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[House Report 107-370]
[From the U.S. Government Publishing Office]

107th Congress                                                   Report
                        HOUSE OF REPRESENTATIVES
 2d Session                                                     107-370

======================================================================

 
                   CLASS ACTION FAIRNESS ACT OF 2002

                                _______
                                

 March 12, 2002.--Committed to the Committee of the Whole House on the 
              State of the Union and ordered to be printed

                                _______
                                

 Mr. Sensenbrenner, from the Committee on the Judiciary, submitted the 
                               following

                              R E P O R T

                             together with

                    ADDITIONAL AND DISSENTING VIEWS

                        [To accompany H.R. 2341]

      [Including cost estimate of the Congressional Budget Office]

    The Committee on the Judiciary, to whom was referred the 
bill (H.R. 2341) to amend the procedures that apply to 
consideration of interstate class actions to assure fairer 
outcomes for class members and defendants, to outlaw certain 
practices that provide inadequate settlements for class 
members, to assure that attorneys do not receive a 
disproportionate amount of settlements at the expense of class 
members, to provide for clearer and simpler information in 
class action settlement notices, to assure prompt consideration 
of interstate class actions, to amend title 28, United States 
Code, to allow the application of the principles of Federal 
diversity jurisdiction to interstate class actions, and for 
other purposes, having considered the same, reports favorably 
thereon with an amendment and recommends that the bill as 
amended do pass.

                                CONTENTS

                                                                   Page
The Amendment....................................................     2
Purpose and Summary..............................................     6
Background and Need for the Legislation..........................     7
Hearings.........................................................    22
Committee Consideration..........................................    22
Vote of the Committee............................................    22
Committee Oversight Findings.....................................    26
Performance Goals and Objectives.................................    26
New Budget Authority and Tax Expenditures........................    26
Congressional Budget Office Cost Estimate........................    27
Constitutional Authority Statement...............................    28
Section-by-Section Analysis and Discussion.......................    28
Agency Views.....................................................    36
Changes in Existing Law Made by the Bill, as Reported............    38
Markup Transcript................................................    45
Additional Views.................................................   121
Dissenting Views.................................................   123

    The amendment is as follows:
    Strike all after the enacting clause and insert the 
following:

SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CONTENTS.

    (a) Short Title.--This Act may be cited as the ``Class Action 
Fairness Act of 2002''.
    (b) Reference.--Whenever in this Act reference is made to an 
amendment to, or repeal of, a section or other provision, the reference 
shall be considered to be made to a section or other provision of title 
28, United States Code.
    (c) Table of Contents.--The table of contents for this Act is as 
follows:

Sec. 1. Short title; reference; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Consumer class action bill of rights and improved procedures 
for interstate class actions.
Sec. 4. Federal district court jurisdiction of interstate class 
actions.
Sec. 5. Removal of interstate class actions to Federal district court.
Sec. 6. Appeals of class action certification orders.
Sec. 7. Effective date.

SEC. 2. FINDINGS AND PURPOSES.

    (a) Findings.--The Congress finds as follows:
            (1) Class action lawsuits are an important and valuable 
        part of our legal system when they permit the fair and 
        efficient resolution of legitimate claims of numerous parties 
        by allowing the claims to be aggregated into a single action 
        against a defendant that has allegedly caused harm.
            (2) Over the past decade, there have been abuses of the 
        class action device that have harmed class members with 
        legitimate claims and defendants that have acted responsibly, 
        and that have thereby undermined public respect for our 
        judicial system.
            (3) Class members have been harmed by a number of actions 
        taken by plaintiffs' lawyers, which provide little or no 
        benefit to class members as a whole, including--
                    (A) plaintiffs' lawyers receiving large fees, while 
                class members are left with coupons or other awards of 
                little or no value;
                    (B) unjustified rewards being made to certain 
                plaintiffs at the expense of other class members; and
                    (C) the publication of confusing notices that 
                prevent class members from being able to fully 
                understand and effectively exercise their rights.
            (4) Through the use of artful pleading, plaintiffs are able 
        to avoid litigating class actions in Federal court, forcing 
        businesses and other organizations to defend interstate class 
        action lawsuits in county and State courts where--
                    (A) the lawyers, rather than the claimants, are 
                likely to receive the maximum benefit;
                    (B) less scrutiny may be given to the merits of the 
                case; and
                    (C) defendants are effectively forced into 
                settlements, in order to avoid the possibility of huge 
                judgments that could destabilize their companies.
            (5) These abuses undermine our Federal system and the 
        intent of the framers of the Constitution in creating diversity 
        jurisdiction, in that county and State courts are--
                    (A) handling interstate class actions that affect 
                parties from many States;
                    (B) sometimes acting in ways that demonstrate bias 
                against out-of-State defendants; and
                    (C) making judgments that impose their view of the 
                law on other States and bind the rights of the 
                residents of those States.
            (6) Abusive interstate class actions have harmed society as 
        a whole by forcing innocent parties to settle cases rather than 
        risk a huge judgment by a local jury, thereby costing consumers 
        billions of dollars in increased costs to pay for forced 
        settlements and excessive judgments.
    (b) Purposes.--The purposes of this Act are--
            (1) to assure fair and prompt recoveries for class members 
        with legitimate claims;
            (2) to protect responsible companies and other institutions 
        against interstate class actions in State courts;
            (3) to restore the intent of the framers of the 
        Constitution by providing for Federal court consideration of 
        interstate class actions; and
            (4) to benefit society by encouraging innovation and 
        lowering consumer prices.

SEC. 3. CONSUMER CLASS ACTION BILL OF RIGHTS AND IMPROVED PROCEDURES 
                    FOR INTERSTATE CLASS ACTIONS.

    (a) In General.--Part V is amended by inserting after chapter 113 
the following:

                      ``CHAPTER 114--CLASS ACTIONS

``Sec.
``1711. Judicial scrutiny of coupon and other noncash settlements.
``1712. Protection against loss by class members.
``1713. Protection against discrimination based on geographic location.
``1714. Prohibition on the payment of bounties.
``1715. Clearer and simpler settlement information.
``1716. Definitions.

``Sec. 1711. Judicial scrutiny of coupon and other noncash settlements

    ``The court may approve a proposed settlement under which the class 
members would receive noncash benefits or would otherwise be required 
to expend funds in order to obtain part or all of the proposed benefits 
only after a hearing to determine whether, and making a written finding 
that, the settlement is fair, reasonable, and adequate for class 
members.

``Sec. 1712. Protection against loss by class members

    ``The court may approve a proposed settlement under which any class 
member is obligated to pay sums to class counsel that would result in a 
net loss to the class member only if the court makes a written finding 
that nonmonetary benefits to the class member outweigh the monetary 
loss.

``Sec. 1713. Protection against discrimination based on geographic 
                    location

    ``The court may not approve a proposed settlement that provides for 
the payment of greater sums to some class members than to others solely 
on the basis that the class members to whom the greater sums are to be 
paid are located in closer geographic proximity to the court.

``Sec. 1714. Prohibition on the payment of bounties

    ``(a) In General.--The court may not approve a proposed settlement 
that provides for the payment of a greater share of the award to a 
class representative serving on behalf of a class, on the basis of the 
formula for distribution to all other class members, than that awarded 
to the other class members.
    ``(b) Rule of Construction.--The limitation in subsection (a) shall 
not be construed to prohibit any payment approved by the court for 
reasonable time or costs that a person was required to expend in 
fulfilling his or her obligations as a class representative.

``Sec. 1715. Clearer and simpler settlement information

    ``(a) Plain English Requirements.--Any court with jurisdiction over 
a plaintiff class action shall require that any written notice 
concerning a proposed settlement of the class action provided to the 
class through the mail or publication in printed media contain--
            ``(1) at the beginning of such notice, a statement in 18-
        point Times New Roman type or other functionally similar type, 
        stating `LEGAL NOTICE: YOU ARE A PLAINTIFF IN A CLASS ACTION 
        LAWSUIT AND YOUR LEGAL RIGHTS ARE AFFECTED BY THE SETTLEMENT 
        DESCRIBED IN THIS NOTICE.'; and
            ``(2) a short summary written in plain, easily understood 
        language, describing--
                    ``(A) the subject matter of the class action;
                    ``(B) the members of the class;
                    ``(C) the legal consequences of being a member of 
                the class;
                    ``(D) if the notice is informing class members of a 
                proposed settlement agreement--
                            ``(i) the benefits that will accrue to the 
                        class due to the settlement;
                            ``(ii) the rights that class members will 
                        lose or waive through the settlement;
                            ``(iii) obligations that will be imposed on 
                        the defendants by the settlement;
                            ``(iv) the dollar amount of any attorney's 
                        fee class counsel will be seeking, or if not 
                        possible, a good faith estimate of the dollar 
                        amount of any attorney's fee class counsel will 
                        be seeking; and
                            ``(v) an explanation of how any attorney's 
                        fee will be calculated and funded; and
                    ``(E) any other material matter.
    ``(b) Tabular Format.--Any court with jurisdiction over a plaintiff 
class action shall require that the information described in subsection 
(a)--
            ``(1) be placed in a conspicuous and prominent location on 
        the notice;
            ``(2) contain clear and concise headings for each item of 
        information; and
            ``(3) provide a clear and concise form for stating each 
        item of information required to be disclosed under each 
        heading.
    ``(c) Television or Radio Notice.--Any notice provided through 
television or radio (including transmissions by cable or satellite) to 
inform the class members in a class action of the right of each member 
to be excluded from the class action or a proposed settlement of the 
class action, if such right exists, shall, in plain, easily understood 
language--
            ``(1) describe the persons who may potentially become class 
        members in the class action; and
            ``(2) explain that the failure of a class member to 
        exercise his or her right to be excluded from a class action 
        will result in the person's inclusion in the class action or 
        settlement.

``Sec. 1716. Definitions

    ``In this chapter--
            ``(1) Class action.--The term `class action' means any 
        civil action filed in a district court of the United States 
        pursuant to rule 23 of the Federal Rules of Civil Procedure or 
        any civil action that is removed to a district court of the 
        United States that was originally filed pursuant to a State 
        statute or rule of judicial procedure authorizing an action to 
        be brought by one or more representatives on behalf of a class.
            ``(2) Class counsel.--The term `class counsel' means the 
        persons who serve as the attorneys for the class members in a 
        proposed or certified class action.
            ``(3) Class members.--The term `class members' means the 
        persons who fall within the definition of the proposed or 
        certified class in a class action.
            ``(4) Plaintiff class action.--The term `plaintiff class 
        action' means a class action in which class members are 
        plaintiffs.
            ``(5) Proposed settlement.--The term `proposed settlement' 
        means an agreement that resolves claims in a class action, that 
        is subject to court approval and that, if approved, would be 
        binding on the class members.''.
    (b) Technical and Conforming Amendment.--The table of chapters for 
part V is amended by inserting after the item relating to chapter 113 
the following:

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

SEC. 4. FEDERAL DISTRICT COURT JURISDICTION OF INTERSTATE CLASS 
                    ACTIONS.

