U.S. Senate Passes Limits on Class-Action Lawsuits (Update2) Listen Feb. 10 (Bloomberg) -- The U.S. Senate approved legislation to move most class-action lawsuits seeking more than $5 million in damages from state to federal courts, an initiative topping U.S. President George W. Bush's agenda for changing the legal system.
The bill, approved by a vote of 72-26, would shield companies from what Bush has called ``frivolous lawsuits'' filed in state courts with reputations for giving plaintiffs large damage awards. It now goes to the House of Representatives where Republican leaders said it will be put to a vote next week.
The measure would put new restrictions on settlements of cases in which consumers who collectively sue companies over defective products or marketing fraud receive coupons toward their next purchase. The bill would base lawyers' fees on how many coupons are redeemed instead of the number issued or hours billed.
``This bill gives us the first opportunity to take a major step forward'' in curbing lawsuit abuses, Senate Republican Leader Bill Frist said. The bill would help end huge legal fees awarded at the expense of injured victims, he said, predicting the House will soon pass it and ``send it to the president's desk.''
Some Democrats said the bill would make it harder for consumers who can't afford to sue individually to seek redress for overcharges, defective products and environmental damage because federal judges are less likely to approve multistate class-actions.
Democratic Support
``Businesses know they can win more class-action cases in federal court,'' said Illinois Democrat Dick Durbin. ``That's what this whole debate is about.''
Still, 18 Senate Democrats and independent James Jeffords voted in favor.
``Today the U.S. Senate did something constructive,'' Bush said in Blue Bell, Pennsylvania, where he was pushing his Social Security private accounts plan. ``They voted to reform class-action lawsuits so that frivolous lawsuits won't drive up the cost of doing business in America.''
Democratic Leader Harry Reid said the legislation will encourage companies to defraud consumers out of small amounts of money. ``This is the cheat-a-little-bit legislation,'' he said.
The bill is the first test of the added political muscle Republicans gained on Capitol Hill in last November's election when they enlarged their majorities in the House and Senate.
``We have new opportunities for action on long-term priorities,'' House Republican Leader Tom DeLay said.
Medical Malpractice
Bush is also asking Congress to cap non-economic awards in medical malpractice suits and end litigation by victims of asbestos exposure by compensating them from a $140 billion trust fund.
A coalition of companies including Ford Motor Co., Intel Corp., Allstate Corp. and Pfizer Inc. has lobbied Congress for enactment of a legal overhaul. The U.S. Chamber of Commerce has spearheaded efforts by businesses to win passage of the class- action bill.
Frist said he hopes the Senate can move soon to pass legislation to limit personal bankruptcy, which is sought by JPMorgan and other creditors. He said that bill enjoys ``overwhelming'' bipartisan support.
Connecticut Democrat Christopher Dodd, a sponsor of the class-action bill, said he has `real problems'' with that bill and doesn't think Democratic support for bankruptcy reform ``is quite as overwhelming as the (Republican) leader suggested.''
Reaching Agreement
With 10 Senate Democrats supporting the class-action bill before debate began, Frist and House Speaker Dennis Hastert reached an agreement under which the House would consider the Senate-passed bill provided it wasn't amended. Democrats, who blocked Senate action on the bill during the last two years, tried unsuccessfully to attach a series of amendments to soften the bill's impact on class-action lawsuits.
``This is about court reform rather than tort reform,'' said Dodd said. ``This bill is a simple matter of seeing to it that victims get compensation'' and prevent that money from ``ending up in the pockets of those who allegedly represent them or in those of the defendants who want to avoid payments they have to make.''
The bill would make it harder for trial lawyers to file class-actions in what the Chamber of Commerce called ``judicial hellholes'' such as Madison County, Illinois, and Jefferson County, Mississippi. Those jurisdictions have been described as plaintiff-friendly by critics of the legal system.
``We don't need home cooking in big-time class actions,'' said Alabama Senator Jeff Sessions.
Protecting Victims
Sessions said the bill would discourage trial lawyers from negotiating settlements that aren't in the interests of the victims. ``Many of the class members have no part in shaping the settlement agreement. In fact many of the members of the class have no knowledge they have even been involved in a lawsuit,'' Sessions said.
Judges would be required to hold hearings to assess the fairness of coupon settlements under the bill. Settlements that result in a net loss to consumers would be banned as would agreements that result in larger payments to some consumers because they live closer to the court than others.
The bill is the product of a compromise reached with Dodd, New York Senator Charles Schumer and other Democrats in late 2003. Democrats demanded several changes to win their support, including the assurance that it would not apply retroactively. As a result, the legislation would apply only to class-actions filed after the day it is signed into law.
To contact the reporter on this story:
James Rowley in Washington jarowley@bloomberg.net
To contact the editor responsible for this story:
Joe Winski at jwinski@bloomberg.net.
Last Updated: February 10, 2005 17:05 EST