Class Action Fairness Act of 1998

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Class Action Fairness Act of 1998''.

SEC. 2. NOTIFICATION REQUIREMENT OF CLASS ACTION CERTIFICATION OR 
              SETTLEMENT.

    (a) In General.--Part V of title 28, United States Code, is amended 
by inserting after chapter 113 the following new chapter:

                      ``CHAPTER 114--CLASS ACTIONS

``Sec.
``1711. Definitions.
``1712. Application.
``1713. Notification of class action certifications and settlements.
``1714. Limitation on attorney's fees in class actions.
``Sec. 1711. Definitions
    ``In this chapter the term--
            ``(1) `class' means a group of persons that comprise 
        parties to a civil action brought by 1 or more representative 
        persons;
            ``(2) `class action' means a civil action filed pursuant to 
        rule 23 of the Federal Rules of Civil Procedure or similar 
        State rules of procedure authorizing an action to be brought by 
        1 or more representative persons on behalf of a class;
            ``(3) `class certification order' means an order issued by 
        a court approving the treatment of a civil action as a class 
        action;
            ``(4) `class member' means a person that falls within the 
        definition of the class;
            ``(5) `class counsel' means the attorneys representing the 
        class in a class action;
            ``(6) `plaintiff class action' means a class action in 
        which class members are plaintiffs; and
            ``(7) `proposed settlement' means a settlement agreement 
        between or among the parties in a class action that is subject 
        to court approval before the settlement becomes binding on the 
        parties.
``Sec. 1712. Application
    ``This chapter shall apply to--
            ``(1) all plaintiff class actions filed in Federal court; 
        and
            ``(2) all plaintiff class actions filed in State court in 
        which--
                    ``(A) any class member resides outside the State in 
                which the action is filed; and
                    ``(B) the transaction or occurrence that gave rise 
                to the class action occurred in more than 1 State.
``Sec. 1713. Notification of class action certifications and 
              settlements
    ``(a) No later than 10 days after a proposed settlement in a class 
action is filed in court, class counsel shall serve the State attorney 
general of each State in which a class member resides and the 
Department of Justice as if such attorneys general and the Department 
were parties in the class action with--
            ``(1) a copy of the complaint and any materials filed with 
        the complaint and any amended complaints;
            ``(2) notice of any scheduled judicial hearing in the class 
        action;
            ``(3) any proposed or final notification to class members 
        of--
                    ``(A) the members' rights to request exclusion from 
                the class action; and
                    ``(B) a proposed settlement of a class action;
            ``(4) any proposed or final class action settlement;
            ``(5) any settlement or other agreement contemporaneously 
        made between class counsel and counsel for the defendants;
            ``(6) any final judgment or notice of dismissal;
            ``(7)(A) if feasible the names of class members who reside 
        in each State attorney general's respective State and the 
        estimated proportionate claim of such members to the entire 
        settlement; or
            ``(B) if the provision of information under subparagraph 
        (A) is not feasible, a reasonable estimate of the number of 
        class members residing in each attorney general's State and the 
        estimated proportionate claim of such members to the entire 
        settlement; and
            ``(8) any written judicial opinion relating to the 
        materials described under paragraphs (3) through (6).
    ``(b) A hearing to consider final approval of a proposed settlement 
may not be held earlier than 120 days after the date on which the State 
attorneys general and the Department of Justice are served notice under 
subsection (a).
    ``(c) Any court with jurisdiction over a plaintiff class action 
shall require that--
            ``(1) any written notice provided to the class through the 
        mail or publication in printed media contain a short summary 
        written in plain, easily understood language, describing--
                    ``(A) the subject matter of the class action;
                    ``(B) the legal consequences of joining the class 
                action;
                    ``(C) the ability of a class member to seek removal 
                of the class action to Federal court if--
                            ``(i) the action is filed in a State court; 
                        and
                            ``(ii) Federal jurisdiction would apply to 
                        such action under section 1332(d);
                    ``(D) if the notice is informing class members of a 
                proposed settlement agreement--
                            ``(i) the benefits that will accrue to the 
                        class due to the settlement;
                            ``(ii) the rights that class members will 
                        lose or waive through the settlement;
                            ``(iii) obligations that will be imposed on 
                        the defendants by the settlement;
                            ``(iv) a good faith estimate of the dollar 
                        amount of any attorney's fee if possible; and
                            ``(v) an explanation of how any attorney's 
                        fee will be calculated and funded; and
                    ``(E) any other material matter; and
            ``(2) any notice provided through television or radio to 
        inform the class members of the right of each member to be 
        excluded from a class action or a proposed settlement shall, in 
        plain, easily understood language--
                    ``(A) describe the persons who may potentially 
                become class members in the class action; and
                    ``(B) explain that the failure of a person falling 
                within the definition of the class to exercise such 
                person's right to be excluded from a class action will 
                result in the person's inclusion in the class action.
    ``(d) Compliance with this section shall not provide immunity to 
any party from any legal action under Federal or State law, including 
actions for malpractice or fraud.
    ``(e)(1) A class member may refuse to comply with and may choose 
not to be bound by a settlement agreement or consent decree in a class 
action if the class member resides in a State where the State attorney 
general has not been provided notice and materials under subsection 
(a).
    ``(2) The rights created by this subsection shall apply only to 
class members or any person acting on a class member's behalf, and 
shall not be construed to limit any other rights affecting a class 
member's participation in the settlement.
    ``(f) Nothing in this section shall be construed to impose any 
obligations, duties, or responsibilities upon State attorneys general 
or the Attorney General of the United States.
``Sec. 1714. Limitation on attorney's fees in class actions
    ``In any class action, the total attorneys' fees and expenses 
awarded by the court to counsel for the plaintiff class may not exceed 
a reasonable percentage of the amount of--
            ``(1) any damages and prejudgment interest actually paid to 
        the class; and
            ``(2) costs actually incurred by all defendants in 
        complying with the terms of an injunctive order or settlement 
        agreement.''.
    (b) Technical and Conforming Amendment.--The table of chapters for 
part V of title 28, United States Code, is amended by inserting after 
the item relating to chapter 113 the following:

