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CLASS ACTION FAIRNESS ACT OF 2003

HEARING

BEFORE THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES

ONE HUNDRED EIGHTH CONGRESS

FIRST SESSION

ON

H.R. 1115

MAY 15, 2003

Serial No. 23

Printed for the use of the Committee on the Judiciary

(

Available via the World Wide Web: http://www.house.gov/judiciary 

(II)

COMMITTEE ON THE JUDICIARY 

F. JAMES SENSENBRENNER, JR., Wisconsin, Chairman 

HENRY J. HYDE, Illinois 

HOWARD COBLE, North Carolina 

LAMAR SMITH, Texas 

ELTON GALLEGLY, California 

BOB GOODLATTE, Virginia 

STEVE CHABOT, Ohio 

WILLIAM L. JENKINS, Tennessee 

CHRIS CANNON, Utah 

SPENCER BACHUS, Alabama 

JOHN N. HOSTETTLER, Indiana 

MARK GREEN, Wisconsin 

RIC KELLER, Florida 

MELISSA A. HART, Pennsylvania 

JEFF FLAKE, Arizona 

MIKE PENCE, Indiana 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

JOHN R. CARTER, Texas 

TOM FEENEY, Florida 

MARSHA BLACKBURN, Tennessee 

JOHN CONYERS, JR., Michigan 

HOWARD L. BERMAN, California 

RICK BOUCHER, Virginia 

JERROLD NADLER, New York 

ROBERT C. SCOTT, Virginia 

MELVIN L. WATT, North Carolina 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

MAXINE WATERS, California 

MARTIN T. MEEHAN, Massachusetts 

WILLIAM D. DELAHUNT, Massachusetts 

ROBERT WEXLER, Florida 

TAMMY BALDWIN, Wisconsin 

ANTHONY D. WEINER, New York 

ADAM B. SCHIFF, California 

LINDA T. SA ́ NCHEZ, California

PHILIP G. KIKO, Chief of Staff-General Counsel 

PERRY H. APELBAUM, Minority Chief Counsel 

(III)

C O N T E N T S 

MAY 15, 2003

OPENING STATEMENT 

Page 

The Honorable F. James Sensenbrenner, Jr., a Representative in Congress 

From the State of Wisconsin, and Chairman, Committee on the Judiciary ... 1

The Honorable Rick Boucher, a Representative in Congress From the State 

of Virginia ............................................................................................................. 2

The Honorable Bob Goodlatte, a Representative in Congress From the State 

of Virginia ............................................................................................................. 3

WITNESSES 

The Honorable Viet Dinh, Assistant Attorney General, Office of Legal Policy, 

U.S. Department of Justice 

Oral Testimony ..................................................................................................... 6

Prepared Statement ............................................................................................. 7

Mr. Lawrence H. Mirel, Commissioner, District of Columbia Department of 

Insurance and Securities Regulation 

Oral Testimony ..................................................................................................... 10

Prepared Statement ............................................................................................. 11

John H. Beisner, Esq., Partner, O’Melveny & Myers LLP 

Oral Testimony ..................................................................................................... 14

Prepared Statement ............................................................................................. 16

Brian Wolfman, Esq., Staff Attorney, Public Citizen Litigation Group 

Oral Testimony ..................................................................................................... 25

Prepared Statement ............................................................................................. 27

APPENDIX 

MATERIAL SUBMITTED FOR THE HEARING RECORD

Prepared Statement of the Honorable Bob Goodlatte, a Representative in 

Congress From the State of Virginia .................................................................. 67

Prepared Statement of the Honorable Sheila Jackson Lee, a Representative 

in Congress From the State of Texas ................................................................. 68

Executive Summary of Class Action Dilemmas: Pursuing Public Goals for 

Private Gain published by the RAND Institute for Civil Justice .................... 70

Prepared Statement of Thomas J. Henderson, Chief Counsel, Lawyers’ Committee for Civil Rights Under Law ..................................................................... 116

(1)

CLASS ACTION FAIRNESS ACT OF 2003

THURSDAY, MAY 15, 2003

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON THE JUDICIARY, 

Washington, DC.

The Committee met, pursuant to call, at 10:02 a.m., in Room 

2141, Rayburn House Office Building, Hon. F. James Sensenbrenner, Jr., (Chairman of the Committee) presiding. 

Chairman SENSENBRENNER. The Committee will be in order. 

Today, the Committee will conduct a legislative hearing on H.R. 

1115, the ‘‘Class Action Fairness Act of 2003,’’ introduced by Members Goodlatte and Boucher. 

The increasing use and abuse of class action lawsuits filed in 

State courts continues to be a matter of grave concern. Long ago 

this matter became more serious than the occasional frivolous class 

action lawsuit that produced an outrageous verdict or settlement. 

The problems are now systemic. They are a threat to the integrity 

of our civil justice system and a drain on the national economy. 

Since this economy last conducted a hearing on class action reform in the 107th Congress, the problem has gotten worse, not better. In the last 10 years, State court class action filings nationwide 

have increased over 1,000 percent. In certain ‘‘magnet courts’’

known for certifying even the most speculative class action suits, 

the increase in filings over the last 5 years is now approaching 

4000 percent. 

Last November, The Washington Post editorial board, in a critique of the present system, wrote: ‘‘Class actions permit almost infinite venue shopping; national 

class actions can be filed almost anywhere and are disproportionately brought in a handful of State courts whose judges get elected 

with lawyers’ money. These judges effectively become regulators of 

products and services produced elsewhere and sold nationally. And 

when cases are settled, clients get token payments, while the lawyers get enormous fees. This is not justice; it is an extortion racket 

only Congress can fix.’’ So today, the Committee is once again acting to examine the 

scope of the problem and to fix it. Clearly, some lawyers are winners under the current rules. The present rules encourage a race 

to any available State courthouse in the hopes of a rubber-stamped 

nationwide settlement that produces millions in attorneys’ fees. 

But the ultimate losers in this system run amok are the consumers, who have their individual rights to relief preempted, receive only coupons as their reward, and bear the cost of increased 

prices for goods and insurance. 

2

Article III of the Constitution empowers Congress to establish 

Federal jurisdiction over cases between citizens of different States. 

But the current rules require all plaintiffs and defendants to be 

residents of different States, and that every plaintiff’s claim is valued at $75,000 or more. These jurisdictional statutes, enacted before the advent of modern class actions, lead to results the Framers 

would find perverse. 

For example, under current law, a citizen of one State may bring in Federal court a simple $75,001 slip and fall claim against a 

party from another State. But if a class of 25 million product owners living in all 50 States bring claims collectively worth $15 billion 

against the manufacturer, the lawsuit usually must be heard in 

State court. 

H.R. 1115 would apply new diversity standards to class actions 

by changing the diversity requirement for class actions where any 

plaintiff and any defendant reside in different States and where 

the aggregate of all plaintiffs’ claims is at least $2 million. These 

modest changes will keep large actions of a national character in 

Federal court where they belong. 

H.R. 1115 also addresses another major area in need of reform, 

the incentives for settlements in class action cases and scrutiny of 

those settlements. Under current rules, the first case settled wins. 

Those left out must either find a way to join the settlement or forego their claim. This leads to bad settlements favoring lawyers over 

consumers in jurisdictions with lax class actions requirements. 

In the last year, more such one-sided benefits benefiting only 

lawyers have occurred. For example, one, a settlement with Blockbuster over late fees, produced $9.25 million in lawyer fees, and 

nothing but dollar coupons for the consumers represented, only 20 

percent of which will likely be redeemed. 

Second, a State settlement with Crayola over asbestos included in crayons produced $600,000 in attorneys’ fees and nothing but a 

75-cent discount on more crayons for affected consumers. 

In order to help prevent abuses like these, H.R. 1115 aims to protect plaintiffs by prohibiting the payment of bounties to class representatives, barring the approval of net loss settlements, establishing a ‘‘plain English’’ requirement which clarifies class members’ rights, and by requiring greater scrutiny of coupon settlements and settlements involving out-of-State class Members. 

I will now recognize the gentleman from Virginia, Mr. Boucher, 

for an opening statement. 

Mr. BOUCHER. Thank you very much, Mr. Chairman. 

During the course of the last Congress, class action reform legislation, which I was pleased to join with my colleague, the gentleman from Virginia, Mr. Goodlatte, in introducing, was approved 

in this Committee, and also approved with a bipartisan majority on 

the floor of the House. 

Unfortunately, during the last Congress, the Senate did not take 

up this measure. In the intervening 2 years, the problems we have 

been seeking to address have grown and more voices have now 

been raised in support of our modest remedy. 

Cases that are truly national in scope are being filed as State 

class actions before certain favored judges who employ an almost 

‘‘anything goes’’ approach that renders almost any controversy subVerDate 0ct 09 2002 10:20 Jun 25, 2003 Jkt 000000 PO 00000 Frm 00006 Fmt 6633 Sfmt 6601 G:\WORK\FULL\051503\87093.000 HJUD1 PsN: 87093
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ject to certification as a class action. In that environment, defendants, and even the plaintiff class members, are routinely denied 

their range of normal rights as there is a rush to certify classes 

and then a rush to settle the cases. 

Plaintiffs suffer a range of harms. In order to prevent removal 

of the case to Federal court, the amount sued for is sometimes kept 

artificially below the $75,000 Federal jurisdictional threshold 

amount. 

In another effort to avoid removal to Federal court, the class action complaint sometimes will not assert Federal causes of action 

that could legitimately be raised, thereby denying the plaintiffs an 

opportunity to have these particular aspects of their claims heard. 

Sometimes in the settlement of the cases, the plaintiffs get mere 

coupons while their lawyers make millions. And in at least one 

case, the plaintiff class members at the end of the settlement had 

a deficit of $91 posted to their mortgage escrow accounts, while 

their lawyers received $8.5 million in compensation for their services. The plaintiffs actually had a net loss as a result of this action. 

They were worse off than if the class action had never been filed. 

Our legislation addresses these problems by preventing cases 

that are truly national in scope to be removed to the Federal 

courts, even if the strict diversity of citizenship requirements of 

current law are not met. 

Instead, we look to the center of gravity of the case. The target 

of these cases is typically a large out-of-State corporation. The 

plaintiffs are usually consumers who reside in many States across 

the Nation. These cases are national in character, and our bill 

would permit their removal to Federal court, even if a local defendant has been sued for the purpose of destroying complete diversity 

of citizenship. 

In one noted example of the abuse and injustice that has occurred, a pharmacist in Mississippi, who testified before this Committee in the last Congress, has been sued hundreds of times, not 

because anyone expected to recover anything from her, but because 

her presence in the case kept that case out of Federal court and 

kept it in State court in the State of Mississippi. 

The reform that Mr. Goodlatte and I are advancing is truly modest, and it would be effective in resolving the problems plaguing 

current class action State practice. 

I appreciate the Chairman scheduling this hearing today, and I 

look forward to further action on the bill in this Committee and on 

the floor of the House. 

Thank you, Mr. Chairman. I yield back. 

Mr. GOODLATTE. [presiding.] I thank the gentleman for his comments, and for joining me as the lead cosponsor in this important 

legislation which we have passed through the House of Representatives twice, and I am very optimistic that we will do so again in 

the very near future. 

However, the great interest we have right now is in the progress 

that is being made in the Senate. That is very encouraging. 

This legislation is badly needed. It is very bipartisan, and it targets a very significant and serious problem in our country. That is 

the imbalance that exists in the ability to bring forward class action lawsuits, which we certainly recognize is an important right, 

4

but the inability to get fair treatment in the judicial process because of the fact the case has become locked into the judge that is 

selected by the plaintiff, in many cases. 

There are over 4,000 jurisdictions in this country, so a nationwide class action lawsuit with plaintiffs located all across the country gives the attorney the opportunity, and any good attorney is 

going to exercise that opportunity, to choose the jurisdiction they 

feel is most favorable to their case. That is well recognized. As a 

trial lawyer, I certainly looked for what I thought was the best jurisdiction. 

But in the cases that I handled, you would have two, three, 

maybe four or five different courts that I could bring the action in, 

and that was it. Being able to choose from 4,000 and knowing 

which are the couple of dozen jurisdictions that are most friendly 

to certification of these nationwide class action lawsuits, is an unfair advantage. It becomes an even more unfair advantage when it 

is impossible to move the case to Federal court because of Federal 

rules which are indeed arcane in the light of the use and the abuse 

of the class action process in recent decades. 

Our Founding Fathers created diversity jurisdiction for the very 

type of cases that we are considering here: cases involving parties 

from a multitude of different States being brought into Federal 

court for fair treatment. 

The fact of the matter is that because of the diversity require- ments of having to allege $75,000 per plaintiff, a class action lawsuit of 1 million plaintiffs involving an average claim of $50,000, 

or a $50 billion lawsuit, cannot be brought in Federal court under 

our diversity rules; while a simple slip and fall involving a Virginia 

plaintiff and a Maryland defendant and alleging $75,000 in damages can be. That is wrong, and that is what this legislation is designed to fix. 

It has a number of other important features dealing with making 

sure that bounties aren’t paid to the named plaintiff in the suit 

while every other plaintiff in the case receives a coupon, or in some 

instances actually have to wind up paying attorneys’ fees in cases 

that they were not seeking to become a part of that class action. 

I myself have seen this abuse in class actions that I have been 

named a plaintiff to because of a company that I have done business with, and where the attorneys were proposing to receive millions of dollars in attorneys’ fees, I think $13 million in that case. 

I was going to receive a promise from the company that they would 

not engage in this activity, which all 50 States have authorized this 

activity to take place, but this one judge certifying this class action 

lawsuit didn’t think was appropriate. That kind of action, overturning the laws of the 49 other States by bringing a class action 

lawsuit in a State court, is a further abuse of the process. 

Some have criticized this legislation saying that it violates the 

rights of the States. I would strongly argue the opposite, that this 

corrects an abuse of the States by allowing the Federal courts to 

determine issues that affect a multitude of different jurisdictions, 

and not allowing one State court judge in one jurisdiction to decided on the law of the other 49 States. 

This legislation is badly needed. We have shown that time and 

again here in the House. We look forward to working with the SenVerDate 0ct 09 2002 10:20 Jun 25, 2003 Jkt 000000 PO 00000 Frm 00008 Fmt 6633 Sfmt 6601 G:\WORK\FULL\051503\87093.000 HJUD1 PsN: 87093
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ate to produce a bill to send to President Bush, who has indicated 

his intention to sign legislation ending this abuse. 

At this time the Chair would be happy to recognize the witnesses. We are very pleased to have Assistant Attorney General 

Viet Dinh. Viet Dinh has served as the Assistant Attorney General 

for the Office of Legal Policy since May 31, 2001. Prior to his entry 

into Government service, Mr. Dinh was Professor of Law at the 

Georgetown University Law Center. He was a law clerk to Judge 

Lawrence H. Silverman of the U.S. Court of Appeals for the D.C. 

Circuit and to U.S. Supreme Court Justice Sandra day O’Connor. 

Dinh graduated magna cum laude from Harvard and Harvard Law 

School. 

Commissioner Lawrence H. Mirel has served as Commissioner of 

the District of Columbia Department of Insurance and Securities 

Regulation since he was appointed by Mayor Anthony A. Williams 

in 1999. Commissioner Mirel directs the 100-person Government 

agency responsible for enforcing all laws of the District of Columbia 

relating to the conduct of the businesses of insurance and securities 

in the jurisdiction. 

Mr. Mirel also plays an active role in the National Association 

of Insurance Commissioners and chairs their new working group on 

class action litigation. Before becoming Commissioner, Mr. Mirel 

worked in the insurance industry, practiced and taught law, and 

served as a congressional aide. 

Mr. John Beisner heads the 120-attorney class action practice 

group at O’Melveny and Myers. Mr. Beisner specializes in the defense of purported class actions, mass tort matters, and other complex litigation in both Federal and State courts. Over the past 20 

years, he has been involved in the defense of over 440 class actions 

in Federal and State courts of 37 States at both the trial and appellate court level. 

Mr. Beisner is also a frequent writer and lecturer on class action 

and complex litigation issues, and has been an active participant 

in litigation reform initiatives before Congress, State legislatures, 

and judicial committees. He has testified before this Committee 

previously on class action reform, and he is a graduate of the University of Michigan Law School. 

Mr. Brian Wolfman has served since 1990 with Public Citizen 

Litigation Group as a staff attorney. Mr. Wolfman practices in the 

areas of consumer health and safety, class actions, court access, 

open Government litigation, general appellate litigation, and poverty law. 

In addition to litigating cases for Public Citizen, Mr. Wolfman 

has taught law as an adjunct professor during this time, and has 

been published on numerous topics, including class action. Prior to 

joining Public Citizen he worked for Legal Services Corporation, 

and clerked for the U.S. Court of Appeals for the 11th Circuit. 

He is an honors graduate at Harvard Law School and the University of Pennsylvania. 

At this time we are pleased to recognize Assistant Attorney General Dinh. We would remind all panelists that their full statements 

will be part of the record. We ask you to limit your comments to 

5 minutes. 

Attorney General Dinh, thank you for being with us. 

6

STATEMENT OF THE HONORABLE VIET DINH, ASSISTANT ATTORNEY GENERAL, OFFICE OF LEGAL POLICY, U.S. DEPARTMENT OF JUSTICE 

Mr. DINH. Thank you, Mr. Chairman, for the opportunity to 

present the views of the Department of Justice. I want to commend 

you for your leadership in class action reform, as well as the efforts 

of other cosponsors of the legislation. 

I want to especially thank Chairman Sensenbrenner for having 

this hearing. He is a good friend of the Department, and an advocate of good government, as represented by his cosponsorship of 

this excellent legislation, the ‘‘Class Action Fairness Act of 2003.’’ Just as we did in the 107th Congress, the Department and the 

Administration strongly support your efforts to reform our Nation’s 

class action system, and we strongly support this bill. 

Let me emphasize at the outset, as you have, that the problem 

here is not the class action device itself. If that were the case, we 

would simply repeal Rule 23 and we can all go home. Everyone recognizes that class actions serve a very noble goal: the protection of 

large numbers of victims with similar claims who, without the ability to aggregate their claims in a class, may not have an effective 

remedy in the courts. 

Abuses of this mechanism, however, have taken a toll on our 

legal system. As explained by multiple committees of the Judicial 

Conference, the process burdens both plaintiffs and defendants 

with expenses of multiple litigation. Worst of all, under the current 

system, the incentives in class action litigation often inhibit the 

resolution of lawsuits on terms that are fair to victims and consumers. 

The goal of class action reform, then, is to end the abuses so that 

the class action device will work effectively to serve its noble purpose of compensating victims, deterring wrongdoers, and protecting 

consumers. The Department supports each of the three essential 

components of the ‘‘Class Action Fairness Act of 2003.’’ First, the bill would establish a consumer class action bill of 

rights. The bill would establish long needed protections for class action plaintiffs whose rights are often advocated by lawyers not of 

their own choosing in fora with which they have little connection 

and where settlements are often approved without their knowledge. 

This section guards against settlements that are unreasonable or 

even harmful to individual class members by requiring thorough 

review by the courts. 

To ensure that class members receive adequate information and 

notice, this section also requires settlement notices to be in plain 

English and in a standardized, easy-to-read-and-understand format. These and other commonsense consumer protections will help 

restore class actions to their noble purpose. 

Second, the legislation would expand Federal court jurisdiction 

for national class actions. In addition to the problem of duplicative 

class actions filed in numerous States, certain State and local 

courthouses have become notorious for the ease with which they 

certify nationwide class action actions and impinge upon the substantive laws of other States. 

Threats of large awards arising out of class actions filed in these 

jurisdictions coerce defendants to agree to disproportionately high 

7

settlement amounts. Such interstate litigation is exactly why the 

Framers created diversity jurisdiction, to provide a Federal forum 

preventing bias against out-of-State defendants and out-of-State 

plaintiffs. 

The legislation would close the gap in diversity jurisdiction and 

prevent attorneys from avoiding removal through artful pleading. 

Specifically, sections 4 and 5 relax the so-called complete diversity 

rule and instead would permit but not require removal by any class 

member and any defendant so long as there is ‘‘minimal diversity’’, 

as long as the aggregate amount in controversy exceeds $2 million 

and the lawsuit is not primarily intrastate in nature. 

The Department fully supports these changes to the Federal diversity jurisdiction and removal procedures, which recognize the 

strong Federal interest in class action litigation that is national in 

reach and in scope. 

Third, the bill would allow immediate appeal of class action certification decisions. Federal Rule of Civil Procedure 23(f) currently 

permits appeals of class certification decisions as a matter of judicial discretion. The bill would permit immediate appeal of certification decisions as a matter of right. 

The Department litigates numerous class actions on behalf of the 

Federal Government and other agencies, and our interest in this 

provision is born of experience. We have seen many cases where a 

class is certified, and 15 or 20 years later the actual merits of the 

case are actually appealed. 

By that time the incentives for review are quite significant, and 

courts are very, very hesitant to overturn the initial class certification decision, even if, as in a number of cases, they have reason 

to suspect that the original certification decision was ill-informed. 

This immediate certification appeal would recognize that the decision has significant litigation impact on the interests and incentives for both sides of the case, and allow for an immediate appeal 

of such a decision. 

In sum, H.R. 1115 is an important step in returning common 

sense to the Nation’s class action system. It will, in our judgment, 

alleviate some of the burdens on class action litigants and provide 

greater protections for the class action system’s intended beneficiaries, victims and consumers. The Attorney General and the 

President share your goal in reforming the class action system. We 

greatly appreciate your efforts, and would answer any questions 

that you may have. 

Thank you very much, Mr. Chairman. 

[The prepared statement of Mr. Dinh follows:]

PREPARED STATEMENT OF VIET D. DINH

Mr. Chairman, it is a pleasure for me to be here this morning to present the views 

of the Department of Justice on H.R. 1115, the ‘‘Class Action Fairness Act of 2003.’’

The Department of Justice supports this bill, which is nearly identical to H.R. 2341 

passed by the House of Representatives in the 107th Congress, also with our strong 

support. Mr. Chairman, we appreciate your leadership on this important legislation, 

and the leadership of the bill’s bi-partisan group of sponsors. 

Let me emphasize at the outset that the problem is not the class action device 

itself. If that were the case, then we could simply repeal Rule 23 and all go home. 

Everyone recognizes that class actions can serve a very important goal. As one 

former Solicitor General has stated, ‘‘their true purpose is noble—to vindicate the 

8

rights of large groups of individuals who sought justice for civil rights violations and 

other wrongs, but who could not achieve such justice individually.’’ Class action abuses, however, have taken a toll on our legal system. All too often, 

class actions represent a lawyer’s rush to the courthouse in order to select the most 

favorable State forum before duplicative actions purporting to represent the same 

victims with the same claims are filed in other States. In essence, it becomes a race 

to the courthouse for the attorneys to see who among them can file and then settle 

his or her case the fastest and thereby collect attorney’s fees. The losers in this race 

are the victims who often gain little or nothing through the settlement, yet are 

bound by it in perpetuity. 

As explained by committees of the Judicial Conference, overlapping and duplicative class actions in federal and state courts threaten the resolution and settlement 

of such actions on terms that are fair to victims, burden both plaintiffs and defendants with the expenses of multiple litigation of the same issues, and place conscientious class counsel at a potential disadvantage. Certainly we can all agree that consumers such as Bank of Boston account holders do not benefit when plaintiffs are 

each awarded $8.76, but then each must pay $90 to the attorneys who purportedly 

brought the action on their behalf. The goal of class action reform, then, must be 

to stop the abuses which have frustrated the class action device’s noble purpose. 

The Class Action Fairness Act of 2003 contains three distinct, but necessary components: (1) a ‘‘Consumer Class Action Bill of Rights’’ which addresses the administration of class actions in Federal courts; (2) expanded federal diversity jurisdiction 

to ensure that class actions with national implications can be heard in federal 

courts; and (3) expedited appellate review of decisions whether to certify a class. I 

would like to briefly address each in turn. 

CONSUMER CLASS ACTION BILL OF RIGHTS

Section 3 of H.R. 1115, entitled the ‘‘Class Action Bill of Rights and Improved Procedures for Interstate Class Actions,’’ would establish long needed protections for 

victims whose rights are often adjudicated by lawyers not of their choosing in fora 

with which they have no connection, and where settlements are, in practical effect, 

imposed on them. Too often victims receive notices of class action settlement proposals that are too confusing to provide any meaningful information about the proposed settlement. This section appropriately would guard against settlements that 

were unreasonable or even harmful to individual class members by providing for 

thorough review by the courts. To ensure that class members receive adequate information, this section would require settlement notices be in plain English and in a 

standardized, easy-to-read format. 

FEDERAL COURT JURISDICTION FOR NATIONAL CLASS ACTIONS

In addition to the problem of duplicative class actions being filed in numerous 

states, certain local courthouses have become known for the ease with which they 

certify class actions. The threat of large awards arising out of class actions filed in 

these jurisdictions coerces defendants to agree to disproportionately high settlement 

amounts. Often, these tiny jurisdictions are the first to adjudicate a class action 

claim and impose their laws on class members from other States and on those 

States themselves, where similar actions may be pending. Such interstate litigation 

is exactly why the Founders created diversity jurisdiction: to provide a Federal 

forum preventing bias against out-of-State defendants and out-of-State plaintiffs. 

H.R. 1115 would close the gap in diversity jurisdiction that has resulted from the 

interpretation and application of diversity and jurisdictional amount requirements 

in the unique class action world. The bill would prevent attorneys from avoiding removal through artful pleading that eliminates full diversity or minimizes the 

claimed damages of the individual class members—actions that fail to serve the victims and prejudice the defendants. Specifically, sections 4 and 5 of H.R.1115 provide 

much needed amendments to Federal diversity jurisdiction by relaxing the ‘‘complete diversity’’ rule. The Act would permit, but not require, removal by any class 

member and any defendant, so long as there is ‘‘minimal diversity,’’ the aggregate 

amount in controversy exceeds $2 million, and the lawsuit is not primarily intrastate in nature. 

Importantly, H.R. 1115 also contains an anti-circumvention measure. Section 4 

provides that—regardless of the label placed on a lawsuit by the State court—an 

action will be ‘‘deemed’’ a class action if: (1) the named plaintiff (exclusive of a State 

attorney general) purports to act for the interests of its members who are not named 

parties to the action; or (2) the monetary relief claims of 100 or more other persons 

are proposed to be tried jointly in the action on the grounds the claims involve common questions of law or fact. This definition would appropriately encompass ‘‘priVerDate 0ct 09 2002 10:20 Jun 25, 2003 Jkt 000000 PO 00000 Frm 00012 Fmt 6633 Sfmt 6621 G:\WORK\FULL\051503\87093.000 HJUD1 PsN: 87093
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vate attorney general suits’’ in which an individual seeks to recover on behalf of the 

general public, as well as ‘‘mass actions’’ brought on behalf of plaintiffs who claim 

that their suits present common questions of law or fact that should be resolved in 

a single proceeding. 

The Department fully supports these changes to Federal diversity jurisdiction and 

removal procedures, which recognize the Federal interest in significant class action 

litigation that truly involves multiple interstate plaintiffs and defendants. In addition, providing for consistent and uniform Federal adjudication of these claims will 

protect each State and its citizens from other State courts’ legal rulings from which 

there is no recourse. 

Prior witnesses before this committee have described the multi-billion dollar judgment awarded in Madison County, Illinois against State Farm Insurance for repairing automobiles with ‘‘aftermarket parts’’ as distinguished from original manufacturers’ parts. That decision applied Illinois law to plaintiffs in all 50 states, even 

though such a ruling was contrary to state insurance regulations in New York, Massachusetts, and Hawaii among other places. The State Farm case is not an isolated 

example. Right now, for instance, we are following with interest a case in Oklahoma 

where a nationwide class has been certified against DaimlerChrylser Corporation. 

The Oklahoma courts plan to apply Michigan law to adjudicate, on behalf of residents of all 50 states, claims that Chrysler should not have installed certain airbags 

that comply with federal safety standards. 

Expansion of Federal diversity jurisdiction, of course, will shift some state class 

actions to the Federal courts. However, Federal courts have significant interests in 

cases that involve interstate commerce and parties from many States, and federal 

adjudication avoids costly and inefficient duplication in State courts. The Constitution’s provision for diversity jurisdiction was intended to prevent just the sort of 

local biases that have resulted from State court class actions that often award higher settlements to in-State victims and award excessive damages against out-of-State 

defendants. The unique circumstances of class actions, a modern phenomenon, have 

outstripped the original conception of 28 U.S.C. § 1332, when that provision was initially enacted. 

INTERLOCUTORY APPEAL OF CLASS CERTIFICATION DECISION

Because a district court’s decision whether to certify a class often is decisive—a 

decision to certify may place insurmountable pressure on the defendant to settle, 

while a refusal to certify may force the plaintiffs to abandon their claims—the bill 

permits immediate appeal of certification decisions as a matter of right. Immediate 

appeals of certification decisions can be crucial to efficient management of class actions, preventing the nightmare situation where parties engage in years of expensive litigation under a ruling on the class certification, only to have the appeals 

court reverse the class certification determination. Contrary to concerns voiced 

about previous legislative proposals, H.R. 1115 would not encourage or permit the 

destruction of documents or other evidence during the appeal of the certification decision. On the contrary, discovery would be stayed under this section unless the 

court finds that specific discovery is necessary to preserve evidence or to prevent 

undue prejudice. 

CONCLUSION

In sum, H.R. 1115 is an important step in returning common sense to the nation’s 

class action system and providing greater protections for the victims the system 

originally was designed to benefit. The bill would update diversity jurisdiction appropriately to account for class action litigation, while permitting State court actions 

to proceed in cases where no party sought removal and in specified circumstances 

such as where the class is relatively small or where the primary plaintiffs and defendants are within the State. Thus, State courts would be able to offer redress and 

provide a convenient forum for their citizens, while Federal courts would provide a 

forum for truly interstate class actions. 

