Pending bill could change class action certifications

Changes in the way class action lawsuits are handled are being considered by Congress and the Judicial Conference of the United States.

Some House representatives think the current law is overly broad, allowing people who have not been injured to benefit, while others say a proposed change would eliminate important civil rights and injunctive type claims that do not involve damage to property or body.

Members of the House Judiciary Committee’s Subcommittee on the Constitution and Civil Justice on Wednesday conducted a hearing on the proposed “Fairness in Class Action Litigation Act of 2015.”

Rep. Steve Cohen, D-Tennessee, the subcommittee’s ranking minority member questioned why they were having a hearing that would “destroy class actions” instead of talking about civil rights when unarmed black men were being killed by law enforcement.

He talked about the riots in Baltimore, subsequent to the killing of Freddie Jackson, whom he said did nothing, but averted his eyes away from a police officer. He also mentioned the recent killings of Eric Garner in New York, Walter Scott in South Carolina, Michael Brown in Missouri and Tamir Rice in Ohio.

“No action by this committee on constitutional rights on the death of human beings?” Cohen said. “African-American lives count too and they’re being killed on a regular basis and nobody in this Congress seems to care that has authority to have a hearing or bring a vote. And yet we have a hearing to destroy class actions that help little people that have a problem with a large corporation that might have a defective product.”

Rep. Ron DeSantis, R-Florida, vice chair of the subcommittee, said the proposal (House Resolution 1927) is a simple one-page bill that makes clear common sense principles should apply in class action lawsuits where only those people who share the same type and extent of injuries should be allowed in the class.

He said courts have allowed classes to be certified before a showing that all members share a common injury of the same extent.

The proposed Fairness in Class Action Litigation Act, introduced April 22 by Judiciary Committee Chairman Bob Goodlatte, R-Virginia, would prohibit federal courts from certifying a class unless the party seeking the class action can demonstrate each proposed class member suffered an injury of the same type and extent as the injury of the named class representative(s).

Goodlatte helped pass the Class Action Fairness Act 10 years ago that forbade federal courts from hearing most interstate class actions, but said abuses continue.

“I am concerned that in the years since CAFA was enacted there has been a proliferation of class actions filed by lawyers on behalf ofa classes including members who have not suffered any actual injury,” Goodlatte said.

One of the primary abuses since CAFA is the increasing frequency in which some federal courts are certifying overly broad or no-injury class actions, according to John H. Beisner, a partner in the Washington, D.C. office of Skadden, Arps, Slate, Meagher & Flom LLP, the first of four witnesses to testify.

He said overly broad and no-injury cases have a highly distortive effect at several levels, improperly magnifying the value and magnitude of claims asserted.

As an example, he said a consumer whose new car leaks oil might bring a class action on behalf of everyone else who bought the same car and if certified and it goes to trial, a sympathetic jury might award damages to everyone in the class even if no one else had an oil leak problem.

“These types of lawsuits under compensate people who have genuine harm and, at the same time, over compensate people who haven’t been harmed at all,” said Mark A. Behrens, a partner in the Washington, D.C. office of Shook, Hardy & Bacon LLP. “They raise prices for all consumers and put a strain on the economy.”

He mentioned a case in Ohio in which the manufacturer of front-loading washing machines was sued by a class of more than 200,000 Ohioans because two of them had a problem with the interior of the machine smelling moldy and making their clothes smell.

Behrens said after two hours, a Sixth Circuit jury found the product was not defective, which he said some may call a victory for Whirlpool Corp., but it spent nine years in litigation and millions of dollars in a case where most people were perfectly satisfied with their product.

“I think this bill is a terrible idea,” said Alexandra D. Lahav, professor of law at the University of Connecticut School of Law. “It will eliminate class actions for legitimate claims and prevent people from asserting their rights and liberties. It will violate federalist principles by usurping states’ rights to make their own contract and consumer protection law.”

She noted the Judicial Conference rule makers are already considering changes to Rule 23 of the Federal Rules of Civil Procedure, which deals with class actions, and suggested waiting for that process to play out.

Her example — “since we’re all about stories” — involved a bank illegally charging its customers a $2 fee every time they used their ATM card. She said John used his five times so he had a $10 injury, compared to Mary who used her card 100 times, leaving her with a $200 injury.

“They have not suffered an injury of the same extent, right?” Lahav asked. “Under this law, that case could be brought as a class action, but nobody in their right mind is going to bring a lawsuit for $10 and that means that the bank gets away with stealing $10 from John. That’s not right.”

Lahav also took exception with the language of the bill, saying the requirement to have plaintiffs prove all class members suffered the identical injury means having “a full-blown trial” at the outset, creating a lot of needless work for all involved.

She said a bigger problem is the proposed law does not contemplate injunctive class actions, which would kill the type of class action that everyone agrees is legitimate, such as Brown v. Board of Education, 347 U.S. 483, a class action suit that resulted in the 1954 landmark decision declaring separate schools for blacks and whites as unconstitutional.

“Passing this bill is like cutting off your hand if you have a splinter,” Lahav said. “This bill will wipe out class actions in civil rights cases seeking injunctive relief, in employment discrimination cases seeking back pay, in cases enforcing important laws that protect competition and our economy, like anti-trust laws; and in cases enforcing our liberty and privacy interests which Congress has protected by legislation.”

Andrew J. Trask, counsel, London office of McGuireWoods LLP, representing Lawyers for Civil Justice, talked about Eubank v. Pella Corp., in which the U.S. Court of Appeals for the Seventh Circuit reversed a settlement of product liability claims against a window and door manufacturer after the four named plaintiffs objected.

Trask said the judge called the settlement “scandalous” because the four named plaintiffs had been replaced by more compliant plaintiffs to push through a settlement that paid $11 million to attorneys and an estimated $8.5 million in relief to the class.

He said if the proposed law was in place, it would have certified the people who were actually injured so those who were not did not receive the same relief.

A video of the hearing may be viewed on the committee’s website at http://judiciary.house.gov/index.cfm/hearings.

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