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Bill in Congress targets class actions

March 22, 2017

The battle lines drawn in a fight over federal class-action lawsuits include skirmishes from class-certification standards to how much attorneys can collect in legal fees.

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The Fairness in Class Action Litigation Act, House Resolution 985, passed the U.S. House on a 220-201 vote March 9. Bose McKinney & Evans LLP partner Brian Jones handles complex civil litigation, including class actions, and said the bill should be called the Class Action Elimination Act. “This bill creates procedural and, I think, some evidentiary burdens that are so high as to make class actions practically impossible,” he said.

“I would say this is a blowback to a perception of judicial activism which is, at best, probably characterized as an alternative fact,” Jones said.

But lawyers who defend against class actions say the bill responds to abuses they encounter in suits that at the outset can be nebulous and sometimes cost businesses a bundle to respond to, let alone defend.

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Ice Miller LLP managing partner Judy Okenfuss said a key element of the bill would resolve a split among federal circuits as to class ascertainability. The legislation proposes that before a class can be certified, courts would have to define the class “with reference to objective criteria,” and class counsel would have to demonstrate “a reliable and administratively feasible mechanism” to both determine whether putative class members fit the class definition and to distribute any money obtained for the class.

“It’s not a specific requirement in the current Rule 23” of the Federal Rules of Civil Procedure, Okenfuss said. “We believe ascertainability should be part of the rule.”

Separately, the bill also would require that members of a putative class share the same “type and scope” of injury.

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Frost Brown Todd LLC member Darren Craig said the ascertainability language in the bill adopts the law of the 3rd Circuit Court of Appeals in Philadelphia in determining whether claimants are in or out of a putative class. The 7th Circuit and other circuits have not so stringently held that ascertainability is a requirement for class certification. Whether the bill clears the Senate — a slim chance in Craig’s view — he said the U.S. Supreme Court ultimately may set a federal standard.

Craig and other defense attorneys also say the bill’s revision of discovery procedures is warranted. “A lot of businesses are confronted with claims that they believe lack any merit,” he said. The bill provides discovery would be stayed in most cases during pending dispositive motions.

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Lucy Dollens, managing partner in Quarles & Brady LLP’s Indianapolis office, said discovery “can be extremely onerous and burdensome” for class-action defendants.

“It can be crippling at the early stage of litigation,” she said, but noted the bill also preserves discretion so that judges can allow particularized discovery where warranted to preserve evidence or guard against prejudicing a litigant.

class-factbox.gifDollens’ Quarles colleague in Tampa, Florida, Zac Foster, said the legislation also provides a right of appeal from district court rulings on class certification, something he said is currently granted only in about a quarter of cases. “Class certification is usually the whole ballgame,” he said. “I think this piece of legislation rightfully acknowledges this is really the motion in a class-action case.”

Okenfuss said the bill’s language regulating conflicts and barring class counsel from representing relatives or employees is relatable. She said the firm has defended cases where named plaintiffs or members would fall within the bill’s list of conflicts. “Seeing it show up now in a House bill would lead you to believe others have had the same experience,” she said.

But trial lawyers say the bill’s response to perceived judicial activism and litigation abuses is legislative intrusion into the federal judiciary. Jones ridiculed the conflict language: “I have no idea what problem this is designed to resolve that the courts aren’t already allowed to address.”

Cohen & Malad LLP managing partner Irwin Levin said the Judicial Conference of the United States has been reviewing Rule 23, taking comments from all quarters in an effort to improve how class actions are handled. “That’s in stark contrast to this congressional approach in the House, which is just to throw the baby out with the bathwater in the dark of night.”

Levin said the bill is the latest in a string of legislative attempts over the years to limit access to courts. He called HR 985 “anti-little guy, anti-working-class legislation,” but he’s nonetheless optimistic. The bill passed by a slim margin with 14 Republicans voting against it and no Democrats for it. (Indiana’s House delegation voted along party lines.) Levin said it’s refreshing to see some members of Congress regard the Seventh Amendment right to trial by jury as highly the Second Amendment right to bear arms.

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“I think it’s significant the true conservatives in the House voted against it,” Levin said. “They realized this is an attack on the Constitution and people’s access to the courts. … I’m confident the Senate will look at this and just reject it out of hand.”

Trial attorneys said the bill most harms access to the courthouse for those least able to press claims on their own. Class actions exist to compensate for sometimes small harms to a broad number of people, said John P. Young of Young & Young, who’s president of the Indiana Trial Lawyers Association.

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“What it basically comes down to is Americans don’t like to be cheated for a lot and they don’t like to be cheated for a little,” Young said. Class actions were developed over time through case law and courts working with all parties to balance the rights of individuals with those of corporations and the government, and to encourage the efficient settlement of similar claims.

Young said the legislation suggested to him an effort to change those rules by powerful interests who don’t like being held accountable for their bad behavior.

Jones said the bill’s limits on attorney fees would gut civil rights lawsuits where monetary judgments aren’t as significant as victories that result in changes in policy or practices. Young said language in the bill targeting fees plays on public misconceptions that trial lawyers angle for what he called “lottery cases.”

“These cases take up a hell of a lot of time, and they are costly cases with experts and depositions” in addition to often voluminous discovery, he said. “People don’t go into these lightly.”•

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