Thank you for this opportunity to present our views. We greatly appreciate your 

efforts in support of meaningful class action reform. I would be pleased to answer 

any questions that the Committee may have on this subject.

Mr. GOODLATTE. Thank you, Attorney General Dinh. 

Mr. Mirel, welcome. We will be glad to have your testimony, as 

well. 

10

STATEMENT OF LAWRENCE H. MIREL, COMMISSIONER, DISTRICT OF COLUMBIA DEPARTMENT OF INSURANCE AND SECURITIES REGULATION 

Mr. MIREL. Thank you. I am very glad to be here. 

I am the Insurance Commissioner for the District of Columbia. 

In that role, I have the privilege of enforcing the laws passed by 

this Congress from the time the office was created in 1901 until the 

time the District government was set up in 1974, and since then 

the bills passed by the District council with the approval of this 

Congress. 

I have the same role for the District of Columbia as State insurance commissioners in the States, and in essence, I am your State 

insurance regulator. 

I agree with the statements made by the Chairman and by the 

other Members who have spoken already, and I agree with Mr. 

Dinh’s comments. The problem is not class action per se; the problem is the abuse of class actions. What I want to do today is describe one of those abuses in some detail. 

We have a very elaborate system of State regulation of insurance 

in this country today. I am not speaking for the State regulators 

per se today, I am speaking on my own behalf, but I am an active 

member of the NAIC, and I know this is a matter of interest to the 

association. 

What we do is enforce laws that have been enacted by legislators, 

by this Congress in my case, and by the State legislators in the 

case of my colleagues. Very often, our ability to enforce those laws 

is compromised by State class actions that are filed in other States. 

There are two different systems in conflict here, in my view. One 

is the statutory law system, the system where legislators representing the people enact laws that are designed to provide the 

greatest good for the greatest number. 

The other is the common law system, where parties go into court 

to try to resolve a dispute between them. They serve very different 

purposes, and in the courtroom the judge is enjoined to do justice 

between the parties. It is not his responsibility to look at the larger 

issues and to deal with the larger good. That falls to the legislators 

and to those of us who administer the laws passed by the legislators. 

Let me give you a couple of examples of where these conflicts 

exist. I think, by the way, that this bill is a very excellent start in 

trying to fix some of these problems, because I think they can be 

more easily handled in the Federal courts than they can in the 

State courts. 

I agree with what Mr. Goodlatte said earlier, that it is not a diminution of State law, but rather an enhancement of State law. 

Let me mention one case filed in a municipal court in Los Angeles claiming that the Nation’s largest auto insurer, a mutual company, was retaining too much of its earnings in reserves. The suit 

asked that the company be forced to disgorge these reserves to the 

mutual policyholders. 

My responsibility as an insurance commissioner is to make sure 

this company and other companies like it have enough reserves to 

be able to pay future claims. I take that seriously. We need to protect our citizens. That is our job. The best way to do it is to make 

11

1 31 Stat. 1289, CH 854 § 645 2The District of Columbia Self-Government and Governmental Reorganization Act, 87 Stat. 

777, D.C. Official Code, § 1–201.01 et seq. 3McCarran-Ferguson Act, 15 U.S.C.A. § 1011 et seq. 4 U.S. Constitution, Art. I, Section 8, clause 17. 

sure the companies can pay their claims when those claims are 

due. 

Now, what happens when a jury of laymen in municipal court in 

Los Angeles decides that this company must reduce its reserves? 

I never get a chance to comment on that. Yet, I am charged by 

statute with making sure that this company is viable. 

That case was dismissed by the trial judge. It was appealed, and 

the intermediate appellate court in California restored the suit in 

a two-to-one decision, and it is now before the California Supreme 

Court. 

Let me give you one other example. I know my time is running 

out. There are more in my testimony. 

A series of cases have been filed in New Mexico in State court 

against all the major life insurance companies in the United States 

on the issue of modal payments. A modal payment is the ability to 

pay a premium due installments. That is, you know what the annual premium is, but you are allowed to pay it every 6 months, 

every quarter, or every month. Companies typically charge a small 

fee for that, for the administration of these checks. 

The suit does not claim these modal payments are illegal, it does 

not claim that they are excessive, it does not claim, even, that they 

are unknown to the people who choose modal payments. The single 

claim is that these payments are not expressed in terms of annual 

percentage rates, APRs. That, they claim, is a violation of fair practices under the New Mexico unfair trade practices law. 

Now, we have approved these arrangements, and yet we are 

going to be told they are not valid. Well, these cases are not going 

to trial, they have all been settled, the first for $7.5 million, all 

went to the plaintiff’s attorneys, none went to the plaintiffs; the second for $10 million, all went to the attorneys, and the plaintiffs 

got $30 off on their next purchase of insurance from that life insurance company. 

That is the kind of abuse that is going on. That is why I would 

like to support this bill. 

[The prepared statement of Mr. Mirel follows:]

PREPARED STATEMENT OF LAWRENCE H. MIREL

Mr. Chairman and members of the Committee, my name is Lawrence Mirel. I am 

the Commissioner of Insurance and Securities for the District of Columbia. The position I hold was originally created by Congress in 1901 1 as the Office of the Superintendent of Insurance for the District of Columbia and became part of the District’s ‘‘Home Rule’’ Government upon the passage of the Home Rule Act of 1973.2

As you know, the business of insurance is regulated primarily by the states.3 Although the District of Columbia is not a state, I have the authority of a state insurance commissioner, and I am a full member of the National Association of Insurance 

Commissioners (NAIC). My job is to enforce the insurance laws and the securities 

laws of the District of Columbia as enacted over the years by the Congress of the 

United States, as the District’s primary legislature,4 and by the Council of the District of Columbia, with the approval of Congress, since that body was created in 

1974. 

Although I chair an NAIC working group looking into the issue of the impact of 

class action lawsuits on the regulatory authority of state insurance commissioners, 

I am speaking today solely in my capacity as insurance commissioner for the DisVerDate 0ct 09 2002 10:20 Jun 25, 2003 Jkt 000000 PO 00000 Frm 00015 Fmt 6633 Sfmt 6621 G:\WORK\FULL\051503\87093.000 HJUD1 PsN: 87093
12

trict of Columbia, and not on behalf of the NAIC. The NAIC working group was established only recently and has just begun its work. 

I want to thank the Committee for its consideration of H.R. 1115. This is 

very significant legislation and an important first step in curbing the abuses—

‘‘havoc’’ is not too strong a term—that certain kinds of class action lawsuits can visit 

on an orderly and well-regulated insurance system. I do not think this legislation 

alone is sufficient to protect the public against the cost and dislocation of questionable class action litigation against insurers, but it will go a long way toward eliminating one of the most egregious aspects of the current system—the ability of plaintiffs’ lawyers to ‘‘forum shop.’’ Currently plaintiffs’ lawyers can file their nationwide 

suits in the most favorable state or county court they can find. H.R. 1115 provides 

for the removal of most class action suits to federal District Courts, where appointed, tenured judges are likely to have a broader outlook on the issues at stake. 

What H.R. 1115 does not address directly, however, is the larger issue of the impact of certain kinds of class action lawsuits on the statutory authority of elected 

or appointed state insurance regulators. I would like to urge this Committee to consider, as part of this bill or as future legislation, an ‘‘exhaustion of administrative 

remedies’’ provision that would make clear that where there is a statutory regulator 

and an administrative remedy available for the abuse complained about, plaintiffs 

must show that they tried and failed to obtain relief from the regulator before they 

are allowed to file their complaint in court. 

As a state insurance commissioner, my primary function is to protect the public. 

My colleagues and I see ourselves as consumer advocates, and the laws we administer give us that responsibility and authority. Our expert staffs are knowledgeable 

about the stringent laws that govern the operation of the business of insurance, and 

about the complex financial rules that insurance companies must follow. We receive 

and act upon consumer complaints against insurance companies. We make sure that 

insurance contracts are fair, understandable, and in accordance with the law. We 

go after companies that do not treat their customers properly, or that are engaged 

in fraud. We have substantial enforcement tools at our disposal, including the authority to fine or even to close down insurance companies that misbehave, and to 

refer bad actors for criminal prosecution. 

Insurance is a highly regulated business, and it needs to be. There is no other 

business in which a customer pays up front for protection against some future event 

without knowing when, or sometimes even if, that event will occur. As insurance 

commissioners, we must make sure that when a covered claim is made the company 

that took the consumer’s premium money is able and willing to pay that claim. That 

means we must assure that the insurers we regulate are solvent and are prudent 

in how they manage and invest their capital and reserves. We are also responsible 

for maintaining a fair and competitive insurance market that allows insurance companies to offer their customers good products at fair prices in accordance with clear 

and uniformly applied laws and regulations. In other words, we have the statutory 

responsibility to balance all aspects of the insurance market to make sure that the 

public is well served. 

Judges have very different responsibilities. They are required to render justice as 

between the parties before them, without regard to the larger public or to issues 

of economic impact on persons or institutions that are not represented in the courtroom. Where the matter at issue involves one or a small number of injured persons, 

a litigated solution can provide the fairest solution. Where a claim is filed, however, 

on behalf of millions of persons, most of whom are unaware that they have been 

‘‘injured,’’ and where the result of such litigation is to severely distort the insurance 

market, by increasing costs to policyholders and future policyholders in order to provide token benefits to those persons putatively injured, the system does not provide 

justice and does not serve the public interest. 

Large-scale nationwide litigation against major insurance companies frequently 

circumvents or simply ignores state insurance laws and the role of state regulators. 

Class action lawsuits against insurers can, and often do, directly impair our statutory authority to regulate the business of insurance in our jurisdictions. Moreover 

these suits, whether successful or not, can have a major effect on the cost and even 

the availability of good insurance products to the public. That is because they 

produce small, sometimes negligible, benefits to a large class of present or past policyholders—and, incidentally, huge legal fees to the lawyers who bring them—without regard to the impact on the insurance market as a whole and the cost to the 

insurance-buying public. 

Consider the following examples:

• In Texas, two of the state’s largest automobile insurance companies eventually decided to settle a $100 million class action lawsuit brought against them 

13

in 1996 over a long-standing, industry-wide practice of ‘‘rounding up’’ to the 

nearest dollar for auto insurance premiums. Although the insurers’ premiums 

were calculated according to specific instructions from the Texas Department 

of Insurance, mounting legal expenses and negative publicity compelled the 

companies to settle for nearly $36 million. Policyholders received refunds of 

about $5.50 each, while the lawyers took home almost $11 million.

• More than 20 nationwide class action lawsuits are currently pending in New 

Mexico’s trial courts claiming that the nation’s largest life insurance companies are misleading policyholders by not disclosing the ‘‘annual percentage 

rate’’ of fees charged for processing installment payments of premiums. In the 

District of Columbia, and in most if not all states, companies are allowed to 

charge small processing fees to customers who make ‘‘modal payments’’ on their annual premiums, so long as those charges are disclosed and are reasonable. I would not permit companies selling in the District of Columbia to show 

these fees at an ‘‘annual percentage rate’’ because APRs imply that a loan 

was made, and there is no loan. Modal payments are simply a convenience 

to customers who would rather not make lump-sum annual payments. There 

has never been a complaint about such charges in the District of Columbia 

or any other jurisdiction, as far as I know. Yet not only was the issue not 

raised with the New Mexico Insurance Commissioner before suit was filed, 

but when he tried to intervene in the case his petition was denied.

Facing billions of dollars in potential liability, as well as the threat of massive 

costs to defend themselves against these suits, insurance companies are under tremendous pressure to settle. Once the first modal premium case was settled, with 

$7.5 million paid to the plaintiffs attorneys and nothing to class members, that pressure increased. A second insurer agreed to a proposed settlement of $10 million, all 

of which was to go to the plaintiffs attorneys, but this proposal was withdrawn 

when Trial Lawyers for Public Justice—a plaintiffs’ lawyers trade association—denounced it as ‘‘outrageous’’ and ‘‘an abuse of both the class-action device and class 

members.’’ The settlement was reinstated when the company agreed to give all class 

members $30 off their next purchase of an insurance policy from that company. 

None of these modal payment cases has yet to be tried on the merits, but the damage already done to the insurance market is enormous.

• A county court in southern Illinois rendered a billion-dollar judgment against 

the nation’s largest auto insurer that would provide miniscule payments to 

the six million members of the plaintiff class and huge fees for the lawyers 

who brought the suit. The case has already caused the insurer to discontinue 

nationally its practice of replacing damaged auto parts with parts made by 

companies other than the original manufacturer of the automobile. Now on 

appeal before the Illinois Supreme Court, the trial court decision has been 

strongly denounced by consumer advocates. Clarence Ditlow, director of the 

Center for Auto Safety, a non-profit group founded by Ralph Nader and Consumers Union, has expressed fear that the decision will end the use of aftermarket parts, which are allowed in the District of Columbia and most states, 

and required by some. Mr. Ditlow believes such a move could cost consumers 

an extra $2 billion to $3 billion a year for auto repairs, which of course means 

higher auto insurance premiums.

• A suit was brought in a Los Angeles municipal court alleging that a large national mutual insurance company based in Illinois is keeping too much money 

in reserves, thereby depriving its policyholders of the benefits of that money 

in the form of refunds or reduced premiums. The suit ignores the fact that 

insurance commissioners, such as myself, require insurance companies to 

maintain adequate reserves, so that we can assure the public that their covered claims will be paid. Who should decide what level of insurer reserves are 

‘‘adequate’’ to protect the policyholders in the District of Columbia, the statutory Commissioner of Insurance for the District of Columbia or a lay jury in 

California? The trial judge dismissed the suit, but it was ordered reinstated 

by an intermediate appellate court (in a 2 to 1 decision) and is now before 

the California Supreme Court.

• A case was brought in Georgia against a major auto insurer claiming that the 

company is defrauding its insureds by paying only the cost of fixing a damaged car, and not the loss of value of the car because it has been damaged 

in an accident—even though the insurance contract, which has been approved 

by insurance commissioners of the various states where the company operates, specifically requires the company to fix the car, not to pay for any diminished value of the vehicle.

14

There are many more examples like these where multimillion dollar nationwide 

class action lawsuits are dreamed up by creative plaintiffs’ attorneys and filed 

against insurance companies that have large amounts of money in ‘‘reserve’’—money 

that we insurance commissioners require companies to maintain in order to fulfill 

our statutory obligation to protect the public by making sure that insurers are able 

to pay legitimate claims. The lawyers reap millions of dollars in fees from these 

cases, most of which are settled because of the high cost of defending against them 

and the fear that a loss in court could be crippling. The large policy-owning public 

in whose names these suits are filed generally receive little if any benefit, but end 

up paying for them through higher insurance premiums as companies factor the risk 

and cost of this kind of litigation into their rate bases. 

Let me be clear about my position. I am not opposed to class action lawsuits per se, but rather to the abuse of such powerful and expensive litigation weapons. Class 

action suits, when used properly, have an important role to play in our legal system. 

But they should not be allowed to substitute for, or interfere with, administrative 

systems enacted into law by the various state legislatures and the U.S. Congress 

for protecting the public. When suits are filed on behalf of persons residing in more 

than one state, those suits should be heard in Federal, not state, court so that we 

do not have a court in one state, applying the law of that state, setting policy for 

all the other states and the District of Columbia. 

The costs of large class action lawsuits are substantial, whether the cases are litigated or settled, and these costs will be paid by insurance consumers in the form 

of higher premiums. When valid insurance company practices, reviewed and approved by state insurance regulators, are challenged in class action litigation, we 

must recognize that the result could be the discontinuation of products that are desired by the public and are beneficial to the public. 

I commend the House Judiciary Committee for holding hearings on this important 

topic, and for considering H.R. 1115, the ‘‘Class Action Fairness Act of 2003.’’ It 

would be very helpful to those of us who regulate insurance at the state level to 

know that class actions brought in the name of our citizens in another state are 

going to be heard in Federal court, under Federal procedural rules, rather than the 

courts of that state. 

I want to conclude by expressing my hope that class action reform not be looked 

at as a partisan issue. I was appointed to my present position by the Democratic 

Mayor of the District of Columbia, Anthony A. Williams. In an earlier part of my 

career I worked here in the House of Representatives for former Representative 

Robert Kastenmeier of Wisconsin, a Democrat, and in the Senate for Democratic 

Senator George McGovern. Before that I had been a special assistant to another 

Democrat, Abraham Ribicoff, when he was Secretary of Health, Education and Welfare. I do not think that concerns about possible abuses in the use of class action 

lawsuits should be limited to one party or one level of government. We are all in 

agreement about the goal-protecting the public in the most effective and efficient 

way we can. 

Thank you for inviting me to testify. I am happy to answer any questions you may 

have.

Mr. SMITH. [Presiding.] Thank you, Mr. Mirel. 

Without objection, the entire statements of all witnesses will be 

made part of the record. 

Mr. Beisner. 

STATEMENT OF JOHN H. BEISNER, ESQ., PARTNER, 

O’MELVENY & MYERS LLP 

Mr. BEISNER. Thank you, Mr. Chairman. 

Let me begin with a few questions for everyone in this room. 

Have you ever bought a product? Do you have automobile insurance? Do you have a cell phone in your pocket or a long distance 

service at your home? If you answered yes to any of these questions, then you are probably a plaintiff right now in a State court 

class action. In fact, each of us in this room today is probably a 

plaintiff in at least four or five such cases. 

Did anybody ask you to file, or did you ask anybody to file those 

lawsuits? No. Did anybody ask you if you wanted to be a plaintiff 

in any of those lawsuits? No. Do you even know the lawyers who 

15

supposedly represent you in those lawsuits? Probably not. Do you 

agree with the claims asserted in those lawsuits? Who knows, because you don’t even know what those lawsuits are about. 

Welcome to the world of class actions, where attorneys you never 

heard of can file a lawsuit on your behalf without your permission 

asserting claims with which you may not agree. 

Unlike other lawsuits where the plaintiff controls his or her own 

claims, class actions are controlled by lawyers. For that reason, 

they are a lawyer’s dream. But for that same reason, they also can 

be a societal nightmare, because without adequate supervision 

class actions present a very substantial risk of abuse. 

Unfortunately, such abuse is becoming commonplace in at least 

some State courts. Those courts are readily certifying class actions 

with little regard for procedural rules or basic due process considerations. They are taking it upon themselves to tell other States 

what their laws should be with little regard for what their laws 

really are, and they are rubber-stamping class action settlements 

with little regard to whether they benefit the plaintiffs on whose 

behalf the cases were supposedly brought. 

As The Washington Post editorialized last year, class actions 

have turned into an extortion racket. Plaintiffs’ lawyers bring suits 

in small county courts with elected judges and frighten defendants 

into massive settlements that do little for consumers but enrich the 

lawyers. 

For example, the current issue of Smart Money Magazine suggests that shareholders should consider selling their stock in companies that have class actions pending against them in certain 

county courts, regardless of the merits of those actions. 

H.R. 1115 would correct that problem by amending the Federal 

diversity jurisdiction statute to allow more interstate class actions 

to be heard in Federal court, as authorized by article III of the 

Constitution. It would also establish a consumer bill of rights protecting class action litigants. 

Opponents of H.R. 1115 argue that the bill would improperly federalize class actions, and that all cases involving State law should 

remain in State court. But in making these arguments, what they 

are essentially advocating is a repeal of a substantial portion of article III of the Constitution. 

The framers included the concept of diversity jurisdiction in article III for just this situation. They wanted to provide a Federal 

forum for major disputes involving only State law issues—that is, 

disputes involving no Federal law issues at all—in order to protect 

out-of-State defendants from the potential of biases of local courts. 

Without question, if Congress were drafting the statutes implementing article III for the first time today, class actions would top 

the list of cases to be heard in Federal court. They typically involve 

the most people, the most money, and the most interstate commerce implications of any lawsuits in our judicial system. 

Only a drafting glitch that occurred when the jurisdictional statute was written over 200 years ago, before the modern day class 

action existed, is keeping those cases out of Federal court. Those 

opposing the bill are trying to preserve that glitch that prevents 

the full realization of what diversity jurisdiction is supposed to be. 

That is a glitch that allows single plaintiff $75,000 slip-and-fall 

16

1 Class Action Lawsuits—Examining Victim Compensation and Attorneys’ Fees: Hearing before 

the Subcomm. on Administrative Oversight and the Courts, Senate Comm. on the Judiciary, SE- RIAL NO. J–105–62 (S. HRG. 105–504), 105th Cong., 1st Sess. (Oct. 30, 1997); Mass Torts and 

Class Action Lawsuits: Hearing before the Subcomm. on Courts and Intellectual Property of the 

House Comm. on the Judiciary, SERIAL NO. 141, 105th Cong., 2d Sass. (Mar. 5, 1998); Class 

Action Jurisdiction Act of 1998: Hearing before the Subcomm. on Courts and Intellectual Property of the House Comm. on the Judiciary, SERIAL NO. 121, 105th Cong., 2d Sess. (June 18, 

1998); Interstate Class Action Jurisdiction Act of 1999: Hearing before the House Comm. on the 

Judiciary, 106th Cong, 1st Sess. (July 21, 1999); The Class Action Fairness Act of 1999: Hearing 

before the Subcomm. on Administrative Oversight and the Courts, SERIAL NO. J–106–22 (S. 

HRG. 106–465) 106th Cong., 1st Sess. (May 4, 1999); The Class Action Fairness Act of 2000, 

S. REP. NO. 106–420, 106th Cong., 2d Sess. (Sept. 26, 2000); The Class Action Reform Act of 

2001: Hearing before the House Comm. on the Judiciary, SERIAL NO. 59, 107th Cong., 2d Sess. 

(Feb. 6, 2002); Class Action Fairness Act of 2002, H. REP. 107–370, 107th Cong., 2d Sess. (Mar. 

12, 2002); Class Action Fairness Act of 2002: Hearing before the Sen. Comm. on the Judiciary

(July 31, 2002). 

cases to be heard in Federal court while excluding billion-dollar 

cases involving millions of persons. 

In closing, I want to mention a yet-to-be-seen alternative class 

action bill that reportedly will be introduced by Senator Leahy. By 

offering that bill, Senator Leahy is implicitly acknowledging that 

there is a serious State court class action problem, ending any real 

debate on that issue. 

But beware of the Leahy bill. It is all holes and no doughnut. 

Supposedly, it would more rigorously regulate class actions to be 

heard in Federal courts, but the trick is that the bill really would 

not move any cases to Federal court where they would be subject 

to that regulation. It is like passing the Sarbanes-Oxley Act, but 

sticking in a provision that says it doesn’t apply to corporations. 

For example, as I understand it, the bill would effectively declare 

significant corporations to be citizens of all 50 States so that they 

could never remove cases to Federal court. Under the bill, lawyers 

could file, as I understand it, a class action in the State court of 

Madison County, Illinois, on behalf of all residents of New York, 

California, and Texas, almost 30 percent of the U.S. Population. 

So the bill would encourage State courts to continue presiding 

over huge class actions that had absolutely nothing to do with the 

community in which they are filed, and that require the court of 

one State to dictate the laws of other jurisdictions. 

The Leahy bill is a ruse to preserve the status quo. Only H.R. 

1115 will provide the change that is so badly needed. 

[The prepared statement of Mr. Beisner follows:]

PREPARED STATEMENT OF JOHN H. BEISNER

Since 1997, the House and Senate Judiciary Committees have held eight hearings 

to address concerns about a troubling scandal that is hurting consumers and businesses and undermining confidence in our legal system.1 With each hearing, it has 

become clearer that the problem is getting worse. Yet, millions of Americans continue to be ripped off, our courts continue to be misused for personal gain, and the 

public is still waiting for their elected representatives to pass corrective legislation. 

The scandal that I am referencing, of course, is class action abuse. Every year, 

thousands of class actions are filed in the United States—the vast majority in our 

state court system. The attorneys who file such lawsuits explicitly represent to the 

court that they are filing their actions on behalf of allegedly injured individuals and 

that they are assuming a fiduciary responsibility to fully vindicate those individuals’

rights. But the record is now clear that all too frequently, the interests of the supposedly injured parties in those cases are not really represented at all. Indeed, in 

many instances, if those class actions produce any recovery, the money ends up in 

the pockets of the attorneys who bring the lawsuit—not in the hands of the supposedly injured parties they purport to represent. 

17

2 It should be stressed that this is a problem only with a select number of state courts. Others 

handle class actions admirably. Unfortunately, as some of the studies cited later in this testimony demonstrate, class action counsel tend to file their cases in state courts that are more 

prone to tolerate or foster abuses. 

Class action abuse is unjustifiably draining millions of dollars from our nation’s 

economy by transferring large amounts of capital from companies to plaintiffs’ lawyers with no commensurate benefit to society at large. It is also undermining public 

confidence in the law by suggesting to American citizens that our judicial system 

condones a perverse form of justice in which plaintiffs go without any real compensation, while their supposed lawyers walk away with millions in cash. 

The good news is that unlike many other problems we confront as a nation, this 

one is relatively easy to fix. One major reason for the increase in class action abuse 

is the failure of some state courts to properly supervise these cases.2 These courts 

readily satisfy the whims of the class counsel (while ignoring the due process rights 

of unnamed class members and defendants), and they serve as assembly lines for 

the mass production of settlements that benefit only the lawyers. As a result, they 

have become magnets for dubious class action filings in which plaintiffs’ counsel extort settlements from frightened corporations familiar with the reputation of these 

courts. 

The irony is that most class actions should not be in state court in the first place. 

When the Framers drafted the Constitution, they gave federal courts jurisdiction 

over disputes among persons residing in different states because they wanted to ensure that local bias and ‘‘uneven’’ justice would not interfere with the conduct of 

interstate commerce. Unfortunately, over the years, the contours of such federal diversity jurisdiction have been interpreted in a way that has prevented most interstate class actions from being heard in federal court. 

H.R. 1115 is a modest bill that would both correct this jurisdictional anomaly and 

implement a ‘‘Class Action Consumer Bill of Rights,’’ steps that would curb class action abuse and restore the integrity of our judicial process. 

I. THE SCOPE OF THE PROBLEM: ABUSIVE CLASS ACTIONS AND COERCIVE SETTLEMENTS

The original purpose of the class action device was a noble one—to vindicate the 

rights of large groups of individuals who sought justice for civil rights violations and 

other wrongs but could not achieve such justice individually. Without question, that 

honorable intent has been fulfilled in many cases over the years. But today, the life 

cycle of a class action too frequently involves a very different scenario: A lawyer 

scans the newspaper or television, looking for articles and news programs about corporate practices that have attracted regulatory or press scrutiny—whether it is 

home video late fees, chicken processing techniques, or weight reduction program 

representations. Then, the lawyer hunts down someone who was the object of the 

allegedly suspect business practice to serve as a named plaintiff in a class action 

challenging the practice. Sometimes, the plaintiff is a paralegal in the lawyer’s office 

or the friend of a friend; other times, the lawyer simply places an advertisement 

in a local newspaper that is located in a county where the judges are reputed to 

be friendly to class actions and recruits a stranger. Once the lawyer has selected 

a plaintiff and a court, he or she files a state court class action on behalf of all persons across the United States supposedly affected by the challenged business practice. Then, the lawyer sits back and waits for the company, which is likely to be 

concerned about negative publicity and the risk of an astronomical jury verdict to 

a huge class (even though the legal challenge may be frivolous), to yield to counsel’s 

demand to ‘‘settle cheap’’—i.e., to agree to a resolution that pays counsel handsomely, but provides little or nothing for the class members. 

What’s wrong with this form of so-called ‘‘private law enforcement’’? It’s analogous 

to permitting self-appointed ‘‘cops’’ to go out on the streets, set up speed traps, pull 

drivers over (whether they were speeding or not), and give them the option of either: 

(a) spending a few nights in jail, or (b) resolving the problem by paying the ‘‘cop’’

(for personal benefit) whatever he demands. No doubt, the ‘‘cops’’ would argue that 

this is a marvelous system—on the theory that it discourages speeding. But justifiably, the public would have no trust in—or respect for—such a system of law enforcement, since prosecutorial decisions would be driven (or at least have the appearance of being driven) by the overwhelming financial self-interest of the ‘‘cops’’

themselves. 

Unfortunately, that is what is occurring in the class action arena. A small number 

of lawyers have anointed themselves as ‘‘cops,’’ and are making decisions about 

when and where to ‘‘enforce’’ the law based in many instances not on what best 

serves the public interest or what will most effectively redress consumer injuries—

18

3For example, the current issue of one financial magazine recommends that investors consider 

selling off any stock that they hold in companies that face class actions in certain ‘‘magnet’’ county courts, seemingly without regard for the subject matter or merits of those actions. See

James B. Stewart, The Perils of Litigation, Smart Money, June 2003, at 50–51. 4 Class Action Lawsuits: Examining Victim Compensation and Attorneys’ Fees: Hearing before 

the Subcomm. on Administrative Oversight and the Courts of the Senate Comm. on the Judiciary, 105th Cong., 1st Sess. (Oct. 30, 1977) (statement of Martha Preston). 5Final Order of Settlement, Unfried v. Charter Communications, Inc., No. 99–L–48 (granted 

Dec. 21, 2000). 6Judge OKs Blockbuster Plan On Fees, Associated Press, Jan. 11, 2002. 7Lawyers Win Big in Class-Action Suits: Is It Justice or Greed?, Charleston (S.C.) Daily Mail, 

June 19, 2001, at 4A. 8 Jerry Heaster, Enough Already With Lawsuits, Kansas City Star, July 10, 1999, at C10.

but rather based on what will provide them with the largest direct revenue flow. 

