House Passes Class Action Reforms

WASHINGTON – Congress sent President Bush legislation Thursday aimed at discouraging multimillion-dollar class action lawsuits (search) by having federal judges take them away from state courts, a victory for conservatives who hope it will lead to other lawsuit limits.

The legislation the House passed, 279-149, is the first of Bush's 2005 legislative priorities to win congressional approval. The Senate voted 72-26 for the bill Feb. 10. The president has described class action suits as often frivolous, and businesses complain that state judges and juries have been too generous to plaintiffs.

"This bill is an important step forward in our efforts to reform the litigation system and to continue creating jobs and growing our economy," said Bush, who is expected to sign the bill Friday.

But Democrats say the legislation is aimed at protecting GOP business donors and hurting trial lawyers, a traditional part of their base. They also warn that Republican changes to the legal system will only make it harder for people to sue over injuries caused by corporations.

The legislation is "a payback to big business at the expense of consumers," said House Minority Leader Nancy Pelosi (search), D-Calif.

Changing the legal system — including class action, medical malpractice and asbestos injury lawsuits — has been a priority of Bush, the GOP and the business community. They have criticized what they see as a litigation crisis that enables lawyers to reap huge profits while businesses and consumers are stuck with the bill.

"This is the beginning of meaningful efforts by the Congress to curb lawsuit abuse," said House Judiciary Committee Chairman James Sensenbrenner (search), R-Wis.

Under the legislation, class-action suits seeking $5 million or more would be heard in state court only if the primary defendant and more than one-third of the plaintiffs are from the same state. But if fewer than one-third of the plaintiffs are from the same state as the primary defendant, and more than $5 million is at stake, the case would go to federal court.

State courts have been known to issue multimillion-dollar verdicts like they did against tobacco companies. Critics of the current situation have said federal jurists are not as likely to let multimillion dollar class action lawsuits move forward.

Bush and other Republicans say greedy lawyers have taken advantage of the state class-action lawsuit system by filing frivolous lawsuits in certain states where they know they can win big dollar verdicts. Meanwhile, those lawyers' clients get only small sums or coupons giving them discounts for products of the company they just sued, GOP lawmakers contend.

In response, Republicans said, companies have had to raise prices on products to recoup their costs.

House Majority Whip Roy Blunt, R-Mo., said that moving those cases to federal court will ensure that state judges will no longer "routinely approve settlements in which the lawyers receive large fees and the class members receive virtually nothing."

But Democrats say Republicans just want to protect corporations from taking responsibility for their wrongdoing by keeping them clear of state courts that might issue multimillion-dollar verdicts against them.

"It's the final payback to the tobacco industry, to the asbestos industry, to the oil industry, to the chemical industry 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," said Rep. Ed Markey, D-Mass.

Democrats warned that Republicans will try the same thing with other types of lawsuits.

"Today we will attempt to pre-empt state class action," said Rep. John Conyers, D-Mich. "Next month we will take up a bankruptcy bill that massively tilts the playing field in favor of credit card companies and against ordinary consumers and workers alike. On deck are equally one-sided medical malpractice bills and asbestos bills that both cap damages and eliminate liability to protect some of the most egregious wrongdoing in America."

The legislation is not retroactive, and cases already in court will go forward in their current courts.

The bill also would limit lawyers' fees in so-called coupon settlements — when plaintiffs get discounts on products instead of financial settlements — by linking the fees to the coupon's redemption rate or the actual hours spent working on a case.