WASHINGTON – President Bush on Friday signed into law the first act aimed at changing class-action procedures in decades — a priority for big and small businesses.
Business has long argued mass lawsuits, involving numerous plaintiffs in several states, allow judges sitting in one state jurisdiction to rewrite law in many different states and provide for huge damage awards that wouldn't occur if the case where adjudicated in federal courts.
Stressing that the measure will curtail multimillion-dollar class-action lawsuits (search) against companies and help end "the lawsuit culture in our country," Bush said the measure will prevent trial lawyers from "shopping around for local venues."
"The bill will keep out of state businesses, workers, and shareholders from being dragged before unfriendly local juries or forced into unfair settlements. And that's good for our system and it's good for our economy," the president said during a White House signing ceremony.
Bush welcomed Democratic and Republican lawmakers to the White House, as well as plaintiffs who received tiny damage awards in mass-action cases that gave trial lawyers huge settlements. He said greedy lawyers have taken advantage of the state class-action suit system by filing cases in places where they know they can win big-dollar verdicts — while their clients get only small sums or coupons giving them discounts for products of the company they just sued.
"This bill helps fix the system," Bush said in the East Room of the White House during his first bill-signing ceremony of the year. "Congress has done its duty."
Bush repeatedly described the bill as just the beginning in his drive to place much broader restraints on the American legal system. Next up, he said, should be curbs on asbestos litigation and medical malpractice awards.
"Today's bill signing is a victory for American consumers and entrepreneurs. The Class-Action Reform Act (search) takes a significant first step to reining in lawsuit abuse," Senate Majority Leader Bill Frist, R-Tenn., said in a statement. "I'm proud of what we've accomplished, and look forward to building on this momentum as we continue moving America forward."
The president, the GOP and businesses have criticized what they see as a litigation crisis that enables lawyers to reap huge profits while businesses — and thus consumers — are stuck with the bill.
"We're making important progress toward a better legal system," he said. "There's more to do. ... We have a responsibility to confront frivolous lawsuits head-on."
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.
Businesses failed to get the measure to apply to suits already in the courts.
Consumer groups and trial lawyers fought against the bill, but lost their struggle when Republicans gained seats in last fall's elections and Democrats defected on the issue.
"The House of Representatives joined the Senate in sending a clear message to the nation: the rights of large corporations that take advantage of seniors, low-wage workers and local communities are more important than the rights of average American citizens," said Helen Gonzales of USAction (search), a liberal, pro-consumer activist group.
The bill also would limit lawyers' fees in settlements where plaintiffs get discounts on products instead of financial settlements. The measure links the fees to the coupon's redemption rate or the actual hours spent working on a case.
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.
Federal courts are expected to allow fewer large class-action suits to go forward, which Democrats say means more businesses will get away with wrongdoing and fewer ordinary people will be protected.
"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. "And these people are saying that your state isn't smart enough, your jurors aren't smart enough" to hear those cases.
The Associated Press contributed to this report.