Thus, class actions have become a big game in which lawyers seek to divert to themselves corporate revenues that would otherwise be paid to shareholders, often including the very consumers they claim to represent. And these lawyers are using 

the state court system as a means of achieving their own personal ends—rather 

than a means of achieving justice. 

Let me make clear that it is difficult to blame defendants for entering into these 

settlements. They are caught in the ‘‘speedtrap’’ referenced previously—they have 

the choice of either paying off the counsel or putting their shareholders at risk of 

a substantial verdict before a pro-plaintiff court, even if the claim is frivolous, or 

(at best) borderline (as many of the foregoing claims appear to be).3

By now, I’m sure you have all heard of the Bank of Boston case settlement in 

which an Alabama state court judge approved a settlement that awarded up to 

$8.76 each to individual class members, while the class counsel received more than 

$8.5 million in fees. To pay off that fee award, the court ordered that money be debited from class members’ mortgage accounts, such that they ended up losing money 

on the deal. It has now been six years since one of the victims of that state courtsanctioned scam—Martha Preston—appeared before the Senate Judiciary Committee and expressed disbelief that ‘‘people who were supposed to be my lawyers, 

representing my interests, took my money and got away with it.’’ 4 And in the intervening years, millions of other Americans have gotten the short end of the stick in 

state court class actions. 

Unfortunately, it would require little effort to fill up pages and pages of testimony 

with examples of class action settlements that provided few—if any—benefits to 

class members while enriching their lawyers. I will mention just a few:

• In the settlement of an Illinois state court class action, cable television customers received no compensation whatsoever for allegedly excessive billing. 

The cable operator did agree to change some billing practices prospectively, 

but all of the cash paid in the settlement—$5.6 million—went to the class 

counsel.5

• In a class action settlement approved by a Texas state court last year, approximately 38.5 million customers nationwide who alleged that they were 

charged excessive video rental late fees by a national chain will receive $1 

coupons off future rentals. The lawyers? They are receiving a $9.25 million

award. Again, all of the cash went to the lawyers. Indeed, it seems that only 

the lawyers benefit from this arrangement. The settlement allows the defendant to continue its practice of charging customers for a new rental period 

when they return a tape late; experts predict that only a small percentage 

of class members will redeem the coupons; and the coupons are the sort of 

promotion that the defendant likely would have offered in any event.6

• The settlement in a class action involving souvenirs and merchandise sold at 

NASCAR Winston Cup stock car races gave consumers coupons toward the 

purchase of more merchandise. And the lawyers? They are eligible to receive 

more than $2 million.7 Again, all of the cash goes to the lawyers. If coupons 

were adequate compensation for the allegedly injured class members, why 

didn’t the class counsel agree to be paid in coupons instead of cash? 

• In a California state court class action regarding representations about the 

size of computer monitor screens, the court approved a settlement that offered 

$13 rebates to class members who purchased new monitors. Class members 

who did not need to buy new monitors or who wished to buy a different brand 

got absolutely nothing. And the lawyers? They received approximately $6 million in fees.8 Again, all of the cash went to the lawyers. 

• Under the settlement of an Illinois state court class action involving changes 

to an airline frequent flyer program, participants received vouchers good for 

19

9 American Airlines Settles Lawsuits Over Frequent Flier Program, Forth Worth Star-Telegram, June 22, 2000. 10Lawyers Get $1.5 Million, Clients Get 50 Cents Off, Fulton County (Ga.) Daily Report, Nov. 

21, 1997. 11 Editorial, We All Pay Dearly For Costly Class Actions, Corpus Christi (Tex.) Caller-Times, 

Jan. 8, 2001, at A7. 12Deborah R. Hensler et al., CLASS ACTION DILEMMAS: PURSUING PUBLIC GOALS FOR PRIVATE

GAIN 15 (1999). 13Federal Judicial Center, EMPIRICAL STUDY OF CLASS ACTIONS IN FOUR FEDERAL DISTRICT

COURTS 68–69 (1996). 14See Deborah R. Hensler et al., PRELIMINARY RESULTS OF RAND STUDY OF CLASS ACTION

LITIGATION 15 (1997). 15 Analysis: Class Action Litigation, Class Action Watch, Spring 1999, at 3 (Figure 2), available at http://www.fed-soc.org/publicantions/classactionwatch/classaction1-2.pdf. 16Deborah R. Hensler et al., CLASS ACTION DILEMMAS: PURSUING PUBLIC GOALS FOR PRIVATE

GAIN 15 (1999) at 7.

$25 to $75 off the price of future travel, or a similarly valued reduction in 

the number of miles required for an award. And the lawyers? They received 

up to $25 million—all of the cash paid in the settlement. When the settlement was announced, travel experts were quoted as saying that ‘‘the practical 

value of those discounts will be modest,’’ and the airline ‘‘could end up generating enough extra revenue to more than offset the cost of the offer.’’ 9

• In a Georgia state court class action alleging that a manufacturer improperly 

added sweeteners to apple juice, the defendant was required to distribute coupons worth at least 50 cents each. The lawyers? They received all of the 

cash—$1.5 million in fees and costs.10

• In a Texas state court class action settlement, telephone company customers 

who alleged overcharges received three optional phone services free for three 

months (or a $15 credit if they already subscribed to those services). The lawyers? They pocketed $4.5 million in hard cash.11

The evidence on this point is not merely anecdotal. Empirical studies confirm that 

plaintiffs in state court class actions frequently come away with little or no money, 

while their lawyers take home bundles of cash. For example, in a study jointly funded by the plaintiffs’ and defense bar, the Institute for Civil Justice/RAND took a 

hard look at where the money goes in class settlements. That study indicates that 

in state court consumer class action settlements (i.e., non-personal injury monetary 

relief cases), the class counsel frequently walk away with more money than all class 

members combined.12 Another in-depth study found that this ‘‘lawyer takes all’’ phenomenon was not occurring in federal courts—‘‘[i]n most [class actions handled by 

federal courts], net monetary distributions to the class exceeded attorneys’ fees by 

substantial margins.13

Given how much money can be made from class action settlements, it should come 

as no surprise that more and more lawyers are getting in on the action. And given 

that state courts have been more receptive to these actions, it should also come as 

no surprise that these lawyers are concentrating their efforts in state courts (particularly in those courts that have been most receptive to nationwide class actions 

and coupon settlements). A number of research efforts have produced empirical evidence confirming these troubling trends:

• A preliminary report on a major empirical research project by RAND’s Institute for Civil Justice (‘‘ICJ’’) observed a ‘‘doubling or tripling of the number 

of putative class actions’’ that was ‘‘concentrated in the state courts.’’ 14

• A survey indicated that while federal court class actions had increased somewhat over the past decade, the frequency of state court class action filings had 

increased 1,315 percent—with most of the cases seeking to certify nationwide 

or multi-state classes.15

• The final report on the RAND/ICJ class action study confirmed the explosive 

growth in the number of state court class actions and concluded that class 

actions ‘‘were more prevalent’’ in certain state courts ‘‘than one would expect 

on the basis of population.’’ 16

I recently co-authored two studies regarding class actions based on research conducted by the Center For Legal Policy of the Manhattan Institute. The first study 

surveyed the dockets of three county courts with reputations as hotbeds for class 

action activity between 1998 and early 2001, and found exponential increases in the 

20

17See John H. Beisner and Jessica Davidson Miller, They’re Making A Federal Case Out Of 

It . . . In State Court, 25 HARV. J. L. & PUB. POL’Y 143 (Fall 2001) (‘‘Federal Case’’). 18See John H. Beisner and Jessica Davidson Miller, Class Action Magnet Courts: The Allure 

Intensifies, 4 BNA CLASS ACTION LITIG. R. 58 (Jan. 24, 2003) (‘‘Allure Intensifies’’). 19Federal Case at 161. 20 Allure Intensifies at 58–59. 21Federal Case at 164. 22 Id. at 169. 23 Id. at 164. 24See the website of the Institute for Legal Reform at www.litigationfairness.org/ pdf/america—survey.pdf. Among the respondents, 45% thought that the ‘‘lawyers who represent the alleged victims’’ benefit most; 28% thought that ‘‘lawyers who represent the companies being 

sued’’ benefit most. 25 Id.

numbers of class actions filed in recent years.17 The second study went back to one 

of those courts, the Circuit Court of Madison County, Illinois, to determine whether 

the trends were continuing in 2001 and 2002.18 The results were quite dramatic. 

In Madison County, a small rural county that covers 725 square miles and is home 

to less than one percent of the U.S. population, the number of class actions filed 

annually grew from 2 in 1998 to 39 in 2000—an increase of 3,650 percent.19 And 

the follow-up study found that the number of class actions filed in the county continued to grow dramatically in 2001 and 2002.20

So, why are so many cases being filed in Madison County? 

It isn’t because Madison County is a hub of commerce. In fact, our study showed 

that none of the companies listed as defendants in the Madison County class action 

cases was based locally.21

It isn’t because the residents of Madison County are being singled out for corporate mischief. In fact, in well over 70 percent of the cases, counsel proposed to 

represent nationwide classes—that is, the classes encompassed claimants from all 

50 states.22 Thus, in most instances, over 99 percent of the claimants in the case had 

no relationship to Madison County whatsoever. 

And it isn’t because Madison County just happens to be home to a lot of lawyers. 

Most of the lawyers who bring these lawsuits also have nothing to do with Madison 

County. To be sure, the data show that there is a small group of local Illinois lawyers who regularly assist with the filing of these cases. But among the new class 

actions filed during the 1988—early 2001 period, 85 percent of the plaintiffs’ counsel 

listed on the complaints provided office addresses outside of Madison County, mostly 

from major legal markets like Chicago, New York, and San Francisco.23

Of course, that leaves us with a curious mystery. Why are lawyers who live and 

practice in places like San Francisco, New York, or Chicago coming to a place like 

Madison County, Illinois, to file class action lawsuits on behalf of people who don’t 

live in Madison County, Illinois, against defendants who don’t reside in Madison 

County, Illinois, regarding events that didn’t occur in Madison County, Illinois? It 

can’t be because the law is better in Madison County. Class certification law should 

be the same in all Illinois state courts and does not differ radically from class action 

law nationwide. And the substantive law should come from the jurisdiction in which 

the claims arose—so that law should not be different in Madison County either. And 

it presumably isn’t because of a perception that the juries are ‘‘better’’ in Madison 

County—it’s hard to find a class action that has ever been tried in Madison County, 

consistent with the fact that class actions seldom go to trial anywhere. 

The answer, of course, is a simple one. Lawyers think that if they go to Madison 

County, they’ll be able to get a class certified quickly, scare defendants into a settlement, and take home a lot of money—even if they have very weak legal theories 

and do very little legal work. 

None of this scam has been lost on American citizens—they are acutely aware 

that they are being short-changed by the existing state court class action system. 

In a national survey conducted by Penn, Schoen & Berland Associates, 73 percent 

of those surveyed expressed the opinion that lawyers benefit most from the current 

class action lawsuit system; only 7 percent thought that consumers who buy a company’s products benefit most.24 The vast majority also expressed the view that the 

U.S. legal system should be changed in this area.25

At a time when we are seeing an erosion of public confidence in many institutions, 

class action abuse looms large as an area in which our legal system is failing the 

general public. Not only are members of the general public being used as pawns to 

make a few lawyers rich, they are also paying the tab in the end. While it is difficult 

to quantify the cost to society of class action abuse, recent reports have found that 

Americans pay a hefty ‘‘litigation tax’’ on goods and services, including such things 

as pharmaceuticals and insurance policies, because of excessive lawsuits in this 

21

26See William Worthington, The ‘‘Citadel’’ Revisited: Strict Tort Liability and the Policy of 

Law, 36 S. TEX. L. REV. 227, 250 (April 1995). 27See Barrow S.S. Co. v. Kane, 170 U.S. 100, 111 (1898) ( ‘‘The object of the [diversity jurisdiction] provisions . . . conferring upon the [federal] courts . . . jurisdiction [over] controversies 

between citizens of different States of the Union . . . was to secure a tribunal presumed to be 

more impartial than a court of the state in which one litigant[ ] resides.’’); Pease v. Peck, 59 

U.S. (18 How.) 518, 520 (1856); Martin v. Hunter’s Lessee, 14 U.S. (1 Wheat) 304, 307 (1816). 

See also The Federalist No. 80, at 537–38 (Alexander Hamilton) (Jacob E. Cooke ed. 1961) (‘‘[I]n 

order to [ensure] the inviolable maintenance of that equality of privileges and immunities to 

which the citizens of the union will be entitled, the national judiciary ought to preside in all 

cases in which one state or its citizens are opposed to another state or its citizens. To secure 

the full effect of so fundamental a provision against all evasion and subterfuge, it is necessary 

that its construction should be committed to that tribunal which, having no local attachments, 

will be likely to be impartial between the different states and their citizens, and which, owing 

its official existence to the union, will never be likely to feel any bias inauspicious to the principles [up]on which it is founded.’’). 28See James William Moor & Donald T. Weckstein, Diversity Jurisdiction: Past, Present and 

Future, 43 TEX L. REV. 1, 16 (1964). See also Bank of United States v. Deveaux, 9 U.S. (5 

Cranch) 61, 87 (1809) (Marshall, C.J.) (‘‘[Even if] tribunals of states will administer justice as 

impartially as those of the nation, to the parties of every description, . . . the Constitution itself 

. . . entertains apprehensions of the subject . . . , [such] that it has established national tribunals for the decision of controversies between . . . citizens of different states.’’). 29 John P. Frank, Historical Bases of the Federal Judicial System, 13 LAW & CONTEMP. PROBS. 

3, 22–28 (1948); Henry J. Friendly, The Historic Bases of Diversity Jurisdiction, 41 HARV. L. 

REV. 483 (1928). 30 John J. Parker, The Federal Constitution and Recent Attacks Upon It, 18 A.B.A. J. 433, 437 

(1932).

country.26 Further, the money that is paid to class counsel is siphoned away from 

corporate revenues that would otherwise go to shareholders—such as individual investors, mutual funds, pension funds, and charities. Thus, American consumers, 

whom class action lawsuits ostensibly seek to protect, end up paying for these costly 

settlements at the pharmacy, at the supermarket, in their retirement funds, and in 

their mutual funds—a cost to society that is hardly offset by the apple juice, cereal 

or cruise coupons they periodically receive from class action settlements. 

II. H.R. 1115 IS A MODEST STEP THAT WOULD BOTH REDUCE CLASS ACTION ABUSE IN

STATE COURTS AND FULFILL THE FRAMERS’ CLEAR INTENT REGARDING THE PROPER

JURISDICTION OF FEDERAL COURTS. 

A. The Law Governing Diversity Jurisdiction Generally Excludes Class Actions 

From Federal Court. 

The Constitution provides for federal court jurisdiction over cases of a distinctly 

federal character—such as cases raising issues under the Constitution or federal 

laws—and generally leaves to state courts the adjudication of local questions arising 

under state law. However, the Constitution specifically extends federal jurisdiction 

to include one category of cases involving issues of state law: suits ‘‘between Citizens 

of different States,’’ which have come to be known as ‘‘diversity’’ cases. The Framers established the concept of federal diversity jurisdiction to ensure 

that local biases would not affect the outcome of disputes between in-state plaintiffs 

and out-of-state defendants.27 Diversity jurisdiction was designed not only to diminish the risk of uneven justice, but also to protect the reputation of our courts—‘‘to 

shore up confidence in the judicial system by preventing even the appearance of discrimination in favor of local residents.’’ 28 The Framers were concerned that some 

state courts might discriminate against out-of-state businesses engaged in interstate 

commerce (the very same concerns that are being raised today with regard to class 

actions). They felt that such discrimination could be avoided by providing a fair, uniform and efficient forum for adjudicating interstate commercial disputes—i.e., the 

federal courts.29 Thus, since the nation’s inception, diversity jurisdiction has served 

to guarantee that parties of different state citizenship have a means of resolving 

their legal differences on a level playing field in a manner that protects interstate 

commerce. As one federal appellate judge noted: 

No power exercised under the Constitution . . . had greater influence in welding these United States into a single nation [than diversity jurisdiction]; nothing has done more to foster interstate commerce and communication and the 

uninterrupted flow of capital for investment into various parts of the Union, 

and nothing has been so potent in sustaining the public credit and the sanctity 

of private contracts.’’ 30

So why aren’t most class actions already being heard in federal court? The problem is that Congress enacted the first diversity jurisdiction statute back in the 

22

31Testimony by Ms. Hilda Bankston, Senate Committee on the Judiciary, July 31, 2002. 32 Allure Intensifies at 63. 

eighteenth century, long before the dawn of today’s class actions. With that statute, 

Congress intended to ensure that federal courts could only hear ‘‘diversity’’ cases 

that were truly interstate in nature and involved substantial sums of money. (Understandably, they didn’t want the federal courts to get bogged down in small claims 

cases between citizens of different states or cases that were primarily intrastate in 

nature.) Congress did this by placing two limitations in 28 U.S.C. § 1332, the diversity jurisdiction statute. First, an action is subject to federal diversity jurisdiction 

only where the parties are ‘‘completely’’ diverse (that is, where no plaintiff is a citizen of the same state where any defendant is deemed to be a citizen). And second, 

diversity jurisdiction is only applicable where each plaintiff asserts claims that exceed a threshold amount in controversy—currently set at $75,000. 

Unfortunately, many years later, when class actions entered the arena, federal 

courts interpreted the diversity statute to bar most class actions from being heard 

in federal court, by holding that ‘‘diversity’’ cases can be brought in federal court 

only if each plaintiff’s claims meet the jurisdictional minimum enacted by Congress 

regardless of how substantial the plaintiffs’ claims are in the aggregate—and if each 

plaintiff and defendant come from different states. 

These judicial interpretations have provided a roadmap for plaintiffs’ lawyers 

seeking to evade federal jurisdiction and to litigate class actions in what they perceive as friendly state courts. After all, as long as they seek just $74,999 in damages 

on behalf of each plaintiff or add a local entity to their suit as a defendant, they 

are virtually ensured that they will be able to remain in state court. 

Last year, the Senate Judiciary Committee heard testimony from Hilda Bankston, 

a former pharmacy owner from Mississippi who has been joined as a defendant in 

numerous multi-plaintiff actions in Jefferson County, Mississippi against major outof-state pharmaceutical companies for just this purpose—to ensure that the cases 

lack ‘‘complete diversity’’ and therefore cannot be heard in federal court. According 

to Mrs. Bankston:

[I]n 1999, we were named in the national class action lawsuit brought against 

the manufacturer of Fen-Phen. Let me stop here to explain why we were 

brought into this suit. While I understand that class actions are not allowed 

under Mississippi state law, what is permitted is the consolidation of lawsuits. 

These consolidations involve Mississippi plaintiffs or defendants who are included in cases along with plaintiffs from across the country. . . . By naming 

us, the only drugstore in Jefferson County, the lawyers could keep the case in 

a place known for its lawsuit-friendly environment. I’m not a lawyer, but that 

sure seems like a form of class action to me....

Since then, Bankston Drugstore has been named as a defendant in hundreds of 

lawsuits brought by individual plaintiffs against a variety of pharmaceutical manufacturers. Fen-Phen. Propulsid. Rezulin. Baycol. At times, the bookwork became so 

extensive that I lost track of the specific cases. And today, even though I no longer 

own the drugstore, I still get named as a defendant time and again....31

In addition to naming local defendants, plaintiffs’ counsel also evade federal jurisdiction by limiting the damages sought in class actions to less than $75,000. It is 

not uncommon to see class action complaints in which plaintiffs seek a total of 

$74,999 on behalf of each plaintiff—a sum which, when multiplied by the number 

of potential class members—can reach tens of millions of dollars (resulting, of 

course, in a far more substantial claim than an individual action seeking $75,001 

in damages). Such damages limitations showed up repeatedly in the two Madison 

County surveys; in one typical case involving telephone company charges, for example, the complaint sought damages ‘‘in no event exceeding $75,000 per plaintiff or 

class member.’’ 32

Thus, judicial interpretation of the diversity statute, coupled with the pleading 

shenanigans engaged in by plaintiffs’ lawyers, has led to an anomalous result. 

Under current law, federal courts have jurisdiction over a state law claim arising 

out of a slip-and-fall by a Maryland plaintiff at a Virginia gas station—as long as 

the plaintiff alleges medical bills, lost wages and other damages amounting to 

$75,001. But at the same time, federal jurisdiction does not encompass large-scale, 

interstate class actions involving thousands of plaintiffs from multiple states, defendants from many states, the laws of several states, and hundreds of millions of 

dollars—cases that have obvious and significant implications for the national economy. This clearly was not the intent of the Framers and the first Congress. 

23

33Fixing Class Actions, Washington Post, Mar. 21, 2002, at A34.

B. Proposed Legislation Would Cure This Jurisdictional Anomaly 

H.R. 1115 would correct this anomaly by amending the diversity statute to allow 

some of the larger class actions to be heard in federal court, while continuing to preserve state court jurisdiction over cases that involve smaller sums of money or truly 

interstate matters. This bill would allow federal courts to adjudicate class actions, 

as well as mass joinder actions (of the type in which Mrs. Bankston was frequently 

sued) with large numbers of plaintiffs, in which any of the named plaintiffs or defendants come from different states. Moreover, it would change the amount-in-controversy threshold to allow class actions into federal court as long as the aggregate

claims exceed a substantial threshold amount. Significantly, however, the bill would 

not extend federal jurisdiction to encompass ‘‘intra-state’’ class actions, in which the 

majority of the plaintiffs and the primary defendants are citizens of that state. H.R. 

1115 therefore allows federal courts to exercise jurisdiction over substantial interstate class actions with significant nationwide commercial implications, while retaining exclusive state court jurisdiction over more local class actions that principally involve parties from that state and application of that state’s own laws. 

I urge the members of this Committee to support H.R. 1115 for a number of reasons: 

First, H.R. 1115 would fulfill the intent of the Framers when they established diversity jurisdiction. As I noted earlier, class actions squarely implicate the Framers’

concern with protecting interstate commerce through the exercise of diversity jurisdiction. In fact, if Congress were starting anew to define what kinds of cases should 

be included within the scope of diversity jurisdiction, large-scale interstate class actions would surely top the list, since they typically involve the largest amounts in 

controversy, the most people, and the most substantial interstate commerce implications. Moreover, there can no longer be any question that some local judges are exhibiting bias against out-of-state defendants in class actions—the very type of bias 

that led to the creation of diversity jurisdiction in the first place. Thus, H.R. 1115 

is not only a constitutional solution to the class action problem; it would actually 

comport with the Framers’ intent far more than the current state of affairs, which 

allows federal courts to adjudicate interstate fender-benders, while leaving nationwide class actions that involve thousands of plaintiffs and millions of dollars in 

county courts of the lawyers’ choosing. 

As The Washington Post put it, class action cases are:

disproportionately filed in selected counties where judges are elected—meaning 

that a judge accountable to a single county can make decisions regulating products distributed nationwide. . . . It is a bad system—one that irrationally taxes 

companies in a fashion all but unrelated to the harm their products do and that 

provides nothing resembling justice to victims of actual corporate misconduct.’’ 33 In short, the existence of such ‘‘magnet’’ courts and troubling settlements, which undermine public confidence in our judicial system, would be 

greatly reduced if federal courts had jurisdiction over interstate class actions. 

Second, H.R. 1115 would promote federalism principles. One of the principal objections to H.R. 1115 has been that the proposed legislation would undermine federalism interests by limiting the ability of states to experiment with class action 

lawsuits. In fact, however, the critics have it backwards: a key reason for supporting

H.R. 1115 is that it would protect federalism by restricting state courts from dictating the laws of other states. 

One of the most dangerous trends in state court class actions—and one that has 

had the biggest impact on the proliferation of ‘‘nationwide’’ lawsuits—is that many 

state courts are ‘‘federalizing’’ class actions. That is, when state courts preside over 

class actions involving claims of residents of more than one state (especially nationwide class actions) as they are increasingly inclined to do, they often end up dictating the substantive laws of other states, sometimes over the protests of officials 

in those other jurisdictions. 

An example of this phenomenon is a nationwide insurance class action in Illinois 

that resulted in a $1.3 billion judgment against State Farm. In that case, plaintiffs 

alleged that State Farm’s use of ‘‘aftermarket’’ parts for repairs (as opposed to parts 

made by the original manufacturer) was fraudulent. After certifying a nationwide 

class, the Illinois court applied Illinois law to claims from all fifty states and the 

District of Columbia even though states’ policies on the use of these parts differ and 

even though some state insurance commissioners testified that their states encourage or even require insurers to use aftermarket parts to reduce insurance costs. 

24

34 Avery v. State Farm Mut. Auto Ins. Co., 746 N.E.2d 1242 (Ill. Ct. App. 2001). 35See, e.g., Georgine, 83 F.3d at 627; Zinser v. Accufix Research Inst., Inc., 253 F.3d 1180, 

1187–90 (9th Cir. 2001); Zapka v. Coca-Cola Co., No. 99 CV 8238, 2000 U.S. Dist. LEXIS 16552, 

at *11–13 (N.D. Ill. Oct. 26, 2000); Fisher v. Bristol-Myers Squibb Co., 181 F.R.D. 365, 369 (N.D. 

Ill. 1998); Dhamer v. Bristol-Myers Squibb Co., 183 F.R.D. 520, 532–34 (N.D. Ill. 1998); Jones v. Allercare, Inc., 203 F.R.D. 290, 307 (N.D. Ohio 2001); In re Ford Motor Co. Ignition Switch 

Prods. Liab. Litig., 174 F.R.D. 332, 346–54 (D.N.J. 1997); Marascalco v. Int’l Computerized 

Orthokeratology Soc’y, Inc., 181 F.R.D. 331, 338–39 (N.D. Miss. 1998); In re Ford Motor Co. 

Bronco II Prods. Liab. Litig., 177 F.R.D. 360, 369–71 (E.D. La. 1997); In re Stucco Litig., 175 

F.R.D. 210, 214, 215–217 (E.D.N.C. 1997); Ilhardt v. A.O. Smith Corp., 168 F.R.D. 613, 619–

20 (S.D. Ohio 1996); Harding v. Tambrands Inc., 165 F.R.D. 623, 629–30, 631–32 (D. Kan. 

1996); Walsh v. Ford Motor Co., 130 F.R.D. 260, 271–75 (D.D.C. 1990); Feinstein v. The Firestone Tire & Rubber Co., 535 F. Supp. 595, 608 (S.D.N.Y. 1982). 36See, e.g., In re Bridgestone/Firestone, Inc., 288 F.3d at 1024; Szabo v. Bridgeport Machines, 

Inc., 249 F.3d 672, 674–75 (7th Cir. 2001); Spence v. Glock, GES.m.b.H, 227 F.3d 308, 313–15 

(5th Cir. 2000); In re Am. Med. Sys., 75 F.3d 1069, 1085 (6th Cir. 1996); Castano v. American 

Tobacco Co., 84 F.3d 734, 741–43, 749–50 (5th Cir. 1995); In re Rhone-Poulenc Rorer, Inc., 51 

F.3d 1239, 1302 (7th Cir. 1995); Walsh v. Ford Motor Co., 807 F.2d 1000, 1017–19 (D.C. Cir. 

1990). 

Nonetheless, the Illinois court approved the judgment and the court of appeals affirmed, effectively deciding the question for the entire nation.34

So what exactly did this class action achieve? For starters, an Illinois state court 

decided effectively to overrule other states’ insurance laws, depriving the duly elected and designated regulators in those jurisdictions of their right to regulate insurance rates and policies for the citizens to whom they are accountable. In addition, 

auto insurance rates for most consumers likely will increase (as insurers are obliged 

to use more expensive OEM parts). Of course, with increased rates will come an increase in the number of uninsured drivers on our roads (since more people will be 

priced out of the insurance market). And finally, for the kicker, because State Farm 

is a mutual insurance company, owned by its customers, the people on whose behalf 

this class action was filed will receive nothing. Instead, the award will come out of 

their pockets, since they are the company’s owners. Indeed, the only winners in this lawsuit are the class lawyers, who stand to gain over $500 million if the judgment 

is upheld and plaintiffs’ lawyers are paid the 40 percent fee that some of the class 

counsel have said they will seek from the court. And who pays that half-billion dollar payday? Once again, the so-called winners are really the losers: the class members whom the lawyers supposedly represented ultimately will foot the bill for the 

lawyers’ fees. 

Of course, the danger posed by these efforts to federalize state law extends far 

beyond insurance. By way of example, the dockets of the three surveyed counties 

in the class action studies mentioned previously included numerous cases in which 

plaintiffs’ counsel sought to have locally elected judges in county courts set policies 

in areas as diverse as warranties, land use rights, plumbing licenses, environmental 

protection, advertising campaigns, bank billing practices, employee investment 

plans, and numerous other broad-ranging issues for 49 other states in addition to 

their own. 

H.R. 1115 would address this very serious federalism problem by expanding federal jurisdiction over interstate and nationwide class actions. Contrary to many 

state courts, federal courts have consistently concluded that in the case of a nationwide lawsuit, the laws of all states where purported class members were defrauded, 

injured, or purchased the challenged product or service must come into play.35 And 

in those very few instances in which a federal district court has toyed with the idea 

of engaging in ‘‘false federalism’’ (i.e., applying a single state’s law to all asserted 

claims), that notion has been reversed on appeal almost immediately.36

Third, H.R. 1115 would increase judicial efficiency, by enabling ‘‘copycat’’ cases to 

be consolidated in a single federal court, rather than leaving them to proceed in numerous state courts, as does the current system. Frequently, tens or even hundreds 

of overlapping or ‘‘copy-cat’’ class actions are filed in state courts across the country 

regarding the same controversy. Right now, that means that numerous state court 

judges around the country are duplicating each other’s work, resulting in enormous 

inefficiencies. Further, the class action device is being abused, as lawyers vie to certify or settle overlapping nationwide class actions as cheaply as possible. In contrast, when numerous duplicative class actions are filed in different federal courts, 

they are typically consolidated for pretrial proceedings in a multidistrict litigation 

proceeding under a federal statute that allows for such coordination—28 U.S.C. 