``114. Class Actions........................................... 1711''.

SEC. 3. DIVERSITY JURISDICTION FOR CLASS ACTIONS.

    Section 1332 of title 28, United States Code, is amended--
            (1) by redesignating subsection (d) as subsection (e); and
            (2) by inserting after subsection (c) the following:
    ``(d)(1) In this subsection, the terms `class', `class action', and 
`class certification order' have the meanings given such terms under 
section 1711.
    ``(2) The district courts shall have original jurisdiction of any 
civil action where the matter in controversy exceeds the sum or value 
of $75,000, exclusive of interest and costs, and is a class action in 
which--
            ``(A) any member of a class of plaintiffs is a citizen of a 
        State different from any defendant;
            ``(B) any member of a class of plaintiffs is a foreign 
        state or a citizen or subject of a foreign state and any 
        defendant is a citizen of a State; or
            ``(C) any member of a class of plaintiffs is a citizen of a 
        State and any defendant is a foreign state or a citizen or 
        subject of a foreign state.
    ``(3) In any class action, the claims of the individual members of 
any class shall be aggregated to determine whether the matter in 
controversy exceeds the sum or value of $75,000, exclusive of interest 
and costs.
    ``(4) This subsection shall apply to any class action before or 
after the entry of a class certification order by the court.
    ``(5) A district court shall dismiss any civil action if--
            ``(A) the action is subject to the jurisdiction of the 
        court solely under this subsection; and
            ``(B) the court determines the action may not proceed as a 
        class action under rule 23 of the Federal Rules of Civil 
        Procedure.''.

SEC. 4. REMOVAL OF CLASS ACTIONS TO FEDERAL COURT.

