New Legislation Passed By House Of Representative Could Substantially Limit Class Actions In Federal Court

By Jeff Bone | March 29, 2017

The U.S. House of Representatives recently passed legislation — the Fairness In Class Action Litigation Act of 2017 (H.R. 985) —  that would widen the gulf between the approaches taken by Washington and federal courts on class certification issues.  A link to the legislation is here [https://www.congress.gov/bill/115th-congress/house-bill/985].

The Act was introduced by Chairman of the House Judiciary Committee Bob Goodlatte, who authored the last major class action legislation passed by Congress, the Class Action Fairness Act of 2005 (“CAFA”).  According to Goodlatte, since the passage of CAFA, “unscrupulous attorneys have been exploiting loopholes at the expense of their own clients, and the American Consumer.” [http://goodlatte.house.gov/news/documentsingle.aspx?DocumentID=831].  The new Act is designed to close those loopholes by making it more difficult to obtain class certification, imposing additional conflicts of interest rules for plaintiffs’ attorneys, and making changes to the settlement process.  Specifically, the Act:

  • Prohibits a court from certifying a class in a case involving a claim for monetary relief for personal injury or economic loss unless the class representative “affirmatively demonstrates that each proposed class member suffered the same type and scope of injury as the named class representative.”  Left undefined is what “same type and scope of injury” means.
  • Includes an explicit ascertainability requirement, providing that a court cannot certify a class seeking monetary relief “unless the class is defined with reference to objective criteria and the party seeking to maintain such a class action affirmatively demonstrates that there is a reliable and administratively feasible mechanism” to (i) determine whether class members fall within the class definition and (ii) distribute any monetary recovery directly to “a substantial majority” of class members.  
  • Permits a direct appeal, by right, of any order granting or denying class certification under any provision of Rule 23.
  • Requires that plaintiffs’ counsel disclose whether any proposed representative or named plaintiff is a relative, present or former employee, or present or former client of class counsel, or otherwise has any contractual relationship with class counsel.  The court must deny certification if the proposed representative is a relative or employee of class counsel.
  • The class action complaint must also describe the circumstances under which each class representative agreed to be included in the complaint and whether any representative has been a representative in any other class action.
  • Provides for a mandatory stay of discovery during the pendency of a motion to transfer, motion to dismiss, or motion to strike or otherwise dispose of class allegations, unless the court determines that discovery is necessary “to preserve evidence or to prevent undue prejudice.”
  • Contains provisions related to distribution and reporting of settlement fund and class counsel’s attorneys’ fees.

The Act was passed on March 9, 2017 on a 220-201 vote.  It received no votes from Democrats, and 14 Republicans also voted against it.  The Act was received by the Senate on March 13 and has been referred to the Judiciary Committee.

If you’ve opposed a motion for class certification before a Washington state court in recent years, you know that it is much easier to obtain certification in Washington state court than in federal court — despite the fact that the state and federal civil rules governing class actions are substantively identical and that Washington state courts have stated that federal decision on class actions are “highly persuasive.”  Passage of the Act would most likely widen the gulf between the approaches taken by federal and state courts within Washington, and would certainly impact the calculus that defendants make in determining whether to remove a class action filed in Washington state court.  It would also not be surprising to see more plaintiffs attempt to craft their complaints to ensure that they remain in state court.

Check back for updates as we continue to track the Act’s status in Congress.

 

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