§ 1407. By expanding federal jurisdiction over interstate class actions, H.R. 1115 

would enable duplicative cases to be removed to federal court and then consolidated 

under federal multidistrict litigation procedures, thereby preventing the waste and 

abuse that flow from the litigation of duplicative suits in multiple state courts. 

25

37Making Justice Work, Washington Post, Nov. 25, 2002.

Fourth, H.R. 1115 would protect consumers from abusive settlements. The growing 

public disgust with class actions is fed—and properly so—by a host of abusive settlement practices and by the dissemination of unintelligible class action notices. H.R. 

1115 seeks to address those serious public concerns in two ways. First, as I noted 

earlier, federal judges have exhibited much more rigor in reviewing proposed class 

action settlements than some of their state court counterparts. That means the mere 

act of allowing more class actions to be heard in federal court will reduce class action abuse. Second, the bill includes a ‘‘consumer class action bill of rights’’ that affords additional protections to class action plaintiffs than those already in place in 

federal court. Under this section of the bill:

• Written notice of a proposed federal court class action settlement would have 

to be provided to class members in a clearer, simpler format;

• A federal court could not approve a coupon or other non-cash settlement unless it first holds a hearing and makes a written finding that the settlement 

is fair, reasonable and adequate;

• A federal court could not approve a settlement (like the Bank of Boston settlement) that results in a net loss for the class members unless it makes a written finding that non-monetary benefits to the class members outweigh any 

loss precipitated by the terms of the settlement; and

• A federal court could not approve a settlement that: (1) provides greater sums 

of money to certain class members because they are located in closer proximity to the court, or (2) provides a bounty to the class representatives.

Opponents of H.R. 1115 have suggested that Congress pass a bill that simply enacts these (or other) pro-consumer provisions, without expanding federal jurisdiction 

over class actions (or expanding it only slightly). (In fact, there are published reports that Senator Leahy plans to introduce such an alternative bill along these 

lines (although those reports also indicate that no bill has yet been drafted).) The 

problem with such alternative legislation is that any consumer provisions enacted 

by Congress will apply only to cases that are being litigated in federal court. Since 

that alternative legislation would leave the vast majority of interstate class actions 

in state court, few would be subject to these consumer protection provisions. Thus, 

the alternative legislation would achieve little or nothing: class action lawyers could 

continue to file duplicative cases, manipulate the pleadings to evade federal jurisdiction, and shop for courts willing to rubber-stamp self-serving settlement proposals. 

In urging Congress to enact legislation to address the class action problem, The 

Washington Post editorialized:

[N]o component of the legal system is more prone to abuse. For unlike normal 

lawyers, who are retained by people who actually feel wronged, class counsel—

having alleged a product deficiency that caused some small monetary damage 

to some discernible group of people—largely appoint themselves. The ‘‘clients’’

may not even be dissatisfied with the goods or services they bought, but unless 

they opt out of a class of whose existence they may be unaware, they become 

plaintiffs anyway. Class actions permit almost infinite venue shopping; national 

class actions can be filed just about anywhere and are disproportionately 

brought in a handful of state courts whose judges get elected with lawyers’

money. These judges effectively become regulators of products and services produced elsewhere and sold nationally. And when the cases are settled, the ‘‘clients’’ get token payments, while the lawyers get enormous fees. This is not justice. It is an extortion racket that only Congress can fix.37

I respectfully add my voice to that of The Washington Post and numerous others 

in urging this Committee to act favorably on H.R. 1115 so that class actions will 

once again become a tool of justice, instead of a blemish on our legal system.

Mr. SMITH. Thank you, Mr. Beisner. 

Mr. Wolfman. 

STATEMENT OF BRIAN WOLFMAN, ESQ., STAFF ATTORNEY, 

PUBLIC CITIZEN LITIGATION GROUP 

Mr. WOLFMAN. Thank you, Mr. Chairman, and Members of the 

Committee, for the opportunity to appear today in opposition to 

H.R. 1115. 

26

In my judgment, this bill does nothing to further its stated goal 

of class action fairness. In my office, I and my colleagues have opposed dozens of inappropriate or collusive class settlements and excessive attorneys’ fees in State and in Federal court, including the 

major settlements that have caught the public’s attention, although 

we still fervently believe that the vast majority of class actions in 

both State and Federal court serve consumer and societal interests. 

We take a back seat to no one, though, in fighting improper class 

actions to assure that the class action tool is not weakened. But 

H.R. 1115 would do just that. It will gravely harm consumers and 

increase the prospects for collusive settlements, which is why business wants it. 

I want to turn first to section 6 of the bill, which allows an automatic appeal of all class certification decisions. Though it is tacked 

on at the end of the bill, I address it first because it is emblematic 

of what H.R. 1115 in my judgment is all about: tilting the playing 

field in favor of corporate defendants, making it nearly impossible 

for consumers to get a fair shake. 

Sections 4 and 5 of the bill take almost all State class actions 

and put them in Federal court. Then section 6 says, okay, now that 

you are in Federal court where we think it will be much more difficult for you to get a class certified and much more difficult to win 

on the merits, any time you do get a class certified we will tie you 

up on appeal for years. 

Practically speaking, that erects an insurmountable barrier to 

prompt justice. The victims of Enron and other perpetrators of the 

corporate crime wave will wait months and months and months for 

justice in the courts, and watch the value of their cases plummet. 

Third Circuit Judge Anthony Scirica, who is the chair of the Judicial Conference’s Committee on Rules of Practice, has reiterated 

recently the conference’s opposition to the bill, and specifically 

asked this Committee to get rid of section 6. 

The appeal provision he said ‘‘might tempt a party to file an interlocutory appeal solely for tactical reasons. Staying discovery and 

other proceedings would only increase the tactical advantages,’’

which is another thing the bill does, ‘‘particularly because resolution of the appeal may not occur for 12 to 18 months.’’. 

The only thing I say about that is to think Judge Scirica is being 

a little protective of his own branch, because in complex cases of 

this magnitude appeals frequently take longer than that. 

In 1998, the Federal Civil Rules Committee adopted a new rule, 

rule 23(f), allowing discretionary review of class certification decisions. That rule allows an appeal, just like in the situation prepared by Attorney General Dinh, for review of plainly erroneous 

certification decisions that threaten serious harm. As Judge Scirica 

puts it, ‘‘The rules committees are unaware of any dissatisfaction 

expressed by the bench and the bar with this new rule, so there 

is absolutely no need for this provision, unless the intent is simply 

to give corporate wrongdoers a get-out-of-jail-free card.’’

Now, let me turn to the heart of the bill. Section 4 of the bill, 

when combined with section 5, its removal provision, would end almost all State court involvement in consumer class actions. Although the bill provides certain exceptions, as I have explained in 

27

some detail in my written testimony, those exceptions would rarely 

kick in. 

The bill’s purposes section, its introductory sections, say that it 

is intended to deal with interstate class actions, but that is not actually what the bill does. It also puts most intrastate class actions 

in Federal court whenever one of the defendants is incorporated or 

has its headquarters out of State, even when that defendant has 

a substantial business presence in that very State. 

So ask yourself, why in the world shouldn’t a class of Florida 

plaintiffs be able to sue Disney under Florida law in the Florida 

courts? But under H.R. 1115, they can’t. In fact, under H.R. 1115, 

in many instances, a class can’t even sue Ford in its own backyard 

in Michigan State court. 

H.R. 1115 should, in reality, be called the Defendant’s Choice of 

Forum Act, since it allows defendants, not plaintiffs, to pick the 

court system it prefers. 

When abuses occur in the State or the Federal system, the courts 

must be vigilant in stopping them. Congress in my judgment can 

play a limited role in consolidating overlapping class actions. But 

if I were a corporate wrongdoer thinking of ways to avoid liability 

and delay justice, H.R. 1115 would be my bill, which is exactly why 

it ought to be rejected. 

Thank you again for the opportunity to appear today. 

[The prepared statement of Mr. Wolfman follows:]

PREPARED STATEMENT OF BRIAN WOLFMAN

Chairman Sensenbrenner and members of the Committee: Thank you for the opportunity to appear today in opposition to H.R. 1115, the Class Action Fairness Act 

of 2003. Although Public Citizen supports the use of class actions and actively works 

to improve the class action process, this bill, despite its lofty title, would do nothing 

to further the goal of ‘‘fairness’’ in class actions. To the contrary, H.R. 1115 is an 

unwise and ill-considered incursion by the federal government on the jurisdiction of 

the state courts. It works a radical transformation of judicial authority between the 

state and federal judiciaries that is not justified by any ‘‘crisis’’ in state-court class 

action litigation. That is presumably why the official body of the federal courts—

the Judicial Conference of the United States, headed by Chief Justice Rehnquist—

and its state court counterpart—the Conference of State Supreme Court Justices—

oppose this legislation. 

Before explaining the basis for my conclusion that H.R. 1115 should not be enacted, I want to describe my experience in class action litigation. I am a staff attorney with Public Citizen Litigation Group, a non-profit, national public interest law 

firm founded in 1972, as the litigating arm of Public Citizen, a consumer advocacy 

organization with approximately 125,000 members. Although we do not bring many 

consumer class actions, we occasionally file them for the purpose for which they are 

designed: to remedy wrongdoing in situations where bringing individual claims 

would be economically impossible. And at no time are class actions more important 

than they are now, when the country is experiencing a corporate pervasive crime 

wave. Consumers must have effective remedies to hold the free marketplace accountable or public trust in business will decline even further than it already has. 

Because we value class actions as an important tool for justice, we have, for a 

number of years, combated abuses in the class action system. We have increasingly 

devoted resources to opposing what we believe are inappropriate or collusive class 

action settlements, and have become the nationwide leader in fighting class action 

abuse. Among the more than 30 nationwide class actions settlements on which we 

have worked, we have served as lead or co-counsel for objectors in many of the most 

important cases, including Devlin v. Scardelletti (Supreme Court case establishing 

absolute right of objectors to appeal approval of class settlements); Bowling v. Pfizer

(Bjork-Shiley heart valve); Amchem v. Windsor (settlement of future asbestos personal-injury cases, also known as Georgine); Wish v. Interneuron Pharmaceutical

(Redux diet drug); Hanlon v. Chrysler Corp. (Chrysler mini-vans); In re Telectronics 

Pacing Systems, Inc. (pacemaker leads); Duhaime v. John Hancock Mut. Life Ins. 

28

1See Brian Wolfman & Alan Morrison, Representing the Unrepresented in Class Actions Seeking Monetary Relief, 71 N.Y.U. L. Rev. 439 (1996); Brian Wolfman, Foreword: The National Association of Consumer Advocates’ Standards and Guidelines for Litigating and Settling Class Actions, 176 F.R.D. 370 (1998); David C. Vladeck, Trust the Judicial System to Do Its Job, The 

Los Angeles Times, p. M5 (Apr. 30, 1995); Brian Wolfman, Class actions for the injured classes, 

The San Diego Union Leader, p. B–11 (Nov. 14, 1997). 2The bill would also bar federal jurisdiction over class actions where the aggregate damages 

asserted by all class members do not exceed $2 million or in which there are fewer than 100 

class members. This provision would have little or (more likely) no practical effect; no significant 

consumer class actions fall into this category. 

Co. (life insurance sales practices); In re General Motors Corp. Pickup Truck Fuel 

Tank Prod. Liab. Litig. (GM C/K Pickup Trucks); and In re Ford Motor Co. Bronco 

II Prod. Liab. Litig. (Ford Broncos). In these and other cases, we have objected to 

settlements that we thought grossly undervalued the plaintiffs’ claims and/or we 

have opposed what we believed were the inflated fees of the plaintiffs’ attorneys. In 

addition, we have written articles on the problems we have encountered in class action settlements for law reviews and the press.1

The point of these introductory comments is that Public Citizen takes a back seat 

to no one in fighting improper class actions, to assure that injured consumers will 

be justly compensated, that class action attorneys’ fees are sufficient (but not excessive), and that the class action tool is not weakened. In our judgment, H.R. 1115 

will not aid injured consumers or combat collusion, but it will work a massive shift 

of power and cases to our overburdened federal courts at the expense of the state 

courts, the traditional forum for hearing disputes involving state law. 

Part I below discusses H.R. 1115’s principal vice—the unwarranted expansion of 

federal jurisdiction over state-law-based class actions contained in sections 4 and 5 

of the bill. Part II discusses two other serious flaws in the bill’s jurisdictional provisions. Part III addresses two aspects of H.R. 1115’s non-jurisdictional provisions—

its automatic appeal provision and its do-nothing provision regarding coupon settlements—which, though purportedly aimed at improving class action practice, actually undermine the interests of consumers. Finally, Part IV explains an alternative 

approach to the problems presented by nationwide and overlapping class actions. 

That approach would create federal jurisdiction only for those cases in which it is 

truly justified, leaving most state-law class actions in state court where they belong. 

I. THE ENORMOUS AND UNJUSTIFIED EXPANSION OF FEDERAL JURISDICTION. 

A. Section 4 of H.R. 1115 allows proposed class actions to be filed in federal court 

if ‘‘any member of a class of plaintiffs is a citizen of a State different from any defendant....’’ Building on the language in section 4, section 5 of the bill permits 

removal from state court to federal court of any class action meeting this expanded 

criterion for filing class actions in federal court. Thus, as a practical matter, section 

4, when combined with section 5’s removal provision, would end most state-court involvement in consumer class actions. The bill provides that the federal court may 

not entertain class actions only in very limited circumstances: where a ‘‘substantial 

majority’’ of the proposed class and all of the primary defendants are citizens of a 

single state, and the claims asserted will be governed primarily by the laws of that 

state.2

As explained below, the bill would effectively eliminate state-court jurisdiction 

over class actions involving only in-state plaintiffs and only that state’s law, as long 

as any primary defendant’s principal place of business or state of incorporation is 

out of state, even where that defendant does substantial in-state business. As a result, the bill effects an enormous shift in class action cases from state to federal 

courts at a time when the federal courts are already overwhelmed. 

Two hypotheticals illustrate the kind of cases that would be removed. Assume 

that over the past two years a regional life insurance company, with headquarters 

in Massachusetts and incorporated in Delaware, and with a sales force of agents 

employed by the company’s New York affiliate, fleeced 20,000 of its New York customers, by charging premiums higher than those promised and not paying certain 

benefits. On average, each customer lost about $500. The company, the New York 

affiliate, and the sales agents particularly targeted senior citizens. The customers 

file a class action against the company, the New York affiliate, and the key agents 

who helped perpetrate the scheme in New York state court alleging solely violations 

of New York law. Under H.R. 1115, any of the defendants would have the option 

of removing this class action to federal court, even though there is little or no federal interest in resolving such a dispute because it does not involve federal law. 

Moreover, the New York courts have a strong interest in resolving the case, to assure that New York law is properly enforced. That interest is usurped by H.R. 1115. 

29

3 Under current law, this case would remain in state court because the plaintiffs and many 

of the defendants are citizens of New York, and thus the diversity of citizenship necessary to 

establish federal jurisdiction under 28 U.S.C. 1332 does not exist. In addition, federal jurisdiction might also be lacking because each class member does not have the requisite $75,000 in 

controversy. See Zahn v. Int’l Paper Co., 414 U.S. 291 (1973). 4 Hanlon v. Chrysler Corp., 150 F.3d 1011 (9th Cir. 1998). 

Indeed, this example shows that H.R. 1115 is, in reality, a ‘‘Defendants’ Choice of 

Forum Act,’’ since it allows the corporate defendants—not the plaintiffs—to select 

the court system they prefer.3

Similarly, suppose a class of Oklahoma property owners allege that they have 

been unlawfully deprived of oil and gas royalties by an Oklahoma utility company 

(through its Oklahoma-based sales force), and by the Oklahoma firm’s parent company, a Texas-based energy conglomerate, incorporated in Delaware. The property 

owners, who, on average have lost $5,000 each but stand to lose much more if the 

companies’ practices are not stopped, file suit in state court under a Oklahoma consumer protection statute and Oklahoma common law. There is no reason why an 

Oklahoma state court should not handle this class action. Surely, most Oklahoma 

trial courts, and the Oklahoma appellate courts on review, will be more familiar 

with the state-law issues than would a federal court sitting in Oklahoma or the relevant federal appeals court headquartered in Denver, composed mostly of judges 

who have little or no background in Oklahoma law. And yet H.R. 1115 virtually 

assures that, regardless of the plaintiffs’ wishes, this one-state controversy, involving only state law, will end up in federal court. 

These hypotheticals demonstrate that H.R. 1115 dishonors the proper spheres of 

the states and the federal government in our federal system. The bill is a resounding vote of ‘‘no confidence’’ in our state courts. It is premised on a deep—and misplaced—distrust in state courts’ ability to uphold the law. Our Constitution properly 

assumes that the states are fully capable of interpreting their own laws and handing out justice impartially. 

B. Although this radical revision of the allocation of authority between the state 

and federal courts is enough in itself to warrant the rejection of H.R. 1115, it is the 

inefficiencies created by the bill that may pose the largest roadblock to justice for 

ordinary citizens. By channeling most state-law based class actions to the federal 

courts, H.R. 1115 will further weaken the ability of litigants to obtain justice in our 

federal courts. As Chief Justice William H. Rehnquist has repeatedly explained in 

his annual report on the judiciary, the federal courts are already overburdened with 

cases that traditionally are dealt with in state courts, and the federal courts cannot 

bear any additional burden. See, e.g., William H. Rehnquist, The 1998 Year-End Report of the Federal Judiciary 5–7 (Jan. 1, 1999). And the Chief Justice has particularly asked Congress to consider reducing, not expanding, federal diversity jurisdiction. Id. at 7. 

Moreover, not only would H.R. 1115 increase the caseload of the federal courts, 

but it would do so with cases that are extremely complex and time consuming. Making matters even worse, these new federal cases involve solely issues of state law, 

with which state-court judges are intimately familiar, but federal judges generally 

are not. 

The caseload burden imposed by H.R. 1115 would be reason enough to reject this 

legislation at any time, but the problem is particularly acute now, because the civil 

docket in some districts is severely backlogged. In short, H.R. 1115 promises that 

injured consumers will be put on ‘‘hold’’ in the overburdened federal courts, without 

any opportunity to litigate their cases in state courts where they properly belong. 

C. The proponents of H.R. 1115 try to justify the bill on the ground that there 

is a class action ‘‘crisis’’ peculiar to the state courts. In general, the class action tool 

is a tremendous benefit to Americans. It is an important and powerful component 

of our civil justice system that can compensate ordinary citizens who, acting individually, would not have the means to challenge corporate and governmental wrongdoers. As noted at the beginning of this testimony, Public Citizen recognizes that 

class action abuse threatens to sour the public on class actions and harm the very 

people that the class action tool is supposed to help. But it is wrong to think that 

abuse is limited to state courts. For instance, a federal appeals court approved the 

Chrysler minivan settlement—where the settlement did little more than restate 

Chrysler’s prior promise to a federal regulator to fix the class members’ defective 

door latches, with Chrysler agreeing to pay the lawyers five million dollars in fees.4

30

5See, e.g., In re Mexico Money Transfer Litigation, 267 F.3d 743 (7th Cir. 2001). Some of the 

most questionable coupon settlements have been approved by federal courts. See, e.g., In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 257 (N.D. Ga. 1993); States of New York & Maryland v. Nintendo of Am., 775 F. Supp. 676, 682 (S.D.N.Y. 1991); In re Cuisinart Food Processor 

Antitrust Litig., 1983 WL 153 (D. Conn. Oct. 24, 1983); Ohio Public Interest Campaign v. Fisher 

Foods, Inc., 546 F. Supp. 1 (N.D. Ohio 1982); see generally ‘‘In Camera,’’ 16 Class Action Reports

369, 485–87 nn.2–8 (July-Aug. 1993). For a full discussion of this issue, see Public Citizen, ‘‘Class Action Settlements: Federal Courts Are No Better than State Courts When It Comes to 

Protecting Consumers’’ (April 15, 2003), a copy of which is attached to this testimony. 6See, e.g., Ex Parte State Mutual Ins. Co., 715 So.2d 207 (Ala. 1997); Ex Parte American Bankers Life Assur. Co. of Fla., 715 So.2d 186 (Ala. 1997). 7See, e.g., Bloyed v. General Motors, 881 S.W.2d 422 (Tex. Ct. App. 1994), aff’d and remanded, 

916 S.W.2d 949 (Tex. 1996). See also http://tm0.com/LAW/

sbct.cgi?s=141867472&i=504100&m=1&d=2534849 (describing April 2002 holding of Florida 

state trial court rejecting class action settlement on ground that plaintiffs obtained little or no 

value, but plaintiffs’ counsel sought sizeable fee). 8 Reid and Coutroulis, ‘‘Checkmate in Class Actions: Defensive Strategy in the Initial Moves,’’

Litigation (Winter 2002). 

Unfortunately, other serious abuses in settlement approval have occurred in federal 

trial and appellate courts.5

The state courts can play an important role in preventing abuse. When the corporate community began pushing the legislation that is now H.R. 1115, it relied on 

anecdotes from class actions in Alabama where, the argument went, the state courts 

had been certifying classes without following reasonable procedures. Responding to 

due process and forum-shopping concerns from corporate defendants, however, the 

Alabama Supreme Court has abolished the practice of certifying class actions before 

the defendant has an opportunity to answer the suit. The Alabama court made clear 

that classes may not be certified without notice and a full opportunity for defendants to respond and that the class certification criteria must be rigorously applied.6

State courts have been vigilant in other cases as well.7 In sum, there is no crisis 

in the state courts. 

D. There should be no mistaking why this bill’s proponents want class actions 

moved to federal court. Businesses perceive an advantage in defending these cases 

in federal court. To quote from a recent law journal article written by two corporate 

class action defense lawyers: ‘‘As a general rule, defendants are better off in federal 

court . . . there is generally a greater body of federal law precedent favorable to 

defendants.’’ 8

Some of the advantages are obvious, such as the fact that federal judges often feel 

obliged to interpret state laws conservatively and reject novel claims. Others are 

more subtle. Currently, Public Citizen’s Congress Watch is compiling a comprehensive report on the class action suits settled by the industries lobbying for this bill. 

The report’s preliminary findings indicate that each of these industries, including 

insurance, tobacco, retail, automotive, and other giants, have fared much better in 

federal courts than state courts. Much of the advantage comes from the federal 

courts’ overly restrictive interpretation of certification rules. When that report is released later this month, copies will be provided to the Committee. 

As evidence of the supposed state-court class action ‘‘crisis,’’ the supporters of H.R. 

1115 rely on a few examples of settlements in which the class members were cheated at the expense of their lawyers. Although abuses do occur in state and federal 

court, those abuses generally must be fought in the courts, and certainly not 

through ill-advised and sweeping responses like H.R. 1115. Moreover, the anecdotes 

are just that—anecdotes—and much more evidence showing a systematic pattern of 

abuse in the state (as opposed to federal) courts is required before Congress should 

consider enacting anything approaching the radical transformation in our state-federal balance contemplated by H.R. 1115. 

In sum, H.R. 1115 should be rejected as unwise and unnecessary. It is an unfair 

attack on the integrity of the state courts and their ability to provide justice to their 

citizens, and it comes at a time when the federal courts are unable to handle the 

enormous increase in caseload that H.R. 1115 would produce. 

II. OTHER SERIOUS PROBLEMS WITH SECTIONS 4 AND 5 OF H.R. 1115. 

Although we believe that H.R. 1115 should be defeated, it should surely not be 

enacted in its current form. The following amendments would improve the bill. 

• Eliminating H.R. 1115’s Federalization of State-Court Private Attorney 

General and Joinder Actions. In one respect, H.R. 1115 is far more ambitious 

than most of its predecessors in stripping the state courts of their historical jurisdiction and their role in protecting the rights of their own citizens. H.R. 1115 federalizes more than class actions: Under proposed 28 U.S.C. 1332(d)(9), this bill would 

31

9This provision surfaced once before, in the 107th Congress in H.R. 2341. It did not appear 

in its predecessors, such as H.R. 1875, introduced in the 106th Congress. 10 City of Revere v. Massachusetts General Hosp., 463 U.S. 239, 243 (1983) (state courts are 

free to have less restrictive standing requirements than those imposed by federal courts). 11States other than California permit private attorney general actions under their deceptive 

acts and practices statutes. H.R. 1115 would federalize such actions as well. The focus here is 

on the California law because it has been an important tool for consumers and it is the obvious 

target of proposed 28 U.S.C. 1332(d)(9)(A). 

also create federal jurisdiction for two additional categories of cases: (1) private attorney general actions brought by any organization or citizen; and (2) groups of 

cases in which 100 or more individuals seeking monetary relief seek to try any common legal or factual issue together. This provision is so extreme—and its potential 

effect so immense—that it deserves special consideration.9

Proposed section 1332(d)(9)(A) would define private attorney general actions as 

class actions and allow them to be removed to federal court if filed in state court. 

The provision is obviously aimed at actions under section 17200 of the California 

Business and Professions Code, which has proved an important tool for victims of 

unfair and deceptive business practices. In section 17200, the California Legislature 

has decided to provide legal standing for organizations and individuals to act as private attorneys general that is broader than the standing generally allowed in the 

federal courts. Apparently, the California Legislature has seen fit to allow private 

parties to combat corporate fraud and other malfeasance on the theory that the 

California Attorney General simply does not have the resources to do it all on his 

or her own. That policy choice, in our system of federalism, is California’s prerogative,10 at least before H.R. 1115. Proposed section 1332(d)(9)(A) would override that 

state policy choice and transfer California private attorney general actions to federal 

court, where they would be automatically deemed class actions and be subjected to 

federal Rule 23 certification criteria and federal standing requirements. 

And that’s not all. H.R. 1115’s puny exclusions for federal jurisdiction—for instance, where the aggregate value of the claims is $2 million or less, or where the 

number of affected people is fewer than 100—do not apply to its private attorney 

general action provision. And because we know that in a state as large and as transient as California, any private attorney general action seeking compensation for all 

victims of a corporation’s in-state misconduct will involve some significant number 

of out-of-state victims, virtually all 17200 actions seeking monetary relief will be removable to federal court.11

H.R. 1115’s federalization of individual joinder actions may be even worse than 

its treatment of private attorney general actions. Proposed 28 U.S.C. 1332(d)(9)(B) 

would define damages suits filed in state court by individual plaintiffs as class actions if, at any time, 100 or more plaintiffs sought to try any common legal or factual issue. Assume, for instance, that 250 plaintiffs in Kentucky filed suit seeking 

an injunction under Kentucky common law against a local chemical plant spewing 

toxic arsenic into the adjoining neighborhoods. The plant is run by a regional chemical manufacturer with plants not only in Kentucky, but also in Indiana and Illinois, 

where its corporate headquarters is located. The plaintiffs also seek damages for 

personal injuries and compensation for damages to homes and businesses in the vicinity of the plant. Some of the plaintiffs’ claims are significant, but most, particularly those involving only property damage, are valued at between $10,000 and 

$30,000. For purposes of efficiency, and to enable them to afford the high costs of 

litigation, the plaintiffs move to join their cases for a determination on common factual issues (such as the frequency and toxicity of the emissions) and common legal 

questions (such as whether the state’s regulatory emission standards govern the 

common-law duty of care). Each plaintiff plans to try his or her damages claim individually because those claims are based on issues that are not shared commonly by 

the 250 plaintiffs. 

Under current law dating back to the creation of the federal courts (and, indeed, 

even under most of H.R. 1115’s predecessors), these individual actions could only 

be tried in state court. But under H.R. 1115, these 250 cases could be removed to 

federal court, away from the trial and appellate courts with expertise in Kentucky 

law, perhaps many miles from the town in which the injuries arose and, if an appeal 

were ever filed, to a federal court of appeals sitting in Cincinnati. 

But the affront to federalism is even greater. Under proposed 28 U.S.C. 

1332(d)(9), the individual joinder actions described above ‘‘shall nevertheless be 

deemed a class action’’ for the purposes of federal jurisdiction, and are thus subject 

to the certification requirements of Federal Rule of Civil Procedure 23 after they are 

removed to federal court. However, unlike the bill’s treatment of genuine class actions, these individual state-law cases are not dismissed without prejudice to re-filVerDate 0ct 09 2002 10:20 Jun 25, 2003 Jkt 000000 PO 00000 Frm 00035 Fmt 6633 Sfmt 6621 G:\WORK\FULL\051503\87093.000 HJUD1 PsN: 87093
32

12 E.g., Prado-Steiman v. Bush, 221 F.3d 1266 (11th Cir. 2000). 13See http://www.uscourts.gov/judbus2001/front/highlights.pdf (2001 caseload highlights: ‘‘Rising for the seventh consecutive year, appeals filings grew 5 percent to an all- time high of 

57,464’’). 14See http://www.uscourts.gov/judbus2002/front/jdbusiness.pdf (2002 caseload highlights). 15 Coopers & Lybrand v. Livesay, 437 U.S. 463 (1978). 16 28 U.S.C. 1291; Catlin v. United States, 324 U.S. 229, 233–34 (1945). 17http://www.uscourts.gov/judbus2002/appendices/b04sep02.pdf. 

ing in state court if Rule 23’s requirements are not met; rather, they remain in 

limbo in federal court (presumably for adjudication on the merits, although the bill 

does not say). See proposed 28 U.S.C. 1332(d)(9) (last sentence). This provision is 

unprecedented, because it would require the federal court to adjudicate dozens or 

even hundreds of garden-variety state tort claims on an individual basis—claims 

valued at far less than the $75,000 jurisdictional amount set by Congress for federal 

court diversity cases under 28 U.S.C. 1332(a). 

