House Approves Sweeping Class Action Overhaul Legislation

Bloomberg Law’s combination of innovative analytics, research tools and practical guidance provides you with everything you need to be a successful litigator.

By Bruce Kaufman

Legislation revamping federal class action practice passed the House March 9 on a largely party-line vote, and headed to the Senate where it will face greater scrutiny and longer odds.

The Republican-led House approved the far-reaching Fairness in Class Action Litigation and Furthering Asbestos Claim Transparency Act of 2017 ( H.R. 985) by a 220-201 margin.

All but 14 Republicans voted for the bill, while all Democrats opposed the measure.

Similar legislation passed the House in 2016 by a 211-188 margin, yet went nowhere in the Senate. But things are different now.

Then-President Barack Obama vowed a veto last year, offering little incentive for the Senate to take up the complex and divisive bill.

As President Donald Trump is viewed as a likely supporter, an expensive and highly consequential battle is shaping up in the upper chamber, also controlled by Republicans.

In a surprise development that may have impacted the final vote on the class action bill, the House Republican Liberty Caucus, consisting of some of the more conservative House members, released a letter opposing the bill.

Calling class action suits a “market-based solution,” the caucus letter said the bill “violates the freedom of contract.”

Despite the drama, the bill still passed.

Consumer advocate Pamela Gilbert, a partner at Cuneo Gilbert & LaDuca in Washington, told Bloomberg BNA after the vote that “with no Democratic support, and both Democratic and Republican opposition, this bill will have a difficult time moving forward through the legislative process.”

Another opponent, Linda Lipsen, the CEO for the American Association for Justice in Washington, said the House “rushed” H.R. 985 through without a hearing. The Senate “should recognize this ridiculous bill for what it truly is—a corporate handout—and reject it,” she said.

But Lisa A. Rickard, president of the U.S. Chamber Institute for Legal Reform, praised the House action.

“Today, the House has done its job to ensure that class members get paid first and that plaintiffs’ lawyers only earn a percentage of what class members actually receive,” Rickard said.

Also approved by the House March 9 was the Innocent Party Protection Act ( H.R. 725), which targets what is known as fraudulent joinder—the improper addition of local defendants to suits in a bid to keep cases in more plaintiff-friendly state courts.

H.R. 725 passed the House 224-194. A similar bill, known as the Fraudulent Joinder Prevention Act, passed the chamber in 2016 on a 229-189 vote. It died in the Senate.

Urging support on the floor for H.R. 725, sponsor Rep. Bob Goodlatte (R-Va.) said the bill will help reduce the “litigation abuse that regularly drags small businesses into court for no other reason than as part of a lawyer’s forum shopping strategy.”A third bill is expected to pass the House March 10. That measure, the Lawsuit Abuse Reduction Act ( H.R. 720), would require judges to impose mandatory sanctions on attorneys who file “meritless” civil cases in federal courts.

The bills are part of a business-friendly “litigation reform” package endorsed by House Speaker Paul Ryan and targeted for fast-track action in the House.

Fast-Track Strategy

The House class action bill, introduced only a few weeks ago, was moved rapidly through the House Judiciary Committee by Goodlatte, its sponsor, without any hearings. Goodlatte chairs the panel.

The fast-track strategy was pushed by industry backers who believe that rapid House approval was needed to allow extra time for reluctant Senators to take up and advance the measures.

The legislation will face more scrutiny in the more deliberative Senate, where Democratic votes are essential to adopt legislation and opponents will try to gum up the process.

Assuming all 52 Senate Republicans support the bills, at least eight Democrats must cross the aisle to halt an almost certain filibuster.

That’s a tall order. As of March 9, only one of the bills had companion measures in the Senate, the Lawsuit Abuse Reduction Act ( H.R. 720 / S. 237). And no hearings on that proposal or the need for civil litigation changes in general are scheduled.

But that’s expected to change.

With house passage secured, many business groups will be imploring Senate Majority Leader Mitch McConnell (R-Ky.) and Judiciary Committee Chairman Charles Grassley (R-Iowa) to shepherd bills through the Senate and ultimately to Trump’s desk.

Business Backs Class Bill

The class action bill, which also targets asbestos plaintiffs, is strongly championed by business groups and opposed by consumer, labor and civil rights organizations and plainitffs’ attorneys as a handout to industry. The asbestos provision mandates increased reporting of payments to plaintiffs by trusts that pay out asbestos exposure claims against bankrupt companies.

Hours before the final debate, the National Association of Manufacturers informed House members that H.R. 985 would be a “key vote” in determining which members receive the group’s coveted endorsement.

Too often courts have allowed classes to be certified despite class members not sharing a common injury of the same type or of comparable scope, “greatly increasing the costs of litigation,” NAM said.

After the final vote, Rickard, with the Chamber, also endorsed the House action on The Innocent Party Protection Act, saying it will prevent plaintiffs’ lawyers from suing small businesses and individuals “solely to keep a lawsuit in a plaintiff friendly state court.”

“The House’s action today authorizes federal judges to stop this gaming of the system and sends a loud message that this manipulation of our courts must end,” she said.

Before the crucial final vote, Sarah Jones, communications director for the American Association of Justice, which represents plaintiffs’ attorneys, said the bill would “effectively end all but a handful of class actions in the United States.”

H.R. 985 “tilts the playing field even further in favor of corporate defendants, and would only burden groups of people seeking to enforce their rights under state and federal laws that protect consumers and workers, as well as civil rights laws,” Jones said.

Bill’s Key Provisions

Preceding the final vote on the class action bill, the House defeated seven amendments by Democratic opponents aimed at weakening the measure. One by Goodlatte passed, making clear that provisions covering conflicts of interest and stays of discovery don’t extend to securities covered by the Private Securities Litigation Reform Act of 1995.

H.R. 985 would make major changes to class action procedures, including:

  •  Mandating that all class members suffer the “same type and scope of injury";
  •  Requiring the disclosure of relationships between class counsel and class representatives;
  •  Providing that all class members be ascertainable as a prerequisite for class certification;
  •   Delaying payment of class counsel’s fees until after settlement distribution is complete;
  •   Tying of calculation of class counsel fees to the actual payout to class members;
  •   Tying of 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.
The bill also would make these changes to multidistrict litigation procedure, often used for complex cases:
  •  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.

More Bills Coming

Three additional bills that impact civil litigation are expected to pass in the House at a later date, perhaps as early as the week of March 13.

Two of them, the Stop Settlement Slush Funds Act ( H.R. 732) and the Protecting Access to Care Act ( H.R. 1215), have already made it through the committee level and are awaiting House floor action.

H.R. 732 bars certain federal agencies from entering into settlements that steer funds to favored third-party groups. H.R. 1215 caps medical malpractice awards and limits the liability of medical device defendants.

The Sunshine for Regulatory Decrees and Settlements Act ( H.R. 469) remains in the Judiciary Committee but is expected to be approved by the House at some point. The so-called “sue-and-settle” bill alters the settlement process for citizen suits. It passed the House in 2016.

With assistance from Perry Cooper

To contact the reporter on this story: Bruce Kaufman in Washington at bkaufman@bna.com

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

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

Request Litigation on Bloomberg Law