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  Legislative Feature

Class Action Legislation Passes U.S. Senate

Posted 3/08/2005
By Robert L. Redding, Jr.

For the past six years, any major reforms of our legal system have stalled in the U.S. Senate. So it's good news that the Senate has completed its work on major class action reform legislation. ASA supports reform policy that would prohibit a climate of unbridled lawsuits that could add to small businesses' cost of doing business.

The U.S. Senate has completed its work on major class action reform legislation. The Automotive Service Association (ASA) is a longtime supporter of this reform policy.

For the past six years, any major reforms of our legal system have stalled in the U.S. Senate. No clear majority was in place to limit or close debate. Despite these repeated legislative failures, small and large businesses have continued their support for tort reform.

The largest threat that has loomed for this class action legislation has been technical amendments from both parties. The Senate leadership has worked tirelessly to limit amendments so that the legislation could move forward with substantive reform.

Iowa Republican Sen. Charles E. "Chuck" Grassley's S.B. 5 highlighted four reasons for the legislation:

  • Class action lawsuits are an important and valuable part of the legal system when they permit the fair and efficient resolution of legitimate claims of numerous parties by allowing the claims to be aggregated into a single action against a defendant that has allegedly caused harm.
  • Over the past decade, there have been abuses of the class action device.
  • Class members often receive little or no benefit from class actions, and are sometimes harmed.
  • Abuses in class actions undermine the national judicial system, the free flow of interstate commerce and the concept of diversity jurisdiction as intended by the framers of the U.S. Constitution in that state.

At the core of the Class Action Fairness Act of 2005 is its shift of many class action lawsuits from state to federal courts if the dispute exceeds $5 million and when the defendant and any of the plaintiffs live in separate states. Many reformers have long argued that certain state jurisdictions provide too many opportunities for businesses to be treated unfairly. "Forum shopping" has been a target of the business community for some time. The American Trial Lawyers Association has been successful in defeating state and federal legislative reforms until this year.

Democratic amendments offered to dilute the class action legislation were defeated during the Senate debate. A significant number of democratic senators supported the reforms and helped produce a bill not weakened by advocates for the trial lawyer community. Sen. Thomas R. Carper, D-Del., said, "My overriding concern is we not begin to pick apart this carefully balanced compromise."

President George W. Bush made it clear after the 2004 elections that tort reform would be at the top of the list for the administration's agenda in the new 109th Congress. The establishment of an asbestos trust fund was thought to be a second piece to this reform puzzle but fell aside during early class action legislation negotiations. Efforts to limit medical malpractice awards are thought to be too controversial to become law this year. Although the U.S. House of Representatives has passed several tort reform bills, the Senate's success rate has not been equivalent.

Various consumer organizations have stood with the trial lawyers to block these reform bills. Small business organizations and the U.S. Chamber of Commerce are the strongest supporters of the class action legislation. The National Federation of Independent Business (NFIB) said, "As the nation's legal system continues to spiral out of control and billion-dollar lawsuits become the norm, NFIB is working hard for legal reform in all 50 states."

During the bill's debate, much of the opposition from the last Congress had dissipated. Sen. Edward M. Kennedy, D-Mass., offered an amendment to exempt civil rights and wage-and-hour lawsuits from the bill's restrictions but it was defeated. Also defeated was an amendment submitted by Sen. Diane Feinstein, D-Calif., giving federal judges added discretion as to which state consumer protection laws should be applied when an action's plaintiffs are from differing states. Sen. Mark Pryor, D-Ark., suggested amending the bill to exempt actions brought by attorneys general. This, too, was defeated.

ASA leaders have argued that a climate of unbridled lawsuits adds to the cost of doing business for small businesses and puts their individual businesses at risk. Although this first tier of tort reform may appear cosmetic or procedural and not directly impacting small businesses, the president made it clear in a speech at the U.S. Department of Commerce that he is hopeful more legal reform legislation is on the way (on asbestos fund legislation, medical malpractice and more).

Congress moving so quickly on the first of the president's agenda will allow more time for action on critical small business legislation such as tax reform. With the president's tax reform commission now in place, ASA is hopeful that concerns over current tax laws will be addressed in the 109th Congress.

Bob Redding Bob Redding is the Automotive Service Association's Washington, D.C., representative. He is a member of several federal and state advisory committees involved in the automotive industry.

For more information about the legislative activities of ASA, visit www.TakingTheHill.com.

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