• Enacting A Meaningful Exclusion for Intrastate Class Actions. The rationale of diversity jurisdiction when it was first enacted at the end of the 18th century was to avoid prejudice against out-of-state defendants. As the Chief Justice 

pointed out in his 1998 annual report, that rationale is not nearly so powerful in 

today’s society. See, e.g., William H. Rehnquist, The 1998 Year-End Report of the 

Federal Judiciary 7 (Jan. 1, 1999) (noting that in 1789, when the Judiciary Act was 

enacted, ‘‘there was reason to fear that out-of-state litigants might suffer prejudice 

at the hands of local state-court judges and juries, and there was legitimate concern 

about the quality of state courts. Conditions have changed drastically in two centuries.’’). 

Under H.R. 1115, an in-state class of plaintiffs suing under their own state law 

can keep a state-law class action in state court only if the primary defendants are 

citizens of that state. (A corporation’s citizenship is generally defined to include both 

the state in which it has its principal place of business and its state of incorporation). To be blunt, that makes little sense in a society in which large corporations 

have a significant business presence in many states. Surely, Disney should be required to defend a suit in state court in Florida, as well as in California, where it 

has its headquarters. Ford Motor Company should not be able to remove a suit from 

state court in Kentucky, where it has a substantial manufacturing plant, as well 

as in Michigan (where it has its headquarters). Thus, at the very least, the portion 

of proposed 28 U.S.C. 1332(d)(3)—which purports to, but does not in reality, bar federal jurisdiction over certain intrastate class actions—should be amended. Under 

the amendment, the federal court would not have jurisdiction in class actions in 

which a substantial majority of the class members are citizens of a single state of 

which the primary defendants are also citizens ‘‘or in which the primary defendants 

have a substantial business presence,’’ and the claims asserted will be governed primarily by the laws of that state. 

III. OTHER PROVISIONS OF H.R. 1115 UNDERMINE CONSUMER INTERESTS. 

• H.R. 1115’s Automatic Appeal Provision Would Impose Grave Harm on 

Consumers. Section 6 of H.R. 1115 provides an interlocutory appeal as of right to 

anyone adversely affected by a district court’s decision to certify (or not to certify) 

a class action under Rule 23. Since 1998, Federal Rule of Civil Procedure 23(f) has 

allowed permissive interlocutory appeals of class certification decisions. Rule 23(f) 

is reserved for cases in which an erroneous decision threatens to impose serious 

harm on a litigant.12 The courts of appeals are now in the process of setting standards governing the circumstances in which such permissive appeals should be allowed. Thus, section 6’s drastic expansion of the federal appellate docket is unnecessary. In 2001, federal appellate case filings climbed to record levels, part of a decade-long trend.13 In 2002, federal appellate filings set another record, although the 

rate of growth was smaller.14 Section 6 of H.R. 1115 would add a new category of 

complex appeals to the already crowded appellate docket. More fundamentally, the 

proposal is directly contrary to Supreme Court precedent 15 and longstanding federal 

policy against piecemeal litigation that, with a few narrow exceptions, requires a 

‘‘final decision’’ before an appeal may be taken.16

Let’s be clear why this provision is in the bill: Corporate defendants want the 

right to appeal class certification immediately to delay the case and make sure that 

the merits (including any merits discovery) are not reached until years down the 

road. That delay, of course, undermines the plaintiffs’ ability to press their cases 

to trial and to receive reasonable settlement offers. A federal civil appeal currently 

takes, on average, a year from filing to decision,17 with some circuits having greater 

33

18 Id. (Sixth Circuit; Ninth Circuit). 19See, e.g., Buchet v. ITT Consumer Financial Corp., 845 F. Supp. 684, 695–96 (D. Minn. 

1984) (minuscule coupon redemption rates), amended, 858 F. Supp. 944, 944–45 (D. Minn. 1984) 

(citing additional information to same effect); ‘‘In Camera,’’ 16 Class Action Reports 369, 485–

87 nn.2–8 (July-Aug. 1993) (survey of coupon settlements, showing that settling parties generally vastly overstate expected redemption rates and that, without transferability, settlement 

coupons are generally worthless); B. Meier, ‘‘Fistful of Coupons—Millions for Class Action Lawyers, Scrip for Plaintiffs,’’ New York Times, pp. D1, D5 (May 26, 1995) (only one percent redemption rate where coupons could be used toward purchase of new vehicle). 

delays.18 Of course, class actions are not ‘‘average’’ cases, because of their complexity and because the parties will generally request and receive oral argument, 

and so the appeals to which this provision would apply will take considerably longer 

than average, as is the case for almost all the federal appeals in which Public Citizen is involved. If they lost on appeal, defendants could seek certiorari to the Supreme Court, which would rarely, if ever, succeed, but which would add 6 to 9 

months to the delay. 

Another aspect of this provision unmasks its improper purpose: Unless otherwise 

ordered because specific discovery is necessary to preserve evidence or prevent 

undue prejudice to a party, all proceedings in the district court are stayed during 

the pendency of the appeal. This automatic stay provision demonstrates that the bill 

seeks to take all pressure off the defendant for a long period of time after a district 

court certifies a class. Rule 23(f)—the permissive appeal provision discussed above—

takes the opposite approach; it says that, unless otherwise ordered, proceedings in 

the district court will not be stayed during the pendency of an appeal. 

In sum, this provision will be very harmful to plaintiffs with meritorious claims. 

It will increase the number of ‘‘sell out’’ settlements because no other kind of settlement will be offered until years of appellate proceedings have ended. It will overload 

the already overworked appellate courts. It has no relationship to the bill’s supposed 

concerns about overlapping class actions in state court, and indeed it is hostile to 

one of the bill’s stated purposes—to enable plaintiffs with meritorious claims to 

achieve justice. Even if H.R. 1115 were otherwise worth supporting—which it is 

not—the bill should be rejected based on section 6 alone. 

• The Bill Does Nothing to Address the Problem of Coupon Settlements.

Much of the effort by corporate defendants, and some in Congress, to convince the 

public of the need for class action reform, is based on stories about coupon settlements, in which the class members obtain certificates for a few dollars off a future 

purchase of the defendant’s product, and class counsel walks away with millions of 

dollars in fees. Although the rhetoric regarding coupon settlements sometimes outpaces the reality, coupon settlements are a real problem when the class member has 

no use for, does not want, or cannot afford the product, the coupon is difficult to 

obtain or use, or the settlement does not include a market maker who can sell the 

coupon on the class member’s behalf to a third party who wishes to use it. In such 

cases, coupon settlements are nothing more than promotions of the defendants’

products rather than anything of value to the consumer as redress for prior wrongdoing. 

However, the corporate community’s use of stories about coupon settlements to 

drive the class action debate drips with irony because, as the old saying goes, ‘‘It 

takes two to tango.’’ The coupon settlement is their creation; defendants love coupon 

settlements in which the coupon will have little or no value. The settlement provides 

a modest marketing gimmick for the defendants’ products, while ridding the defendants of potentially troublesome litigation for little more than the cost of attorney’s 

fees. The little empirical evidence that exists demonstrates that most class members 

get nothing from coupon settlements because redemption rates are very low.19 Such 

low rates can result from indifference, lack of proper notice, a lack of desire to use 

the coupon to purchase another one of the defendant’s products that is the subject 

of the lawsuit, or, in cases involving big-ticket items, an inability to afford the defendant’s product. That’s why defendants are willing to pay class counsel in cold, 

hard cash to make the litigation go away. 

So, what does H.R. 1115 do about the issue? Other than lip-service, absolutely

nothing. Under proposed 28 U.S.C. 1714, a part of the so-called ‘‘consumer class action bill of rights,’’ a coupon settlement may be approved only after a hearing and 

a written judicial finding that ‘‘the settlement is fair, reasonable, and adequate for 

class members.’’ But all state and federal courts already hold settlement hearings 

(known as ‘‘fairness hearings’’), and all state and federal courts approve settlements 

only after issuing a written finding that the settlement is ‘‘fair, adequate, and reasonable’’—the universal settlement approval standard. Thus, every time a court approves a coupon settlement, it makes a finding that the settlement is fair, adequate, 

34

20 In re Domestic Air Transp. Antitrust Litig., 148 F.R.D. 297, 322 (N.D. Ga. 1993); see General 

Motors, 55 F.3d at 807–10. 21Dunk v. Ford Motor Co., 48 Cal. App. 4th 1794, 1805 (1996). 22General Motors, 55 F.3d at 808–10. 23See National Ass’n of Consumer Advocates—Standards and Guidelines for Litigating and 

Settling Consumer Class Actions, 176 F.R.D. 375, 382–84 (1998); General Motors, 55 F.3d at 

809. 24See 28 U.S.C. 1407. 25 In this regard, Senator Leahy’s proposal honors the traditional rule in diversity cases, 

which prohibits a defendant from removing a case if the defendant is a citizen of the forum 

state. See 28 U.S.C. 1441(b) (second sentence). 

and reasonable. Section 1714 would add no additional ‘‘judicial scrutiny,’’ contrary 

to what its title suggests. 

There is a solution, however, but it is one that corporate defendants dread: Pay 

class counsel’s fee based on a reasonable percentage of the coupons actually redeemed. 

In some cases, class counsel have simply multiplied the number of certificates 

issued by the certificate’s face value and asked for a ‘‘reasonable’’ percentage of the 

resulting figure. In other cases, fees have been awarded as a percentage of the 

plaintiffs’ expert’s prediction regarding the level of coupon redemption,20 predictions 

that, as noted above, are at odds with what is actually known about actual coupon 

redemption rates in consumer class actions. Either way, corporate defendants have 

gladly paid up. 

Whatever one thinks of coupon settlements—and there are arguments against 

their use in any case—this value-based method of awarding fees will surely eliminate the worst settlements. With the prospect of a paltry fee, no longer would class 

counsel agree to a settlement in which coupons are non-transferable,21 or in which 

the impediments to redemption are so great as to render the coupons valueless to 

most class members.22 In fact, by tying counsel’s fate to that of their clients, the 

typical coupon settlement would become a thing of the past, and only settlements 

in which the coupon has a cash redemption value or the settlement includes the participation of a secondary market-maker—in other words, a settlement that actually 

broadly benefits the class—would be worth counsel’s efforts.23

IV. AN ALTERNATIVE TO H.R. 1115’S ANTI-CONSUMER, OVERKILL APPROACH. 

As explained above, H.R. 1115 would provide federal jurisdiction for almost all 

state-law class actions—even where only one class action has been filed, and the 

class members, who reside in one state, have sued in their own state courts for relief 

under that state’s law. As I’ve said, that overkill approach is an affront to federalism, would overload the already crowded federal dockets with state-law cases, 

and simply makes no sense because it attacks a non-existent problem. Nevertheless, 

modest reform is appropriate. In recent years, critics have noted that problems arise 

when multiple class actions, involving many of the same class members suing the 

same defendants on the same or similar claims, are filed in different courts. Such 

overlapping class actions can be wasteful. Multiple counsel and multiple courts will 

be called upon to consider the same discovery issues, entertain the same motions 

(including class certification motions), and, in theory, try the same case (although 

such cases rarely are tried). Moreover, when some or all of the cases are filed in 

different state courts (or in state and federal courts), there is no mechanism for consolidating the actions. 

Even more important, multiple class actions may, in some circumstances, hurt 

class members because their presence allows the defendant, in seeking settlement, 

to choose plaintiffs’ counsel most willing to settle on terms favorable to it. This socalled reverse-auction phenomenon—in which the price of the plaintiffs’ claims 

(though not class counsel’s fee) are bid down, not up—is a serious concern in some 

cases. 

Senator Leahy has proposed legislation that would allow most regional or national 

class actions—defined as cases in which significant numbers of class members reside 

in three or more states—to be filed in, or removed to, federal court. This legislation 

would have the effect of allowing the consolidation of multiple regional or national 

state-court class actions, after removal, by the federal Judicial Panel on Multidistrict Litigation.24 This is the approach preferred by the Judicial Conference of the 

United States, which opposes H.R. 1115. Under Senator Leahy’s legislation—which 

is modeled on the Judicial Conference’s concerns—a class action filed in state court 

would not be removable to federal court if a principal defendant were a citizen of 

the forum state. That result makes perfect sense since a defendant can hardly claim 

‘‘prejudice’’ if it is sued in its home state.25 Senator Leahy’s proposal contains other 

35

genuine reforms—such as taking real aim against valueless coupon settlements by 

requiring fees to be calculated as percentage of actual coupon redemption and by 

banning settlements that waive class members’ future legal rights. In sum, Public 

Citizen is prepared to support real reform that helps consumers and protects the 

legitimate interests of corporate defendants in efficiency and fairness. H.R. 1115 

provides none of that. 

In closing, I want to reiterate our opposition to this legislation. Since the founding 

of the Republic and the first Judiciary Act, it has been our shared national understanding that litigation of state-law questions would, in general, be the province of 

state courts. The enormous expansion of federal court power envisioned by H.R. 

1115 is unwise because it tears a large hole in the fabric of federal-state relations 

and because it imposes a considerable burden on our already overworked federal 

court system. If there are genuine problems with state-court class actions, Congress 

should work hand-in-hand with state courts and legislatures to resolve them, mindful of the vital state interests that are implicated when Congress proposes curtailing 

state-court jurisdiction. Senator Leahy’s proposal is a good place to start. But under 

no circumstances should Congress adopt the heavy-handed approach embodied in 

H.R. 1115.

36

ATTACHMENT


Wolf1.eps
37


Wolf2.eps
38


Wolf3.eps
39


Wolf4.eps
40

Mr. SMITH. Thank you, Mr. Wolfman. 

Mr. Beisner, let me address a question to you, and it is this. As 

I understand it, H.R. 1115 obviously applies only to cases that have 

been certified as class actions that have been filed after the date 

of enactment. 

But my question goes to the pending cases where you have suits 

that have been filed that have not been certified as class actions. 

If this bill did not apply to those, then you have a situation where 

individuals, consumers, could be made part of a pending case and 

therefore forfeit their rights under H.R. 1115 because it has not 

been made applicable to the pending cases. 

Don’t you feel that H.R. 1115 should apply to pending cases that 

have not been certified as class actions? 

Mr. BEISNER. It seems to me that that is something the Committee should consider during the markup process. I think there 

are a lot of cases out there that are posing these problems. I also 

think that there is legitimate concern about the potential that, if 

the bill is enacted, you will have many new cases that will be filed 

just before the effective date of the statute. We have seen that happen in other situations, so I think that is something that the Committee should seriously consider. 

Mr. SMITH. Okay. Thank you, Mr. Beisner. I have several more 

questions that I would like to submit to you all in writing and ask 

you to respond within 10 days, if you would. Thank you. 

Now we will recognize the gentleman from Virginia, Mr. Boucher, for his questions. 

Mr. BOUCHER. Thank you very much, Mr. Chairman. 

Mr. Beisner, I also have some questions for you. First of all, I 

would appreciate it if you could survey the landscape that perhaps 

may have involved changes during the course of the last 2 years 

since this Committee had its last hearing on class action reform 

legislation. Have the problems that we are seeking to address increased in volume? Have they decreased? What changes have we 

seen? 

Secondly, before you answer, let me just propound two others, 

and then you can have the balance of the time in responding. 

I would appreciate your response to two of the arguments that 

Mr. Wolfman has raised. First, he has suggested in his testimony 

that if this bill passes there will be a flood of cases entering the 

Federal courts, and that increased volume of Federal court litigation would constitute a tax on resources and disadvantage other 

litigants. 

Could you respond to that and let us know if, in your view, that 

is likely to happen; and if not, why not? That would be helpful. 

Third, Mr. Wolfman has objected to the provision in the bill that 

provides an appeal as a right on an interlocutory basis for decisions 

to certify or not to certify classes in Federal court, and has suggested that this appeal as a right would disadvantage consumers. 

My personal view is that it would actually help to protect the interests of consumers, but I would appreciate your statement as to 

whether you agree or disagree, and why. 

So those three questions, and I would appreciate your answer. 

Mr. BEISNER. As to question number one, I think the situation 

with State court class actions certainly has not improved over the 

41

last few years, and I think there are clear indications it has gotten 

worse. The volume of cases, from all indications, in magnet courts 

based on the studies that have been done are increasing dramatically in a number of locations. 

The problem that was noted by several of the speakers about 

particular courts dictating the laws of other jurisdictions seems to 

be continuing. For example, just within the last month the Supreme Court of Oklahoma affirmed a trial court decision that says 

that the law of one State in that particular case shall be applied 

to the class members who hail from all 50 States. 

So if you bought a vehicle, which was the matter at issue in that 

particular State, in Massachusetts, the law that you thought was 

going to apply when you bought that car, presumably the law of 

Massachusetts, won’t; according to the law of Oklahoma, the law 

of some other jurisdiction will be imposed. 

So I think that the concerns that have been expressed here are 

actually growing worse. 

With respect to the allegations about the flood of class actions 

into Federal court, I guess I would make three points. 

One is that I think that there is an erroneous assumption that 

all class actions will be removed to Federal court. Defendants, as 

it stands now, don’t always remove cases that they can remove to 

Federal court, and I don’t think that that will necessarily occur 

here. It is expensive to remove cases to Federal court. I think they 

will make a judgment and in some cases they will, in some cases 

they won’t. 

Secondly, I think the notion of a flood is overstated, because so 

many of the class actions that are filed now are copycat class actions. The record documents that in many instances you will have 

a single issue, and you will have 100 virtually identical class actions filed in courts all over the country with all these judges out 

there litigating the same cases over and over again, with a dramatic duplication of effort. 

If this bill was enacted, those cases presumably would be in Federal court and could be drawn together very efficiently before a single Federal judge, and I think thereby obviating any of the workload concerns that would be there. 

Finally, I would note that I think that the workload concerns are 

overplayed and they ignore the great burdens that are faced by our 

State courts. For example, I note the statistics indicate that, on average, in most jurisdictions, each statutory judge is assigned, on 

average, over 1,500 new cases a year compared to an average of 

454 new cases to our Federal judges last year. 

I think that these concerns about workload ignore the fact that 

class actions are burdening the entire system and are focusing too 

much on the impact on the Federal judges. 

On the appeal of right issue, I would simply note the following. 

I think that the concerns expressed by Mr. Wolfman ignore the fact 

that a class action—if the class certification is denied, that may be 

appealed under this bill to Federal court or to the appellate court, 

as well. 

As it stands right now, the plaintiffs have to wait to the very end 

of the case, try the claims, and they never get a chance to appeal 

that, whereas under this bill that could be done right away, which 

42

would, I think, hasten the termination of the litigation and the resolution of the rights of all the parties. 

Mr. BOUCHER. Thank you very much, Mr. Beisner. Thank you, 

Mr. Chairman. 

Mr. SMITH. Thank you. 

The gentleman from North Carolina, Mr. Coble. 

Mr. COBLE. Thank you, Mr. Chairman. I have two meetings 

going on simultaneously, so I have to run back and forth. Good to 

have you all with us, gentlemen. 

Let me put a two-part question to you, Mr. Dinh. 

Opponents of the bill contend that the passage of this bill will 

result in the complete federalization of class action standards. Let 

me hear your response about that question. 

And let me follow up with another question. Are opponents of the 

bill correct in suggesting that the bill would result in another sort 

of federalization; that is, Federal courts dictating substantive State 

law? 

Mr. DINH. Thank you very much, sir. I will take the second question first, because it is much simpler to answer, and then I will 

take the first part second. 

With respect to the substantive law, absolutely not. The class action mechanism is simply a procedural mechanism in order to aggregate claims under the applicable laws. H.R. 1115 in no way 

seeks to alter the substantive law that would apply, or even the 

choice of law rules that would apply when the case is heard in Federal court. The choice of law and substantive law would depend on 

the traditional State laws of the applicable forum State. 

With respect to the federalization of class action standard, yes, 

the bill does amend existing Federal law; that is, rule 23(f) of the 

Federal Rules of Civil Procedure. That law is Federal in nature because the rule applies only in Federal court. 

It does expand the jurisdiction of the Federal courts by changing 

the current rule of total diversity to one of minimal diversity. We 

think that this expansion advances the Federal interest not only in 

uniformity of class action procedures, but, much more importantly, 

in the protection of individual State interests. 

Currently, the system exists whereby one State can impose its 

judgment, and thereby alter the law of the other 49 States. I think 

one of the more celebrated cases is the case in Illinois, whereby in 

a case regarding the after-market auto parts in a nationwide class 

action, that court approved a settlement that was opposed by the 

Attorney General and the Governors of a number of States, as well 

as defendants and plaintiffs, simply because that judgment altered 

the autonomy and regulation of a number of those States. 

So in that sense, the Federal interest here is strong or only—not 

at all in imposing Federal substantive law, but in protecting the 

substantive law of the various States. 

Mr. COBLE. Thank you, Mr. Dinh. 

Mr. Wolfman, Mr. Beisner addressed the question about increased workload. Let me give you a chance to insert your oars into 

these waters. 

Do you believe that the concern about increased workload that 

will be imposed upon Federal judges is a valid one, and do you beVerDate 0ct 09 2002 10:20 Jun 25, 2003 Jkt 000000 PO 00000 Frm 00046 Fmt 6633 Sfmt 6601 G:\WORK\FULL\051503\87093.000 HJUD1 PsN: 87093
43

lieve that enactment of this bill will significantly affect the speed 

or pace at which cases move through the Federal court system? 

Mr. WOLFMAN. I do, and here is why, sir. You can’t just look at 

these cases and say, well, there are going to be 3,000 more cases. 

It is the difficulty and complexity of these cases. They are complicated cases, they are important cases. So in our experience, we 

litigate principally in the Federal courts all the time, the delays are 

getting greater. 

Let me say one other thing. I think this is driving the Judicial 

Conference’s opposition in part to this legislation over the years. It 

is not just the federalism concerns, although that is important; but 

they are concerned that not all of these cases that would be transferred under this bill comes from the Federal court, and a much 

more balanced, narrow approach should be taken. 

Mr. COBLE. Mr. Mirel? 

Mr. MIREL. On the issue of whether it is going to affect the State 

courts? 

Mr. COBLE. Yes. 

Mr. MIREL. The problem Mr. Dinh talked about having decisions 

in one State court undo the carefully put together legislation that 

I and my fellow commissioners have to deal with every day in our 

jurisdictions is a very serious concern. 

We have to look at the large picture. We have to make sure not 

only that a particular plaintiff is made whole, but that the insurance system continues to function and function well on behalf of all 

the policyholders we are supposed to protect. It is hard to do when 

you have a State court in another State overturning decisions we 

have made. 

Mr. COBLE. Thank you, sir. 

Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Mr. Coble. 

The gentleman from Virginia, Mr. Scott, is recognized for his 

questions. 

Mr. SCOTT. Thank you, Mr. Chairman. 

Let me just set an idea. If you catch a corporation stealing a lot 

of money, but just a little bit from each person, and you want to 

get them—let’s see how this thing works. 

First of all, when can a group of defendants or one defendant remove? What is the latest they can actually remove? 

Mr. Dinh, are you representing the Department of Justice today? 

Mr. DINH. I am, indeed. 

Mr. SCOTT. What is the latest that the removal can take place? 

Mr. DINH. I do not know the latest, but I think the removal is 

there available. Perhaps Mr. Beisner can talk to that more clearly. 

Mr. BEISNER. The bill would not change current law, which says 

that you have to remove the action to Federal court within 30 days 

after you receive notification of the justification for removing the 

case to Federal court, which is normally 30 days after—within 30 

days after the action is filed. 

Mr. SCOTT. Now, they said a plaintiff can—somebody who finds 

they are in the class, when they get noticed, after everything is 

done and certified, then the plaintiff can jump up—they can pick 

a plaintiff to get him to remove it, is that right? If you are trying 

to get your case done, what is the latest it can be removed? 

44

Mr. BEISNER. A plaintiff under this bill may remove it within 30 

days after they receive notification of the lawsuit. 

Mr. SCOTT. That could be well down the line? 

Mr. BEISNER. That could be later in the lawsuit, that is correct. 

Mr. SCOTT. Then you get over to Federal court and start arguing, 

and the Federal court makes the decision. Who can appeal? 

Mr. BEISNER. On class certification? 

Mr. SCOTT. Yes. 

Mr. BEISNER. Any party of record in the action may appeal that 

if they are a losing party on class certification. 

Mr. SCOTT. Okay. Now, suppose the original plaintiffs win and 

it gets sent back to State court after the removal, the appeal, back, 

and you finally win. It should have been in State court. Can you 

start all over again and somebody else try to remove it, or is it res 

judicata on the decision that it is not a Federal case? 

Mr. BEISNER. It is res judicata that it is not a Federal case if 

they don’t change anything, if the case in State court isn’t changed 

in any way. 

Mr. SCOTT. So there is no way you can go back and forth between 

the Federal court and the State court, and then somebody trying 

to get you back in the Federal court? 

Mr. BEISNER. If the Federal court determines that jurisdiction 

doesn’t exist over the case and the case is remanded to State court, 

if no facts change in the State court—that is, if the plaintiff doesn’t 

amend the complaint—you can’t remove again. 

Mr. WOLFMAN. Representative, I think what you were referring 

to is the fact that under this bill, if the Federal court decides that 

the case can’t be certified under Federal standards and the case is 

dismissed, and if the same class refiles in Federal court, it will 

then be removed again—in State court, it will then be removed 

again to Federal court and we will be in, I think, what you are referring to as a merry-go-round type of situation; that is correct. 

Mr. SCOTT. Mr. Beisner, is that not true? 

Mr. BEISNER. If you are talking about the court, I think the situation you had posited was the court remands to State court because 

jurisdiction doesn’t exist, I think the answer I gave was correct to 

that. 

I think what Mr. Wolfman is positing is a different hypothetical; 

that is, that the Federal court denies class certification. He is correct that in that situation the case is then dismissed. It doesn’t get 

remanded to State court under the bill, it would be dismissed. If 

the plaintiffs then refile a new action, as it would be always the 

case if it is subject to Federal jurisdiction, it may be removed. 

Mr. SCOTT. So you can go back and forth. 

If you get into Federal court, Virginia has contributory negligence, other States have comparative negligence. 

If it is a tort case, how do you decide which law applies if you 

are in Federal court? 

Mr. BEISNER. The Federal court applies the choice of law principles in the jurisdiction where the action is filed, as it does in any 

diversity case, and as any State court would be obliged to do. 

Mr. SCOTT. Where it is filed? 

Mr. BEISNER. Yes. 

Mr. SCOTT. So you are applying State law. 

45

Mr. BEISNER. If it is a State law based claim, you would be applying State law, and you would decide which law applies to the 

particular claims in the action based on the choice of law principles. 

Mr. SCOTT. The Federal court may have to certify the question 

back to the State court to find out what the State law is? 

Mr. BEISNER. As would a State court if it was having to deal with 

the law of another jurisdiction. That is the problem we are dealing 

with here, is that often you will have an Illinois court trying to figure out what the law of Oregon is because that is what applies to 

these claims. 

The problem is that a lot of State courts don’t have authority to 

ask the courts of those States what their law is, they just have to 

make a decision. The Federal courts, though, have a greater ability 

to ask the State courts of the other jurisdictions what their laws 

are and what law should be applied. 

Mr. SMITH. Thank you, Mr. Scott. 

The gentleman from Arizona, Mr. Flake, is recognized for his 

questions. 

Mr. FLAKE. Thank you, Mr. Chairman. Forgive me for coming in 

late, and forgive me if some of these questions have been addressed. 

Mr. Beisner, the Supreme Court approved some changes to rule 

23 that may or may not be compatible with this legislation. 

In your opinion, are the changes to rule 23 helpful to the class 

action or are they compatible with this legislation, and how does 

it mix? 

Mr. BEISNER. The changes that the Supreme Court has sent over 

to Congress, I think, are indicative of the reason why this bill is 

so important, because the Federal courts have been taking these 

issues of class action abuse very seriously. They have adopted these 

rule changes, which would go into effect under normal procedures 

in December of this year, and I think they indicate the dedication 

of the Federal courts to addressing class action abuse problems. 

My view is that the rule changes are complementary of what is 

in the bill. I do think the Committee should take a careful look to 

ensure that there are no conflicts between the two. I think that the 

consumer protection provisions of the bill are actually quite complementary of what the Supreme Court has sent over to Congress, 

but I would encourage a review of that. 

I would further encourage the Committee to put a provision in 

the bill that would accelerate the effective date of those amendments to be consistent with the effective date of the law if it passes 

so that those new Federal provisions, which I think are an improvement in the class action context, would be applicable simultaneously with the effective date of the bill. 

Mr. FLAKE. All right. 

Another question. Many of us, I think all of us, have constituents 

who find out that they are part of a class action class and it is too 

late for them to opt out, or they receive notices that they simply 

don’t understand and throw it away. 

Does this legislation address that concern? 

Mr. BEISNER. Yes. The legislation has in it provisions thatit 

would improve the notice that is being sent to class members: a reVerDate 0ct 09 2002 10:20 Jun 25, 2003 Jkt 000000 PO 00000 Frm 00049 Fmt 6633 Sfmt 6601 G:\WORK\FULL\051503\87093.000 HJUD1 PsN: 87093
46

quirement that it be in plain English; an encouragement to courts 

to provide clearer notice to class members. 

I would note that the rules that have come over from the Supreme Court also have provisions of that sort in them, as well, and 

that, in particular, would be the area where I would urge that a 

review be made to ensure that they are all consistent. 

