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March 30, 2017 by Mindee J. ReubenDownload PDF

Why the "Fairness in Class Action Litigation Act of 2017" Is Anything But FairMindee J. Reuben

On February 15, 2017, the House Judiciary Committee approved (along party lines) H.R. 985, the “Fairness in Class Action Litigation Act of 2017” (the “Act”), without public hearings or debate. Eight amendments were proposed in the House, all of which failed. On March 9, 2017, the Act was approved by the House in its original form, again along party lines (220 to 201). It was received in the Senate on March 13, 2017, and referred to the Judiciary Committee. No action has yet been taken by the Senate Judiciary Committee.

Although the Act has been held out by its proponents as being intended to “assure fair and prompt recoveries for class members” and to “diminish abuses in class action and mass tort litigation,” it is anything but fair to class members. By way of limited example:

Unless every class member suffers identical harm, a class cannot be certified.
The proposed legislation requires plaintiffs to affirmatively demonstrate that each unnamed class member suffered precisely the same type and scope of injury as the named class representative before a class can be certified. Such a requirement eviscerates a multitude of class actions in which the harm to class members varies, such as in civil rights matters, even if a class action is the superior method of resolving the dispute. (§ 1716(a)).

Consumers and businesses cannot retain counsel with whom they have a pre-existing relationship. The Act precludes a court from certifying a class action if the proposed class representative is a present or former client of class counsel, or has any contractual relationship with class counsel. As a result, a consumer or business that has any pre-existing business relationship with an attorney would be precluded from retaining that same attorney to represents his/its interests in a class action. (§ 1717(b)).

No class member can recover damages—even if they can be identified—unless a “substantial majority” of the class can also be definitively identified.
It is often very difficult to identify class members in consumer class actions because the defendants do not have records of who purchased their products. For example, a producer of shell eggs does not know who went down to their local store and purchased a carton of eggs. Accordingly, the moving plaintiffs cannot identify class members until notice is given to the class and class members self-identify. By requiring plaintiffs to definitively establish that a “substantial majority” of a class can be identified before a class is certified, even if some of the class can be identified, allows defendants to escape liability for serious violations and effectively eviscerates the majority of consumer class actions. (§ 1718(a)).

The efficiencies of issue certification will be lost. Under Federal Rule of Civil Procedure 23, plaintiffs may move to certify a class as to all issues. Plaintiffs may also move to certify a class as to certain issues (e.g., plaintiffs may move to certify the issue of liability on a class basis, but proceed individually on damages). The Act proposes to eliminate issue certification, thereby throwing the proverbial baby out with the bath water. (§ 1720).

The Act will needlessly prolong litigation and remove discretion from the courts.
The federal courts of appeals have discretion to hear an appeal from the grant or denial of class certification. Under the Act, federal courts of appeals would be required to entertain all appeals from the grant or denial of class certification, even if such an appeal is entirely frivolous, unnecessarily delaying the case and taxing an already over-taxed judiciary. (§ 1723).

The Act also automatically freezes all discovery while defendants bring a myriad of motions to transfer or dismiss the case or to otherwise dispose of the class allegations. The ability to manage discovery in litigation is within the discretion of the federal district courts. For example, in cases where a defendant has pleaded guilty, or has produced documents to the federal government in a related criminal action, courts will often authorize limited discovery while such motions are pending. Under the Act, the district courts would no longer have the ability to substantively advance the litigation until defendants run out of motions to file. (§1721).

The Act elevates foreign interests over domestic interests.
In many class actions, particularly antitrust class actions, the defendants are foreign corporations and the plaintiffs are U.S. business and consumers. By increasing the number of hurdles which plaintiffs must clear before a class can be certified, the Act allows foreign defendants to violate our laws, cheat U.S. businesses and consumers, and get away scot free all because, for example, plaintiffs cannot identify every consumer who bought eggs at their local grocery store.