Class Action Fairness Act of 2005

Class Action Fairness Act of 2005

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The U.S.
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...

 Class Action Fairness Act of 2005, 28 U.S.C.
United States Code
The Code of Laws of the United States of America is a compilation and codification of the general and permanent federal laws of the United States...

 Sections 1332(d), 1453, and 1711–1715, expanded federal jurisdiction over many large class-action lawsuits and mass actions taken in the United States.

The bill was the first major piece of legislation of the second term of the Bush
George W. Bush
George Walker Bush is an American politician who served as the 43rd President of the United States, from 2001 to 2009. Before that, he was the 46th Governor of Texas, having served from 1995 to 2000....

 Administration. Business groups and tort reform
Tort reform
Tort reform refers to proposed changes in common law civil justice systems that would reduce tort litigation or damages. Tort actions are civil common law claims first created in the English commonwealth system as a non-legislative means for compensating wrongs and harm done by one party to...

 supporters had lobbied for the legislation, arguing that it was needed to prevent class-action lawsuit abuse. President George W. Bush had vowed to support this legislation.

The Act gives federal courts jurisdiction
Jurisdiction
Jurisdiction is the practical authority granted to a formally constituted legal body or to a political leader to deal with and make pronouncements on legal matters and, by implication, to administer justice within a defined area of responsibility...

 to certain class actions in which the amount in controversy
Amount in controversy
Amount in controversy is a term used in United States civil procedure to denote the amount at stake in a lawsuit, in particular in connection with a requirement that persons seeking to bring a lawsuit in a particular court must be suing for a certain minimum amount before that court may hear the...

 exceeds $5 million, and in which any of the members of a class of plaintiffs is a citizen of a state different from any defendant, unless at least two-thirds or more of the members of all proposed plaintiff
Plaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...

 classes in the aggregate and the primary defendants are citizens of the state in which the action was originally filed. The Act also directs the Courts to give greater scrutiny to class action settlements, especially those involving coupons.

Support


The Act accomplished two key goals of tort reform advocates:
  1. Reduce "forum-shopping" by plaintiffs in friendly state courts by expanding federal diversity jurisdiction
    Diversity jurisdiction
    In the law of the United States, diversity jurisdiction is a form of subject-matter jurisdiction in civil procedure in which a United States district court has the power to hear a civil case where the persons that are parties are "diverse" in citizenship, which generally indicates that they are...

     to class actions where there is not "complete diversity" giving federal jurisdiction over class actions against out-of-state defendant
    Defendant
    A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...

    s. Proponents argued that "magnet jurisdictions" such as Madison County, Illinois
    Madison County, Illinois
    Madison County is a county located in the U.S. state of Illinois. Madison County is part of the Metro-East region of the St. Louis Metro Area. According to the 2010 census, it has a population of 269,282, which is an increase of 4.0% from 258,941 in 2000. The county seat is Edwardsville, home to...

     were rife with abuse of the class action procedure.
  2. Requires greater federal scrutiny procedures for the review of class action settlements and changes the rules for evaluating coupon settlement
    Coupon settlement
    In law, a coupon settlement is a resolution between disputing parties about a class action legal case, reached either before or after court action begins. In a coupon settlement, class members receive coupons or other promises for products or services instead of a cash award...

    s, often reducing attorney's fees that are deemed excessive relative to the benefits actually afforded class members. For example, in an infamous Alabama class action involving Bank of Boston, the attorneys' fees exceeded the relief to the class members, and class members lost money paying attorneys for the "victory."


Republicans supported the act in that only one Republican member of Congress (John Doolittle
John Doolittle
John Taylor Doolittle , American politician, was a Republican member of the United States House of Representatives from 1991 to 2009, representing . In the 109th Congress, he held a leadership role as the Deputy Whip for the Republican party in the House...

 of California) voted against it, and a Republican president signed it.

Critics


Critics charged that the legislation would deprive Americans of legal recourse
Legal recourse
A legal recourse is an action that can be taken by an individual or a corporation to attempt to remedy a legal difficulty.* A lawsuit if the issue is a matter of civil law* Many contracts require mediation or arbitration before a dispute can go to court...

 when they were wronged by powerful corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...

s. Congressman Ed Markey
Ed Markey
Edward John "Ed" Markey is the U.S. Representative for , serving since 1976. He is a member of the Democratic Party. The district includes most of Boston's northern and western suburbs, such as Medford and Framingham. Markey is the Dean of both the Massachusetts and New England House delegations...

 (D-Mass.) called the bill "the final payback to the tobacco industry
Tobacco industry
The tobacco industry comprises those persons and companies engaged in the growth, preparation for sale, shipment, advertisement, and distribution of tobacco and tobacco-related products. It is a global industry; tobacco can grow in any warm, moist environment, which means it can be farmed on all...

, to the asbestos
Asbestos
Asbestos is a set of six naturally occurring silicate minerals used commercially for their desirable physical properties. They all have in common their eponymous, asbestiform habit: long, thin fibrous crystals...

 industry, to the oil industry
Petroleum industry
The petroleum industry includes the global processes of exploration, extraction, refining, transporting , and marketing petroleum products. The largest volume products of the industry are fuel oil and gasoline...

, to the chemical industry
Chemical industry
The chemical industry comprises the companies that produce industrial chemicals. Central to the modern world economy, it converts raw materials into more than 70,000 different products.-Products:...

 at the expense of ordinary families who need to be able go to court to protect their loved ones when their health has been compromised."

Critics charge that this bill makes it far more difficult to bring class action suits, and may prolong such litigation, clogging the federal courts' dockets. The act also gives the federal government some ability to control, through judicial appointments, outcomes that were previously under state control.

Critics argue that the expansion of federal jurisdiction comes at the expense of state's rights and federalism
Federalism
Federalism is a political concept in which a group of members are bound together by covenant with a governing representative head. The term "federalism" is also used to describe a system of the government in which sovereignty is constitutionally divided between a central governing authority and...

, something that Republicans have historically protested; however, proponents respond that the bill is consistent with the founders' original intent for the role of federal courts and diversity jurisdiction expressed by Alexander Hamilton
Alexander Hamilton
Alexander Hamilton was a Founding Father, soldier, economist, political philosopher, one of America's first constitutional lawyers and the first United States Secretary of the Treasury...

 in Federalist No. 80
Federalist No. 80
Federalist No. 80 is an essay by Alexander Hamilton and the eightieth of the Federalist Papers. It was published on June 21, 1788 under the pseudonym Publius, the name under which all the Federalist Papers were published...

.

Impact


A study by researchers at the Federal Judicial Center
Federal Judicial Center
The Federal Judicial Center is the education and research agency of the United States federal courts. It was established by an Act of Congress in 1967, at the recommendation of the Judicial Conference of the United States....

has found that the enactment of CAFA was followed by an increase in the number of class actions filed in or removed to the federal courts based on diversity jurisdiction. This finding is consistent with the congressional intent in enacting CAFA. The observed increase was due primarily to increases in consumer class actions. Somewhat surprisingly, the FJC study found that much of the increase in diversity class actions has been driven by an increase in original filings in federal courts. This finding suggests that plaintiffs' attorneys are choosing the federal forum, post-CAFA, rather than defendants' counsel through removal, contrary to expectations.

Further reading


External links