But I think together what is in the bill and the Federal rule 

change provisions are all intended to make sure that people understand what their rights are in class actions, and can timely take 

action to deal with them. 

Mr. FLAKE. Mr. Mirel, I am interested on your opinion of the effect of this legislation on the insurance industry. 

Mr. MIREL. On the insurance industry? 

Mr. FLAKE. Yes. 

Mr. MIREL. I think it will give the insurance industry a chance 

to contest some of these suits on the merits, with more hope of having a fair hearing than happens in some of the State courts where 

they are now filed. 

[11:01 a.m.] 

Mr. MIREL. I think that—I mean, there is no guarantee, of 

course, of fairness in any court, including Federal courts. But I 

think that Federal courts with appointed judges have a broader 

viewpoint and are more likely to weigh the merits more fairly. 

Even on procedural issues now, the industry often settles cases for 

multimillions of dollars because the procedural hurdles of getting 

heard on the merits are so high that they really haven’t got a 

chance. And that would, I think, be helped by this bill. 

Mr. FLAKE. Thank you, Mr. Chairman. 

Mr. SMITH. [Presiding.] Thank you, Mr. Flake. 

The gentleman from New York, Mr. Nadler, is recognized for his 

questions. 

Mr. NADLER. Thank you. 

Mr. Dinh, I am going to ask a number of questions, so please answer briefly, if you can. 

Mr. DINH. If I can. 

Mr. NADLER. You state that the removal to Federal court—well, 

one objection to this is that removal to Federal court could leave, 

as was said a moment ago, could leave a litigant, the plaintiff, 

shuffling from State to Federal court and back if they meet the 

State certification requirements but don’t meet the Federal certification requirements. 

Why not say that the Federal court shall apply the State certification requirements and not have to develop a Federal common law 

certification? I mean, if you are suing in New York, if you have 

an—why shouldn’t—if the plaintiff—if the suit is filed in New York 

and removed from New York courts, why not have the Federal 

court apply the New York certification requirements? 

Mr. DINH. I think the simple answer is that the courts of the 

United States apply the procedural rules of the Federal courts. 

And, the normal choice of law only apply to substantive rules, not 

procedural rules. And rule 23——

Mr. NADLER. But of course—excuse me—certification is a substantive rule in effect. 

Mr. DINH. Certification——

47

Mr. NADLER. It tells you whether you can have a class action suit 

or not. 

Mr. DINH. If——

Mr. NADLER. Unless your real purpose is to eliminate class action 

suits, why not allow the application of the State certification? 

Mr. DINH. Sir, with respect, I think rule 23 is a procedural rule. 

That is why it is a rule rather than a law. And whether or not to 

determine——

Mr. NADLER. Would you object to an amendment to allow to have 

the Federal courts apply the State certification rule? 

Mr. DINH. I would not object to anything you do, but I think that 

would just——

Mr. NADLER. Well, would the Administration support or oppose 

such an amendment? 

Mr. DINH. I think that the entire purpose of the bill would be vitiated by such an amendment, because it would not serve any purpose, in that——

Mr. NADLER. So what you are really saying is that the purpose 

of the bill is to vitiate State certification rules. 

Mr. DINH. No, sir. The purpose of the bill is to reform a class action mechanism that——

Mr. NADLER. But that is rhetoric. I mean, you just said the entire 

purpose of the bill would be vitiated if the bill were amended to 

apply—to instruct the Federal courts to apply State certification 

rules. 

Mr. DINH. The purpose of the bill is to reform the class action 

mechanism by amending Federal rule 23, as Mr. Beisner noted. If 

you amend Federal Rule 23 but then make it inapplicable to a majority of cases, then there is no point in amending rule 23. That is 

my point. 

Mr. NADLER. Well, the bill does a lot of other things besides that. 

All right. So basically you are saying, in effect, that the admittedly 

much more difficult—Federal certification, which is more difficult 

than many States’, should apply. And that is one of the purposes 

of the bill, which is to make it harder to get a class certification. 

Correct? 

Mr. DINH. In order to protect——

Mr. NADLER. Whatever reason. 

Mr. DINH. And also——

Mr. NADLER. Sir, yes or no? 

Mr. DINH. That the Federal rules apply in Federal court. 

Mr. NADLER. And you will concede that the Federal certification 

rule is much tougher than many State rules. 

Mr. DINH. I have not conducted a survey of all 50 States’ certification rules. I do know that the Federal certification rule asked—

propounded in the bill, is to ensure that certifications are done to 

protect the interests of consumers and victims. And that is why we 

support this bill. 

Mr. NADLER. Okay. I will take that as a—since everybody knows, 

whether you claim ignorance or not, that Federal certification rules 

are much stricter than many States’, that the Administration intends and that the proponents of this bill intend that many suits 

that are certified under State law should not be certified. 

48

Let me ask you a second question. This bill, unlike prior versions 

of the bill, this year’s version would define private Attorney General actions as class actions and allow them to be removed to Federal court if filed in State court. Now, California for instance has 

a section 17,200, which has proved an important tool for victims of 

unfair and deceptive business practice. The legislature has apparently seen fit to allow private parties to combat corporate fraud 

and other malfeasance on the theory that the California attorney 

general does not have the sources to do it all on their own. 

Until this bill, federalism says that that is California’s choice. 

This bill would override that State policy choice and transfer California private attorney general’s actions to Federal courts where 

they would automatically be deemed class actions and be subject to 

the certification criteria and Federal standing requirements. 

Why is it necessary to do that, in effect abolish the California 

and other States’ private attorney generals sections, which has not 

been in prior versions of this bill? 

Mr. DINH. I think the principle is very simple. If it looks like a 

duck and quacks like a duck, it is a duck and should be treated 

as such. Whether—— Mr. NADLER. And would Mr. Wolfman comment on that? Thank 

you. 

Mr. WOLFMAN. I mean, it is not a duck. That is the problem. I 

mean, these are different types of actions. They have a different 

view of standing. It is very consistent with your previous question, 

which is, some States apply class certification rules differently. The 

State of California has deemed it important that private attorneys 

general can get into court—— Mr. NADLER. Thank you. Let me ask one more question of Mr. 

Dinh before my time runs out. 

You talk, all the proponents of this bill talk about abuse of settlements that—coupon settlements, other settlements that give nothing to the plaintiffs and give everything to the lawyers. Yet this 

bill, aside from saying that the courts should have a hearing on 

whether the fair—the settlement is fair, adequate, and reasonable, 

does nothing about that. But, of course, the courts already hold 

hearings on whether it is fair, adequate, and reasonable, and find 

these coupon settlements to be fair, adequate, and reasonable. So 

why does this bill do nothing about that problem? 

Mr. DINH. I think part of the Bill of Rights under section 3 includes the provision whereby the—where they are what I call the 

net gain/net loss benefit. That is where a noneconomic benefit purports to outweigh the economic cost that the class members have 

to pay, that that has to be made explicit, and it has to be substantial——

Mr. NADLER. Mr. Wolfman is shaking his head. 

Mr. WOLFMAN. Well, I mean, that is a different provision. That 

is not the coupon provision. The coupon provision does absolutely 

nothing. The net gain provision is just a different ball of wax. 

Mr. NADLER. So this bill does nothing about this problem, which 

is allegedly one of the main reasons for this bill. 

Mr. WOLFMAN. That is absolutely correct. 

Mr. NADLER. Thank you. 

Mr. SMITH. Thank you, Mr. Nadler. 

49

The gentlewoman from Pennsylvania, Ms. Hart, is recognized for 

her questions. 

Ms. HART. Thank you, Mr. Chairman. 

I have a couple of questions I guess initially to Mr. Beisner. 

There appear to be, as we have discussed—I happen to agree— abuse of diversity jurisdiction rules. What in your mind was the 

original intent of those rules to begin with? 

Mr. BEISNER. I think the original intent of the concept of diversity jurisdiction was to allow to be heard in Federal court major 

disputes among citizens of different States. And, nothing satisfies 

those criteria more than class actions. 

Ms. HART. So, in your opinion, the original intent ought to be 

carried out as a result if this bill becomes law? 

Mr. BEISNER. I think if the framers were making the list of cases 

that they thought should be in Federal court, and if class actions 

had existed back in the late 1700’s, as they do now, these would 

be at the top of the list of the cases they would want to move there. 

They are classic interstate controversies. 

Ms. HART. Thank you. Critics say that moving these class actions 

to Federal court might result in fewer classes actually being certified, which, in their explanation, would deprive the consumer of 

an important tool for bringing these small claims. How would you 

respond to that criticism? 

Mr. BEISNER. I don’t think there is any basis for that assertion 

at all. Mr. Nadler stated earlier that the standards for class certification in State courts are more lax than they are in Federal courts. 

I happen to strongly disagree with that. The Federal courts invented the current form of class actions in adopting rule 23. The 

vast majority of States have adopted that rule virtually verbatim. 

A couple States, maybe arguably, have laxer standards, some have 

slightly more stringent standards. But by and large the rules are 

quite similar. 

And before the Senate, Professor Dellinger last year submitted a 

substantial amount of information about the certification of classes 

in Federal court. And, the assumption that classes don’t get certified in Federal court is just absolutely wrong if you look at the 

record that he submitted. 

Ms. HART. Okay. So that will avoid—well, excuse me. It won’t 

avoid cases that are legitimate then being filed? 

Mr. BEISNER. I think that legitimate cases, where the certification requirements are satisfied, will be certified. And the requirements bump up against due process requirements. I don’t think 

you can go much further constitutionally than what the Federal 

courts permit. 

Ms. HART. Okay. Finally, I just want to touch on the issue of 

copycat cases. What has been stated by a lot of those, a number 

of those who support the legislation, is that copycat cases are filed 

in several courts across the country where a group of lawyers will 

get a class certified in one area and another area, and so there are 

a number of cases that are the same proceeding in different venues 

across the country. 

I just want some thoughts on how these cases actually are harmful to consumers and how this problem would be taken care of by 

this legislation. 

50

Mr. BEISNER. I think the cases are harmful to consumers because 

what you have then are lawyers competing to settle the case for the 

cheapest amount. I have personally had calls from lawyers saying, 

you know, we will give you, your client, the best deal in terms of 

making a settlement so long as I get my fees out of it. 

Ms. HART. Okay. 

Mr. BEISNER. And this bill would prevent that by putting these 

cases together before a single judge where that sort of reverse auction situation can’t occur. 

Ms. HART. That is a good thing. 

I would like to ask Mr. Dinh also a question regarding the goal 

of the legislation, making sure—and, in fact, Mr. Beisner as well, 

if you have thoughts on this—being sure that the injured party, 

when there actually is an injured party, receives compensation. 

The concern is the coupon settlements, and that there is really no 

award; that the only award really goes to the lawyers. 

Mr. Wolfman mentioned several Federal cases that have approved coupon settlements. Could you comment on these settlements, and do you think that this bill would actually make a difference and ensure that if cases were moved to Federal court, the 

injured party actually does receive fair compensation as opposed to 

what they receive now in these coupon settlements? 

Mr. DINH. Thank you very much for that question. There is no 

dispute that the class action mechanism is not only necessary but 

essential to efficient functioning of the legal system by aggregating 

small claims and providing proper incentives for those claims to be 

properly heard so that wrongdoing is deterred and victims are compensated and consumers thereby protected. 

I think that the form of compensation, of course, can take cash, 

noncash, or structural reforms. The entire panoply of remedies is 

available in Federal courts just as they are in State courts, I think. 

But this bill goes a long way to ensure that such compensation, 

whatever form they take, go to the benefit of the consumers and 

the victims rather than to the intermediaries in the system. 

Ms. HART. Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Ms. Hart. 

The gentlewoman from California, Ms. Sa ́nchez, is recognized for 

her questions. 

Ms. SA ́ NCHEZ. Thank you, Mr. Chairman. I might ask that I reserve my right to ask questions and allow somebody else to go 

ahead of me. 

Mr. SMITH. We will be happy to accommodate the gentlewoman 

from California, and instead recognize the gentleman from North 

Carolina, Mr. Watt, for his questions. 

Mr. WATT. Thank you, Mr. Chairman. I thank the witnesses for 

being here. 

I confess to believing that we are elected to come here from various backgrounds and experiences to try to put things like this in 

the context that we have experienced in life. And I will say to each 

of the four gentlemen who testified that there are aspects of what 

each of you have said that I can identify with, but there are also 

some aspects that I am having trouble identifying with. 

I detect not only in this legislation but in a number of different 

areas a growing arrogance about the Federal Government and its 

51

role vis-a-vis the States. And it seems to me, particularly in light 

of what Mr. Beisner said, if you take Federal rule 23, it is essentially the same rule that governs actions in States. Theoretically, 

if that is the case, you should be getting the same result whether 

you are in Federal court or State court. And there is just genuine 

arrogance, I think, in the belief that somehow the Federal court is 

going to give you a different or better or worse result. 

And I relate to that, because I actually started my law practice 

in 1970 assuming that the Federal courts would give you a much 

better result. So I had that arrogance for a number of years but 

at least it was based on some historical experience. We were litigating a lot of civil rights cases, and a lot of the southern judges 

didn’t necessarily give you the same result that what we believed 

were more enlightened Federal judges would give you if you filed 

your case in Federal court. There was a time in which we changed 

our view of that for a couple of different reasons: Number one, the 

people who were being appointed to Federal courts didn’t necessarily keep pace, and the people who were appointed to State 

court judgeships started to catch up and equalize. 

So, I mean, I just don’t have this kind of arrogant feeling that 

somehow everything is better if it is done in Federal court. And my 

experience is such that most of the class action notices and opt-in 

or opt-out letters that I get saying you can be a member of this 

class or you can opt out of the class, are actually coming from Federal courts. They are not coming from State courts. 

So I guess the question I would address to Mr. Wolfman and Mr. 

Beisner—not to discriminate against the other two gentlemen—I 

would just like to hear the different sides of it. 

Mr. Beisner, how could you say that the rules are essentially the 

same, yet the result is going to be somehow different? 

And then, Mr. Wolfman, would you give me the other side? I presume there will be another side to what he says. 

Mr. BEISNER. I want to respond, first of all, by noting I don’t 

think this is a Federal courts are better than State courts discussion. What we are seeing is, and the studies indicate this, there are 

certain magnet State courts that are drawing huge—— Mr. WATT. So this is in response—this legislation is in response 

to a couple of really bad situations, and we are letting the tail wag 

the dog? 

Mr. BEISNER. No. It is more than a couple. It is quite a few. But 

it is like certain counties in certain States that are drawing these 

cases. 

Mr. WATT. Oh, that is even worse; we are letting the tail wag the 

dog. 

Mr. BEISNER. Well, it is a dog that is eating a lot of consumers, 

and it needs to be addressed. And you are having particular courts 

that are basically setting themselves up as supreme courts of class 

actions. We have discovered one place, this Committee heard testimony several years ago of one court—— Mr. WATT. Can you answer the question, because the Chairman 

is going to cut me off here. 

Mr. BEISNER. Well, I would simply say I would not view it as 

completely a comparison of the two, and let Mr. Wolfman give his 

comments. 

52

Mr. WOLFMAN. Well, let me just say—I mean, I jotted down what 

Mr. Mirel said, and I am quoting: He said ‘‘The Federal courts are 

more likely to do these cases more fairly.’’ And that is just not my experience. And this is a slap in the face 

to the State courts. There is a limited role when there are overlapping classes for Federal jurisdiction. This bill, though, essentially 

takes them all from State court and moves them into Federal court. 

And that is just not what we ought to be doing. 

Mr. WATT. Thank you, Mr. Chairman. 

Mr. SMITH. Thank you, Mr. Watt, for your questions. 

The gentleman from Virginia, Mr. Goodlatte, is recognized for his 

questions. 

Mr. GOODLATTE. Thank you, Mr. Chairman. 

First let me clarify that that is not the case at all. This bill gives 

the Federal court judge the discretion to send any of the cases back 

to State court if they think it is appropriate. The amendment offered in the Senate has a clear definition of cases that will stay in 

State court because they are predominantly State court actions. 

But, Mr. Mirel, let me just ask you. You say on page 6 of your 

testimony that our Constitution properly assumes that the States 

are fully capable of interpreting their own laws and handing out 

justice impartially. I certainly agree with that assertion, but when 

it is applied to that State’s dealings with its own citizens. 

However, wouldn’t you agree that article 3 of the Constitution indicates that the framers foresaw and were concerned about potential conflicts of interest arising when a State court is adjudicating 

a claim between one of its own citizens and a citizen from a different State? 

Mr. MIREL. You directed that question to me, but I don’t believe 

it was my testimony. 

Mr. GOODLATTE. Oh. Mr. Wolfman. I am sorry. Did you hear the 

question, Mr. Wolfman? 

Mr. WOLFMAN. It was directed to Mr. Mirel, you had used his 

name. And if you—— Mr. GOODLATTE. I apologize. The question to you is, you said in 

your statement that the Constitution properly assumes that the 

States are fully capable of interpreting their own laws and handing 

out justice impartially. And I fully agree with that. And I don’t 

think that this legislation at all impugns the ability of the States 

to do that. But article 3 of the Constitution clearly recognizes, in 

my opinion—and I want to know if you share that opinion—that 

the reason for having diversity jurisdiction and the reason for allowing Federal courts to handle disputes between different citizens 

of different States is to address the very problem that it cannot be 

addressed in class action lawsuits today because of the $75,000-

per-plaintiff requirement to remove the most abundantly diverse 

cases to Federal court. 

Mr. WOLFMAN. Well, I agree with you in principle but not in the 

reality. Let me use just one very brief example. Take for instance, 

a case where all the plaintiffs are from Kentucky and they sue 

Ford in Kentucky. I understand that formally Ford is a citizen of 

Delaware and Michigan, but they have a plant in Kentucky. And 

to say that that is an interstate case just because—just to give it 

that name I think defies reality. 

53

And as I have said in my testimony, there is a limited role for 

overlapping our national classes to have limited Federal jurisdiction. But to bring all of these, what I consider essentially in-State 

cases into Federal court, I think is a mistake. 

Mr. GOODLATTE. Well, I think that is an example that is not 

based on an actual case. Let me give you two that are based in on 

actual case. You have got the State Farm case brought in an Illinois court. One Illinois judge decides that it is inappropriate for 

State Farm to be requiring the use of aftermarket parts, even 

though some States like Massachusetts require insurance companies to use aftermarket parts. But this one judge in one State has 

overridden the laws of 49 other States. 

A second example, the same thing: The case that I mentioned in 

my opening statement is Massachusetts Mutual Life Insurance before a State court judge in New Mexico who has held that not only 

Massachusetts Mutual but dozens of other national life insurance 

companies who sell insurance where you can either pay a lump 

sum up front or you can pay in installments, because they don’t—

even though it is plain on the face of the bill that the combined 

total of the 12 monthly payments or four quarterly payments is 

more than the up-front, because they didn’t spell that out in the 

bill, that that is a violation of the law, and that they should pay 

damages; whereas all 50 insurance commissioners, including the 

Insurance Commissioner of New Mexico, have held to the contrary. 

Now, he certainly has the ability as a court judge in New Mexico 

to override his own insurance commissioner. But why should he 

have the authority to override the other 49 insurance commissioners in making that finding, which is going to cost billions of 

dollars to those insurance companies and to the owners of those insurance companies, including me? 

Mr. Beisner, do you want to respond to this example? 

Mr. BEISNER. Yes. And I think it is a great example, because it 

illustrates exactly why that sort of case ought to be in Federal 

court. You have a class action where thousands, as I understand 

the example correctly, of Kentucky residents are suing Ford—got 

a plant there, but it is fundamentally an out-of-State company. The 

judge is looking at this. You have got a case brought by thousands 

of voters who are going to determine whether that judge stays on 

the bench or not. Now, I think most State court judges wouldn’t let 

that affect them, but you have the appearance that it might. 

And that is exactly what article 3 was getting at, is that when 

the home-State folks are electing and selecting the judges, that is 

not the person you want deciding a case against an out-of-State 

resident who can’t vote for the judge. 

And that is exactly what diversity jurisdiction is about, and I 

think that is why that is a classic example of exactly the kind of 

case that ought to be in Federal court to avoid any potential, even, 

appearance of bias whether it exists or not. 

Mr. GOODLATTE. I thank the gentleman, and I thank the Chairman. 

Mr. SMITH. Thank you, Mr. Goodlatte. 

The gentlewoman from California Ms. Lofgren is recognized for 

her questions. 

54

Ms. LOFGREN. Thank you, Mr. Chairman. There have been many 

good questions asked today. And before I ask mine, I will need to 

say that I think there are legitimate concerns about certain elements of class action activity. I think that there are problems that 

need a remedy, but I am not at all convinced that this bill is the 

appropriate remedy. 

And I guess I was ‘‘bemused,’’ I guess is the word, that when 

California Attorney General Bill Lockyer and Chief Justice William 

Rehnquist agree that they oppose a bill, it does cause you to pay 

some attention to the fine print to find out why. 

I want to ask actually a rather narrow question, and it relates 

to the impact of this proposed legislation to California in particular. As you know, the bill would federalize cases brought under 

California Business and Professions Code, section 17–200. California, like many other States, has enacted strong consumer protection and antitrust laws that prohibit unfair combinations and unlawful restraints of trade. But in California, in addition to the 

State attorney general, which has been acknowledged in the bill, 

local district attorneys are permitted to enforce the code section, as 

are individuals. And this bill I think would usurp California’s 

choice in that matter. 

I am wondering—well, and actually I was—the last time a similar bill was considered in the House, I mentioned a case brought 

by the district attorney of San Francisco against Providian Bank 

that actually resulted in a payment of more than $300 million to 

consumers because of deceptive practices. And that is not chump 

change, in my judgment, nor is that a frivolous case. I mean, that 

is a significant settlement. And I believe that under the proposed 

legislation, that type of action by a district attorney would be preempted. 

So I guess my question to you, Mr. Dinh, would be: Would the 

Administration support a change to the proposed legislation that 

would permit district attorneys and individuals to be exempt from 

the provisions of the act? 

Mr. DINH. Thank you very much, Congresswoman. I know that 

that concern is a significant one for the State of California. Senator 

Feinstein has raised a similar concern on this particular provision 

on the Senate side, and we are very cognizant of those concerns. 

Earlier I said that the bill seeks to make things that look like 

class action to be treated like class actions. And I think that the 

class actions of other States are similar to that, and in some respects section 17–200 is like that, because it allows one citizen to 

be representative of the entire population, so the entire population 

is the class, if you will, and the citizen bringing suit is the representative class member. And so in that respect it is quite similar. 

In another respect, as you pointed out, where it is not a private 

attorney general but actually a public attorney general, he or she 

doing the protection of the public good, I think there may be some 

distinction. And we would welcome any opportunity to review modifications that you or Senator Feinstein may have, and will work 

out the details. 

Ms. LOFGREN. Well, don’t get me wrong. I think there are problems with the bill anyhow, which is why the Chief Justice opposes 

it relative to its impact on the court system. But, I do believe that 

55

on page 15 of the bill, to outline State attorney generals but to 

overlook district attorneys just doesn’t to me make any sense, and 

I would hope that that—I will offer an amendment relative to that 

when we—if we mark up—and I would hope to get the Administration’s support. 

And before my red light goes on, I would just like to offer my 

congratulations to you for your return to your career teaching law. 

That will probably be a lot more fun than what you have done in 

the last several years. 

Mr. DINH. A lot more fun but not as important. I thank you very 

much for the congratulations. 

Ms. LOFGREN. Thank you. 

And I yield back, Mr. Chairman. 

Mr. GOODLATTE. [Presiding.] The gentlewoman from California, 

Ms. Waters. 

Ms. WATERS. Thank you very much. 

Mr. Dinh, when did the Department of Justice realize there was 

a crisis in State court action litigation, class action litigation? 

Mr. DINH. I cannot tell you exactly when in the collective consciousness we made the realization. But I do know that we have 

participated in these class actions as the litigator for the Federal 

Government for a number of years. 

Ms. WATERS. Is Mr. Goodlatte carrying this bill because the Department of Justice realized there was a crisis and put together 

something and asked him to carry the bill? 

Mr. DINH. I do not know the exact derivation of the feedback loop 

in legislation here, but I do recall specifically drafting or supervising the drafting of the support letter in the last—107th Congress. 

Ms. WATERS. Has the Department of Justice done a study that 

documents this crisis that you have come to realize in some way? 

Mr. DINH. We have relied upon the very excellent studies that 

are conducted, for example, by the Institute of Civil Justice at the 

RAND Corporation as well as a number of other empirical studies 

done—— Ms. WATERS. So it was these studies that you put together and 

decided to use to ask Mr. Goodlatte to help you to deal with this 

crisis? 

Mr. DINH. I do not think that a specific request was made to Mr. 

Goodlatte for his leadership, nor Mr. Boucher, for their leadership. 

But I think that—— Ms. WATERS. Okay. And I hate to seem as if I am cutting you 

off, but once you get past the first sentence I kind of get it. Let me 

ask, have you done any studies to determine the impact of this legislation on the caseloads in our Federal courts? 

Mr. DINH. We have not. But let me say that the Judicial Conference has proposed an additional bill in order to increase the 

number of judges in our Federal system, and the present Attorney 

General has expressed support for such a measure. 

Ms. WATERS. So you have not done a study to determine that 

there is a crisis. You did not organize a response to a crisis that 

you suspected by asking Mr. Goodlatte or any other legislator to 

carry this legislation. This legislation basically originates from the 

private sector. You don’t know the impact that it is going to have 

56

on the Federal courts, but you are willing to advance the notion 

that there needs to be more Federal judges to take care of a perceived increase in the caseloads. 

Mr. DINH. No, ma’am. My answer to the last question is in response to the current judicial need that the Judicial Conference has 

noted with respect to derivation of this legislation and its support. 

We know a good idea when we see one, and it does not necessarily 

have to come from our own head for us to support it. We have no 

pride in authorship. 

Ms. WATERS. It would be helpful, even though you may have a 

greater sense of what a good idea is, to come with some documentation for the good idea, so that some of us could understand the nature of the crisis and the degree that the crisis is supposedly being 

described. 

All right. 

Mr. DINH. I would refer you to the letter of Assistant Attorney 

General Dan Bryant to Chairman Sensenbrenner in the 107th Congress with that documentation as to fully explaining our basis for 

support. 

Ms. WATERS. I thank you for that reference. Perhaps it would be 

good for you to be able to cite it so that we could take advantage 

of these hearings when we have it. The whole idea of the hearings 

is to gather as much information as possible, particularly from the 

experts and those who are advancing the legislation. What I am 

unable to determine at this moment is whether or not the Department of Justice who is weighing in on this bill today has really 

done its homework and they have really been involved in doing the 

kind of studies that could credibly come—so they could credibly 

come before this Committee and represent that crisis and what impact it is going to have on the Federal courts. 

Mr. DINH. Let me be very clear about my answer. Even though 

we have not done our specific studies—and it is a matter that we 

are addressing in all of our studies for civil justice—most of our 

work is in criminal justice, and we would like to do more work on 

the civil justice side. We have reviewed the excellent studies out 

there that I think are quite credible and quite excellent. And it is 

in our collective judgment of the Department of Justice and the Administration that we support this bill based on that evidence and 

based on the reforms that are common sense and reasonably advanced by the sponsors of this bill. 

Ms. WATERS. Yes. I understood that. You had said that before. 

Mr. GOODLATTE. The time of the gentlewoman has expired. 

Ms. WATERS. Thank you very much. 

Mr. GOODLATTE. Thank you. 

The gentlewoman from Texas, Ms. Jackson Lee. 

Ms. JACKSON LEE. Thank you very much, Mr. Chairman, and 

thank you very much for hosting this hearing. 

Mr. Chairman, I would ask unanimous consent to submit my 

opening statement into the record. 

Mr. GOODLATTE. Without objection. 

Ms. JACKSON LEE. Thank you very much. 

It is important for the collegiality of this Committee to qualify 

my remarks, because I have the greatest respect for the Chair and, 

57

as well, Mr. Boucher in the work that they have done. And I glean 

that they may be supportive of this legislation. 

But I do want to place in the record that we have been under 

siege. We have literally been under siege. And let me lay out—and 

I may not be as encompassing as I would like to. We have misrepresented to the medical professionals, primarily our good 

friends, the physicians, with a dastardly medical malpractice legislation that is making its way through this body. We have left people who have lost limbs and loved ones dangling in courthouses 

around the Nation on the basis that we are attacking our good 

medical profession in undermining the survival of hospitals. 

In every legislative initiative that we have had, we have ensured 

that the loser has always been the poor petitioner and plaintiff, 

and the winner has been the guy with the money in his pocket all 

the time. In our States across the Nation, we are fighting the proponents of a despotic tort reform that indicates to people who have 

no money in their pocket that the doors of justice are closed to you. 

We now come to this plea of a class action, if you will, debacle 

where we again close the doors of the last bastion to some of us 

of justice. And that is, of course, in some instances, the Federal 

courts. And, of course, the idea of a class action. And when I say 

the Federal courts, the Federal courts in their place and the State 

courts in their place. 

And so I am concerned that we are following a pathway where 

the heavyweights are in charge and the little guys are struggling. 

Let me pose a question to Mr. Wolfman, who I hope is a student 

of what I have said more so than your expertise on class actions. 

Can you—and, again, our time is short—give any substance and 

credence to my limited chronicling of what seems to be happening 

with the justice system around the Nation? 

Let me just add, I remember when we were discussing tort reform here and the Contract With America about 6 or 7 years ago, 

and they cited Alabama and Mississippi, and it was this big hurrah 

that plaintiffs were running into the courtroom and tearing away 

bags of money, similar to what we saw with the Iraqis who took 

billions of dollars out of the tombs that they had there—not the 

tombs, but the safes. And so the claims of America were running 

away and that is why we needed to move. 

