With the passage of the Fairness in Class Action Litigation by the House on March 9, Congress is one step closer to passing serious tort reform that would put new restrictions on class-action lawsuits.
The bill, which was approved 220-201, is designed to narrow the scope of membership in class-action suits, limit attorney fees, increase transparency and add procedural protections. It passed with the Furthering Asbestos Claim Transparency (FACT) Act to address asbestos compensation.
According to Rep. Blake Farenthold (R-Texas), the legislation will help companies by curbing overly broad class-action lawsuits.
“The purpose of a class action is to provide a fair means of evaluating similar meritorious claims, not to provide a way for lawyers to artificially inflate this size of a class to extort a larger settlement fee for themselves, siphoning money away from those actually injured and increasing prices for everyone,” he said.
Rep. Jamie Raskin (D-Md.) disagreed with Farenthold’s take and argued that Republicans were doing nothing but making it more difficult for victims to sue and protecting companies that have done wrong.
“I oppose this misguided legislations because it sends another huge valentine and wet kiss to large corporate polluters and tortfeasors, but gives the finger to millions of American citizens who suffer injuries from these defendants,” he said.
FICALA Makes Certifying a Class Stricter
At the heart of the Fairness in Class Action Litigation Act, or H.R. 985, is a provision that requires a federal court to certify a class only when each member of the proposed class can show they have suffered the same type and scope of injury as the class representative after “a rigorous analysis of the evidence.”
Part of the idea behind the provision is to prevent those who have not suffered injuries from receiving unwarranted compensation.
“When, for example, plaintiffs who have suffered physical injuries from consumer products purport to represent thousands of people who have not been injured and who are not unhappy with the product, the ‘no-injury’ class members receive unwarranted compensation and are then barred from further damages if they suffer future injury,” Alexander Dahl, a shareholder in Brownstein Hyatt’s Washington, D.C., office wrote on Law 360.
Plymouth products liability lawyer Walter Kelley told BridgeTower Media Newswires that it sounds good in theory but would favor multi-billion-dollar corporations and their insurance companies.
“By requiring that all plaintiffs in a consolidated action have identical injuries or losses, they are effectively wiping out a family’s ability to seek justice on an even playing field with the world’s largest and wealthiest corporations when they cause harm,” Kelley said.
However, others have argued that it would help prevent attorneys from inflating the size of a class to increase the value of a settlement and better target deserving victims.
Another provision would avoid conflicts of interest by prohibiting class representatives or named plaintiffs from being “relatives of, present or former employees or clients of, or contractually related to class counsel.”
It also sets up some procedures to help the court navigate the new certification order.
Bill Also Puts Limits on Attorney’s Fees
Another goal of the Fairness in Class Action Litigation Act is to ensure class members get a meaningful share of the judgment or settlement funds by limiting attorney’s fees to a “reasonable percentage” of payments received by class members and the value of any equitable relief.
As for distribution of attorney’s fees, it says that none shall “be paid until distribution of the monetary recovery to class members has been completed or exceed the total amount distributed to and received by all class members.”
Plaintiff lawyers would also be required to file a report on how all the money paid by the defendants was distributed to increase transparency.
“Rather than class counsel getting the lion’s share of any award in a class action, the bulk of it would have to go to class members,” Matt Webb, the U.S. Chamber Institute for Legal Reform senior vice president of legal reform policy, said to BridgeTower Media Newswires. He added that the legislation puts class members ahead of lawyers.
Future of the FICALA Still Unclear
Despite passage in the Republican-controlled House, the future of the Fairness in Class Action Litigation Act remains unclear.
The legislation may face a tougher time in the Senate, which is more closely divided along partisan lines.
Webb said he is cautiously optimistic that the bill could pass the Senate and may even be backed by some Democrats.
“There are a number of Democratic senators who are up for reelection in states that President Trump carried,” Webb said. “They’re going to be looking for things they can support that help differentiate themselves from those [Democrats] who are basically obstructing everything.”
Some are also unsure whether President Donald Trump would sign the legislation or veto it.
“There’s a level of unpredictability,” Annette Gonthier-Kiely, president of the Massachusetts Academy of Trial Attorneys, said to BridgeTower Media Newswires. “We really don’t know where President Trump stands on this. Even if he had his own opinion that he was not in favor of it, it could become a bargaining chip to get some other legislation.”