    (a) Application of Federal Diversity Jurisdiction.--Section 1332 is 
amended--
            (1) by redesignating subsection (d) as subsection (e); and
            (2) by inserting after subsection (c) the following:
    ``(d)(1) In this subsection--
            ``(A) the term `class' means all of the class members in a 
        class action;
            ``(B) the term `class action' means any civil action filed 
        pursuant to rule 23 of the Federal Rules of Civil Procedure or 
        similar State statute or rule of judicial procedure authorizing 
        an action to be brought by one or more representative persons 
        on behalf of a class;
            ``(C) the term `class certification order' means an order 
        issued by a court approving the treatment of a civil action as 
        a class action; and
            ``(D) the term `class members' means the persons who fall 
        within the definition of the proposed or certified class in a 
        class action.
    ``(2) The district courts shall have original jurisdiction of any 
civil action in which the matter in controversy exceeds the sum or 
value of $2,000,000, exclusive of interest and costs, and is a class 
action in which--
            ``(A) any member of a class of plaintiffs is a citizen of a 
        State different from any defendant;
            ``(B) any member of a class of plaintiffs is a foreign 
        state or a citizen or subject of a foreign state and any 
        defendant is a citizen of a State; or
            ``(C) any member of a class of plaintiffs is a citizen of a 
        State and any defendant is a foreign state or a citizen or 
        subject of a foreign state.
    ``(3) Paragraph (2) shall not apply to any civil action in which--
            ``(A)(i) the substantial majority of the members of the 
        proposed plaintiff class and the primary defendants are 
        citizens of the State in which the action was originally filed; 
        and
            ``(ii) the claims asserted therein will be governed 
        primarily by the laws of the State in which the action was 
        originally filed;
            ``(B) the primary defendants are States, State officials, 
        or other governmental entities against whom the district court 
        may be foreclosed from ordering relief; or
            ``(C) the number of proposed plaintiff class members is 
        less than 100.
    ``(4) In any class action, the claims of the individual class 
members shall be aggregated to determine whether the matter in 
controversy exceeds the sum or value of $2,000,000, exclusive of 
interest and costs.
    ``(5) This subsection shall apply to any class action before or 
after the entry of a class certification order by the court with 
respect to that action.
    ``(6)(A) A district court shall dismiss any civil action that is 
subject to the jurisdiction of the court solely under this subsection 
if the court determines the action may not proceed as a class action 
based on a failure to satisfy the requirements of rule 23 of the 
Federal Rules of Civil Procedure.
    ``(B) Nothing in subparagraph (A) shall prohibit plaintiffs from 
filing an amended class action in Federal court or filing an action in 
State court, except that any such action filed in State court may be 
removed to the appropriate district court if it is an action of which 
the district courts of the United States have original jurisdiction.
    ``(C) In any action that is dismissed under this paragraph and is 
filed by any of the original named plaintiffs therein in the same State 
court venue in which the dismissed action was originally filed, the 
limitations periods on all reasserted claims shall be deemed tolled for 
the period during which the dismissed class action was pending. The 
limitations periods on any claims that were asserted in a class action 
dismissed under this paragraph that are subsequently asserted in an 
individual action shall be deemed tolled for the period during which 
the dismissed action was pending.
    ``(7) Paragraph (2) shall not apply to any class action brought by 
shareholders that solely involves a claim that relates to--
            ``(A) a claim concerning a covered security as defined 
        under section 16(f)(3) of the Securities Act of 1933 and 
        section 28(f)(5)(E) of the Securities Exchange Act of 1934;
            ``(B) the internal affairs or governance of a corporation 
        or other form of business enterprise and arises under or by 
        virtue of the laws of the State in which such corporation or 
        business enterprise is incorporated or organized; or
            ``(C) the rights, duties (including fiduciary duties), and 
        obligations relating to or created by or pursuant to any 
        security (as defined under section 2(a)(1) of the Securities 
        Act of 1933 and the regulations issued thereunder).
    ``(8) For purposes of this subsection and section 1453 of this 
title, an unincorporated association shall be deemed to be a citizen of 
the State where it has its principal place of business and the State 
under whose laws it is organized.
    ``(9) For purposes of this section and section 1453 of this title, 
a civil action that is not otherwise a class action as defined in 
paragraph (1)(B) of this subsection shall nevertheless be deemed a 
class action if--
            ``(A) the named plaintiff purports to act for the interests 
        of its members (who are not named parties to the action) or for 
        the interests of the general public, seeks a remedy of damages, 
        restitution, disgorgement, or any other form of monetary 
        relief, and is not a State attorney general; or
            ``(B) monetary relief claims in the action are proposed to 
        be tried jointly in any respect with the claims of 100 or more 
        other persons on the ground that the claims involve common 
        questions of law or fact.
In any such case, the persons who allegedly were injured shall be 
treated as members of a proposed plaintiff class and the monetary 
relief that is sought shall be treated as the claims of individual 
class members. The provisions of paragraphs (3) and (6) of this 
subsection and subsections (b)(2) and (d) of section 1453 shall not 
apply to civil actions described under subparagraph (A). The provisions 
of paragraph (6) of this subsection, and subsections (b)(2) and (d) of 
section 1453 shall not apply to civil actions described under 
subparagraph (B).''.
    (b) Conforming Amendments.--
            (1) Section 1335(a)(1) is amended by inserting ``(a) or 
        (d)'' after ``1332''.
            (2) Section 1603(b)(3) is amended by striking ``(d)'' and 
        inserting ``(e)''.

SEC. 5. REMOVAL OF INTERSTATE CLASS ACTIONS TO FEDERAL DISTRICT COURT.

    (a) In General.--Chapter 89 is amended by adding after section 1452 
the following:

``Sec. 1453. Removal of class actions

    ``(a) Definitions.--In this section, the terms `class', `class 
action', `class certification order', and `class member' have the 
meanings given these terms in section 1332(d)(1).
    ``(b) In General.--A class action may be removed to a district 
court of the United States in accordance with this chapter, without 
regard to whether any defendant is a citizen of the State in which the 
action is brought, except that such action may be removed--
            ``(1) by any defendant without the consent of all 
        defendants; or
            ``(2) by any plaintiff class member who is not a named or 
        representative class member without the consent of all members 
        of such class.
    ``(c) When Removable.--This section shall apply to any class action 
before or after the entry of a class certification order in the action, 
except that a plaintiff class member who is not a named or 
representative class member of the action may not seek removal of the 
action before an order certifying a class of which the plaintiff is a 
class member has been entered.
    ``(d) Procedure for Removal.--The provisions of section 1446 
relating to a defendant removing a case shall apply to a plaintiff 
removing a case under this section, except that in the application of 
subsection (b) of such section the requirement relating to the 30-day 
filing period shall be met if a plaintiff class member files notice of 
removal within 30 days after receipt by such class member, through 
service or otherwise, of the initial written notice of the class 
action.
    ``(e) Review of Orders Remanding Class Actions to State Courts.--
The provisions of section 1447 shall apply to any removal of a case 
under this section, except that, notwithstanding the provisions of 
section 1447(d), an order remanding a class action to the State court 
from which it was removed shall be reviewable by appeal or otherwise.
    ``(f) Exception.--This section shall not apply to any class action 
brought by shareholders that solely involves--
            ``(1) a claim concerning a covered security as defined 
        under section 16(f)(3) of the Securities Act of 1933 and 
        section 28(f)(5)(E) of the Securities Exchange Act of 1934;
            ``(2) a claim that relates to the internal affairs or 
        governance of a corporation or other form of business 
        enterprise and arises under or by virtue of the laws of the 
        State in which such corporation or business enterprise is 
        incorporated or organized; or
            ``(3) a claim that relates to the rights, duties (including 
        fiduciary duties), and obligations relating to or created by or 
        pursuant to any security (as defined under section 2(a)(1) of 
        the Securities Act of 1933 and the regulations issued 
        thereunder).''.
    (b) Removal Limitation.--Section 1446(b) is amended in the second 
sentence by inserting ``(a)'' after ``section 1332''.
    (c) Technical and Conforming Amendments.--The table of sections for 
chapter 89 is amended by adding after the item relating to section 1452 
the following:

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

SEC. 6. APPEALS OF CLASS ACTION CERTIFICATION ORDERS.

    (a) In General.--Section 1292(a) is amended by inserting after 
paragraph (3) the following:
            ``(4) Orders of the district courts of the United States 
        granting or denying class certification under rule 23 of the 
        Federal Rules of Civil Procedure, if notice of appeal is filed 
        within 10 days after entry of the order.''.
    (b) Discovery Stay.--All discovery and other proceedings shall be 
stayed during the pendency of any appeal taken pursuant to the 
amendment made by subsection (a), unless the court finds upon the 
motion of any party that specific discovery is necessary to preserve 
evidence or to prevent undue prejudice to that party.

SEC. 7. EFFECTIVE DATE.

    The amendments made by this Act shall apply to any civil action 
commenced on or after the date of the enactment of this Act.

                          Purpose and Summary

    H.R. 2341 is intended to provide meaningful improvements in 
litigation management by allowing Federal courts to hear large 
interstate class actions and by establishing new protections 
for consumers against abusive class action settlements. In 
making these improvements, H.R. 2341 does not limit access to 
the courthouse or alter any existing State or Federal 
substantive law. Furthermore, it will help prevent a handful of 
State courts from usurping the authority of other States and 
the rights of their citizens.
    H.R. 2341 has two core purposes. First, it amends the 
current Federal diversity-of-citizenship jurisdiction statute 
(28 U.S.C. Sec. 1332)--to allow large interstate class actions 
to be adjudicated in Federal courts. Currently, Federal courts 
have jurisdiction over (a) lawsuits dealing with a Federal 
question and (b) cases meeting current diversity jurisdiction 
requirements--matters in which all plaintiffs are citizens of 
jurisdictions different than all defendants, and each claimant 
has an amount in controversy in excess of $75,000. H.R. 2341 
would change the diversity jurisdiction requirement for class 
actions, generally permitting access to Federal courts in class 
actions where there is ``minimal diversity'' (that is, any 
member of the proposed class is a citizen of a State different 
from any defendant) and the aggregate amount in controversy 
among all class members exceeds $2 million. In that way, H.R. 
2341 recognizes that large interstate class actions deserve 
Federal court access because they typically effect more 
citizens, involve more money, and implicate more interstate 
commerce issues than any other type of lawsuit.
    Second, it implements long needed protections for consumers 
against abusive settlements. These protections are established 
in the ``Consumer Class Action Bill of Rights'' (Bill of 
Rights), which is located in Section 3 of the bill. The Bill of 
Rights would: (1) establish new ``Plain English'' requirements 
(non-legal jargon) so that class members can better understand 
class action settlement notices and how these notices effect 
their rights; (2) enhance judicial scrutiny of coupon 
settlements; (3) provide judicial scrutiny over settlements 
that would result in a net monetary loss to plaintiffs; (4) 
prohibit unjustified payments, also known as bounties, to class 
representatives; and (5) protect out-of-state class members 
against settlements that favor class members based upon 
geographic proximity to the courthouse.

                Background and Need for the Legislation

    Class actions are an important part of our legal system. 
They can promote efficiency by allowing plaintiffs with similar 
claims to adjudicate their cases in one proceeding. They may 
lead to the adjudication of homogeneous groups of smaller 
claims alleging harms to a large number of people, which would 
otherwise go unaddressed because the cost to individuals of 
suing would far exceed any possible benefit to the individual. 
However, because class actions empower one individual to 
represent the interests of thousands (and sometimes millions) 
of other people without their permission or supervision, there 
is substantial risk of serious abuse. Unfortunately, that abuse 
has become pervasive in certain county courts. Even more 
unfortunately, because interstate class actions often have 
nationwide ramifications, those abuses are impacting persons 
(both class members and defendants) having little or no 
relationship to the jurisdictions in which these abuses are 
occurring. In short, even though these abuses are occurring 
primarily in our State court system, the impact is national in 
scope.
Concerns for the Rights of Class Members
    Recent developments in class action practice have created 
concern about the rights of class members in some of these 
lawsuits.\1\ For instance, a class action filed against an 
airline resulted in coupon rewards for class members for $25 
when they purchased another airline ticket for more than 
$250.\2\ In Boston, a class action against a Boston bank 
resulted in an award of $8.76 to each class member; however, 
each class member was also deducted $90 from their bank account 
to pay their attorney fees.\3\ In Mississippi, an infamous 
class action settlement resulted in extreme disparate rewards 
for class members from different States with identical 
injuries.\4\ In other class actions, named representatives of 
the class have received disparate awards, which diverges the 
interest of the class representatives and other members of the 
lawsuit.\5\ While class actions require that class members 
affirmatively opt-out of the lawsuit, recent studies have 
indicated that most adults are unable to understand notices 
explaining this requirement.\6\ While these abuses have been 
commonplace under the current system, the Bill of Rights in 
Section 3 of H.R. 2341 establishes important rules to prevent 
these abuses.
---------------------------------------------------------------------------
    \1\ Hearings on H.R. 1875 and H.R. 2005: the ``Interstate Class 
Action Jurisdiction Act of 1999'' and ``Workplace Goods Job Growth and 
Competitiveness Act of 1999'' Before the House Comm. on the Judiciary, 
106th Cong., 1st Sess. 57 (prepared statement of John Beisner) (July 
21, 1999).
    \2\ Harry Levins, Airlines Send Coupons To Customers Certificates 
Are Part of Settlement of Suit Alleging Price-Fixing, St. Louis Post 
Dispatch, Dec. 23, 1994, at B3.
    \3\ Hearings on Class Action Lawsuits: Examining Victim 
Compensation and Attorney's fees Before the Senate Comm. on the 
Judiciary Subcomm. on Administrative Oversight and the Courts, 105th 
Cong., 2nd Sess., Hrg. 105-504 (Oct. 30, 1997) (opening statement of 
the Hon. Herb Kohl).
    \4\ Stephen Labaton, Top Asbestos Makers Agree to Settle 2 Large 
Lawsuits, The New York Times, Jan. 23, 2000, at Sec. 1 p. 22.
    \5\ C. Krislov, Scrutiny of the Bounty: Incentive Awards for 
Plaintiffs in Class Litigation, 78 Ill.B.J. 286 (1990) (``[m]any 
commentators have said that awarding representatives any more than the 
proportionate amount of the class recovery creates an unacceptable 
conflict between the class and representatives. ''). See also: Warren & 
Stuckey, Recent Developments in Class Actions: Attorneys' Fees, Partial 
Settlements, and Awards to Named Plaintiffs, 430 PLI/Lit 625, 663 
(1992).
    \6\ J. Willging, L. Hooper, and R. Niemic, An Empirical Analysis of 
Rule 23 to Address the Rulemaking Challenges, 71 N.Y.U.L.Rev. 74, at 
134 (``[m]any, perhaps most, of the notices present technical 
information in legal jargon . . . and most notices [were] not 
comprehensible to the lay reader.'').
---------------------------------------------------------------------------
Class Action Certification Standards
    Class actions were initially created in State courts of law 
and equity, and in 1849 became statutory with the advent of the 
Field Code, which several States adopted. In 1938, a Federal 
class action rule was first enacted in the form of Federal Rule 
of Civil Procedure 23.\7\ Rule 23 was substantially amended in 
1966, and granted courts more flexibility in certifying class 
actions.\8\
---------------------------------------------------------------------------
    \7\ The original rule 23 recognized three types of class actions: 
the ``true'' class action involving joint rights in which a class 
decision was res judicata; the hybrid category involving several rights 
relating to specific property; and the ``spurious'' class action 
involving several rights affected by common questions, as to which the 
result was res judicata only as to the parties actually joined.
    \8\ See Fed. R. Civ. Proc. 23.
---------------------------------------------------------------------------
    Today, the vast majority of Federal and State courts have 
adopted (sometimes with minor modifications) the 1966 version 
of Federal Rule 23. Indeed, only six States (Georgia, North 
Carolina, Nebraska, South Carolina, and Wisconsin) follow rules 
substantially different from Federal Rule 23, and even the 
courts of most of those States tend to look to the Federal rule 
and Federal court precedents for guidance on the circumstances 
in which cases should be certified for class treatment. (Two 
States--Mississippi and Virginia--have never adopted rules 
authorizing class actions.)
Rule 23 Class Action Requirements (Federal Rules of Civil Procedure)
    As amended in 1966, rule 23 of the Federal Rules of Civil 
Procedure prescribes the conditions under which class action 
suits may be brought in the Federal courts. Rule 23(a) outlines 
the prerequisites for a class action. They are (1) the class is 
so numerous that joinder of all members is impracticable; (2) 
there are questions of law or fact common to the class; (3) the 
claims or defenses of the representative parties are typical of 
the claims or defenses of the class; and (4) the representative 
parties will fairly and adequately protect the interests of the 
class.
    In addition to meeting these prerequisites, an action may 
only be maintained as a class action if one of the following 
three conditions outlined in rule 23(b) are met: (1) the 
prosecution of separate actions by or against individual 
members of the class would create a risk of either inconsistent 
or varying adjudications with respect to individual members of 
the class which would establish incompatible standards of 
conduct for the party opposing the class, or adjudications with 
respect to individual members of the class which would as a 
practical matter be dispositive of the interests of the other 
members not parties to the adjudications or substantially 
impair or impede their ability to protect their interests; (2) 
the party opposing the class has acted or refused to act on 
grounds generally applicable to the class, thereby making 
appropriate final injunctive or corresponding declaratory 
relief with respect to the class as a whole; or (3) the court 
finds that the questions of law or fact common to the members 
of the class predominate over any questions affecting only 
individual members, and that a class action is superior to 
other available methods for the fair and efficient adjudication 
of the controversy. The matters pertinent to the findings 
include: (A) the interest of members of the class in 
individually controlling the prosecution or defense of separate 
actions; (B) the extent and nature of any litigation concerning 
the controversy already commenced by or against members of the 
class; (C) the desirability or undesirability of concentrating 
the litigation of the claims in the particular forum; and (D) 
the difficulties likely to be encountered in the management of 
a class action.
    Rule 23(c) outlines the notice requirement for actions 
brought under rule 23(b)(3). Members of any class must be 
provided with the ``best notice [of the action] practicable 
under the circumstances, including individual notice to all 
members who can be identified through reasonable effort.'' 
After notice has been made class members are automatically 
included in the action unless they affirmatively opt-out of the 
class. Information on how to opt-out is also supposed to be 
clearly communicated by this notice.
Class Certification Dilemmas of Interstate Class Actions
    Large interstate class actions create the potential for 
considerable abuse, particularly when the case involves parties 
from multiple States and/or requires the application of the 
laws of many States.\9\ For example, some State courts 
routinely certify classes before the defendant is even served 
with a complaint and given a chance to defend itself.\10\ Other 
State courts employ very lax class certification criteria, 
rendering virtually any controversy subject to class action 
treatment.\11\ 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.\12\ This has the 
effect of making the law of that State applicable nationwide.
---------------------------------------------------------------------------
    \9\ Hearings on H.R. 1875: The ``Interstate Class Action 
Jurisdiction Act of 1999'' Before the House Comm. on the Judiciary, 
106th Cong., 1st Sess. (July 21, 1999) (prepared statement of Hon. 
Walter Dellinger, III, Esq.).
    \10\ Hearings on ``Mass Torts and Class Action Law-suits'' Before 
the House Comm. on the Judiciary Subcomm. on Courts and Intellectual 
Property, 105th Cong., 2nd Sess. (March 5, 1998) (prepared statement of 
John W. Martin, Jr.).
    \11\ Id.
    \12\ Avery v. State Farm Mut. Auto Ins. Cos., 746 N.E. 2d 1242 (Ill 
5th Dis. Court of Appeals); See also: Matthew L. Wald, Suit Against 
Auto Insurer Could Affect Nearly All Drivers, The New York Times, Sep. 
27, 1998, at sec. 1 p. 29.
---------------------------------------------------------------------------
    Certain county courts that do not rigorously enforce class 
action certification rules have encouraged plaintiffs to forum 
shop for the court which is most likely to certify a purported 
class. In many instances, the fact that a class is certified 
will determine the outcome of the case.\13\ Because the cases 
are brought on behalf of thousands (and sometimes millions) of 
claimants, the potential exposure for a defendant is enormous. 
Plaintiffs' counsel can use this potential exposure to coerce 
settlements that offer minimal benefits to the class members. 
These settlements also result in hefty attorneys' fees.\14\
---------------------------------------------------------------------------
    \13\ H.R. Report No. 106-320, 106th Cong., 1st Sess., at 8 (1999).
    \14\ Stuart Eskenazi, Consumer activists: Bell deal a 'ripoff' // 
Phone company defends offer of services to settle class action suit, 
Austin American-Statesman, April 17, 1998, at A1.
---------------------------------------------------------------------------
    The inability of our Federal and State judicial systems to 
draw together all class actions that are filed on a particular 
subject for coordinated adjudication is injuring the rights of 
both plaintiffs (that is, the unnamed class members) and 
defendants in such cases.\15\ In the Federal court system, 
class actions asserting the same claims on behalf of the same 
or overlapping classes may be transferred to one district for 
coordinated or consolidated pretrial proceedings.\16\ When 
these class actions are pending in State courts, however, there 
is no corresponding mechanism for cogently adjudicating the 
competing suits. Instead, a settlement or judgment in any of 
the cases makes the other class actions moot.\17\ 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 counsel against each other and drive the 
settlement value down.\18\ Again, the loser is the putative 
class member whose claim is extinguished by the settlement, 
benefitting the lawyer seeking large fees. \19\ This has led to 
phenomena commonly referred to as ``copycat'' class actions, 
where identical actions are filed in multiple jurisdictions by 
the same pool of plaintiffs.\20\ H.R. 2341 is intended to 
prevent these abuses by allowing large interstate class action 
cases to be heard in Federal court.
---------------------------------------------------------------------------
    \15\ Working Papers of the Advisory Committee on Civil Rules on 
Proposed Amendments to Civil Rule 23, Vol. 3, at 32 (May 1, 1997) 
(hereinafter ``Advisory Committee Working Papers'') (statement of Prof. 
Samuel Isaacaroff, University of Texas Law School) (noting that ``rival 
State court proceedings'' in class actions are ``emerging as real 
problem spots''); Id., Vol. 4, at 88 (comments of consumer advocate 
Stephen Gardner) (describing the duplication of rival State class 
action proceedings in State and Federal courts).
    \16\ See 28 U.S.C. 1407.
    \17\ Hearings on H.R. 1875 and 2005: the ``Interstate Class Action 
Jurisdiction Act of 1999'' and ``Workplace Goods Job Growth and 
Competitiveness Act of 1999'' Before the House Comm. on the Judiciary, 
106th Cong., 1st Sess. 57 (July 21, 1999) (prepared statement of John 
Beisner).
    \18\ Id.
    \19\ Id.
    \20\ H.R. Rep. No. 106-30, 106th Cong., 1st Sess, at 9 (1999).
---------------------------------------------------------------------------
Federal Diversity Jurisdiction
    While Federal courts have jurisdiction over questions or 
disputes concerning Federal law, article III of the 
Constitution empowers Congress to establish Federal 
jurisdiction over any law when there is diversity--disputes 
``between citizens of different States.'' Diversity 
jurisdiction is premised on concerns that State courts might 
discriminate against out of State defendants. Since 1806, with 
some exceptions, the Federal courts have followed the rule of 
Strawbridge v. Curtiss, which states that Federal jurisdiction 
lies only where all plaintiffs are citizens of States different 
than all defendants.\21\ This is known as the ``complete 
diversity'' rule.\22\ 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.\23\ Since the early days of the country, Congress 
has imposed a monetary threshold--now $75,000--for Federal 
diversity claims.\24\ 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.\25\
---------------------------------------------------------------------------
    \21\ Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267 (1806).
    \22\ The Supreme Court has regularly recognized that the decision 
to require complete diversity, and to set a minimum amount in 
controversy, are political decisions not mandated by the Constitution. 
See, e.g., Newman-Green, Inc. v. Alfonzo-Larrian, 490 U.S. 826, 829 n.1 
(1989). It is therefore the prerogative of the Congress to broaden the 
scope of diversity jurisdiction to any extent it sees fit, as long as 
any two adverse parties to a lawsuit are citizens of different States. 
See State Farm Fire & Cas. Co. v. Tashire, 386 U.S. 523, 530-31 (1967).
    \23\ See Snyder v. Harris, 394 U.S. 332 (1969).
    \24\ See 28 U.S.C. Sec. 1332(a).
    \25\ See Zahn v. International Paper Co., 414 U.S. 291 (1973).
---------------------------------------------------------------------------
    These jurisdictional statutes were originally enacted years 
ago, well before the modern class action arose. As a result, 
State courts typically resolve most class actions--the largest, 
most diverse lawsuits in our civil justice system. Attorneys 
often name irrelevant parties to their class actions in an 
effort to ``destroy diversity''--that is, to keep the case from 
qualifying for Federal diversity jurisdiction. In fact, 
plaintiff's counsel have made statements about a case to 
prevent a defendant from removing the case to Federal court 
(e.g., ``plaintiffs seek only a very small amount of money in 
this case '').\26\ After 1 year, however, the same counsel will 
recant those statements, since at that point, current statutes 
bar removal of the case to Federal court.\27\
---------------------------------------------------------------------------
    \26\ Hearings on H.R. 1875 and 2005: the ``Interstate Class Action 
Jurisdiction Act of 1999'' and ``Workplace Goods Job Growth and 
Competitiveness Act of 1999'' Before the House Comm. on the Judiciary, 
106th Cong., 1st Sess. 57 (July 21, 1999) (prepared statement of John 
Beisner).
    \27\ Id.
---------------------------------------------------------------------------
Standards for Removal of Interstate Class Actions to Federal District 
        Court
    The general Federal removal statute provides, inter alia, 
that any civil action brought in a State court of which U.S. 
district courts have original jurisdiction, may be removed by 
the defendant(s) to the appropriate Federal court.\28\ Removal 
is based on the same general assumption as diversity 
jurisdiction, that an out-of-state defendant may become a 
victim of local prejudice in State court.\29\
---------------------------------------------------------------------------
    \28\ See 28 U.S.C. Sec. 1441(a).
    \29\ See David P. Currie, Federal Jurisdiction at 140 (3rd ed. 
1990).
---------------------------------------------------------------------------
    A defendant must file for removal to Federal court within 
30 days after receipt of a copy of the initial pleading (or 
service of summons if a pleading has been filed in court and is 
not required to be served on the defendant).\30\ An exception 
exists beyond the 30-day deadline when the case stated by the 
initial pleading is not removable. If so, a notice of removal 
must be filed within 30 days of receipt by the defendant of ``a 
copy of an amended pleading, motion, order, or other paper from 
which it may first be ascertained that the case [is 
removable].''
---------------------------------------------------------------------------
    \30\ See 28 U.S.C. Sec. 1446(b).
---------------------------------------------------------------------------
Jurisdictional Dilemmas of Interstate Class Actions
    These jurisdictional statutes were originally enacted years 
ago, well before the modern class action arose. 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 consumers living 
in all 50 States brings claims collectively worth $15 billion 
against a manufacturer, the lawsuit usually must be heard in 
State court. As former Attorney General Walter Dellinger 
articulated in 1999 before the Committee on the Judiciary, if 
Congress were to enact an entirely new Federal diversity 
jurisdiction statute and consider anew which kinds of cases 
most warrant access to Federal courts, there would be little 
legitimate debate that interstate class actions would be at or 
near the top of the list.\31\ Those cases typically have the 
most money in controversy, involve the most people, and have 
the most interstate commerce ramifications. In short, they are 
the types of cases that most clearly fit the historic rationale 
for Federal diversity jurisdiction. Thus, it is an extreme 
anomaly that current law essentially excludes these cases from 
our Federal courts while allowing access to others.
---------------------------------------------------------------------------
    \31\ Hearings on H.R. 1875 and H.R. 2005: the ``Interstate Class 
Action Jurisdiction Act of 1999'' and ``Workplace Goods Job Growth and 
Competitiveness Act of 1999'' Before the House of Comm. on the 
Judiciary, 106th Cong., 1st Sess. 57 (July 21, 1999) (prepared 
statement of Hon. Walter Dellinger, III, Esq.).
---------------------------------------------------------------------------
    As a result of this exclusion, the number of class actions 
filed in State courts has been mushrooming in recent years. 
Although data is difficult to gather, several studies provide a 
clear picture of the growing problem concentrated in certain 
State courts. For example:

         A major empirical research project by RAND's 
        Institute for Civil Justice (``ICJ'') observed that 
        over a several year period, there was a ``doubling or 
        tripling of the number of putative class actions'' that 
        was ``concentrated in the State courts.'' \32\
---------------------------------------------------------------------------
    \32\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of John Beisner).

         Another survey revealed that while Federal 
        court class actions had increased by 340 percent over 
        the past decade, State court class action filings had 
        increased 1,315 percent. Typically, the new State court 
        filings were on behalf of proposed nationwide or multi-
        state classes.\33\
---------------------------------------------------------------------------
    \33\ Id.

         A study submitted to the House Judiciary 
        Committee in 1999 indicated that the local courts of 
        six small, rural Alabama counties were experiencing a 
        tidal wave of class action filings, many seeking relief 
        on behalf of purported nationwide classes concerning 
        matters of national significance.\34\
---------------------------------------------------------------------------
    \34\ Hearings on ``Mass Torts and Class Action Law-suits'' Before 
the House Comm. on the Judiciary Subcomm. on Courts and Intellectual 
Property, 105th Cong., 2nd Sess. (March 5, 1998) (prepared statement of 
John W. Martin, Jr.).

         The final report on the RAND/ICJ study on 
        class actions concluded that class actions ``were more 
        prevalent'' in certain States ``than one would expect 
        on the basis of population.'' \35\
---------------------------------------------------------------------------
    \35\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of John Beisner).

         A new study (the ``Harvard Journal study'') 
        examined data from the dockets of three State courts 
        widely viewed as class action magnets--Madison County, 
        Illinois; Jefferson County, Texas; and Palm Beach 
        County, Florida--confirms that the filing of State 
        court class actions is increasing rapidly in numbers 
        wildly disproportionate with their populations. The 
        most dramatic increase occurred in Madison County, a 
        southwest Illinois county with a population of 250,000, 
        where the number of class actions increased by 1,850% 
        between 1998 and 2000. The majority of class actions in 
        all three counties were brought on behalf of nationwide 
        classes. In Madison County, for example, 81% of the 
        cases filed during the survey period sought to certify 
        nationwide classes. In Jefferson County, the number was 
        57%.\36\
---------------------------------------------------------------------------
    \36\ Id.

         That same study confirms the theory that a 
        select group of State courts had become national 
        magnets for interstate class actions. For example, the 
        study found that the three county courts examined were 
        monopolized by a small cadre of plaintiffs' counsel who 
        did not reside or practice in those counties. Further, 
        the study determined that the vast majority of the 
        class actions filed in those counties had no real nexus 
        to the jurisdiction.\37\
---------------------------------------------------------------------------
    \37\ Id.

    The nature of the problem is illustrated by the lengths to 
which counsel will go in order to keep their cases in their 
favorite local courts--and out of the Federal courts. The 
current jurisdictional rules can be used to game the system and 
keep interstate class actions out of Federal court. During a 
February 6, 2002, hearing, the Committee received detailed 
testimony about how attorneys often name irrelevant parties to 
class actions filed in State court in an effort to ``destroy 
diversity'' and keep the case from qualifying for Federal 
diversity jurisdiction.\38\ One witness, testifying on her 
experiences of owning a small drugstore in Jefferson County 
Mississippi, which was repeatedly dragged into national class 
actions against pharmaceutical manufacturers.\39\ According to 
Mrs. Bankston, her drugstore was a target because if filled FDA 
approved prescriptions, was located in Jefferson County 
Mississippi, and kept accurate records.\40\
---------------------------------------------------------------------------
    \38\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of Hilda Bankston).
    \39\ Id.
    \40\ Id.
---------------------------------------------------------------------------
    The consequence of these jurisdictional limitations is not 
merely to eliminate the Federal forum for adjudication of 
interstate class actions. Because the alternative Federal forum 
is not available, considerable class action abuse is occurring 
in many State courts.\41\ Some State courts are not properly 
supervising class settlements.\42\ The result is that class 
counsel become the primary beneficiaries of those settlements; 
the class members (the persons on whose behalf the actions were 
brought) get little or nothing--or in some cases, even 
worse.\43\
---------------------------------------------------------------------------
    \41\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of John Beisner).
    \42\ Id.
    \43\ Id.
---------------------------------------------------------------------------
    According to the Institute for Civil Justice/RAND study, 
class counsel in State court consumer class action settlements 
(i.e., non-personal injury monetary relief cases) frequently 
walk off with more money than all of the class members 
combined.\44\ Last year, an editorial in the Tampa Tribune 
referred to this phenomenon as ``jackpot justice''--settlements 
that provide little, if any relief, to the class members, make 
their lawyers rich, and ultimately result in higher prices for 
consumers.\45\ (In contrast, a Federal Judicial Center study 
found that ``[i]n most [class actions handled by Federal 
courts], net monetary distributions to the class exceeded 
attorneys' fees by substantial margins.'')\46\
---------------------------------------------------------------------------
    \44\ Id.
    \45\ Patrick Slevin, Class-action lawsuit abuse threatens quality 
of life for all Floridians, The Tampa Bay Tribune, Sep. 16, 2000 at 15.
    \46\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of John Beisner).
---------------------------------------------------------------------------
    In the now infamous Bank of Boston settlement, an Alabama 
State court judge approved a settlement that awarded up to 
$8.76 to individual class members, while the class counsel 
received more than $8.5 million in fees.\47\ One class member 
testified before the Senate Subcommittee on Administrative 
Oversight and the Courts that she was charged a mysterious $80 
miscellaneous deduction that she later learned was an expense 
used to pay the class lawyers' fee.\48\ In her testimony, that 
witness expressed disbelief at the notion that ``people who 
were supposed to be my lawyers, representing my interests, took 
my money and got away with it.'' \49\
---------------------------------------------------------------------------
    \47\ Hearings on Class Action Lawsuits: Examining Victim 
Compensation and Attorney's fees Before the Senate Comm. on the 
Judiciary Subcomm. on Administrative Oversight and the Courts, 105th 
Cong., 2nd Sess., Hrg. 105-504 (Oct. 30, 1997).
    \48\ Id.
    \49\ Id.
---------------------------------------------------------------------------
    While the Bank of Boston settlement is the best-known (and 
perhaps the most egregious) example, witnesses who appeared 
before the Committee noted an abundance of other settlements 
that provided millions of dollars to the lawyers--but only 
pennies to the class members:

         In a case in Madison County, Illinois, 
        involving cable late fees, the customers received no 
        compensation for billing problems; the cable operator 
        was required to change its late fee policies 
        prospectively; and plaintiffs' counsel received $5.6 
        million for their efforts.\50\
---------------------------------------------------------------------------
    \50\ Final Order of Settlement, Unfried v. Charter Communications, 
Inc., No 99-L-48 (granted December 21, 2000).

         In a California State court case regarding 
        the size of computer monitor screens, the court 
        approved a settlement that offered $13 rebates to 
        consumers who purchased new monitors. Their lawyers 
        received approximately $6 million in fees.\51\
---------------------------------------------------------------------------
    \51\ Jerry Heaster, Enough Already With Lawsuits, Kansas City Star, 
July 10, 1999 at C1.

         The settlement of a suit involving souvenirs 
        and merchandise sold at NASCAR Winston Cup stock car 
        races gave consumers coupons toward the purchase of 
        more merchandise; their lawyers were eligible to 
        receive more than $2 million.\52\
---------------------------------------------------------------------------
    \52\ Robert D. Mauk, Lawyers Win Big In Class Action Suits: Is It 
Justice Or Greed?, Charleston Daily Mail, June 19, 2001.

         Customers in a suit against a telephone 
        company in Texas State court received three optional 
        phone services for 3 months or a $15 credit if they 
        already subscribed to those services. The lawyers 
        pocketed $4.5 million in fees.\53\
---------------------------------------------------------------------------
    \53\ Editorial, We All Pay Dearly For Costly Class Actions, Corpus 
Christi Caller-Times, January 8, 2001.

         A very recent class settlement that has 
        received considerable attention arose in a case 
        alleging that a video rental company improperly 
        assessed late fees. Under the proposed settlement 
        (which has reportedly received preliminary approval 
        from the Jefferson County, Texas court), customers 
        would receive varying benefits. For example, a customer 
        who claimed payment of $30 in late fees would get two 
        free movie rentals and five $1 coupons good toward the 
        purchase of non-food items. Initially, the video rental 
        company announced that the various coupons to be issued 
        would have a face value of $460 million, but the 
        company has now acknowledged that fewer than 10 percent 
        of the coupons will be used and that it will not be 
        changing its late fee policy. Plaintiffs' class counsel 
        proposed that they be paid $9.25 million in fees and 
        expenses. One commentator observed that ``the real 
        winners in the settlement are the lawyers who sued the 
        company,'' who will be paid ``in cash, not coupons.'' 
        \54\
---------------------------------------------------------------------------
    \54\ David Koenig, Blockbuster tried to settle class action 
lawsuits over late fees, Associated Press, June 6, 2001.

    Although class action certification standards do not differ 
radically throughout America's Federal and State courts, 
certain county courts in the State systems have shown very lax 
attitudes toward class certification.\55\ The record indicates 
that some State court judges have certified classes before the 
defendant was even served with the complaint and given an 
opportunity to defend itself.\56\ Other State court judges 
simply do not rigorously apply the appropriate class 
certification prerequisites, such that they will afford class 
treatment to virtually any kind of case, even though doing so 
will trample the due process rights of the unnamed class 
members and/or defendants.\57\ Indeed, the record contains 
examples of cases in which Federal courts denied class 
certification based on due process concerns, but State courts 
subsequently certified classes anyway.\58\
---------------------------------------------------------------------------
    \55\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of John Beisner).
    \56\ Hearings on ``Mass Torts and Class Action Law-suits'' Before 
the House Comm. on the Judiciary Subcomm. on Courts and Intellectual 
Property, 105th Cong., 2nd Sess. (March 5, 1998) (prepared statement of 
John W. Martin, Jr.).
    \57\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of John Beisner).
    \58\ Hearings on H.R. 1875 and H.R. 2005: the ``Interstate Class 
Action Jurisdiction Act of 1999'' and ``Workplace Goods Job Growth and 
Competitiveness Act of 1999'' Before the House of Comm. on the 
Judiciary, 106th Cong., 1st Sess. 57 (July 21, 1999); Hearings on 
``Mass Torts and Class Action Law-suits'' Before the House Comm. on the 
Judiciary Subcomm. on Courts and Intellectual Property, 105th Cong., 
2nd Sess. (March 5, 1998).
---------------------------------------------------------------------------
    The power of the class device often corners defendants into 
settling any class action rather than contest its merits.\59\ 
One witness at the Committee's February 6, 2002, hearing 
detailed his experiences of copy-cat class actions being filed 
by the same lawyers in the same State courts at the same 
time.\60\ The witness indicated that these cases were routinely 
settled without regard to their merit.\61\ While the witness 
represented one of the largest technology corporations in the 
world, it is evident that the costs associated with class 
actions that are routinely settled without regard to their 
merit pose no purpose to the American consumer other than 
passing off an additional cost and possibly preventing 
innovation and access to new markets.\62\
---------------------------------------------------------------------------
    \59\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of Peter Detkin)
    \60\ Id.
    \61\ Id.
    \62\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002); Hearings on H.R. 1875 and H.R. 2005: the 
``Interstate Class Action Jurisdiction Act of 1999'' and ``Workplace 
Goods Job Growth and Competitiveness Act of 1999'' Before the House of 
Comm. on the Judiciary, 106th Cong., 1st Sess. 57 (July 21, 1999); 
Hearings on ``Mass Torts and Class Action Law-suits'' Before the House 
Comm. on the Judiciary Subcomm. on Courts and Intellectual Property, 
105th Cong., 2nd Sess. (March 5, 1998).
---------------------------------------------------------------------------
    Some State courts have effectively made themselves the 
arbiters of the laws of other States, raising serious 
federalism concerns.\63\ To facilitate the certification of 
nationwide or multi-state classes, some State courts have 
declared the laws of their forum to apply to all claims in the 
action, even where that home State law is inconsistent with the 
laws of other jurisdictions that should be applied.\64\ Some 
years ago, the U.S. Supreme Court declared this practice to 
constitute a denial of due process, but it continues. In other 
nationwide or multi-state class actions, a single State court 
decides the law of many other jurisdictions, effectively 
telling other States what their laws are with no input from the 
judiciaries of those other jurisdictions.\65\ Again, this 
practice means that a State court, which has no accountability 
to the residents of any other State, is dictating applicable 
laws to out-of-state residents.\66\
---------------------------------------------------------------------------
    \63\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of John Beisner).
    \64\ Id.
    \65\ Id.
    \66\ Id.
---------------------------------------------------------------------------
    Perhaps the best-known example of this phenomenon is Avery 
v. State Farm Mut. Auto Ins. Cos., a case involving allegations 
that an automobile insurance company breached its policyholder 
contracts nationwide by requiring the use of less expensive 
non-original equipment manufacturer parts in making accident 
repairs--a standard industry practice.\67\ In that case, an 
Illinois county court certified a nationwide class, and at 
trial, a jury awarded a verdict of $1.18 billion against 
defendant State Farm. The Avery case received broad media 
attention because the judge granted class certification and 
allowed the jury verdict to stand, even though several 
insurance commissioners testified that a ruling in favor of the 
nationwide proposed class by an Illinois court would actually 
contravene the laws and policies of other States. Some of those 
States have enacted laws encouraging (or even requiring) 
insurers to use less expensive, non-OEM parts in making covered 
accident repairs to motor vehicles as a means of containing the 
cost of auto insurance coverage. In upholding the Avery jury's 
award last year, an Illinois court of appeals discounted 
testimony from ``[f]ormer and current representatives of State 
insurance commissioners [who] testified that the laws in many 
of our sister States permit and in some cases . . . [even] 
encourage competitive price control.'' \68\ According to the 
appellate court, this testimony was irrelevant because of the 
trial court's finding that the parts were inferior.\69\ 
According to The New York Times, the import of the Illinois 
decision was to ``overturn insurance regulations or State laws 
in New York, Massachusetts, and Hawaii, among other places'' 
and ``to make what amounts to a national rule on insurance.'' 
\70\
---------------------------------------------------------------------------
    \67\ 746 N.E.2d 1242 (Ill. Ct. App. 2001).
    \68\ Id. at 1254.
    \69\ Id.
    \70\ Mathew J. Wald, Suit Against Auto Insurer Could Affect Nearly 
All Drivers, N.Y. Times, Sept. 27, 1998 Sec. 1, at 29.
---------------------------------------------------------------------------
    The Harvard Journal study found that in the three county 
courts examined, the class actions 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--and 3,065 counties--in 
addition to their own.\71\ While some of these cases may seem 
trivial (e.g., movie rental late fees, the price of Barbie 
dolls), even those cases (particularly if decided wrongly) 
could dramatically affect commerce by limiting how companies 
can market and charge for their products.
---------------------------------------------------------------------------
    \71\ S. Rep. No. 106-420, 106th Cong., 2nd Sess., at 20 (2000).
---------------------------------------------------------------------------
    An important question thus emerges: who should have 
responsibility for handling such large-scale, interstate class 
actions involving issues with significant national commerce 
implications--(a) Federal judges selected by the President and 
confirmed by the U.S. Senate or (b) State court judges often 
elected by a few thousand voters in a rural county? As the 
Senate Judiciary Committee has noted, ``[c]learly, a system 
that allows State court judges to dictate national policy from 
the local courthouse steps is contrary to the intent of the 
Framers when they crafted our system of federalism.'' \72\
---------------------------------------------------------------------------
    \72\ Id.
---------------------------------------------------------------------------
    In addition to federalizing substantive law, State courts 
are also federalizing procedural class action law. A study 
produced at the Committee's February 6, 2002, hearing, provided 
specific details of county courts where the most questionable 
class actions are frequently filed and resolved.\73\ 
Essentially, there is a race to the bottom--class action 
lawyers find the State courts with the most lax attitude toward 
class actions and file their cases there.\74\ As a result, 
certain State courts hear a highly disproportionate amount of 
nationwide or multi-state class actions and thereby effectively 
dictate Federal class action policy (even though they have no 
charter to do so).\75\
---------------------------------------------------------------------------
    \73\ Id.
    \74\ Id.
    \75\ Id.
---------------------------------------------------------------------------
    A dramatic example of this phenomenon was provided in the 
testimony of Dr. John B. Hendricks at the March 1998 House 
Subcommittee hearing.\76\ He offered a docket study of State 
court class actions in one jurisdiction showing (a) that class 
actions had become disproportionately large elements of the 
dockets of some county courts, (b) that many of the class 
actions were against major out-of-state corporations lacking 
any connection with the forum county, and (c) that the proposed 
classes in those cases typically were not limited to in-state 
residents and often encompassed residents of all 50 States. Dr. 
Hendricks identified one State court judge who had granted 
class certification in 35 cases over the preceding 2 years. As 
Dr. Hendricks stated, ``[t]hat's a huge number of cases when 
one considers that during 1997, all 900 Federal district court 
judges in the United States combined certified a total of only 
38 cases for class treatment.'' \77\ The study did not identify 
any instance in which that judge had ever denied class 
certification. Standing alone, that court clearly was playing a 
radically disproportionate role in setting national class 
action policy.
---------------------------------------------------------------------------
    \76\ Hearings on ``Mass Torts and Class Action Law-suits'' Before 
the House Comm. on the Judiciary Subcomm. on Courts and Intellectual 
Property, 105th Cong., 2nd Sess. (March 5, 1998) (prepared statement of 
John B. Hendrichs). The Alabama has since issued rulings which the 
Alabama legislature have enacted to curb such abuses.
    \77\ Id.
---------------------------------------------------------------------------
    The current concentration of class actions in State courts 
is resulting in enormous waste and is putting class members' 
interests at risk. For example, with increasing frequency, 
counsel are filing overlapping or ``copycat'' class actions--
cases that assert basically the same claims on behalf of 
basically the same class members.\78\ Sometimes these class 
actions are brought by attorneys vying to wrest the potentially 
lucrative lead role away from the lawyers who filed the 
original class actions. In other instances, the ``copy cat'' 
class actions are an exercise in forum-shopping. The lawyers 
file duplicative actions before multiple courts in an effort to 
find a receptive judge who will rapidly certify a class. When 
such ``copycat'' cases are filed in various Federal courts, 
they may be consolidated before a single Federal judge through 
the multidistrict litigation provisions of 28 U.S.C. Sec. 1407, 
thereby assuring consistent treatment of legal issues and 
uniform management of the cases.\79\ But when ``copycat'' class 
actions are filed in multiple State courts in multiple 
jurisdictions, they must be litigated separately--there is no 
consolidation mechanism.\80\ As a result, State courts and the 
counsel involved ``compete'' to control the cases, often to the 
detriment of the unnamed class members and defendants.\81\ 
Counsel also use these ``copycat'' cases to ``forum shop,'' 
presenting the same class certification and other issues to 
different courts, always trying to obtain better results than 
they achieved in another ``copycat'' case.\82\
---------------------------------------------------------------------------
    \78\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statements of John Beisner and Peter 
Detkin).
    \79\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of John Beisner).
    \80\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statements of John Beisner and Peter 
Detkin).
    \81\ Id.
    \82\ Id.
---------------------------------------------------------------------------
    The lax attitudes of some county courts and those courts' 
ineffectiveness in managing class litigation has, not 
surprisingly, resulted in dramatic increases in the number of 
purported class actions being filed in State courts.\83\ And 
also not surprisingly, the record suggests that many of those 
numerous new cases are of questionable merit.\84\ In interviews 
conducted for a study on class actions by the RAND 
Corporation's Institute for Civil Justice, many attorneys 
(including some plaintiffs' counsel) observed that ``too many 
non-meritorious [class action lawsuits] are [being] filed and 
certified'' for class treatment.\85\
---------------------------------------------------------------------------
    \83\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of John Beisner).
    \84\ Id.
    \85\ Id.
---------------------------------------------------------------------------
    Certification of interstate class actions under these 
circumstances is inconsistent with the constitutional theory of 
providing Federal diversity jurisdiction where there is the 
potential for discrimination against an out-of-state defendant. 
Yet, without the ability to remove these cases to Federal 
court, a defendant has no realistic opportunity to challenge 
the propriety of class certification. In many instances, the 
mere fact that a class is certified will determine the outcome 
of the case.\86\ Because the cases are brought on behalf of 
thousands (and sometimes millions) of claimants, the potential 
exposure for a defendant is enormous. As noted above, 
plaintiffs' counsel can use this potential exposure to coerce 
settlements that offer minimal benefits to the class members, 
but which result in hefty attorneys' fees. When a class action 
is heard in Federal court, an interlocutory appeal may be taken 
to challenge an order granting or denying class 
certification.\87\ This is not the case in many State courts; 
in those jurisdictions, a defendant who believes that class 
certification was improper in a case may not challenge the 
certification until having fully litigated the class action on 
its merits. When faced with the option of settling a case soon 
after certification or litigating a case to its conclusion, 
many times the economics of the situation leads defendants no 
logical choice but to settle non-meritorious claims.
---------------------------------------------------------------------------
    \86\ Hearings on H.R. 2341: the ``Class Action Fairness Act of 
2001'' Before the House Committee on the Judiciary, 107th Cong., 2nd 
Sess. (Feb. 6, 2002) (prepared statement of Peter Detkin).
    \87\ See Fed. R. Civ. Proc. 23(f).
---------------------------------------------------------------------------
    There is now an increasing recognition that the 
jurisdictional laws that are keeping most class actions out of 
Federal court should be corrected:

         The leading Federal civil procedure treatise 
        has declared that current principles governing Federal 
        diversity jurisdiction over class actions make no 
        sense: ``The traditional principles in this area have 
        evolved haphazardly and with little reasoning. They 
        serve no apparent policy. . . .'' \88\
---------------------------------------------------------------------------
    \88\ 14B Charles A. Wright, et al., Federal Practice and Procedure, 
Sec. 3704, at 127 (3d ed. 1998)(emphasis added).

         In a 1999 decision, the U.S. Court of Appeals 
        for the Eleventh Circuit ``apologi[zed]'' for its 
        ``seemingly arbitrary'' and ``anomal[ous]'' ruling 
        sending a large interstate class action back to State 
        court, noting that ``an important historical 
        justification for diversity jurisdiction is the 
        reassurance of fairness and competence that a Federal 
        court can supply to an out-of-state defendant facing 
        suit in State court.'' \89\ Observing that the out-of-
        state defendant in that case was confronting ``a State 
        court system [prone to] produce[] gigantic awards 
        against out-of-state corporate defendants,'' the court 
        stated that ``[o]ne would think that this case is 
        exactly what those who espouse the historical 
        justification for section 1332 would have had in 
        mind.'' \90\
---------------------------------------------------------------------------
    \89\ Davis v. Cannon Chevrolet-Olds, Inc., 192 F.3d 792, 797 (11th 
Cir. 1999) (emphasis added).
    \90\ Id.

         In that same case, Judge John Nangle, 
        formerly the chair of the Federal Judicial Panel on 
        Multidistrict Litigation, concurred: ``Plaintiffs' 
        attorneys are increasingly filing nationwide class 
        actions in various State courts, carefully crafting 
        language . . . to avoid . . . the Federal courts. 
        Existing Federal precedent . . . [permits] this 
        practice . . . , although most of these cases . . . 
        will be disposed of through ``coupon'' or ``paper'' 
        settlements. . . . virtually always accompanied by 
        munificent grants of or requests for attorneys' fees 
        for class counsel. . . . [T]he present [jurisdictional] 
        case law does not--accommodate the reality of modern 
        class action litigation and settlements.'' \91\
---------------------------------------------------------------------------
    \91\ Id. at 798-99.

         Similarly, in an opinion by Judge Anthony 
        Scirica (who currently chairs the Federal Judicial 
        Conference's Standing Committee on Rules and 
        Procedure), the U.S. Court of Appeals for the Third 
        Circuit observed that ``national (interstate) class 
        actions are the paradigm for Federal diversity 
        jurisdiction because, in a constitutional sense, they 
        implicate interstate commerce, foreclose discrimination 
        by a local State, and tend to guard against any bias 
        against interstate enterprises,'' but that ``at least 
        under the current jurisdictional statutes, such class 
        actions may be beyond the reach of the Federal 
        courts.'' \92\
---------------------------------------------------------------------------
    \92\ In re Prudential Ins. Co. America Sales Practice Litig., 148 
F.3d 283, (3d Cir. 1998) (emphasis added).

         Even attorneys and scholars associated with 
        the plaintiffs' bar have acknowledged a need to expand 
        Federal court jurisdiction over class actions. For 
        example, at the March 1998 House hearing, Prof. Susan 
        Koniak of the Boston University School of Law stated 
        that such a move would be ``a good idea. . . . Often 
        these [state] courts are picked, and they are in the 
        middle of nowhere. You can't have access to the 
        documents, and I don't think it's a full answer, but I 
        think it should be done.'' \93\ Similarly, Elizabeth 
        Cabraser, one of the foremost members of the 
        plaintiffs' class action bar, testified that ``much of 
        the confusion and lack of consistency that is currently 
        troubling practitioners and judges and the public in 
        the class action area could be addressed through the 
        exploration, the very thoughtful exploration, of 
        legislation that would increase Federal diversity 
        jurisdiction, so that more class action litigation 
        could be brought in the Federal court.'' \94\
---------------------------------------------------------------------------
    \93\ Federal News Service Transcript, Mass Torts and Class Actions: 
Hearing before the Subcomm. on Intellectual Property and the Courts, 
House Comm. on the Judiciary (March 9, 1998), at 19 (``FNS 
Transcript'').
    \94\ Id.

         Increasingly, the media has joined the chorus 
        as well. Several months ago, the Washington Post 
        editorialized that ``no portion of the American civil 
        justice system is more of a mess than the world of 
        class actions . . . [n]one is in more desperate need of 
        policymakers' attention.'' \95\ And within the past few 
        days, the Washington Post endorsed H.R. 2341, noting 
        that ``nowhere is the need for civil justice reform 
        greater than in the high-stakes arena of class actions, 
        where irrational rules have allowed trial lawyers to 
        enrich themselves at the expense of businesses--many 
        guilty of no misconduct--and without benefit to the 
        lawyers' supposed clients.'' \96\
---------------------------------------------------------------------------
    \95\ Editorial, Actions Without Class, The Washington Post, Aug. 
27, 2001, at A14.
    \96\ Id.

    In general, Federal courts are better equipped to deal with 
the complex proceedings often triggered by the filing of an 
interstate class action. While our Federal judicial system is 
facing substantial burdens, State courts are as well. The civil 
caseload in State courts has grown much more rapidly than the 
Federal court civil caseload. Federal courts have more 
resources to meet this challenge. Virtually all Federal court 
judges have two or three law clerks on staff; State court 
judges often have none. Federal court judges are usually able 
to delegate some aspects of their class action cases (e.g., 
discovery issues) to magistrate judges or special masters; such 
personnel are usually not available to State court judges. And 
as noted above, while Federal courts can transfer and 
consolidate similar class actions from various States before a 
single judge in the interest of efficiency; State courts lack 
such consolidation authority and therefore must engage in the 
wasteful exercise of separately handling such overlapping 
cases.
Effect of H.R. 2341 on Existing Law
    H.R. 2341 would amend the diversity jurisdiction and 
removal statutes applicable to class actions where there is a 
substantial risk of discrimination against out-of-state 
defendants. It amends 28 U.S.C. Sec. 1332 to grant original 
jurisdiction in the Federal courts to hear interstate class 
actions where any member of the proposed class is a citizen of 
a State different from any defendant. (A change from ``complete 
diversity'' to ``minimal diversity.'') However, to ensure that 
cases that are truly local in nature are not swept into the 
Federal courts, the bill would exempt from its reach: (1) cases 
in which a ``substantial majority'' of the class members and 
the ``primary defendants'' are citizens of the same State and 
the claims will be governed primarily by that State's law; (2) 
cases involving fewer than 100 class members or where the 
aggregate amount in controversy is less than $2 million; and 
(3) cases where the primary defendants are States or State 
officials, or other governmental entities against whom the 
district court may be foreclosed from ordering relief.
    H.R. 2341 would also establish new rules governing the 
removal of class actions filed in State court. Existing removal 
procedures would apply, with four new features. First, named 
plaintiffs would be permitted to remove class actions to 
Federal court and unnamed plaintiffs would be permitted to 
remove certified class actions, in which their claims are being 
asserted, to Federal court. Under current rules, only 
defendants are allowed to remove. Second, parties could remove 
without the consent of any other party. Current removal rules--
which apply only to defendants--require the consent of all 
defendants. Third, removal to Federal court would be available 
to any defendant, regardless of whether any defendant is a 
citizen of the State in which the action was brought. Fourth, 
the current bar to removal of class actions after 1 year would 
be eliminated, although the requirement that removal occur 
within 30 days of notice of grounds for removal would be 
retained.
    Under H.R. 2341, 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. 
Plaintiffs would then be permitted to re-file their claims in 
State court, presumably in a form amended either to fall within 
one of the types of class actions over which the district court 
is not to exercise jurisdiction, one which could be maintained 
as a class action under Federal Rule 23, or as an individual 
action. The re-filed case would once again be eligible for 
removal if original Federal jurisdiction exists. The statute of 
limitations on individual class members' claims in such a 
dismissed class action would not run during the period the 
action was pending in Federal court, nor would that of claims 
in new class actions filed by the same named plaintiffs in the 
same State venue.

                                Hearings

    The full Committee conducted a full day of hearings on H.R. 
2341 on February 6, 2002. Testimony was received from four 
witnesses: Peter Detkin, Esq.; John Beisner, Esq.; Mrs. Hilda 
Bankston; and Andrew Friedman, Esq..

                        Committee Consideration

    On March 6 and March 7, 2002, the Committee met in open 
session and ordered favorably reported the bill H.R. 2341, as 
amended, by a recorded vote of 16-10, a quorum being present.

                         Vote of the Committee

    The following votes occurred during Committee deliberation 
on H.R. 2341:
    1. An amendment offered by Mr. Boucher and Mr. Goodlatte to 
strike the pleading requirements in Section 3 and change the 
date of the short title to 2002. ADOPTED: voice vote.
    2. An amendment offered by Mr. Conyers to make foreign 
corporations citizens of States where American corporations 
purchased by a foreign corporation are incorporated. DEFEATED: 
voice vote.
    3. An amendment offered by Mr. Watt to prohibit unnamed 
plaintiffs from removing class actions from State court to 
Federal court until the State class action is certified. 
ADOPTED: voice vote.
    4. An amendment offered by Mr. Frank to require Federal 
district courts to remand any removed class action that is 
dismissed for failure to satisfy the requirements of Federal 
Rule 23 to the State court from which the class action was 
removed and permit the State court to certify the class action 
pursuant to the rules of that State. DEFEATED: rollcall vote of 
9 ayes to 14 nays.

                                                   ROLLCALL NO. 1
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Gekas.......................................................
Mr. Coble.......................................................                              X
Mr. Smith (Texas)...............................................
Mr. Gallegly....................................................
Mr. Goodlatte...................................................                              X
Mr. Bryant......................................................                              X
Mr. Chabot......................................................
Mr. Barr........................................................
Mr. Jenkins.....................................................                              X
Mr. Cannon......................................................                              X
Mr. Graham......................................................
Mr. Bachus......................................................                              X
Mr. Hostettler..................................................                              X
Mr. Green.......................................................                              X
Mr. Keller......................................................                              X
Mr. Issa........................................................                              X
Ms. Hart........................................................                              X
Mr. Flake.......................................................
Mr. Pence.......................................................                              X
Mr. Conyers.....................................................              X
Mr. Frank.......................................................              X
Mr. Berman......................................................              X
Mr. Boucher.....................................................                              X
Mr. Nadler......................................................
Mr. Scott.......................................................              X
Mr. Watt........................................................              X
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................
Ms. Waters......................................................              X
Mr. Meehan......................................................              X
Mr. Delahunt....................................................
Mr. Wexler......................................................
Ms. Baldwin.....................................................              X
Mr. Weiner......................................................
Mr. Schiff......................................................              X
Mr. Sensenbrenner, Chairman.....................................                              X
                                                                 -----------------------------------------------
    Total.......................................................              9              14
----------------------------------------------------------------------------------------------------------------

    5. An amendment offered by Mr. Watt to strike the removal 
provision. DEFEATED: rollcall vote of 9 ayes to 15 nays.

                                                   ROLLCALL NO. 2
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Gekas.......................................................                              X
Mr. Coble.......................................................                              X
Mr. Smith (Texas)...............................................                              X
Mr. Gallegly....................................................
Mr. Goodlatte...................................................                              X
Mr. Bryant......................................................                              X
Mr. Chabot......................................................
Mr. Barr........................................................                              X
Mr. Jenkins.....................................................                              X
Mr. Cannon......................................................
Mr. Graham......................................................
Mr. Bachus......................................................
Mr. Hostettler..................................................                              X
Mr. Green.......................................................                              X
Mr. Keller......................................................                              X
Mr. Issa........................................................                              X
Ms. Hart........................................................                              X
Mr. Flake.......................................................                              X
Mr. Pence.......................................................
Mr. Conyers.....................................................              X
Mr. Frank.......................................................              X
Mr. Berman......................................................              X
Mr. Boucher.....................................................                              X
Mr. Nadler......................................................              X
Mr. Scott.......................................................              X
Mr. Watt........................................................              X
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................
Ms. Waters......................................................              X
Mr. Meehan......................................................
Mr. Delahunt....................................................              X
Mr. Wexler......................................................
Ms. Baldwin.....................................................
Mr. Weiner......................................................
Mr. Schiff......................................................              X
Mr. Sensenbrenner, Chairman.....................................                              X
                                                                 -----------------------------------------------
    Total.......................................................              9              15
----------------------------------------------------------------------------------------------------------------

    6. An amendment offered by Mr. Schiff to exclude private 
attorney general actions from the provisions of the bill. 
DEFEATED: rollcall vote of 11 ayes to 17 nays.

                                                   ROLLCALL NO. 3
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Gekas.......................................................                              X
Mr. Coble.......................................................                              X
Mr. Smith (Texas)...............................................                              X
Mr. Gallegly....................................................
Mr. Goodlatte...................................................                              X
Mr. Bryant......................................................                              X
Mr. Chabot......................................................                              X
Mr. Barr........................................................                              X
Mr. Jenkins.....................................................                              X
Mr. Cannon......................................................
Mr. Graham......................................................                              X
Mr. Bachus......................................................
Mr. Hostettler..................................................                              X
Mr. Green.......................................................                              X
Mr. Keller......................................................                              X
Mr. Issa........................................................                              X
Ms. Hart........................................................                              X
Mr. Flake.......................................................                              X
Mr. Pence.......................................................
Mr. Conyers.....................................................              X
Mr. Frank.......................................................              X
Mr. Berman......................................................              X
Mr. Boucher.....................................................                              X
Mr. Nadler......................................................              X
Mr. Scott.......................................................              X
Mr. Watt........................................................              X
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................
Ms. Waters......................................................              X
Mr. Meehan......................................................
Mr. Delahunt....................................................              X
Mr. Wexler......................................................
Ms. Baldwin.....................................................              X
Mr. Weiner......................................................              X
Mr. Schiff......................................................              X
Mr. Sensenbrenner, Chairman.....................................                              X
                                                                 -----------------------------------------------
    Total.......................................................             11              17
----------------------------------------------------------------------------------------------------------------

    7. An amendment offered by Mr. Nadler to prohibit the court 
from sealing class action court records relevant to public 
health or safety. DEFEATED: rollcall vote of 9 ayes and 16 
nays.

                                                   ROLLCALL NO. 4
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Gekas.......................................................
Mr. Coble.......................................................                              X
Mr. Smith (Texas)...............................................                              X
Mr. Gallegly....................................................
Mr. Goodlatte...................................................                              X
Mr. Bryant......................................................                              X
Mr. Chabot......................................................                              X
Mr. Barr........................................................
Mr. Jenkins.....................................................                              X
Mr. Cannon......................................................                              X
Mr. Graham......................................................                              X
Mr. Bachus......................................................
Mr. Hostettler..................................................                              X
Mr. Green.......................................................                              X
Mr. Keller......................................................                              X
Mr. Issa........................................................
Ms. Hart........................................................                              X
Mr. Flake.......................................................                              X
Mr. Pence.......................................................                              X
Mr. Conyers.....................................................
Mr. Frank.......................................................
Mr. Berman......................................................              X
Mr. Boucher.....................................................                              X
Mr. Nadler......................................................              X
Mr. Scott.......................................................              X
Mr. Watt........................................................              X
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................
Ms. Waters......................................................
Mr. Meehan......................................................              X
Mr. Delahunt....................................................              X
Mr. Wexler......................................................
Ms. Baldwin.....................................................              X
Mr. Weiner......................................................              X
Mr. Schiff......................................................              X
Mr. Sensenbrenner, Chairman.....................................                              X
                                                                 -----------------------------------------------
    Total.......................................................              9              16
----------------------------------------------------------------------------------------------------------------

    8. A motion by Chairman Sensenbrenner to favorably report 
H.R. 2341 as amended. ADOPTED: rollcall vote of 16 ayes to 10 
nays.

                                                   ROLLCALL NO. 5
----------------------------------------------------------------------------------------------------------------
                                                                       Ayes            Nays           Present
----------------------------------------------------------------------------------------------------------------
Mr. Hyde........................................................
Mr. Gekas.......................................................
Mr. Coble.......................................................              X
Mr. Smith (Texas)...............................................              X
Mr. Gallegly....................................................
Mr. Goodlatte...................................................              X
Mr. Bryant......................................................              X
Mr. Chabot......................................................              X
Mr. Barr........................................................
Mr. Jenkins.....................................................              X
Mr. Cannon......................................................              X
Mr. Graham......................................................              X
Mr. Bachus......................................................
Mr. Hostettler..................................................              X
Mr. Green.......................................................              X
Mr. Keller......................................................              X
Mr. Issa........................................................
Ms. Hart........................................................              X
Mr. Flake.......................................................              X
Mr. Pence.......................................................              X
Mr. Conyers.....................................................
Mr. Frank.......................................................                              X
Mr. Berman......................................................                              X
Mr. Boucher.....................................................              X
Mr. Nadler......................................................                              X
Mr. Scott.......................................................                              X
Mr. Watt........................................................                              X
Ms. Lofgren.....................................................
Ms. Jackson Lee.................................................
Ms. Waters......................................................
Mr. Meehan......................................................                              X
Mr. Delahunt....................................................                              X
Mr. Wexler......................................................
Ms. Baldwin.....................................................                              X
Mr. Weiner......................................................                              X
Mr. Schiff......................................................                              X
Mr. Sensenbrenner, Chairman.....................................              X
                                                                 -----------------------------------------------
    Total.......................................................             16              10
----------------------------------------------------------------------------------------------------------------

                      Committee Oversight Findings

    In compliance with clause 3(c)(1) of rule XIII of the Rules 
of the House of Representatives, the Committee reports that the 
findings and recommendations of the Committee, based on 
oversight activities under clause 2(b)(1) of rule X of the 
Rules of the House of Representatives, are incorporated in the 
descriptive portions of this report.

                    Performance Goals and Objectives

    H.R. 2341 does not authorize funding. Therefore, clause 
3(c) of rule XIII of the Rules of the House of Representatives 
is inapplicable.

               New Budget Authority and Tax Expenditures

    Clause 3(c)(2) of House rule XIII is inapplicable because 
this legislation does not provide new budgetary authority or 
increased tax expenditures.

               Congressional Budget Office Cost Estimate

    In compliance with clause 3(c)(3) of rule XIII of the Rules 
of the House of Representatives, the Committee sets forth, with 
respect to the bill, H.R. 2341, the following estimate and 
comparison prepared by the Director of the Congressional Budget 
Office under section 402 of the Congressional Budget Act of 
1974:

                                     U.S. Congress,
                               Congressional Budget Office,
                                    Washington, DC, March 11, 2002.
Hon. F. James Sensenbrenner, Jr., Chairman,
Committee on the Judiciary,
House of Representatives, Washington, DC.
    Dear Mr. Chairman: The Congressional Budget Office has 
prepared the enclosed cost estimate for H.R. 2341, the Class 
Action Fairness Act of 2002.
    If you wish further details on this estimate, we will be 
pleased to provide them. The CBO staff contacts are Lanette J. 
Walker (for Federal costs), who can be reached at 226-2860, and 
Page Piper/Bach (for the private-sector impact), who can be 
reached at 226-2940.
            Sincerely,
                                  Dan L. Crippen, Director.

Enclosure

cc:
        Honorable John Conyers, Jr.
        Ranking Member
H.R. 2341--Class Action Fairness Act of 2002.
    H.R. 2341 would expand the types of class-action lawsuits 
that would be heard initially in Federal district courts. CBO 
estimates that implementing the bill would cost the Federal 
district courts about $6 million a year, subject to 
appropriation of the necessary funds. The bill would not affect 
direct spending or receipts, so pay-as-you-go procedures would 
not apply. H.R. 2341 contains no intergovernmental mandates as 
defined in the Unfunded Mandates Reform Act (UMRA) and would 
impose no costs on state, local, or tribal governments.
    H.R. 2341 would impose a private-sector mandate by 
requiring that any notice concerning a proposed settlement of a 
class action provided to the class members through the mail or 
in printed media contain certain information in plain, easily 
understood language and in a specific format. The bill also 
would require certain notices provided through television or 
radio to explain specific information in plain, easily 
understood language. According to the Association of Trial 
Lawyers of America, such notices are currently provided, but 
are not always in plain English language and tabular format as 
required by the bill. Therefore, CBO estimates that the direct 
cost, if any, to comply with the mandates would be minimal and 
would fall well below the annual threshold established by UMRA 
($115 million in 2002, adjusted annually for inflation).
    Under H.R. 2341, most class-action lawsuits would be heard 
in a Federal district court rather than a state court. 
Therefore, CBO estimates that the bill would impose additional 
costs on the Federal district court system. While the number of 
cases that would be filed in Federal court under this bill is 
highly uncertain, CBO expects that at least a few hundred 
additional cases would be heard in Federal court each year. 
According to the Administrative Office of the United States 
Courts, class-action lawsuits tried in Federal court cost the 
government, on average, about $20,000. This estimate includes 
discretionary costs for salaries and benefits for clerks, rent, 
utilities, and associated overhead expenses, but excludes the 
costs of the salaries and benefits of judges. CBO estimates 
that implementing H.R. 2341 would increase the courts' workload 
and result in additional costs of about $6 million annually.
    CBO also estimates that enacting this bill could increase 
the need for additional judges. Because the salaries and 
benefits of district court judges are considered mandatory, 
adding more judges would increase direct spending. However, 
H.R. 2341 would not--by itself--affect direct spending because 
separate legislation would be necessary to authorize an 
increase in the number of judges. In any event, CBO expects 
that enacting the bill would not require a significant increase 
in the number of Federal judges, so that any potential increase 
in direct spending from subsequent legislation would probably 
be less than $500,000 a year.
    The CBO staff contacts for this estimate are Lanette J. 
Walker (for Federal costs), who can be reached at 226-2860, and 
Paige Piper/Bach (for the private-sector impact), who can be 
reached at 226-2940. This estimate was approved by Peter H. 
Fontaine, Deputy Assistant Director for Budget Analysis.

                   Constitutional Authority Statement

    Pursuant to clause 3(d)(1) of rule XIII of the Rules of the 
House of Representatives, the Committee finds the authority for 
this legislation in article III, section one of the 
Constitution.