I understand that statistics show that the predominant victors in 

any civil case are in fact the defendants and/or the cases are settled. 

So if you would just provide me any anecdotal data, some percentages, or anything of the sort that would contribute to what I 

have just done, given anecdotally, to the fact that we have no crisis 

and that plaintiffs are actually the victims in many instances when 

they are trying to seek justice in our courts. 

Mr. Wolfman, would you, please? 

Mr. WOLFMAN. Sure. Let me give you three quick responses. The 

first is that I think you are absolutely right. The evidence is that 

there are more defense verdicts than there are plaintiff’s verdicts. 

I think that is true. 

The second thing is that if you just look at this legislation in 

terms of one State which the defendants don’t like, California, 

where there is a vibrant proconsumer class action practice, it takes 

58

the private attorneys general actions and moves them to Federal 

court. And it moves all the cases in which Californians sue one—

only one out-of-State corporation under California law, which is the 

province of State—California State courts; it moves them into Federal court as well. 

And finally I will add, I found some irony in Attorney General 

Dinh’s statement that they would rely on the RAND Corporation 

study, because that study found that there was no significant evidence of a crisis in the State courts, and frowned on the notion that 

the way to resolve class action problems was through minimal diversity. 

Ms. JACKSON LEE. Let me—I may get back with you. I want you 

to clarify that California point. But let me get quickly to Mr. Dinh. 

Am I pronouncing that correctly? 

Mr. DINH. Yes, ma’am. 

Ms. JACKSON LEE. Thank you, sir, very much. We are in a budget 

crisis. And I imagine that if these cases were moved to the Federal 

courts—I understand that we are not only in a budget crisis, but 

we are in a log jam on the numbers of district court appointees and 

appellate court appointees. In fact, my good friends in the circuit 

that I am involved in are begging for relief. 

Is the Justice Department and the Federal Government simply 

looking for work? And have you done a financial analysis of the 

cost of this new structuring with respect to new Federal judges, the 

building of new courthouses, and the speed of which—since we 

have developed a log jam both on the Democratic and Republican 

side in terms of the advice and consent of the Senate—of the 

logistical nightmare of trying to deal with these new cases in light 

of the one affirmation or confirmation of a judge per 100 years? I 

think that is about the pace we are moving. But have you done a 

financial assessment? 

And let me do this. Let me request formally a financial analysis 

of this legislation as it relates to building courthouses, new judges, 

offices, staffs, et cetera, as to the impact of this bill. 

Mr. DINH. I take your request very seriously, and we will consider that. Let me start addressing the point that you make by noting, first of all, that the removal to Federal court will significantly 

reduce the multiplicity and duplicativeness of competing class actions in the various States. They can be removed to the Federal 

courts, and where there are multiple removals, they can be consolidated in the current multidistrict litigation mechanism; and so 

therefore the numbers should decrease dramatically because of the 

elimination of copycat or similar class actions being filed. 

With respect to the judicial vacancy crisis that you noted, we 

share your concern. And, of course, the DOJ reauthorization bill 

authorized 15 new judges, primarily in the southwest sector. The 

judiciary has requested 56 additional judges. We are evaluating 

that request in light of the need and also the cost. 

And the President—what the President and Attorney General 

have said is that they are inclined to support the judiciary in its 

request for the additional judges. But we will take the additional 

step that you requested. 

59

Ms. JACKSON LEE. Will the Chairman be kind enough—I see Mr. 

Wolfman is trying to answer—would he be kind enough to yield me 

an additional—— Mr. GOODLATTE. We will give Mr. Wolfman a brief opportunity. 

We are about 21⁄2 minutes over right now. Go ahead. 

Ms. JACKSON LEE. Let me just say this to Mr. Dinh. First of all, 

thank you for your kindness of giving a response back. And the request, of course, doesn’t answer the question. I would like a precise 

cost, but it doesn’t answer the procedure—not the procedure, the 

process of those judges being in place. 

Mr. Wolfman, could you just, as you give that summary of California again, with the creativity of lawyers I would imagine that 

if you can talk about removing the multiparty or the multidistrict 

filing, creative lawyers could find ways to just pile up filings in one 

area, if you will, to stop up the court system on the basis of those 

filings. 

So could you give me that California problem again, or that California issue again? And, if you want to comment on the resource 

question of moving these cases to the Federal court. We are already 

backlogged with drug cases and everything else. 

Mr. WOLFMAN. To be a little clearer on the California situation, 

there is a vibrant in-State class action and private attorney general 

practice in California. It has immeasurably helped the consumers 

in California. These are not principally national cases; these are 

cases brought by Californians under California law, sometimes 

against in-State defendants, sometimes against out-of-State defendants. Under this bill, if there is any principal out-of-State defendant, then the case is going to come into Federal court and obviously 

will increase the numbers. 

I think we are talking about apples and oranges when we are 

talking about the situation Professor Dinh speaks of. There is a 

role for the consolidation of national or overlapping cases. We say 

that in our testimony, we consistently say that. But this bill is 

overkill. It takes the in-State cases and brings them into Federal 

court as well. 

Mr. GOODLATTE. The time of the gentlewoman has expired. 

The gentleman from Michigan. 

Mr. CONYERS. I thank you, Mr. Chairman. It is, I think, your inclination to have another round of questions; is that not correct? 

Mr. GOODLATTE. If time permits. I know there is going to be a 

vote here pretty soon, and that may disrupt everything. But please 

go ahead with yours, and we will see what time allows. 

Mr. CONYERS. Well, we can come back after a vote. I mean, the 

votes don’t stop the Committee from working after the votes. 

Mr. GOODLATTE. We will see what the time allows. I would encourage the gentleman to use the time available. 

Mr. CONYERS. Well, thanks for your encouragement. 

Now, I would like to begin with the gentleman that was working 

with the Department of Justice, I believe, and is now back as a law 

professor. And I——

Mr. DINH. Not yet, sir. I am still representing the Department 

of Justice. 

Mr. CONYERS. You are still working there. 

Mr. DINH. Yes, sir. 

60

Mr. CONYERS. And how much longer will you be there? 

Mr. DINH. Approximately 2 weeks, 1 day, and counting. 

Mr. CONYERS. Okay. 

Ms. WATERS. Thanks for that clarification. 

Mr. CONYERS. Yeah. I am, too, because I remember your generous contribution to the creation of the PATRIOT Act and its 

drafting. 

Mr. DINH. And I remember testifying before you as a law professor prior to that, too. 

Mr. CONYERS. Well, you will be able to come up here even after 

you go back to law school. 

Mr. DINH. I would appreciate the opportunity whenever you need 

help. I mean, testimony. 

Mr. CONYERS. Well, thank you very much. I am glad that you are 

volunteering your services. The first thing we have to do is to find 

a subject that we agree on. 

Mr. DINH. Well, as you recall, my first testimony before you was 

on the Felon Reenfranchisement Act, H.R. 621, I believe, where I 

expressed agreement with your intent, but suggested some ways to 

do it within the constitutional framework of our Government. 

Mr. CONYERS. Well, that is my problem. I am always being unconstitutional and you are being constitutional. 

Now, let me get to the questions at hand, though. I just wanted 

to remember you kindly for the record. 

Now, members of the witness panel, what is not clear to me is 

who is in support of this bill. Since the Federal judiciary is opposed 

to it, starting with the Chief Justice of the United States, the State 

judges, the State judiciary is opposed to it, who in the court systems in America are for it? And I would like to ask Attorney 

Wolfman to guide me here. 

Mr. WOLFMAN. Well, the answer to that is the judiciaries are not 

in favor of this bill. The bill is driven by the defendant corporate 

community. There is just no question about that. 

Mr. CONYERS. Well, in the interest of fairness, what do you say 

to that, Mr. Mirel? 

Mr. MIREL. Mr. Conyers, I have a particular interest in this as 

a State regulator, in my case for the District of Columbia. And I 

can tell you that there is a lot of concern on the part of those of 

us who are in the business of trying to implement and enforce 

State law when there are courts in other jurisdictions that are 

undoing our efforts. 

Mr. CONYERS. But you are not a judge. 

Mr. MIREL. I am not a judge and I——

Mr. CONYERS. And I am referring to the organizations and associations that are comprised of judges. 

Mr. MIREL. I believe, Mr. Conyers——

Mr. CONYERS. What is it that they don’t get? 

Mr. MIREL. Judges have a different role in our system than legislators and administrators do, in my view. Judges are enjoined to 

do justice to the people who are before them, without regard to 

what else is out there, outside the courtroom. We have a broader 

view as administrators of laws passed by legislators, who are presumably taking into account——

61

Mr. CONYERS. Well, I recognize and respect your point, your 

broader point of view. But what is it that the judges in both systems of court don’t seem to understand? If you know. 

Mr. MIREL. I can’t speak for the judges. But I believe that the 

judges are looking at what they have to do, and properly so. 

Mr. CONYERS. Well, what is wrong with that? 

Mr. MIREL. Nothing’s wrong with that. It is just that——

Mr. CONYERS. Well, they have looked at it, and they say no to 

this bill at the Federal level and the State level, starting with the 

Chief Justice of the United States of America. I mean, does he got 

it wrong? He is the one that comes and begs me and the Chairman 

of this Committee to fill the vacancies. That is without—with this 

humongous proposal coming down the tracks. I mean, we are 50, 

60 judges short right now. The Chairman of Judiciary in the Senate does the same thing. 

So, could that—might that affect the Federal judges’ attitude in 

this respect? You don’t know? 

Mr. MIREL. As I say, I can’t speak for the judges. 

Mr. CONYERS. I don’t ask you to speak for the judges. I am not 

speaking for anybody but myself. But it would seem that they 

would—and they are conservative judges, by the way. These 

aren’t—you know. So there is something out of whack here. Nobody 

wants this proposal as it has been crafted but, as one of the witnesses said, the corporate sector. Could there be any grain of truth 

in that assertion by Mr. Wolfman? 

Mr. MIREL. I think that it is true to say that the corporate sector 

is involved in it and interested in it. But so are many sectors. 

Mr. CONYERS. Like what? 

Mr. MIREL. Like the administrators, like State legislators, like 

other legislators who have seen their laws that are passed being 

ignored by——

Mr. CONYERS. What about consumers’ organizations? 

Mr. MIREL. I see consumers’ organizations on both sides on this 

issue. 

Mr. CONYERS. You do? 

Mr. MIREL. Yes, sir. 

Mr. CONYERS. Well, all the consumers’ organizations that have 

written me are pretty clearly opposed to the bill. 

Mr. MIREL. I don’t know about their position on this bill, per se, 

Mr. Conyers, but I do know that the Consumer Federation of 

America has been very concerned about the case in Illinois which 

prohibits the use of non—OEM crash parts, because they think it 

will cost consumers more than the use of OEM parts. And I think 

that is an example of the fact that consumers can be hurt by these 

class action lawsuits. 

Mr. CONYERS. Could I point out to you, of national organizations 

opposed to Federal class action is the Consumer Federation of 

America. Did you know that? I guess you didn’t know it. 

Mr. MIREL. I don’t know that. I do know——

Mr. CONYERS. Well, could I correct you now? Could I send you 

their letter or testimony? 

Mr. MIREL. I would be happy to see it. 

Mr. CONYERS. Would you believe me if I didn’t send it to you? 

62

Mr. MIREL. I would believe you if you didn’t send it to me. Yes, 

sir; absolutely. 

Mr. CONYERS. Well, that is good to know. Okay. So now back to 

my question. All the consumers’ organizations that I know are opposed to this bill. How come? You don’t know that? You are not 

speaking for the consumers. Are you? Okay. Let me tell——

Mr. MIREL. I can’t pretend to speak for the organizations that 

you are mentioning. I do know that consumers get hurt when their 

prices for insurance go up. 

Mr. CONYERS. But why don’t they know it? I am glad you know 

it and I know it, but how come they are opposed to this bill? And 

by the way, what makes you think that insurance is going to go 

down if we pass this bill? 

Mr. MIREL. I don’t know that insurance will go down if we pass 

this bill. But I do know that the cost of insurance will go up sharply if these kinds of multimillion dollar settlements are continued to 

be allowed to happen, because somebody has to pay for those. And 

the only people who pay for them are the people who buy insurance. And their rates are going up. And, you know, that is a problem that we have to deal with. 

Mr. CONYERS. Well, okay. 

Mr. GOODLATTE. The gentlemen’s time has expired, and we have 

been generous with him. 

Let me do this, if I may. We will start a second round of questions, and we will make sure that at least I and one Member of 

your side, you, has the opportunity to proceed further. And then we 

will go on to others as the time allows. 

Ms. WATERS. I have a unanimous consent request. 

Mr. GOODLATTE. What is your request? 

Ms. WATERS. I would like Mr. Wolfman to identify the particular 

RAND study that he referenced in his response to my question 

about whether or not any studies have been done. And then I 

would like to—I will get a copy of that, and I would like unanimous 

consent to insert it into the record. 

Mr. GOODLATTE. We will get that, and we will get it inserted into 

the record. And Mr. Wolfman, you can provide that to the clerk at 

the conclusion of the hearing. 

Let me talk about the extortionate nature of the current system, 

because when you are talking about what happens to consumers, 

obviously, if the cost of doing business or the cost of ensuring your 

business is increased, you pass that on to the consumers. There are 

consumer organizations with points of view and there are consumers with points of view about how their money is spent. 

The fact of the matter is this: Under the current system, because 

of the current diversity rules, if the plaintiff’s attorney has 4,000 

jurisdictions to choose from, they pick the jurisdiction they are 

going into. In most cases, if the defendant or another plaintiff to 

the case feels they are being treated unfairly, there are other 

courts that they can choose to seek to remove the case to. 

In these circumstances, there are none. The reason for that is the 

Federal diversity rule. So what happens is the attorneys lock in the 

jurisdiction with one of a handful of judges that they are very familiar with that treat these cases favorably. We are not impugning 

63

the State courts, we are impugning a system that allows them to 

forum shop to that degree of abuse. 

Then once they have done that and the case is brought in a very 

hostile environment, the attorney for the plaintiffs goes to the defendants and says, if you will settle this case by paying us $13 million, or giving the plaintiffs a coupon or a promise, and by the way, 

our named plaintiff, one or two will get one or two hundred thousand, or the plaintiffs in this State will get a higher award than 

the plaintiffs outside the State, we will do all that, do you really 

want to take the risk of going before this judge and this hostile 

court and getting a multi-million or multi-billion dollar judgment 

against you? 

Mr. Wolfman, what is the recourse for defendants, or plaintiffs 

who don’t agree with the approach of the plaintiff’s attorney in 

cases like that where they have no ability to seek review in another 

court? That it seems to me is the very purpose of our Federal court 

system. Why wouldn’t you want to recognize it in these types of 

cases when you have the greatest degree of potential abuse by the 

plaintiffs being able to choose from thousands of different jurisdictions? 

Mr. WOLFMAN. I think that is a fair question. I have two answers 

to that. 

The first is that, in the hypothetical that you use, as my testimony outlines, some of the very worst coupon settlements have 

been in Federal, not State court. We have established that in our 

testimony. I would be happy to provide additional information. 

Those abuses should be dealt with. 

Mr. GOODLATTE. They are dealt with in this legislation. 

Mr. WOLFMAN. I respectfully disagree. I think the coupon provision merely restates the current law. I have suggested a proposed 

amendment in that regard. 

Additionally, I have said on a number of occasions I think there 

is a limited role for Federal court jurisdiction where there is a potential for a multiplicity of litigation in overlapping cases. 

That would be far more limited than in this legislation, because 

it removes and allows the filing in Federal court of all those inState California cases that I talked about, or in-State Kentucky 

cases, where there is one case on file and all the plaintiffs are there 

in one State. 

Mr. GOODLATTE. If there is one plaintiff in California and one 

out-of-State defendant, that defendant can remove the case to Federal court. Why is that different than when there is a multitude of 

plaintiffs and an out-of-State defendant? 

Mr. WOLFMAN. That simply restates—that restates a problem 

with diversity jurisdiction in general. 

The Chief Justice is on the record in his annual report saying 

that some of the uses of diversity jurisdiction need to be narrowed. 

This is one situation where it should not be greatly expanded, as 

this bill envisions. As I have said, there is some role for additional 

expansion, but not to the degree that this bill portends. 

Mr. GOODLATTE. What would you say in response to that, Mr. 

Beisner? 

Mr. BEISNER. I would make a couple of comments on that. First 

of all, with respect to this notion that the Federal courts are doing 

64

a bad job in approving coupon settlements, I think the list Mr. 

Wolfman submitted makes very clear that the Federal courts are 

doing a superior job on that because the examples they use don’t 

demonstrate the point. 

The H&R Block case, the Federal courts ultimately rejected that 

coupon settlement. They didn’t permit it. 

They talk about a Western Union wire transfer case. The Federal 

court did allow that settlement to go through, but only after determining that the plaintiffs really didn’t have a claim; it was windfall 

that they received. 

I guess the final point, I am a little concerned about the ongoing 

statements that the Federal judiciary is opposed to the concepts in 

the bill. There were several letters this Committee has received in 

past sessions indicating opposition. The letter that was sent to the 

Senate from the Judicial Conference earlier for the first time acknowledges that there is a significant problem with statutory class 

actions and endorses the notion of minimal diversity, the core concept in this bill, as a means of addressing it. There is some dispute 

about where the precise lines ought to be drawn, but that is a substantial change in position, I believe, on the part of the Federal judiciary. 

Mr. GOODLATTE. Thank you. 

Mr. Conyers, you are going to get the last word. We will certainly 

take any other questions in writing, unless you yield some of your 

time to Mr. Scott. We just have the vote. I know some of the witnesses need to leave. 

So we will finish with Mr. Conyers and any time he might yield 

to Mr. Scott, and any other questions will certainly be submitted 

for the record, and the witnesses will be asked to respond in a 

timely fashion. 

Mr. CONYERS. Thank you very much, Mr. Chairman. 

Could I ask all of the four witnesses who have been so generous 

with their time, can anyone come back after the vote? Is there anyone who cannot come back after the vote? 

Mr. DINH. Unfortunately, I cannot. I have to meet with Coalition 

Bar Association this afternoon. 

Mr. CONYERS. I see. 

Mr. MIREL. I can do that. 

Mr. GOODLATTE. The Committee is going to adjourn. If you wish 

to meet with Mr. Conyers, that will be appropriate. We are going 

to end the hearing after Mr. Conyers’ question so we can go and 

vote. There is another hearing that I need to attend in the near future. I don’t know if there is anybody else available to continue the 

hearing. 

Mr. CONYERS. I am here to help, Mr. Acting Chairman. There is 

someone that can actually replace you as the temporary Chairman. 

But I concede to the fact that Mr. Dinh has to leave, and so that 

takes care of that. I will yield any time we have remaining before 

the vote to Bobby Scott. 

Mr. SCOTT. Thank you, Mr. Conyers, and Mr. Chairman. 

Mr. Dinh, we are trying to help the consumers. You are representing the consumer interests, are you not? 

Mr. DINH. We represent the interests of consumers and an efficient judicial system, yes, sir. 

65

Mr. SCOTT. Explain to me how—in the present law, if you file a 

lawsuit in class action, present law, in a State court in Virginia, 

you have a couple of weeks when they respond, a couple of weeks 

you try to get a date with the judge to certify the class, and he certifies the class, and within a matter of days you are beginning the 

litigation process; that is, you are taking depositions, interrogatories. As soon as you finish that, you can get a trial date. 

Now, on page 19 of the bill, the appellate situation, you have a 

situation where, when you have gotten to that point and you are 

ready to go, somebody wants to remove it to Federal court. Now, 

the plaintiffs have a slam-dunk case. If they can just get it to the 

jury, they are going to win; but look what happens. You have to 

round up everybody and find a date with the Federal judge. The 

Federal judge has to hear all the arguments about the class action 

and then makes a decision. That is further down the line. When 

he makes the decision, somebody within 10 days can stay everything and send it up to the appellate court. 

How long does the appellate court—how do you think the appellate court would take to decide the case? 

Mr. DINH. It varies from jurisdiction to jurisdiction, sir. 

Mr. SCOTT. About. 

Mr. DINH. Anywhere from within a matter of months, I would 

imagine. 

Mr. SCOTT. Months, up to a year? 

Mr. DINH. Perhaps. I have seen that. 

Mr. SCOTT. Do you have an appeal to the Supreme Court while 

everything is stayed? 

Mr. DINH. It depends on how the appellate court rules. You can 

always have an appeal to the Supreme Court; whether it takes cert 

or not is a different question. 

Mr. SCOTT. While they are waiting to decide, the language is: All 

discovery and other proceedings shall be stayed during the pendency of any appeal. Are you still stayed while somebody is arguing 

with the Supreme Court? 

Mr. DINH. Yes, except in exceptional circumstances. 

Mr. SCOTT. Possibly a year or two down the line? 

Mr. DINH. Perhaps. 

Mr. SCOTT. When you finally get back to the trial court, everybody decides it should have been in State court to begin with, like 

you said. 

Mr. DINH. That is one eventuality. Another eventuality may well 

be that the State court system right now is inadequately protecting 

the interests of consumers by approving inadequate settlements. 

Mr. SCOTT. I think we have already heard that both sides do—

you can get bad settlements in Federal court. I am just talking 

about the time it takes to get your case presented to the jury. You 

have just asserted it could be the better part of 2 years during 

which the plaintiff with the slam-dunk case is stopped from proceeding with the litigation. Is that right? 

Mr. DINH. It depends on whether or not—let me make clear that 

a plaintiff with a slam-dunk case, presenting that case as an individual action is in no way affected by this bill. 

66

Mr. SCOTT. If the company is ripping people off right and left, 

just a little bit, but you need a class action to be able to get any 

amount of money, when do you get to present your case to a jury? 

Mr. DINH. You get to present your case if the Federal court certifies the class, and if, under the conditions—— Mr. SCOTT. If they certified, they can still appeal? 

Mr. DINH. They can still appeal that decision. 

Mr. SCOTT. And insert the 2 years into the process. 

Mr. DINH. The one thing to keep in mind is that it is essential 

or necessary for orderly litigation, except in exceptional circumstances. That does not mean that the interests of the plaintiffs 

or defendants are in any way affected. 

Mr. SCOTT. Mr. Wolfman, do you want to comment on what happens to the plaintiff’s case if they have to gratuitously insert 2 

years into the process? 

Mr. WOLFMAN. Delay is the defendant’s best friend. Any litigator 

knows that. 

Mr. GOODLATTE. The gentleman’s time has expired. The legislative record will remain open for 7 days. 

The Committee will now adjourn. I thank all of the members of 

the panel for their participation today. 

[Whereupon, at 12:15 p.m., the Committee was adjourned.] 

(67)

A P P E N D I X 

MATERIAL SUBMITTED FOR THE HEARING RECORD

PREPARED STATEMENT OF THE HONORABLE BOB GOODLATTE, A REPRESENTATIVE IN

CONGRESS FROM THE STATE OF VIRGINIA

Thank you, Mr. Chairman, for holding this important hearing on the Class Action 

Fairness Act of 2003. I introduced this legislation, along with Chairman Sensenbrenner, and my fellow Judiciary Committee member, Mr. Boucher, Mr. Hyde, and 

Mr. Smith. 

This much-needed bipartisan legislation corrects a serious flaw in our Federal jurisdiction statutes. At present, those statutes forbid our Federal courts from hearing 

most interstate class actions—the lawsuits that involve more money and touch more 

Americans than virtually any other type of litigation in our legal system. 

The class action device is a necessary and important part of our legal system. It 

promotes efficiency by allowing plaintiffs with similar claims to adjudicate their 

cases in one proceeding. It also allows claims to be heard in cases where there are 

small harms to a large number of people, which would otherwise go unaddressed 

because the cost to the individuals suing could far exceed the benefit to the individual. However, class actions are increasingly being used in ways that do not promote the interests they were intended to serve. 

In recent years, state courts have been flooded with class actions. As a result of 

the adoption of different class action certification standards in the various states, 

the same class might be certifiable in one state and not another, or certifiable in 

State court but not in Federal court. This creates the potential for abuse of the class 

action device, particularly when the case involves parties from multiple states or requires the application of the laws or many States. 

For example, some State courts routinely certify classes before the defendant is 

even served with a complaint and given a chance to defend itself. Other state courts 

employ very lax class certification criteria, rendering virtually any controversy subject to class action treatment. There are instances where a State court, in order to 

certify a class, has determined that the law of that State applies to all claims, including those of purported class members who live in other jurisdictions. This has 

the effect of making the law of that State applicable nationwide. 

The existence of State courts that loosely apply class certification rules encourages 

plaintiffs to forum shop for the court that is most likely to certify a purported class. 

In addition to forum shopping, parties frequently exploit major loopholes in Federal 

jurisdiction statutes to block the removal of class actions that belong in Federal 

court. For example, plaintiffs’ counsel may name parties that are not really relevant 

to the class claims in an effort to destroy diversity. In other cases, counsel may 

waive Federal law claims or shave the amount of damages claimed to ensure that 

the action will remain in State court. 

Another problem created by the ability of State courts to certify class actions 

which adjudicate the rights of citizens of many states is that often times more than 

one case involving the same class is certified at the same time. In the Federal court 

system, those cases involving common questions of fact may be transferred to one 

district for coordinated or consolidated pretrial proceedings. 

When these class actions are pending in State courts, however, there is no corresponding mechanism for consolidating the competing suits. Instead, a settlement 

or judgment in any of the cases makes the other class actions moot. This creates 

an incentive for each class counsel to obtain a quick settlement of the case, and an 

opportunity for the defendant to play the various class counsels against each other 

and drive the settlement value down. The loser in this system is the class member 

whose claim is extinguished by the settlement at the expense of counsel seeking to 

be the one entitled to recovery of fees. 

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Our bill is designed to prevent these abuses by allowing large interstate class action cases to be heard in Federal court. It would expand the statutory diversity jurisdiction of the Federal Courts to allow class actions cases involving minimal diversity—that is, when any plaintiff and any defendant are citizens of different States— to be brought in or removed to Federal court. 

Article III of the Constitution empowers Congress to establish Federal jurisdiction 

over diversity cases—cases between citizens of different States. The grant of Federal 

diversity jurisdiction was premised on concerns that State courts might discriminate 

against out of State defendants. In a class action, only the citizenship of the named 

plaintiffs is considered for determining diversity, which means that Federal diversity jurisdiction will not exist if the named plaintiff is a citizen of the same State 

as the defendant, regardless of the citizenship of the rest of the class. Congress also 

imposes a monetary threshold—now $75,000—for Federal diversity claims. However, the amount in controversy requirement is satisfied in a class action only if all 

of the class members are seeking damages in excess of the statutory minimum. 

These jurisdictional statutes were originally enacted years ago, well before the 

modern class action arose, and they now lead to perverse results. For example, 

under current law, a citizen of one State may bring in Federal Court a simple 

$75,001 slip-and-fall claim against a party from another State. But if a class of 25 

million product owners living in all 50 states brings claims collectively worth $15 

billion against the manufacturer, the lawsuit usually must be heard in State court. 

This result is certainly not what the framers had in mind when they established 

Federal diversity jurisdiction. Our bill offers a solution by making it easier for plaintiff class members and defendants to remove class actions to Federal Court, where 

cases involving multiple State laws are more appropriately heard. Under our bill, 

if a removed class action is found not to meet the requirements for proceeding on 

a class basis, the Federal Court would dismiss the action without prejudice and the 

action could be re-filed in State Court. 

In addition, the bill provides a number of new protections for plaintiff class members including a requirement that notices sent to class members be written in plain 

English and provide essential information that is easily understood. Furthermore, 

the bill provides judicial scrutiny for settlements that provide class members only 

coupons as relief for their injuries, and bars approval of settlements in which class 

members suffer a net loss. The bill also includes provisions that protect consumers 

from being disadvantaged by living far away from the courthouse. These additional 

consumer protections will ensure that class action lawsuits benefit the consumers 

they are intended to compensate. 

This legislation does not limit the ability of anyone to file a class action lawsuit. 

It does not change anyone’s right to recovery. Our bill specifically provides that it 

will not alter the substantive law governing any claims as to which jurisdiction is 

conferred. Our legislation merely closes the loophole, allowing Federal Courts to 

hear big lawsuits involving truly interstate issues, while ensuring that purely local 

controversies remain in State Courts. This is exactly what the framers of the Constitution had in mind when they established Federal diversity jurisdiction 

I urge each of my colleagues to support this very important bipartisan legislation.

PREPARED STATEMENT OF THE HONORABLE SHEILA JACKSON LEE, A REPRESENTATIVE

IN CONGRESS FROM THE STATE OF TEXAS

Thank you Chairman Sensenbrenner and Ranking Member Conyers for convening 

this hearing today. We are considering H.R. 1115, the Class Action Fairness Act of 

2003. I oppose H.R. 1115 for several policy reasons including severe infringement 

on the discretion of the judiciary. I remain steadfast in my belief that this legislation is yet another example of the legislature interfering in the affairs of the judiciary. 

The Members of this committee on the other side of the aisle have always espoused the wisdom of allowing state courts and legislatures to decide for their own 

citizens what is best for them. They have professed that, as much as possible, the 

Federal government should not interfere in state business. But H.R. 1115 does exactly that by broadening Federal jurisdiction over state class action lawsuits. 

H.R. 1115 makes severe changes to diversity jurisdiction requirements. The bill 

also makes substantial revisions to the rules governing aggregation of claims. Both 

of these changes would result in significantly more state court actions being removed to federal courts thereby overburdening the federal caseload. 

