Class Action Fairness Act of 2005

TheU.S.Class Action Fairness Act of 2005,28U.S.C.§§ 1332(d), 1453, 1711–15, expanded federalsubject-matter jurisdictionover many largeclass actionlawsuits and mass actions in the United States.

Class Action Fairness Act of 2005

Long title	An Act to amend the procedures that apply to consideration of interstate class actions to assure fairer outcomes for class members and defendants, and for other purposes.
Enacted by	the109th United States Congress
Citations
Public law	Pub. L.109–2 (text)(PDF)
Statutes at Large	119Stat.4–14
Legislative history
Introducedin the Senate asS. 5byChuck Grassley(R–IA) on January 25, 2005 Committee considerationbySenate Judiciary Passed the Senateon February 10, 2005 (72–26) Passed the Houseon February 17, 2005 (279-149) Signed into lawby PresidentGeorge W. Bushon February 18, 2005

The bill was the first major piece of legislation of the second term of theBushAdministration. Business groups andtort reformsupporters had lobbied for the legislation, arguing that it was needed to prevent class action abuse.President George W. Bush had vowed to support this legislation.

The Act permits federal courts to preside over certain class actions indiversity jurisdictionwhere the aggregateamount in controversyexceeds $5 million; where the class comprises at least 100 plaintiffs; and where there is at least "minimal diversity" between the parties (i.e., at least one plaintiff class member is diverse from at least one defendant). The court, however, may decline jurisdiction under certain circumstances and is required to decline jurisdiction in others. The Act also directs the courts to give greater scrutiny to class action settlements, especially those involving corporations.

Support

The Act accomplished two key goals of tort reform advocates:

1. Reduce "forum shopping"by plaintiffs in friendly state courts by extending federaldiversity jurisdictionto class actions where there is not "complete diversity", thereby giving federalsubject-matter jurisdictionover a broader set of class actions. Proponents argued that "magnet jurisdictions" such asMadison County, Illinoiswere rife with abuse of class action procedure.
2. Requires greater federal scrutiny procedures for the review of class action settlements and changes the rules for evaluatingcoupon settlements,often reducing attorney's fees that are deemed excessive relative to the benefits actually afforded class members. For example, in an infamous Alabama class action involving Bank of Boston, attorneys' fees exceeded the relief to class members, and class members lost money paying attorneys for the "victory."

The Act passed the Senate 72 to 26, with all 53 Republicans voting in favor, and the Act passed the House 279 to 149, with the support of 50 Democrats and all but one Republican. PresidentGeorge W. Bushsigned the Act into law on February 18, 2005.

Critics

Critics charged that the legislation would deprive Americans oflegal recoursewhen they were wronged by powerfulcorporations.CongressmanEd Markey(D-Mass.) called the bill "the final payback to thetobacco industry,to theasbestosindustry, to theoil industry,to thechemical industryat the expense of ordinary families who need to be able go to court to protect their loved ones when their health has been compromised. "

Critics charge that this bill makes it far more difficult to bring class action suits, and may prolong suchlitigation,clogging federal court dockets. The Act also gives the federal government some ability to control, through judicial appointments, outcomes that were previously under state control.

Critics argue that the expansion of federal jurisdiction comes at the expense of state's rights andfederalism,something Republicans have historically protested; however, proponents respond that the bill is consistent with the founders' original intent for the role of federal courts and diversity jurisdiction expressed byAlexander HamiltoninFederalist No. 80.

Impact

A study by researchers at theFederal Judicial Centerfound that CAFA was followed by an increase in the number of class actions filed in or removed to the federal courts based on diversity jurisdiction. This finding is consistent with congressional intent in enacting CAFA. The observed increase was due primarily to increases in consumer class actions. Somewhat surprisingly, the FJC study found much of the increase in diversity class actions was driven by an increase in original filings in federal courts. This finding suggests plaintiffs' attorneys are choosing the federal forum, post-CAFA, rather than defendants' counsel through removal, contrary to expectations.

See also

• Tort reform

Further reading

• Salon: "Erin Brockovich, drop dead"
• American Law Media: "A Class Act"?
• "They’re Making a Federal Case Out of It... In State Court" Manhattan Institute, Issue #3, September 2001
• "$5 million Class Action Controversy?--Go to Federal Court", Court Watch, November 8, 2005 (Also, links to the Act)
• Kamilewicz v. Bank of Boston Corp.,100 F.3d 1348 (7th Cir. 1996)
• "Understanding the Class Action Fairness Act of 2005",Prof.William Rubenstein,UCLA School of Law
• "CAFA and Erie: Unconstitutional Consequences?", Note, Fordham Law Review, November 2006
• Emery G. Lee III & Thomas E. Willging, The Impact of the Class Action Fairness Act of 2005 on the Federal Courts (FJC, April 2008)
• "A Step Up in Class," ABA Journal, May 2008
• "CLASS ACTION REFORM: WILL PERCEPTION BECOME REALITY"

External links

• Bill - Results in CongressArchived2008-11-17 at theWayback Machine
• Senate roll call vote
• House roll call vote