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Class Action Reform

Issue:

Whether the current class action system needs to be reformed to operate fairly and efficiently.

Problem:

There has been a significant increase in class action litigation in state courts in recent years. Recent studies report that in the last thirty-six months, representative corporations have been facing a 300 to 1,000% increase in the number of class actions filed against them. Abuse of the class system includes: frivolous claims, gaming of the system to keep cases in state courts, and collusive statements. Frequently, the suits are an attempt to force settlements from corporate defendants that are not guilty of any wrongdoing. In addition, many settlements offer little compensation to plaintiffs, while plaintiffs' lawyers receive enormous fees.

Background:

Class actions emerged in the 1980s as a result of mass marketing of products which increased the American population's exposure to potentially harmful products and substances. At the time, there were also weaknesses in the FDA's regulatory process that resulted in meritorious class action claims. Since then, the class action system has been severely abused.

One of the major reasons that there has been a sharp rise in the number of class action suits is that a number of states' certification standards for these suits have become much more lax. Judges often have an "anything goes" attitude when reviewing potential suits. In many cases, classes that have no parallel foundation in federal law are certified in state court. Therefore, plaintiffs' attorneys file actions in state courts that they would not have considered just five years ago, and they work diligently to ensure that these cases remain in state court. In addition, many of these cases involve plaintiffs and defendants from different states, and some state courts, which frequently do not have the complex legal experience or support staff to handle such multi-state suits, may violate the due process rights of out-of-state corporate defendants.

Rationale:

Ideally, class action suits, by enabling individuals with similar grievances to file a single claim, would allow for a more efficient legal system. Unfortunately, with the present system in state courts, the opposite is true: trial lawyers are able to try cases with little or no merit, and the plaintiffs themselves often only receive negligible compensation. Large corporations are also forced to fend off countless meaningless suits a year.

Possible Course of Action:

To make the class action system more just and predictable, proposed legislation would authorize federal courts to hear class actions when they have a significant interstate character--that is, where at least some members of the plaintiff class are citizens of states different from those of defendants. In addition, other legislation would provide that attorneys' fees be limited to a reasonable percentage of actual damages and costs of plaintiffs when complying with the terms of a settlement agreement. Finally, to prevent meritless lawsuits, mandatory sanctions would be filed against attorneys for filing such frivolous suits.

As of June 30, 2000

ALABAMA

1999--SB 72

Sets procedures to certify class actions.

1) Codifies Supreme Court rulings to ensure that a defendant receives adequate notice prior to class certification.

2) Provides for an immediate appeal of any order certifying a class or refusing to certify a class, and for an automatic stay of matters in the trial court pending such appeal.

LOUISIANA

1997--HB 1984

Updated Louisiana class action laws by providing objective definitions of class action terms, and detailed procedures for class action cases.

OHIO

1998--HB 394

Provides for the interlocutory appeal of class action certification.

Related Documents: