Our colleague John F. O’Brien III brings us this helpful breakdown of the proposed Fairness in Class Action Litigation Act of 2017.
On March 9, 2017, the Fairness in Class Action Litigation Act of 2017 passed the House, 220-201, split almost entirely along party lines. No Democrats voted for the bill and only 14 Republicans voted against it. The proposal faces a number of obstacles, but if it passes, it will be the most sweeping revision of federal class action law to date.
Chairman of the House Judiciary Committee, Bob Goodlatte (R-Va.), who introduced the bill, was a principal author of the Class Action Fairness Act of 2005. On March 13, 2017, the bill was received in the Senate and referred to the Committee on the Judiciary.
The legislation is intended to “assure fair and prompt recoveries for class members and multidistrict litigation plaintiffs with legitimate claims” and to “diminish abuses in class action and mass tort litigation that are undermining the integrity of the U.S. legal system.” To accomplish these goals, the bill proposes several substantive changes to class action procedures in federal court:
- Class Injury — Under this legislation, a court could not certify a class unless the party seeking class certification “affirmatively demonstrates that each proposed class member suffered the same type and scope of injury as the named class representative.” The bill also requires that any order certifying a class include a determination, based on a “rigorous analysis of the evidence.”
- Conflicts — The bill requires disclosure of any relationship between class counsel and class representatives. It also requires the proposed class complaint to describe “the circumstances under which each class representative or named plaintiff agreed to be included in the complaint.” Federal courts would be prohibited from “granting certification of any class action in which any proposed class representative or named plaintiff is a relative or employee of class counsel.” These provisions target the trend of “repeat offenders” filing multiple class action complaints against multiple defendants using the same counsel.
- Administrative Feasibility — The bill requires the class to be defined with reference to objective criteria. The party seeking class status “must affirmatively demonstrate that there is a reliable and administratively feasible mechanism” for determining whether individuals are within the class definition. This is in direct response to recent circuit court decisions that rejected the “ascertainability” requirement recognized by the Third Circuit in Carrera v. Bayer, 727 F. 3d 300 (3d Cir. 2013).
- Funding Disclosures — Class counsel would have to disclose any person or entity “who has a contingent right to receive compensation from any settlement, judgment, or other relief obtained in the action.”
- Attorney’s Fee Awards — The bill delays payment of class counsel’s fees until after the distribution of monetary recovery to the class. Second, instead of tying attorney’s fee awards to the total amount of the class settlement fund, attorney’s fee awards would be limited to “a reasonable percentage” of the payments actually distributed and received by class members. Third, the bill ties the calculation of fees in injunctive classes to the value of the injunctive relief. Finally, class counsel in any settlement providing monetary benefits would have to submit an accounting to the director of the Federal Judicial Center and the director of the Administrative Office of the United States Courts before recovering any fees. Ostensibly, this provision is designed to make it more difficult for class counsel to recover fee awards, which presumably would discourage them from filing class actions in the first place.
- Case Management — The bill stays all discovery during the pendency of any motion to transfer, motion to dismiss, motion to strike class allegations, or other motion to dispose of the class allegations.
- Appeals — The bill mandates that an appellate court must consider an appeal from an order granting or denying class-action certification under Rule 23 of the Federal Rules of Civil Procedure. Currently, appellate review is discretionary.
The Fairness in Class Action Litigation Act of 2017 faces a long road to becoming law, however. In 2015, Chairman Goodlatte proposed a much less cumbersome bill that failed to pass the Republican Senate after making it out of the House.
What’s more, the bill has been opposed by numerous civil rights organizations, nearly every major consumer advocate group, the Committee on Rules of Practice & Procedure of the Judicial Conference of the United States, the American Bar Association, and numerous academics. Indeed, PredictGov currently gives the bill a 21 percent chance of enactment. President Trump, who has been the subject of several class actions, hasn’t addressed the bill. But given his promise not to side with lobbyists, a veto from him could appeal to his base.
Still, it’s nearly impossible to predict how votes like this will go. And the climate seems ripe for legislative reform of class action litigation procedures, as the most recent round of reforms—the Class Action Fairness Act of 2005—became law the last time Republicans controlled both chambers of Congress with a sitting Republican president.