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Class Action Fairness: Restoring the Principles of Federalism
Thursday, June 12, 2003
President Calls for Senate Approval
Today, the House considers H.R. 1115, the Class Action Fairness Act. This important legislation rationalizes the rules governing national class actions and creates important protections for plaintiffs to ensure that class action settlements benefit victims rather than their lawyers. Last year, before consideration of the bill on the Floor, the Policy Committee issued a Policy Statement in support of the legislation. The Statement made then remains accurate today. A copy of the Statement is available here.
Opponents have raised specious arguments against this legislation, wrongly claiming that the bill could close the courthouse door to innocent victims. Nothing could be further from the truth. The bill is procedural in nature, and does nothing to alter any law that would govern any class action. Indeed, there is no class action lawsuit that can be filed today that cannot be filed after H.R. 1115 becomes law. Class actions will still be permitted, and plaintiffs will continue to aggregate their claims to seek justice. The difference will be that a game rigged to benefit trial lawyers will be a little more honest.
The Federalism Canard
What is striking about the legislation, and the hostility it engenders, is its modest ambition. In addition to important procedural protections for plaintiffs, the legislation insures that those cases that should be heard in federal court are indeed heard in federal court. Oddly, this feature has been the source of one of the most bizarre and unexpected criticisms of the bill—that it actually is attempting to “federalize” activities reserved to the states.
The contention that H.R. 1115, or any legislative proposal, violates federalism and impinges on core state responsibilities is an argument that understandably resonates among Republicans. Likewise, it is refreshing to find Democrats arguing in favor of respecting the constitutional rights of states; Republicans ought to remind many of the “converts” of their federalism epiphanies during future legislative debates. In fact, the claim that H.R. 1115 violates federalism is absurd. Exactly the opposite is true: the legislation ensures that the requirements of Article III of the Constitution are met and actually reinforces traditional principles of federalism.
Article III vests the federal judiciary with the authority to hear disputes “between Citizens of different States.” Such disputes, where there is “diversity” of citizenship between parties, are under the Constitution unambiguously removable to the federal courts. The Founders wisely understood that the citizens of different states deserve to be protected from being dragged into foreign state courts that may, wittingly or not, tip the scale of justice in favor of citizens of their own states. The Constitution was, of course, written long before the advent of modern national class action litigation, where plaintiffs and defendants may well come from many different states, and the statute that establishes “diversity” of citizenship requires that all the plaintiffs be citizens of different states from all of the defendants. The result, of course, is that many plaintiffs and defendants, with a modest amount of artful pleading by trial lawyers, can be pulled into states to which they have no ties and have their disputes resolved by courts possibly hostile to out-of-state litigants. This is exactly the kind of problem the Article III diversity requirement was drafted to prevent.
H.R. 1115 would rationalize the problem and bring diversity requirements more in line with Article III’s mandate by allowing a class action to be removable to federal court if any plaintiff and defendant are from different states, so long as the aggregate amount of the claims was sufficient. The legislation, then, does nothing to “usurp” traditional responsibilities of the states, since the Founders wisely and explicitly assigned the responsibility of hearing claims between citizens of different states to the federal courts.
Moreover, far from undermining traditional principles of federalism, the legislation actually reinforces those principles. Because current law governing class actions effectively permits state courts to hear large national class actions, local courts have the ability to decide the laws of other states and create national policy. Such extra-territorial lawmaking by state courts undermines the ability of states to enforce and interpret their own laws, and subjects the citizens of other states to the vagaries of the forum state courts.
Under the current class action regime, a coterie of trial lawyers has gamed the current system to force national class actions into handpicked local courts. The system is unfair to the litigants, who are required to appear in far-away courts specifically selected by plaintiffs’ lawyers because of their likely hostility to out-of-state litigants. The system is unfair to the states, which find their laws interpreted and enforced by other states’ courts. The system is unfair to Americans generally, because these class actions effectively allow local courts in places like Madison County, Illinois and Jefferson County, Texas to impose national costs on consumers. The only winners are the lawyers who bring the suits.
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