House Passes Class Action Lawsuit Changes

The House on Thursday approved moving virtually all national class-action lawsuits (search) from state court into federal court, a move supporters hope will curb frivolous lawsuits but opponents fear will allow big businesses to escape multimillion-dollar verdicts for misdeeds.

Pushing the bill through on a 253-170 vote, majority Republicans argued that trial lawyers increasingly abuse such lawsuits to profit from multimillion-dollar settlements. Victims, on the other hand, often get virtually worthless coupons, GOP lawmakers maintain.

"These suits are one of the most grossly abused parts of the American system of justice," said Rep. Deborah Pryce, R-Ohio. "We have seen a deluge of frivolous lawsuits designed to coerce quick and often unwarranted settlements, often to enrich only a few."

Democrats called the bill corporate welfare to help out big businesses that abuse the public. Federal courts are assumed to be less likely to issue multimillion-dollar verdicts on big corporations.

"It's indefensible," said Rep. Martin Frost, D-Texas. "This is simply welfare for some of the worst corporate wrongdoers, big companies like WorldCom, Arthur Andersen and Enron (search)."

The White House supports the legislation. "The bill will remove significant burdens on class-action litigants and provide greater protections for the victims whom the class-action device originally was designed to benefit," the Bush administration said.

House Democrats say the bill is unfair, because it would change not only future class-action lawsuits, but even the ones being heard in court right now.

"The purpose is to shield corporate wrongdoers from civil liability and leave the public unprotected," said Rep. William Delahunt, D-Mass. "This is not about protecting plaintiffs and insuring prompt recoveries, it's about protecting large corporations."

The House, on a voice vote, changed their legislation to make it similar to a version being considered by the Senate.

Under the House and Senate bills, class-action lawsuits in which the primary defendant and more than one-third of the plaintiffs were from the same state would still be heard in state court. But if fewer than one-third of the plaintiffs were from the same state as the primary defendant, the case would go to federal court.

Also, at least $5 million would have to be at stake for a class-action lawsuit to be heard in federal court.

But House Democrats say the Senate bill is still better, because it does not apply retroactively. The Senate bill also applies only to class-action lawsuits, and not to mass tort cases, consolidated cases, joinder cases, or state attorney general actions.

"We know who they're protecting," said Rep. Max Sandlin, D-Texas.

Businesses long have complained about the threats from liability suits and have made changing the way such cases are tried a priority.

Opponents say the bill would make it harder for individuals to seek grievances against powerful defendants and would add to the burdens of federal courts overloaded with cases.

Public Citizen (search), a consumer advocacy group, says more than 100 companies and pro-business groups spent millions and used at least 475 lobbyists to push the legislation.

The bill "contains a number of changes that will enable corporations to injure or defraud average Americans while hiding behind legal loopholes or procedural technicalities," the group said in a report.