David Randolph Smith

Bush Signs Federal Class Action Bill

2/16/05: President Bush, (with Tennessee's Senator Bill Frist at his side), laughed as he signed the federal class action bill into law that rewards wealthy business supporters by changing the rules for class-action lawsuits. Update: 3/17/05: ABA Teleconference on Class Action Fairness Act of 2005. Denounced by editorials in papers throughout the country, including the Nashville,Tennessean, "Class Action 'Reform' is Consumer Safety Retreat", the true objective of this law is to dilute the impact of strong state laws protecting consumers and the environment and to make it harder for Americans to win redress in court when they are harmed by egregious corporate behavior. Senator Frist believes the "number one agenda " issue for the Congress is "tort reform."

The consumer advocate group Public Citizen explains that the law so gleefully signed by President Bush is nothing more than a power grab that strips consumers of their rights to redress in the courts and gives a green light to corporate greed and deception:

  • "The U.S. Senate today has given banks, credit card companies, insurers, HMOs, drug manufacturers and other big corporations a green light to defraud and deceive consumers without fear of being held accountable. Passage of the class action legislation will mean that many class action lawsuits will not be heard in either state courts or federal courts. Innocent consumers who are victimized by predatory lending, car repossessions, fraudulent billing practices and other corporate abuses will be locked out of the courthouse.

    This action by a Republican-controlled Senate is a Washington power grab that takes power away from the states and renders most state consumer protection laws unenforceable by consumers. It’s a travesty that the Senate cares more about padding the profits of big corporations and protecting their ability to cheat consumers than about protecting the rights of the least powerful in our society."

House Democratic Leader Nancy Pelosi summed up the payola-for-pals nature of the class action bill in her speech on the floor of the House:

  • “Mr. Speaker, I rise in strong opposition to this legislation.  Today, Republicans are bringing to the floor, as their first major legislative action, a payback to big business at the expense of consumers.  The Republican agenda is to ensure that some Americans do not get their day in court.Make no mistake: the class action bill before us today is an extreme bill.  It is not a compromise bill, as some have claimed.  It is an extreme bill that is an injustice to consumers, and a windfall for irresponsible corporations.Consumers will be hit hard by this bill.  It lumps together individual personal injury cases such as those involving Vioxx, which are not class actions under current procedures, and forces them into the federal courts.  Doing so will greatly increase the likelihood that such cases will never be heard.When Americans are injured or even killed by Vioxx or Celebrex or discriminated against by Wal-Mart, they may never get their day in court.  Those cases that do go forward will take significantly longer because the federal courts are overburdened and unequipped for this caseload.  That is why the bill is opposed by federal judges, including the Judicial Conference of the United States.Special interests have even admitted that the real intent of this bill is to clog the federal courts and therefore stop the cases.To irresponsible corporations, however, the class action bill is a belated Valentine.  It is exactly what they asked for.  Powerful corporations will largely be immune from the accountability that currently comes from meritorious state class action cases.  For example, this bill would help shield large corporations from any accountability for Enron-style shareholder fraud, for activities that violate employee rights under state law, and for telemarketing fraud targeted at the elderly.It should come as no surprise, however, that Republicans are seeking yet another way to protect irresponsible corporations.The Washington Post reported that last year’s Republican medical malpractice bill contained special liability protections that would have precluded consumers from suing to recover punitive damages arising from the types of injuries caused by Vioxx and Celebrex.Protecting big drug companies is always at the top of the Republican agenda.  We saw that in the prescription drug bill under Medicare.  This is yet again, another example of the Republicans being the handmaidens of the pharmaceutical industry.This bill also runs counter to the principles of federalism that my colleagues on the other side of the aisle claim to support.  It throws thousands of state cases into federal courts that are not equipped to adjudicate state laws.For instance, lawsuits involving the enforcement of state hourly wage laws, which often have greater protections than federal wage laws, would be forced into federal court.  In fact, 46 state attorney generals, on a bipartisan basis, have requested an exemption so that they can continue to protect their citizens under the state consumer protection laws in state courts.The Republicans have rejected that request, while Democrats have incorporated it into our substitute.Democrats, in our substitute, support sensible approaches that weed out frivolous lawsuits, but not meritorious claims.  Our Democratic substitute says that certain kinds of cases must always have their day in court.  Physical injury cases, civil rights cases, wage and hour cases, state Attorneys General cases, and others must be heard if we are to remain a nation that strives for ‘justice for all.’President Harry Truman said it so well. ‘The Democratic Party stands for the people.  The Republican Party stands, and always has stood, for special interests.’I urge my colleagues to stand up to the special interests, to support the Democratic substitute, to listen to the recommendations of the federal judges and the Judicial Conference of the United States, and to oppose this unjust bill.”

Seen as a significant "victory for the Bush Administration," the new class action law is a serious loss of consumer and individual rights. The ABA has analyzed the new law here.The law sharply limits the ability of people to file class-action lawsuits against companies.The measure prohibits state courts from hearing many kinds of cases they now consider, transferring them to federal courts. Experts say many cases will wind up not being brought because federal judges have been constrained by a series of legal precedents from considering large class actions that involve varying laws of different states. The legislation also makes it more difficult for class-action lawsuits to be settled by payments of coupons for goods and services instead of cash by the defendants.

The measure does not affect pending cases.The measure has been attacked by civil rights organizations, labor groups, consumer organizations, many state prosecutors and environmental groups, who say it would sharply curtail important cases and provide new protections for unscrupulous companies. Many federal and state judges and state lawmakers have also criticized the bill, saying it would strip states of an important role in judging such contests and could add a considerable number of cases to already burdened federal dockets. "This bill is one of the most unfair, anticonsumer proposals to come before the Senate in years," said Senator Harry Reid of Nevada, the minority leader. "It slams the courthouse doors on a wide range of injured plaintiffs. It turns federalism upside down by preventing state courts from hearing state law claims. And it limits corporate accountability at a time of rampant corporate scandals." Democrats cast all 26 dissenting votes in the Senate.

Some experts in civil procedure and class actions said they believed that the fight would now move to federal courts and that some federal judges might become more receptive to hearing such claims now that they know that their dismissal would mean that no one else would hear them. Class-action lawsuits rarely make it to trial but require considerable time because judges are called upon by lawyers from both sides to rule on a variety of pretrial motions. Prof. Arthur R. Miller of Harvard Law School, a longtime critic of the legislation who in previous years worked with organizations that tried to soften the measure, said that the legislation could lead to the balkanization of class-action litigation by encouraging plaintiffs' lawyers to file smaller suits in different courts, rather than a single large nationwide action."This will clearly have a dampening effect on class actions," Professor Miller said. "But accomplished law firms will figure out how to work with it." He also said that the vague language of the new legislation was certain to spawn a significant amount of new litigation over the law's terms. "This is not neat and crisp like the Ten Commandments," he said.