    (a) In General.--Chapter 89 of title 28, United States Code, is 
amended by adding after section 1452 the following:
``Sec. 1453. Removal of class actions
    ``(a) In this section, the terms `class', `class action', and 
`class member' have the meanings given such terms under section 1711.
    ``(b) A class action may be removed to a district court of the 
United States in accordance with this chapter, except that such action 
may be removed--
            ``(1) by any defendant without the consent of all 
        defendants; or
            ``(2) by any plaintiff class member who is not a named or 
        representative class member without the consent of all members 
        of such class.
    ``(c) This section shall apply to any class action before or after 
the entry of any order certifying a class.
    ``(d) The provisions of section 1446 relating to a defendant 
removing a case shall apply to a plaintiff removing a case under this 
section, except that in the application of subsection (b) of such 
section the requirement relating to the 30-day filing period shall be 
met if a plaintiff class member files notice of removal within 30 days 
after receipt by such class member, through service or otherwise, of 
the initial written notice of the class action.''.
    (b) Removal Limitation.--Section 1446(b) of title 28, United States 
Code, is amended in the second sentence by inserting ``(a)'' after 
``section 1332''.
    (c) Technical and Conforming Amendments.--The table of sections for 
chapter 89 of title 28, United States Code, is amended by adding after 
the item relating to section 1452 the following:

``1453. Removal of class actions.''.

SEC. 5. REPRESENTATIONS AND SANCTIONS UNDER RULE 11 OF THE FEDERAL 
              RULES OF CIVIL PROCEDURE.

    Rule 11(c) of the Federal Rules of Civil Procedure is amended--
            (1) in the first sentence by striking ``may, subject to the 
        conditions stated below,'' and inserting ``shall'';
            (2) in paragraph (2) by striking the first and second 
        sentences and inserting ``A sanction imposed for violation of 
        this rule may consist of reasonable attorneys' fees and other 
        expenses incurred as a result of the violation, directives of a 
        nonmonetary nature, or an order to pay penalty into court or to 
        a party.''; and
            (3) in paragraph (2)(A) by inserting before the period ``, 
        although such sanctions may be awarded against a party's 
        attorneys''.

SEC. 6. EFFECTIVE DATE.

    The amendments made by this Act shall--
            (1) take effect 1 year after the date of enactment of this 
        Act; and
            (2) apply to any civil action--
                    (A) pending on such effective date; or
                    (B) filed on or after such effective date.

Summary: Class Action Fairness Act of 1998 - Amends the Federal judicial code to require that, no later than ten days after a proposed settlement in a class action is filed in court, the attorneys representing the class in a class action serve the attorney general of each State in which a class member resides and the Department of Justice (DOJ) with specified information, including notice of a proposed settlement. Prohibits the holding of a hearing to consider final approval of a proposed settlement earlier than 120 days after the date on which the State AGs and DOJ are served notice. Requires any court with jurisdiction over a plaintiff class action to require that: (1) any written notice provided to the class through the mail or publication in printed media contain a short summary written in plain, easily understood language describing the subject matter of the class action, the legal consequences of joining such action, the ability of a class member to seek removal of the action to Federal court if the action is filed in a State court and Federal jurisdiction would apply, and, if the notice is informing class members of a proposed settlement agreement, specified information. And (2) any notice provided through television or radio to inform class members of their rights to be excluded from a class action or a proposed settlement describe, in plain, easily understood language, the persons who may potentially become class members and explain that the failure of persons falling within the definition of the class to exercise their right to be excluded from a class action will result in such persons' inclusion in such action. Authorizes a class member to refuse to comply with, and choose not to be bound by, a settlement agreement or consent decree in a class action if the class member resides in a State where the State AG has not been provided notice and materials under this Act. Limits attorney's fees and expenses awarded to counsel for plaintiffs in class actions to a reasonable percentage of: (1) any damages and prejudgment interest actually paid to the class. And (2) costs actually incurred by all defendants in complying with injunctive orders or settlement agreements. Grants district courts original jurisdiction in class actions involving diversity jurisdiction where the matter in controversy exceeds $75,000 , exclusive of interest and costs. Authorizes removal of class actions to a district court by any: (1) defendant without the consent of all defendants. Or (2) plaintiff class member who is not a named or representative member without the consent of all members. Amends the Federal Rules of Civil Procedure to require the imposition of sanctions for the filing of frivolous lawsuits and the making of other specified misrepresentations to the court.