Class Action Reform Poised to Pass House

Mindful of stories about lawyers reaping millions from class action cases while their clients walk away with little more than coupons, lawmakers are looking at revamping the system in which aggrieved consumers take big companies to court.

The House of Representatives is currently debating a bill that would move a majority of class action suits to federal court to end the practice of "judge shopping" in state courts, a measure that opponents say is a step further away from consumer protections.

Supporters point to recent court cases for examples of the need for reform. For instance, members of a class action suit against a computer monitor manufacturer got the option of $13 in rebates on new merchandise or $6 in cash while their attorneys earned almost $6 million. Class members who sued Cheerios breakfast cereal over a food additive received coupons for a free box of cereal. Their lawyers split $2 million in fees, about $2,000 an hour in this case.

"It's a racket, pure and simple, and the time has come to end that abuse," said Rep. Rick Boucher, D-Va., a co-sponsor of the bill. "We will end that abuse by bringing into federal court class actions of a national nature, where the federal judges are far more skeptical of class action and where standards are applied to protect the traditional litigation rights of both plaintiffs and defendants."

The Class Action Fairness Act would move all cases involving people in more than one state seeking $2 million or more in damages into federal court from the state courts. It would not require cases that involve less than 100 people concentrated in one state to move from the state court, however.

Opponents of the legislation call the bill an attempt to help corporations get out of lawsuits by taking cases to federal courts that generally favor the company over the consumer.

"Our citizens need more protections from getting swindled, not less," said Rep. John Conyers, D-Mich., testifying last month before the House Judiciary Committee.

Conyers tried to link the legislation to the Enron scandal, in which thousands of employees were left out of work and without retirement benefits after the corporation knowingly falsified its accounting procedures.

"Frankly, I am shocked that in the midst of the greatest financial rip-offs of all time, this committee would even consider legislation that would make it easier for corporations, their lawyers and their accountants to engage in fraud and deceit," he said.

Conyers has an ally in Public Citizen, a consumer advocacy group known for its support of class action litigation. It acknowledges abuse in the courtrooms and in settlements, but doesn't think the bill on the floor addresses them enough.

"It's a stealth anti-consumer bill," said Jackson Williams, a lobbyist for Public Citizen. He added that by putting cases in federal court, the system will not only be clogged, but judges will have less sympathy with the plaintiffs.

But one small-town pharmacist said her late husband's pharmacy was abused by trial lawyers looking for a state court in which to sue major drug companies that distributed the diet drug fen-phen and other pharmaceuticals.

"No small business should endure the nightmares I have experienced. I'm not a lawyer, but to me, something is wrong with the legal system when innocent bystanders are little more than pawns for lawyers seeking to strike it rich," said Hilda Bankston, who said lawyers zeroed in on her family shop in Jefferson County, Miss., where the juries are reputed to be sympathetic to plaintiffs in class action suits.

On Monday, the Democratic Leadership Council, made up of moderate Democratic lawmakers, announced it would throw its weight behind the bill, adding much-needed bipartisan muscle. House officials said the measure has bipartisan support in the House, but could face obstacles in the Senate, where similar legislation failed in 1999 after passing the House.

Supporters of the bill say they have added protections missing from the 1999 proposal to appease the Senate, including a plaintiff's "bill of rights" that assures that plaintiffs are given fair settlements and are protected from getting saddled with legal fees if the class action fails.

Last week, the Justice Department wrote a letter to the Judiciary Committee encouraging its passage, an indication that President Bush will support the measure.