at making sure absent class members are taken care of,” defense attorney Andrew J.Trask of McGuire Woods in Los Angeles told Bloomberg BNA.

Trask testified before the committee in support of the previous version of the bill on behalf of Lawyers for Civil Justice, a pro-business group.

Defense attorney John H. Beisner told Bloomberg BNA the bill is driven by “real questions about who benefits from class actions and whether they are benefiting class members.”

“You really have a system now where the primary beneficiaries in many cases—not all, but many—are the attorneys,” Beisner said. He is a partner at Skadden, Arps, Slate, Meagher & Flom LLP in Washington, who testified in support of the original bill on behalf of the U.S. Chamber of Commerce’s Institute for Legal Reform.

Opponents: Mis-named, Misguided

Consumer and civil rights advocates are concerned about the bill’s scope.

“The bill is a mis-named and misguided attempt to slam the court-room doors shut on consumers, small businesses, employees and investors seeking to hold large corporations accountable when their conduct hurts lots of people,” consumer attorney Jonathan D. Selbin, of Lieff Cabraser Heimann & Bernstein LLP in New York, told Bloomberg BNA.

Selbin also called the bill “another shot across the bow of an independent judiciary.”

“Judges already have the discretion to do much of what the bill mandates in the limited circumstances where it may be appropriate,” he said.

Civil rights attorney Jocelyn Larkin compared the bill to a sledgehammer and a wrecking ball. Larkin is the executive director of the pro-plaintiff Impact Fund in Berkeley, Calif., who penned a letter to the House committee on behalf of 120 civil rights organizations opposing the bill.

She’s especially concerned about a provision that could keep organizations like the NAACP from bringing multiple cases with the same attorneys, and one tying attorneys’ fees in civil rights cases and other litigation seeking court-ordered injunctions to the “value of the equitable relief.”

“How do you value Brown v. Board of Education?” she asked, referring to the landmark school desegregation case, Brown v. Bd. of Educ. of Topeka, 347 U.S. 483 (1954). “Maybe the lawyers are going to get 25 percent of a gazillion dollars!”

The legislation, if enacted, would apply to pending as well as future litigation. That makes it particularly disruptive for plaintiffs but also for defendants, Larkin said.

Dominion of Rules Committee

Larkin and Selbin both argued that Congress isn’t the right body to make these changes.

That would be the Judicial Conference Committee on Rules of Practice and Procedure, which is made up of a wide variety of experienced attorneys tasked with amending procedural rules—including the one that governs class actions, Federal Rule of Civil Procedure 23.

“It’s particularly disturbing because so many of the provisions are ones that the rules committee has looked at, evaluated and rejected,” Larkin said. “There was a lot of careful deliberation and a lot of input from both sides of the ‘v.’ on those provisions.”

The American Bar Association wrote the House committee to oppose the bill, arguing that federal procedure should be managed through the advisory committee and not through Congress.

Consensus: Settlement Data Needed

Many of the business-backed changes proposed by the bill are contentious, but one provision seems to have at least some support from both sides.

The bill would require class counsel to submit settlement data to the Federal Judicial Center and the Administrative Office of the U.S. Courts, which would report the data annually. Attorneys’ fees wouldn’t be paid to class counsel in an individual case until they submit the data.

Alexandra D. Lahav, a professor specializing in class actions and aggregate litigation at the University of Connecticut School of Law in Hartford, Conn., said she and other professors have been pushing for more publicly available data for years. Lahav testified against the previous version of the bill.

“The more transparency the better,” she told Bloomberg BNA. “Once we know what the universe is, I think we’d be in a better position to make changes. I worry about these changes that are made based on anecdotes.”

Plaintiffs’ attorney Selbin, and defense attorneys Trask and Beisner agreed.

But Elizabeth Chamblee Burch, a professor at the University of Georgia Law School in Athens, Ga., who specializes in complex litigation, raised one potential concern with the proposal.

“This provision appears to be less concerned about delivering the necessary data to judges and more concerned with holding up plaintiffs’ attorneys’ funds in administration so as to prevent them from investing in new lawsuits,” she told the House committee.

But Trask insists that the defense bar has no strategy of delaying payment to class attorneys.

“If there’s an actual class action that deserves to get paid out, I don’t think anybody minds how the attorneys get paid, provided it is a rational fee related to the amount that the class actually receives,” he said.

“I haven’t heard anyone on the defense side talk about delay of payment as a strategic use either in an individual case or as a macro strategy for reform,” Trask said.  

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 Bill Raises Bar for Certification, Delays Fees and More

Changes to class action procedures mandated in the bill include:

• requiring all class members to have suffered the “same type and scope of injury";
• requiring disclosure of any relationship between class counsel and class representatives;
• including that class members be ascertainable as a prerequisite for class certification;
• delaying payment of class counsel’s fees until after settlement distribution is complete;
• tying calculation of class counsel fees to the actual payout to class members;
• tying calculation of fees in injunctive classes to value of injunctive relief;
• requiring class counsel to report settlement data before recovering fees;
• limiting issue class certification to situations where entire case meets certification prerequisites;
• staying discovery during the pendency of motions to transfer, dismiss, etc.;
• requiring disclosure of third-party funders supporting the class; and
• allowing immediate appeals from orders granting or denying class certification.

Changes to multidistrict litigation procedure include:

• addressing misjoinder of plaintiffs in personal injury and wrongful death actions
• requiring plaintiffs in MDLs to provide evidentiary support of their injuries and causes;
• requiring all parties to agree to trials in specific MDL cases; and
• ensuring that at least 80 percent of recovery obtained in MDL cases goes to the plaintiffs. 

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To contact the reporter on this story: Perry Cooper in Washington at pcooper@bna.com

To contact the editor responsible for this story: Steven Patrick at spatrick@bna.com

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