Class-Action Limitation Bill Fails on Senate Floor

On a procedural vote on July 8, the U.S. Senate declined to move forward a bill that would have limited the use of class-action lawsuits. Although the Class Action Fairness Act reportedly had the support of at least the 60 Senators needed to take up the bill, efforts by some to attach unrelated provisions to it led to its doom.

The Class Action Fairness Act would have authorized federal courts to hear such suits if they involved more than 100 plaintiffs and more than $5 million in damages, and only those suits in which the plaintiffs and companies were from different states. Under the terms of the bill, attorney fees would be greatly reduced in cases in which plaintiffs receive coupons redeemable for merchandise in a settlement of their claims because those fees would be based on the coupons actually redeemed, not those authorized or issued.

The bill's supporters asserted that federal courts would be less vulnerable to the practice of venue shopping and that federal judges would prove better equipped to handle large, nationwide cases. Large corporations were generally behind the bill because it would keep many cases out of state courts, which are considered more favorable toward plaintiffs than federal courts. One of the bill's sponsors, Sen. Thomas Carper (D-DE), stated the day before votes were taken that there were too many instances where consumers got little or nothing from their settlements, while settling companies were left to carry on their businesses as usual. In a release issued July 7, Sen. Carper gave several examples of what he termed past abuses:

• In an Illinois suit against bottled water company Poland Spring, consumers claimed the company's water was not pure and was not from a spring. Under the settlement, consumers received coupons for discounts on Poland Spring water, but their attorneys collected $1.35 million for their efforts. Meanwhile, the company admitted no wrongdoing and was not required to change the way it bottles or markets its water.
• In a Texas class action settlement with movie-rental company Blockbuster over late fees, class members received coupons on future movie rentals, while their attorneys received $9.25 million.
• In an Alabama class action lawsuit against the Bank of Boston, in which more than 700,000 plaintiffs took part, the plaintiffs won their case about mortgage escrow accounts but received payments of only about $10 each, while having $90 deducted from each of their accounts to pay their attorney fees of $9.5 million.

Opponents of the proposed legislation cited decreased consumer power in bringing corporations into line if their venue options were limited.