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Congress OKs Law on Class Action Suits
February 17, 2005 2:02 PM EST
WASHINGTON - Congress on Thursday passed legislation that would transfer most large, multistate class action lawsuits to federal court, fulfilling one of President Bush's second-term goals.
The aim of the bill was to protect businesses and stop lawyers from reaping huge profits by filing suits in carefully selected state courts.
The legislation, given final congressional approval by the House on a 279-149 vote, would ban state courts from hearing large multistate class action lawsuits. Such courts have been known for issuing multimillion-dollar verdicts like they did against tobacco companies.
After the bill becomes law, cases against corporations and businesses accused of wrongdoing against large groups of people will be heard by federal judges. Critics have said these jurists are not as amenable as are their state counterparts to these cases, which often involve millions of dollars.
The Senate passed the bill Feb. 10. It now goes to Bush for his signature.
Bush and other Republicans have been pushing for changes in the legal system for years. They argue that greedy lawyers have taken advantage of the state class action lawsuit system by filing frivolous lawsuits in certain state courts where they know they can win big dollar verdicts. Meanwhile, those lawyers' clients get only small sums or coupons giving them discounts for the products of the company they just sued, lawmakers said.
"Frivolous lawsuits are clogging America's judicial system, endangering America's small businesses, jeopardizing jobs and driving up prices for consumers," said House Majority Whip Roy Blunt, R-Mo.
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," he added.
Companies in response have had to cut back on their activities to defend those lawsuits, and have had to raise prices on products to recoup their costs, Republicans said.
"These out-of-control class action lawsuits are killing jobs, they're hurting small business people who can't afford to defend themselves and they're hurting consumers who have to pay more for products," said Rep. Ric Keller, R-Fla.
Democrats argued that the main goal of Republicans was to hurt trial lawyers who donate heavily to the Democratic Party and to help big business escape multimillion-dollar verdicts from state courts. "This bill is the Vioxx protection bill, it is the Wal-Mart protection bill, it is the Tyco protection bill and it is the Enron protection bill," said Rep. Jay Inslee, D-Wash.
They tried to scuttle the legislation by offering an amendment rewriting the bill and trying to force it back to committee, but Republicans voted those efforts down.
The legislation is "a payback to big business at the expense of consumers," House Democratic leader Nancy Pelosi of California said.
Federal courts are expected to allow fewer large class action lawsuits 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 legislation would affect only cases that are filed after the president signs it into law. Cases already in court could go forward in their current courts. For example, Vioxx cases already being heard in courts, where people accuse the company of causing problems from stroke to irregular heartbeat to heart attack, would not be affected.
Under the legislation, class-action suits seeking $5 million or more would be heard in state court 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, the case would go to federal court.
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.
Copyright 2005 Associated Press. All rights reserved.