H.R. 1115 also provides a party to a class action lawsuit with the right to an interlocutory appeal of the court’s class certification decision provided an appeal notice 

is filed within 10 days. The appeal would stay discovery and other proceedings durVerDate 0ct 09 2002 10:20 Jun 25, 2003 Jkt 000000 PO 00000 Frm 00072 Fmt 6601 Sfmt 6621 G:\WORK\FULL\051503\87093.000 HJUD1 PsN: 87093
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ing the pendency of the appeal. This is a substantial change to Rule 23(f) which 

presently provides the court with discretion to allow an appeal of the class certification order without staying other proceedings. The automatic stay under H.R.1115 

provides defendants with another delaying tactic and another tool to increase the 

expense for plaintiffs. 

These delay tactics and other provisions give a decisive advantage to well-financed 

corporate defendants. I am deeply concerned that if we pass HR 1115 we would 

eliminate the means by which innocent victims of corporate giants can find justice. 

First, I believe that before we consider this legislation, Congress should insist on 

receiving objective and comprehensive data justifying such a dramatic intrusion into 

state court prerogatives. This legislation has the potential to damage federal and 

state court systems. H.R. 1115 will expand federal class action jurisdiction to include most state class actions. H.R. 1115 will dramatically increase the number of 

cases in the already overburdened federal courts. 

For example, as of February 2, 2002, there were 68 federal judicial vacancies. Judicial vacancies mean other courts must assume the workload. Assuming this additional burden contributes to federal district court judges having a backlogged docket 

with an average of 416 pending civil cases. These workload problems caused Supreme Court Chief Justice Rehnquist to criticize Congress for taking actions that 

have exacerbated the courts’ workload problem. 

H.R. 1115 also raises serious constitutional issues because it strips state courts 

of the discretion to decide when to utilize the class action format. In those cases 

where a federal court chooses not to certify the state class action, the bill prohibits 

the states from using class actions to resolve the underlying state causes of action. 

Federal courts have indicated in numerous decisions that efforts by Congress to dictate such state court procedures implicate important Tenth Amendment federalism 

issues and should be avoided. The Supreme Court has already made clear that state 

courts are constitutionally required to provide due process and other fairness protections to the parties in class action cases 

H.R. 1115 also adversely impacts the ability of consumers and other victims to 

receive compensation in cases concerning extensive damages. The bill has the potential to force state class actions into federal courts which may result in increase litigation expenses. Corporate defendants may attempt to force less-financed plaintiffs 

to travel great distances to participate in court proceedings. There are also added 

pleading costs for plaintiffs. For example, under the bill, individuals are required 

to plead with particularity the nature of the injuries suffered by class members in 

their initial complaints. The plaintiff must even prove the defendant’s ‘‘state of 

mind,’’ such as fraud or deception, to be included in the initial complaint. This is 

a very high standard to impose on plaintiffs who may not yet have had the benefit 

of formal discovery. If the pleading requirements are not met, the judge is required 

to dismiss the plaintiff’s complaint. 

Additionally, plaintiffs under H.R. 1115 will face a far more arduous task of certifying their class actions in the federal court system. Fourteen states, representing 

some 29% of the nation’s population, have adopted different criteria for class action 

rules than Rule 23 of the federal rules of civil procedure. Plaintiffs may also be disadvantaged by the vague terms used in the legislation, such as ‘‘substantial majority’’ of plaintiffs, ‘‘primary defendants,’’ and claims ‘‘primarily’’ governed by a state’s 

laws, as they are entirely new and undefined phrases with no precedent in the 

United States Code or the case law. 

Mr. Chairman, H.R. 1115 is riddled with provisions that are burdensome to potential plaintiffs and that potentially infringe on the discretion of state courts. I urge 

all of my colleagues to reject H.R. 1115 as it is presently written. I commend my 

colleagues for proposing numerous amendments to this bill and I hope that these 

amendments will address the gross inequities in this legislation.

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EXECUTIVE SUMMARY OF CLASS ACTION DILEMMAS:

PURSUING PUBLIC GOALS FOR PRIVATE GAIN


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1See February 1, 1999, Comments of the Lawyers’ Committee for Civil Rights Under Law on 

Proposed Amendments to Rules 5, 26, 30, and 34; Supplement to the February 1, 1999 ComPREPARED STATEMENT OF THOMAS J. HENDERSON

I, Thomas J. Henderson, Chief Counsel of the Lawyers’ Committee for Civil 

Rights Under Law (‘‘Lawyers’ Committee’’) submit this testimony on behalf of the 

Lawyers’ Committee. The Lawyers’ Committee for Civil Rights Under Law is a 40-

year-old nonpartisan, nonprofit civil rights legal organization. It was formed in 1963 

at the request of President John F. Kennedy to involve the private bar in providing 

legal services to address racial discrimination. 

I would like to thank Chairman Sensenbrenner and the members of the Committee for holding hearings on the Class Action Fairness Act of 2003 and, in particular, for providing the Lawyers’ Committee with the ability offer members of the 

Committee on the Judiciary with evidence of the significant negative impact this 

legislation will have on critical civil rights litigation. We appreciate the opportunity 

to present the Committee with our analysis of the implications that this legislation 

will have on the Lawyers’ Committee, our independent local affiliates, and our clients across the country. 

The principal mission of the Lawyers’ Committee is to secure, through the rule 

of law, equal justice under law. As such, through both litigation and public policy 

the Lawyers’ Committee has been actively engaged in efforts to combat racial discrimination and segregation throughout out nation. However, the primary work of 

the Lawyers’ Committee has always centered on using the rule of law through the 

state and federal judicial systems to secure redress for clients who have faced racial 

discrimination. Our major objective is to use the skills and resources of the private 

bar to obtain equal opportunity for minorities by addressing factors that contribute 

to racial justice and economic opportunity. The Lawyers’ Committee pursues this 

goal by bringing class action and impact litigation in five major civil rights areas: 

voting, employment, education, housing and environmental justice. It is through our 

role as civil rights litigators that we express our concerns about the Class Action 

Fairness Act of 2003 and the devastating impact it will have on the civil rights litigation that the Lawyers’ Committee has pursued for four decades. 

I. INTRODUCTION

Class actions have proven to be an essential tool for civil rights enforcement efforts in the experience of the Lawyers’ Committee. Historically, Lawyers’ Committee 

cases have been class actions brought in federal court seeking injunctive and, in 

some cases, equitable monetary relief under Federal Rule of Civil Procedure 23 

(b)(2) to vindicate rights under the United States Constitution or federal civil rights 

statutes. In recent years, however, with Congress’ recognition that effective enforcement of the nation’s civil rights laws required more complete remedies, including 

compensatory and, in appropriate cases, punitive damages, Lawyers’ Committee 

class actions have increasingly included actions that seek compensatory and punitive damages under Rule 23 (b)(3), as well as equitable relief under Rule 23 (b)(2). 

Class actions are essential to the enforcement of the nation’s civil rights laws. 

They are a vitally important and are often the only means by which persons can 

challenge and obtain relief from systemic discrimination. Indeed, Rule 23 (b)(2) was 

designed, in part, to accommodate, and has served as a primary vehicle for, civil 

rights litigation seeking broad equitable relief. 

Our concern over this legislation and other efforts to profoundly impact federal 

class action rules has been ongoing. Beginning with the introduction of the Class 

Action Fairness Act in the 106th Congress, the Lawyers’ Committee has been actively engaged in educating the Congress about the harmful effects this legislation 

will have on critical class action lawsuits, especially its impact on our civil rights 

litigation efforts. During the 106th Congress, we sent letters to both this Committee 

and the Senate Judiciary Committee, each of which were considering similar legislation, offering substantial analysis of the legislation’s impact from a civil rights perspective and opposing the legislation. Further, in February of last year, we submitted extensive comments to the Advisory Committee on the Civil Rules, on behalf 

of 18 civil rights, public interest, and bar organizations regarding proposed amendments to Rule 23, the Rule of Federal Civil Procedure governing class actions. Additionally, in its efforts to ensure continued access to the judicial process on behalf 

of classes of persons who suffer discrimination and inequality, the Lawyers’ Committee has commented on proposed amendments to rules of procedure that will enhance or diminish access to the courts for clients bringing meritorious civil rights 

claims.1 Last Summer, I testified on behalf of the Lawyers’ Committee before the 

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ments of the Lawyers’ Committee for Civil Rights Under Law; December 1990 Comments of the 

Lawyers’ Committee for Civil Rights Under Law on Proposed Revisions to Rule 11. 

Senate Judiciary Committee on class action litigation and the Class Action Fairness 

Act of 2001. 

The mission of the Lawyers’ Committee does not involve state tort, contract or 

consumer law and, as a general rule, we do not bring state law tort, contract or consumer cases. It would have been easy for us to view this legislation as concerning 

only litigation in those areas and, thus, irrelevant to our work. We could have simply remained a bystander in what might appear to be another monumental dispute 

about tort reform. But this legislation is not about state tort, contract or consumer 

law. Rather, it concerns the role and availability of the courts and of class actions, 

and of access to justice for those who have no alternative but to rely on the courts 

for the protection of their rights and freedoms. 

It is our belief that the proposals referred to as the Class Action Fairness Act of 

2003, H.R. 1115 and S.274, are unjustified and unjustifiable attempts by Congress 

to impose federal judicial regulation on matters of law committed to the States 

under our Constitution. The determination of state law tort, contract and consumer 

cases is not the responsibility of the federal judiciary under the Constitution. The 

imposition of such substantial new responsibilities on the federal courts will further 

impair the ability of those courts to carry out the essential functions they are to 

serve under the Constitution—the determination of matters involving federal interests, rights and responsibilities. Similarly, compressing virtually all class actions 

into the federal courts, imposing federal standards on nearly all class actions and 

other forms of aggregating claims, and adding new procedural requirements, as this 

legislation would allow, will further erode the availability of class actions and increase the burdens and delays in their use. Accordingly, this legislation will serve 

to deny to those who are without substantial financial means or political power the 

access to justice that class actions have so critically provided. 

The epic reallocation of judicial responsibility proposed in this legislation is opposed by both the federal and state judiciary, and its constitutionality is doubtful. 

More critically, the legislation would tear cases from state judicial systems, 

equipped with thousands and thousands of judges, who administer the laws involved 

on a daily basis, and thrust them on a relatively small federal judiciary that is not 

equipped to handle them and is ill-equipped even to handle the volume and complexity of cases now on its docket. In the end, access to the federal courts and to 

the class action device to secure justice in matters where truly federal issues are 

at stake will be casualties of this legislation. 

II. HOW THE CLASS ACTION FAIRNESS ACT CHANGES THE LAW

It is important to be clear on what the legislation would change in class action 

practice. For example, it has been a subject of debate whether the legislation would 

‘‘federalize’’ class actions and what that means. It is clear that the legislation would 

make very substantial changes, first with respect to state law class actions that are 

now litigated in state, rather than federal, courts and, second, in the procedures to 

be applied in federal court class actions. 

More specifically, as to the first of these categories, the legislation would largely 

eliminate from the state courts class actions brought only under state law and 

under state law procedures, that is, cases in which no federal question is raised. It 

would do so in several ways. First, the legislation would impose federal court jurisdiction in such cases and provide for the removal of these cases from state to federal 

courts. This aspect of the legislation not only creates an entirely new and substantial class of cases subject to federal jurisdiction, but also provides to defendants, or 

a single disaffected class member or class member willing to collaborate with defendants, the ability to determine the choice of forum in which a case will be heard. 

Second, the legislation would effectively eliminate state law class action and claim 

aggregation vehicles and impose federal class action standards—now and whatever 

they may be in the future—on cases involving only state law claims. Simply stated, 

state class action rules and mechanisms would no longer apply; instead, cases dealing exclusively with state law claims would be subject to federal class action rules. 

The Class Action Fairness Act does this by providing for removal into federal court 

and requiring the dismissal of any actions that do not satisfy the prerequisites of 

Rule 23 of the Federal Rules of Civil Procedure (1332 (d) (6)), despite the fact that 

they raise only state law issues. The ability to remove and dismiss cases that do 

not conform to Rule 23 effectively eliminates state law class action, claim aggregation and public interest litigation devices, at least at the choice of defendants. This 

is a breathtaking intrusion of federal regulation into the province of the States and 

118

on the litigation of state law claims. State class action, claim aggregation and public 

interest litigation devices must, of course, comply with constitutional requirements. 

However, displacing these methods and eliminating the ability of the States to develop means for resolving state law claims other than as provided in Federal Rule 

23 goes far beyond ensuring the due process that is already constitutionally required. 

The impact of this legislation on federal class actions is profound. It would impose 

new, burdensome and unnecessary requirements on litigants and the federal courts. 

For example, the prohibition on approving settlements that involve named plaintiffs 

receiving amounts different from other members of the class is not a reasonable or 

practical limitation in all instances. In many employment discrimination cases there 

are fewer employment opportunities denied because of discrimination than there are 

qualified potential claimants. In those situations, a person who sues as an individual can receive a full award of back pay and in a proper case can obtain an order 

placing him or her in the job denied because of discrimination. A class member in 

such a situation must share in the total back pay award, and has only an opportunity to be one of the persons selected for hire or promotion because not all can 

be selected. If the price of trying to protect others is that he or she must also lose 

the full measure of individual relief and take only the same percentage share as 

those who never took any action to challenge the employer, individuals would be deterred from becoming a class representative. Thus, rather than a reform, this provision would discourage and hinder civil rights class actions. 

The current legislation pending in this House goes even further than that in the 

Senate by imposing new procedures and requirements in all federal class actions 

that are not justified. It would, effectively, foreclose certain cases—including many 

civil rights cases, and would build-in further needless delay and expense in the disposition of federal class actions. The bill pending in this House would provide appellate review of interlocutory class certification orders (Sec. 1292(a)(4)), and would require stays of proceedings in connection with both motions to dismiss and certification appeals. 

The imposition of mandatory appeals of class certification orders, rather than the 

discretionary appeals now available under Rule 23 (f), is both unnecessary and will 

build-in to class litigation literally years of delay in the disposition of cases. There 

is no legitimate interest in requiring appellate review of all interlocutory class certification orders and imposing a stay on all proceedings while they are determined, 

particularly where all agree that the disposition of class action litigation often already takes too long. 

To the extent that the legislation seeks to add protections for plaintiff class members, they are minimal and unnecessary. It does not alter the process of, or standards for, the settlement of class actions, other than indicated above, and the matters 

with which it is concerned have been more than sufficiently addressed in proposed 

amendments to Rule 23 adopted by the United States Judicial Conference that will 

be effective in December. Specifically, the proposed amendments will require a number of burdensome new notices, hearings, procedures and judicial determinations, 

that will themselves add new and substantial burdens, delay and expense in federal 

class action practice. In short, the provisions of the legislation that purport to benefit plaintiff class members are too small and transparent a fig leaf to mask the 

great disservice this legislation would work for those who need resort to the class 

action—in federal or state court—to vindicate their rights and interests. 

III. THE LACK OF JUSTIFICATION FOR THE CLASS ACTION FAIRNESS ACT

In entertaining a suggestion that Congress so fundamentally restructure the allocation of responsibility between the state and federal judiciary in our dual system 

of courts, it is important to understand and examine the basis offered for such a 

change. The literature of proponents and supporters of the legislation suggest that 

it is to rid corporations of frivolous lawsuits, eliminate state court bias against corporations incorporated in a different state, and to place these cases of ‘‘national importance’’ in federal courts where they belong. 

The suggestion that state courts are biased against corporations from other states 

such that they will entertain and sustain frivolous cases, is used as a justification 

for a drastic alteration in the meaning of diversity jurisdiction. This, in turn, depends upon a perception of corporations by state courts as ‘‘foreign’’ in states where 

they do business, simply because they are incorporated in another state. But we all 

know that the state of incorporation often has little or nothing to do with the actual 

location of a corporation’s offices, plants and business operations, and of its contacts 

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2See Prepared Statement of Professor Walter Dellinger for Hearing on ‘‘Class Action Litigation’’ Before the Committee on the Judiciary, U.S. Senate, July 31, 2002, at 4, Hearing Transcript at 27. 

izen. The state of incorporation is an artificial factor that does not give rise to bias 

of the type to be addressed through diversity jurisdiction. 

More importantly, the suggestions of state court bias against corporations offered 

in support of this legislation involve an unparalleled deprecation of state judicial 

systems that lack any empirical basis. In the area of civil rights, a concern that 

state courts might not fairly apply the law is premised on historical fact, more than 

a century of national experience after the Reconstruction Amendments, and countless state laws and procedures designed to preclude African Americans and others 

from the courts and other functions of government. Yet there is a presumption that 

state courts are competent to determine even federal civil rights claims. No such 

historical or factual basis supports the extreme and careless allegations of state 

court bias against corporations made in support of this bill. Frankly, as an attorney 

who has argued, in some circumstances, that state courts cannot be trusted to fairly 

determine federal rights, I have been shocked by the empty and self-serving rhetoric 

and anecdotes put forward as though they represent a substantial factual basis for 

this legislation. Those allegations trivialize and demean our state courts, our federal 

system and the crucial role that federal courts must be available to serve in protecting the interests secured by the Constitution and federal law. 

The testimony of Walter Dellinger, on behalf of the Chamber of Commerce before 

the Senate Judiciary Committee, acknowledges that there is no empirical evidence 

of widespread problems with state court class action litigation to support the assertions of proponents of the Class Action Fairness Act. Indeed, Mr. Dellinger acknowledges—even emphasizes—that the problems with class action litigation which purportedly motivate the bill are not characteristic of all, or even most of the States’

courts but, instead, are confined to no more than a few counties.2 is not the appropriate response to claimed problems in only several of the hundreds of county courts 

across the nation. 

Thus, the bill cannot be justified on the basis of protection from local bias against 

out-of-state residents that is the basis for diversity jurisdiction. 

Nor can the bill be justified as dealing with matters of national importance. As 

an alternative to a diversity jurisdiction rationale, proponents would elevate state 

tort, contract and consumer cases to matters of ‘‘national importance’’ simply because large corporations that do business in a number of states are involved. But 

this attempt to define ‘‘national importance’’ as corresponding to the interests of 

large corporations cannot substitute for a proper basis for federal jurisdiction. The 

interest of large corporations in exempting themselves from the jurisdiction of State 

courts in class actions does not correspond to the Constitution’s allocation of judicial 

power between the state and federal courts. ‘‘National importance’’ is not synonymous with ‘‘federal question.’’ For example, these cases do not involve matters on 

which Congress has chosen to exercise its powers under the Commerce Clause and 

which, therefore, involve interests subject to federal regulation. Rather, the legal 

issues involve purely questions of state law among purely private parties. 

The Lawyers’ Committee is an ardent defender and proponent of the power of 

Congress and the exercise of that power in furtherance of national interests. We 

have urged Congress to act to protect constitutional and federal interests through 

legislation, and have raised our voice in the courts to defend the exercise of that 

power in challenges to legislation. However, there is nothing about a state law class 

action against a corporate defendant that makes it an appropriate case in which to 

confer federal jurisdiction, and Congress should confine the jurisdiction of the federal courts to matters in which there is a proper federal interest. 

IV. THE EFFECTS OF THE CLASS ACTION FAIRNESS ACT. 

The consequences of this legislation for class action practice in the federal courts 

would be astounding and, in our view, disastrous. Redirecting state law class actions 

to the federal courts will choke federal court dockets and delay or foreclose the timely and effective determination of cases already properly before the federal courts, 

in addition to the newly redirected cases. In addition, this legislation is one of a 

number of measures that would make federal class action litigation more difficult, 

burdensome and expensive, the result of which will make class actions less available 

to, and effective for, those whose rights cannot otherwise be protected. 

First, this legislation would substantially expand the caseload of the federal 

courts to include hundreds, if not thousands, of complex cases that do not involve 

questions of federal law. It is well established that the dockets of federal courts are 

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3The Administrative Office of the Federal Courts reports that there were 4,563 class actions 

pending in the federal courts as of September 30, 2001 (See Judicial Business of the United 

States Courts 2001, Supplemental Table X–5, Class Action Civil Cases Commenced, by Basis of 

Jurisdiction and Nature of Suit) and that 3,092 class actions were filed in federal courts in FY 

2001 (See Judicial Business of the United States Courts 2001, Supplemental Table X–4, Class 

Action Civil Cases Pending by Nature of Suit and District), although it should be noted that, 

according to the Empirical Study, this figure probably understates the actual number of class 

actions in the federal courts. See Empirical Study, at Appendix D, Footnote 364. Statistical data 

on the number of class actions in the state courts is generally unavailable. In light of this fact, 

the 2000 study Class Action Dilemmas: Pursuing Public Goals for Private Gain, the Rand Institute for Civil Justice attempted to quantify the number of class actions in the state and federal 

courts through a variety of data sources, and concluded that 60% of class actions were in the 

state courts. If the approximately 4,500 class actions in federal courts represent 40% of all class 

actions, then the total number of class actions in state and federal courts can be estimated at 

approximately 11,250. The number of class actions pending in state courts could, therefore, be 

estimated at 6,750. 4Wilging et al., ‘‘Empirical Study of Class Actions in Four Federal District Courts’’. Federal 

Judicial Center, 1996. 

already significantly overburdened. It is important to point out that the federal 

courts have less than 1,500 judges, bankruptcy judges and magistrate judges, compared to more than 30,000 judges currently serving on state courts. Imposing substantial numbers of new cases on the overburdened dockets of the relatively modest 

number of federal court and federal judges will clog those dockets with the consequence that it will be more difficult to have any and all cases decided. 

Currently, there are approximately 4,500 class actions in the federal courts. Although there is not uniform recordkeeping that would tell us the exact number of 

state court class actions. A reasonable estimate would be 6,750.3 Even a relatively 

modest increase in the number of class actions in the federal courts—and there is 

no reason to suppose that the increase would be modest—would substantially increase the volume of work required by judges to dispose of cases. Assuming that the 

bill would affect one-half of pending state court class actions, the bill would increase 

the number of class actions in the federal courts by 3,375 cases, or an increase of 

75% in the number of federal class action cases. Assuming that the bill would affect 

only one-third of pending state court class actions, the bill would increase the number of class actions in the federal courts by 2,250 cases, or an increase of 50% in 

the number of federal class action cases. If the bill affected two-thirds of state court 

class actions it would produce an increase of 4,500 class actions—effectively doubling the number of federal court class actions. 

The increased caseload is not the only burden; this legislation would also increase 

the number of complex and time-consuming cases that the federal courts will have 

to decide. Class actions take a greater share of the time of district judges than do 

other forms of litigation. In fact, empirical studies have shown that class actions on 

average consume almost five times more judicial time than the typical civil case.4

Thus, the stress on the federal courts and the demands on the time of judges would 

far exceed the simply the significant increase in the number of cases on the docket. 

The effect would be to make judges less able to devote time to both existing cases 

before the federal courts and those that would be redirected by this legislation. All 

commentators on the subject agree that the most effective means of addressing the 

particular demands of, and problems that arise in, class action litigation is more 

careful judicial supervision of such cases. By unrealistically increasing the demands 

on federal judges, this legislation would have precisely the opposite effect. Judges 

will have less time and opportunity to give careful supervision to critical class action 

litigation. 

Indeed, faced with overburdened dockets, it can be expected that judges will engage in a form of triage to clear the docket by closing cases. This would lead to an 

exacerbation in the pressure improperly to dispose of cases by dismissal. This is a 

problem that particularly effects civil rights cases, and in many districts it is already difficult for civil rights plaintiffs with meritorious cases to survive pre-trial 

motions in order to have the opportunity to go forward to trial on the facts of the 

case. The unjustified dismissal of cases is a trend in the federal courts that the Supreme Court has consistently sought to correct. See Swierkiewicz v. Sorema, 534 

U.S. 506 (2002), and Reeves v Sanderson Plumbing Products, 530 U.S. 133 (2000). 

An increase in the number of cases federal courts are to handle will only rachet up 

the pressure on district judges to dispose of as many cases as possible at the earliest 

stage of the litigation. 

Moreover increased numbers of cases on federal court dockets and further procedural hurdles will exacerbate the difficulty in securing certification of class actions 

in proper civil rights cases. In the late 1980’s and early 1990’s, Congress determined 

that effective enforcement of the nation’s civil rights laws required that the victims 

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5Thus, in the Fair Housing Amendments Act of 1988, 42 U.S.C. § 3601 et seq., as amended, 

Congress eliminated a $1,000.00 limit on punitive damage awards and provided for civil penalties in federal enforcement actions in housing discrimination cases. In the Civil Rights Act 

of 1991, 42 U.S.C. § 2000e, et seq., as amended; and, 42 U.S.C. § 1981a, Congress provided for 

compensatory and punitive damages for discrimination in employment. As well, the Supreme 

Court determined that damages were available under other federal civil rights statutes. See e.g., 

Franklin v. Gwinnett County Public Schools, 503 U.S. 60 (1992) (damages available for intentional violations of Title IX of the Education Amendments Act and Title VI of the Civil Rights 

Act of 1964). 6Specifically, the decisions of some courts of appeals have interpreted the Advisory Committee 

Notes to the 1966 Amendment to the effect that Rule 23 (b)(2) ‘‘does not extend to cases in 

which the appropriate final relief relates exclusively or predominately to money damages,’’ and 

interpreted the requirement of Rule 23 (b)(3) that common questions ‘‘predominate’’ over questions affecting individuals, in a manner that would preclude certification of almost any civil 

rights action that sought a damages remedy. See Smith v. Texaco, 263 F.3d 394 (5th Cir. 2001), 

withdrawn, No. 00–40337, 2002 WL 131415 (5th Cir. Feb. 1, 2002); Rutstein v. Avis Rent-A-Car 

Systems, Inc., 211 F.3d 1228 (11th Cir. 2000); Allison v. Citgo Petroleum Corp., 151 F.3d 402 

(5th Cir. 1998), modified, suggestion for reh’g denied (Oct. 2, 1998); and, Jackson v. Motel 6 Multipurpose, Inc., 130 F.3d 999 (11th Cir. 1997). In addition, some courts of appeals have interpreted the requirement of Rule 23 (b)(3) that class treatment be ‘‘superior,’’ in a manner that 

would prevent certification of civil rights class actions (as well as preclude individual actions) 

seeking to establish a pattern or practice of discrimination. See Lowery v. Circuit City Stores, 

Inc., 158 F.3d 742, 758–762 (4th Cir. 1998), vacated on other grounds, 527 U.S. 1031 (1999); 

see also, Allison v. Citgo Petroleum Corp., 151 F.3d at 420–426. But see Robinson v. Metro-North 

Commuter R.R. Co., 267 F.3d 147 (2d Cir. 2001)(certification of civil rights class action seeking 

damages available, alternatively, through 23 (b)(2), 23 (b)(2) modified to provide opt-out notice, 

or bifurcated certification under 23 (b)(2) and (b)(3)); Lemon v. Int’l. Union of Operating Engineers, Local 190, AFL-CIO, 216 F.3d 577 (7th Cir. 2000)(certification of civil rights class action 

seeking damages available, alternatively, through 23 (b)(3), divided certification under 23 (b)(2) 

and (b)(3), or 23 (b)(2) modified to provide opt-out notice); Jefferson v. Ingersoll Int’l, Inc., 195 

F.3d 894 (7th Cir. 1999)(same). 

of discrimination have available more expansive remedies, including compensatory 

and, in appropriate cases, punitive damages.5 In order to ensure the effective enforcement of these civil rights laws and fulfill the intent of Congress, it is essential 

that class actions accommodate civil rights class actions that request compensatory 

and punitive damages. The only real opportunity for most victims of pattern and 

practice discrimination to prove and recover damages, or secure other relief, is 

through class actions. Yet, decisions of some courts of appeals have interpreted Rule 

23 (b) in a manner that would make class certification rare, if not impossible, in 

cases seeking these congressionally mandated damage remedies.6

Such misguided interpretations of Rule 23 turn expanded civil rights remedies 

against the victims of discrimination: civil rights plaintiffs would be forced to elect 

between class-wide remedies for systemic discrimination, or the rights of individual 

class members to recover damages. These misapplications of Rule 23 (b) confound 

the intent of Congress, frustrate federal civil rights enforcement, and deny the benefit of the law to victims of discrimination. In considering legislation on the issue 

of class actions, Congress should not add to the difficulty in securing the opportunity to prove and obtain relief for patterns and practices of unlawful discrimination. Yet by compressing virtually all substantial class actions into federal courts 

and imposing additional burdens on their prosecution, this legislation would increase pressure on courts to dispose of class actions by denying certification altogether. 

This legislation is one of a number of measures that is making class action litigation more difficult and costly and less accessible and effective. For example, the proposed amendments to Rule 23 recently approved by the Committee on Practice and 

Procedure impose a number of new procedural requirements and judicial determinations, as well as a number of new notice requirements to federal class action practice, that will further complicate and delay disposition of class actions and make 

them more expensive and less available to the victims of discrimination and others 

with federal interests that need to be protected. Further, amendments to the Civil 

Rules in 1993 and 2000 have made federal courts less well equipped to handle large 

and complex class actions by imposing limits on the opportunity for discovery. In 

combination, all of these changes are rendering federal courts inhospitable and illequipped forums in which to litigate complex class actions. Forcing virtually all substantial class action suits into these forums, as the Class Action Fairness Act would 

have us do, will further compound the difficulty of filing and litigating a class action, including important civil rights cases. 

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V. CONCLUSION

On behalf of the Lawyers’ Committee, our Board of Directors and Trustees and 

our independent local affiliates, I would like to thank you again for the opportunity 

to share the concerns we and others in the civil rights community have about this 

pending legislation. We believe the effect of this legislation on the availability of federal civil rights class actions will be devastating and urge you to reject it. The Lawyers’ Committee joins with a host of other organizations in opposing this legislation. 

We believe the impact that it will have on the ability of our clients to seek legal 

redress through class actions will be profound, and will result in new and substantial limitations on access to the courts for victims of discrimination.

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