               Section-by-Section Analysis and Discussion

    Section 1--Section 1 sets forth the short title of the 
bill--the ``Class Action Fairness Act of 2002''--and specifies 
that any reference to an amendment or repeal of existing law 
shall be to a section of title 28, of the United States Code.
    Section 2--Section 2 contains the findings of the Congress 
in support of the bill.
    Section 3--Section 3 establishes a ``Consumer Class Action 
Bill of Rights'' as part of a new chapter 114 in title 28 of 
the United States Code. These provisions are as follows:
    Sec. 1711. Judicial scrutiny of coupon and other noncash 
settlements--requires the court to conduct a hearing to 
determine whether a coupon or noncash settlement is fair, 
reasonable, and adequate for class members.
    Sec. 1712. Protection against loss by class members--
requires the court to make a written finding that non-monetary 
benefits to class members outweigh the monetary loss in any 
proposed settlement where a class member is obligated to pay 
sums to class counsel that would result in a net loss to the 
class member.
    Sec. 1713. Protection against discrimination based on 
geographic location--prohibits settlements providing greater 
awards to class members on the basis that they are in closer 
geographic proximity to the court.
    Sec. 1714. Prohibition on the payment of bounties--
prohibits settlements providing additional awards to certain 
class representatives other than awards approved by the court 
for reasonable time or costs associated with the class member's 
obligation as a class representative.
    Sec. 1715. Clearer and simpler settlement information--
establishes a new ``Plain English'' requirement for any written 
and broadcast notices concerning a proposed class action 
settlement. The new sections of 28 U.S.C. Sec. 1713(c)(A)-(D) 
mandates that each notice to the class explain in ``plain, 
easily understood language,'' the subject matter of the class 
action and the legal consequences of being ia member of the 
class. If the notice concerns a proposed settlement, according 
to new 28 U.S.C. Sec. 1713(c)(1)(C), then the notice must also 
explain in ``plain easily understood language,'' the benefits 
of settlement to the class, the rights that class members will 
lose through the settlement, the obligations of defendants 
under the proposed settlement, the dollar amount class counsel 
are seeking in attorneys' fees (or, if not possible, a good-
faith estimate of the fees that the class counsel will 
request), and an explanation of how attorneys' fees will be 
calculated. The notice must also include any other material 
information regarding the class action. Such ``material mater'' 
would include any other information a reasonable person would 
want to know before deciding whether the participate in a class 
action or proposed settlement.
    The proper test for determining if class notice is written 
in ``plain, easily understood language'' is reasonableness--
i.e., whether a reasonable person would find the language in 
the notice to be ``plain, easily understood language.'' The 
Committee intends that class counsel bears the burden of 
proving that a reasonable person would find that the notice 
includes all of the requirements listed in this section in 
``plain, easily understood language.''
    Sec. 1716. Definitions--establishes definitions for class 
action, class counsel, class members, plaintiff class action, 
proposed settlement, and contains a technical and conforming 
amendment.
    Section 4--Section 4 amends 28 U.S.C. Sec. 1332 to re-
designate section 1332(d) as section 1332(e). The bill creates 
a new subsection (d) which gives the Federal courts original 
jurisdiction over class action lawsuits in which the matter in 
controversy exceeds the sum or value of $2 million, exclusive 
of interest and costs, and either (a) any member of the 
plaintiff class is a citizen of a State different than any 
defendant; (b) any member of the plaintiff class is a foreign 
state and any defendant is a citizen of a State; or (c) any 
member of the plaintiff class is a citizen of a State and any 
defendant is a citizen or subject of a foreign state. For 
purposes of this new section, the term ``foreign state'' is 
defined as in 28 U.S.C. Sec. 1603(a).
    Pursuant to section 1332(d)(3), the Federal district courts 
are directed not to exercise diversity jurisdiction over class 
actions where (A) the substantial majority of the members of 
the proposed plaintiff class and the primary defendants are 
citizens of the State in which the action was originally filed 
and the claims asserted will be governed primarily by the law 
of that same State (``intrastate'' case); (B) the primary 
defendants are States, State officials, or other governmental 
entities against whom the district court may be foreclosed from 
ordering relief (``state action'' case); or (C) the number of 
members of all proposed plaintiff classes in the aggregate is 
fewer than 100 (``limited scope'' case).
    Pursuant to new section 1332(d)(4), the claims of the 
individual class members in any class action shall be 
aggregated to determine whether the amount in controversy 
exceeds the sum of value of $2 million (exclusive of interest 
and costs). The Committee intends this section to be 
interpreted expansively. If a purported class action is 
removed, the named plaintiff(s) should bear the burden of 
demonstrating that the removal was improvident (i.e., that the 
applicable jurisdictional requirements are not satisfied). If a 
Federal court is uncertain as to whether the matter in 
controversy in a purported class action exceed the sum or value 
of $2 million, the court should err in favor of exercising 
jurisdiction over the case.
    Overall, the new section 1332(d) is intended to expand 
substantially Federal court jurisdiction over class actions. 
For that reason, its provisions should be read expansively; 
they should be read as stating a strong preference that 
interstate class actions be heard in a Federal court if so 
desired by any purported class member or any defendant.
    Consistent with this overriding intent, the provisions of 
the new section 1332(d)(3)(A) should be read narrowly. A 
purported class action should be deemed a case that falls 
outside Federal jurisdiction only if virtually all members of 
all proposed classes are residents of a single State of which 
all ``primary defendants'' are also citizens. For example, a 
case in which a proposed class of 1000 persons sues a North 
Carolina citizen corporation presumably would fit this 
exception if 997 of those persons were North Carolina citizens.
    For the purposes of the section 1132(d)(3)(A) carve out, 
the only parties that should be considered ``primary 
defendants'' are those who are the real ``targets'' of the 
suit; that is, the parties that would be expected to incur most 
of the loss if liability is found. For example, an executive of 
a corporate defendant who, in the interest of completeness, is 
named as a co-defendant in a class action against his employer 
normally should not be deemed a ``primary defendant.'' In most 
instances, the executive would not be the real ``target'' of 
the purported class action; his employer company would be. 
Moreover, no defendant should be considered a ``primary 
defendant'' for purposes of this analysis unless it is the 
subject of legitimate claims by all class members. To 
illustrate, if named as a defendant, a dealer, agent, or sales 
representative of a corporate defendant should not be deemed a 
``primary defendant'' unless that dealer, agent, or sales 
representative is alleged to have actually participated in the 
purported wrongdoing with respect to all class members (e.g., 
the defendant is alleged to have sold a purportedly defective 
product to all class members). Merely alleging that a defendant 
conspired with other class members to commit wrongdoing will 
not be sufficient to cause a person to be a ``primary 
defendant.''
    Similarly, the language in section 1332(d)(2) should also 
be interpreted narrowly. For example, if a court is uncertain 
as to whether ``all matters in controversy'' in a purported 
class action do not in the aggregate exceed the sum or value of 
$2 million, the court should err in favor of exercising 
jurisdiction over the matter. Pursuant to section 
1332(d)(3)(C), the same is true in cases in which it is unclear 
whether the number of a proposed plaintiff class members is 
less than 100. Further, Federal courts should be cautious to 
decline Federal jurisdiction under section 1332(d)(3)(B) only 
where it is relatively clear that States, State officials, or 
other governmental entities are primary defendants against whom 
the court may be foreclosed from ordering relief. In assessing 
that issue, courts should apply the same guidance regarding the 
term ``primary defendants'' discussed above with regard to 
intrastate actions.
    It is the Committee's intention with regard to each of 
these exceptions that the party opposing Federal jurisdiction 
shall have the burden of demonstrating the applicability of an 
exemption. For example, if a plaintiff seeks to have a 
purported class action remanded for lack of Federal diversity 
jurisdiction under section 1332(d)(3)(C), that plaintiff should 
have the burden of demonstrating that ``the number of proposed 
class members is less than 100.''
    New section 1332(d)(5) clarifies that the diversity 
jurisdiction provisions of this section shall apply to any 
class action before or after the entry of a class certification 
order by the court. This allows Federal jurisdiction to apply 
when changes are made to the pleading which bring the case 
within Federal court jurisdiction.
    New section 1332(d)(6) details the procedures governing 
cases removed to Federal court on the sole basis of new section 
1332(d) jurisdiction. Pursuant to new section 1332(d)(6)(A), 
the district courts are directed to dismiss any civil action 
subject to Federal jurisdiction if it is determined that the 
civil action may not proceed as a class action because it fails 
to satisfy the condition of rule 23 of the Federal Rules of 
Civil Procedure. Notwithstanding this subsection, new section 
1332(d)(6)(B) clarifies that the action may be amended and re-
filed in State court, it may be removed it is an action over 
which the district courts of the United have original 
jurisdiction. The Committee has concluded that the 
alternative--forbidding re-removal--would be bad policy. That 
approach would allow lawyers to ask a State court to review and 
overrule the class certification decision of a Federal court, 
since Federal and State court class certification standards 
typically do not differ radically. Allowing a State court to 
certify a case that a Federal court has already found non-
certifiable would set a troubling (if not constitutionally 
suspect) precedent under which State decisions would serve as 
points of appellate review of Federal court decisions. 
Moreover, since Federal court denials of class certification 
typically involve explicit or implied determinations that 
allowing a case to be litigated on a class basis would likely 
result in the denial of some or all of the parties' due process 
rights, there should be no room constitutionally for a State 
court to reach a different result on class certification 
issues.
    In addition, new section 1332 (d)(6)(C) provides that, if a 
dismissed case is re-filed by any of the original named 
plaintiffs in the same State court venue in which it was 
originally filed, the statute of limitations on the claims 
therein will be deemed tolled during the pendency of the 
dismissed case. This applies to both Federal and State statutes 
of limitations. A new class action filed either in a different 
venue or by different named plaintiffs would not enjoy the 
benefits of this provision.
    However, if a class action is dismissed under this section 
and an individual action is later filed asserting the same 
claims, the statute of limitations will be deemed tolled during 
the pendency of the dismissed class action, regardless of where 
the subsequent individual case is filed.
    In the new section 1332(d)(7), the act provides two 
exceptions to the grant of original jurisdiction over cases 
described in new section 1332(d)(2). The first excepts from its 
reach any claims concerning a covered security as that term is 
defined in section 16(f)(3) of the Securities Act of 1933 or 
section 28(f)(5)(E) of the Securities Exchange Act of 1934. 
These claims are essentially claims against the officers of a 
corporation for a precipitous drop in the value of its stock, 
based on fraud. The Committee recognizes that Congress has 
previously enacted legislation governing the adjudication of 
these claims.\97\ So as not to disturb the existing legal 
framework for litigating in this context, claims involving 
covered securities are not included in the new section 
1332(d)(2) jurisdiction.
---------------------------------------------------------------------------
    \97\ See P.L. 104-67, the Private Securities Litigation Reform Act 
of 1995, and P.L. 105-353, the Securities Litigation Uniform Standards 
Act of 1998.
---------------------------------------------------------------------------
    The second exception to the new section 1332(d)(2) 
jurisdiction is for class actions solely involving claims that 
relate to matters of corporate governance arising out of State 
law. This exclusion recognizes that class actions regarding 
business governance issues are more of an internal business 
nature and do not present the same sorts of risks of abuse as 
do other forms of class actions.
    However, the Committee intends that this exception be 
narrowly construed. By corporate governance litigation, the 
Committee means litigation based solely on (a) State statutory 
law regulating the organization and governance of business 
enterprises such as corporations, partnerships, limited 
partnerships, limited liability companies, limited liability 
partnerships, and business trusts; (b) State common law of the 
duties owed between and among owners and managers of business 
enterprises; and (c) the rights arising out of the terms of the 
securities issued by business enterprises.
    This exemption would apply to a class action relating to a 
corporate governance claim filed in the court of any State. 
That is, it will apply to a corporate governance class action 
regardless of the forum in which it may be filed, and 
regardless of whether the law to be applied is that of the 
State in which the claim is filed. So, what constitutes ``the 
internal affairs or governance of a corporation or other form 
of business enterprise'' applies to all forms of business 
enterprises. For example, a proxy fight would be a matter of 
corporate governance for any business, whether it is organized 
as corporation (stock, mutual, or other form), a partnership or 
any other form of business and would fall within the internal 
affairs exception. On the other hand, whether the terms of a 
contract constitute an unfair trade practice is not a matter 
dealing with internal corporate governance and would be covered 
under paragraph (2), regardless of whether the business was 
organized as a corporation (either stock, mutual, or other 
form), a partnership of any other form of business.
    For purposes of this exception, the phrase ``the internal 
affairs or governance of a corporation or other form of 
business enterprise'' is intended to refer to the internal 
affairs doctrine which the United States Supreme Court has 
defined as ``matters peculiar to the relationships among or 
between the corporation and its current officers, directors and 
shareholders. . . .'' \98\ The phrase ``other form of business 
enterprise'' in intended to include forms of business entities 
other than corporations, including, but not limited to, limited 
liability companies, limited liability partnerships, business 
trusts, partnerships and limited partnerships.
---------------------------------------------------------------------------
    \98\ Edgar v. Mite Corp., 457 U.S. 624, 645 (1982). See also Ellis 
v. Mutual Life Ins. Co., 187 So. 434 (Ala. 1939); McDermott v. Lewis, 
531 A.2d 206, 214-15 (Del. 1987); Draper v. Paul N. Gardner Defined 
Plan Trust, 625 A.2d 859, 865-66 (Del. 1993); NAACP v. Golding, 679 
A.2d 554, 559 (Ct. App. Md. 1996); Hart v. General Motors Corporation, 
517 N.Y.S.2d 490, 493 (App. Div. 1987); Amberjack, Ltd., Inc. v. 
Thompson, 1997 WL 613676 (Tenn. App. 1997).
---------------------------------------------------------------------------
    The exception to section 1332(d)(2) jurisdiction created by 
the act is also intended to cover disputes over the meaning of 
the terms of a security, which is generally spelled out in some 
formative document of the business enterprise, such as a 
certificate of incorporation or a certificate of designations. 
The reference to the Securities Act of 1933 contained in new 
section 1332(d)(7)(A) is for definitional purposes only. Since 
the law contains an already well-defined concept of a security, 
this provision simply imports the definition contained in the 
Securities Act.
    New section 1332(d)(8) provides that for purposes of this 
new section and section 1453 of title 28, an unincorporated 
association shall be deemed to be a citizen of a State where it 
has its principal place of business and the State under whose 
laws it is organized. This provision is added to ensure that 
unincorporated associations receive the same treatment as 
corporations for purposes of diversity jurisdiction. The U.S. 
Supreme Court has held that ``[f]or purposes of diversity 
jurisdiction, the citizenship of an unincorporated association 
is the citizenship of the individual members of the 
association.'' \99\ This rule ``has been frequently criticized 
because often * * * an unincorporated association is, as a 
practical matter, indistinguishable from a corporation in the 
same business.'' \100\ Some insurance companies, for example, 
are ``inter-insurance exchanges'' or ``reciprocal insurance 
association.'' They therefore, have been viewed by Federal 
courts as unincorporated associations for purposes of diversity 
jurisdiction purposes. Since such companies are nationwide 
companies, they are deemed to be citizens of any State in which 
they have insured customers.\101\ Consequently, these companies 
can never be completely or even minimally diverse in any case. 
It makes no sense to treat an unincorporated insurance company 
differently from, for example, an incorporated manufacturer for 
purposes of diversity jurisdiction. New section 1332 (d)(8) 
corrects this anomaly.
---------------------------------------------------------------------------
    \99\ United Steelworkers of America v. Boulingy, Inc., 382 U.S. 145 
(1965).
    \100\ See. e.g., 3A J. Moore & J. Lucas, ``Moore's Federal 
Practice,'' para. 17-25, 17-209 (1987 rev.) (``Congress should remove 
the one remaining anomaly and provide that where unincorporated have 
entity status under State law, they should be treated as analogous to 
corporations for purposes of diversity jurisdiction.'')
    \101\ Tuck v. United Services Automobile Ass'n., 859 F. 2d 842 
(10th Cir. 1988).
---------------------------------------------------------------------------
    Section 5--Section 5 of the act governs the procedures for 
removal from State court of interstate class actions over which 
the Federal court is granted original jurisdiction in the new 
section 1332(d). The general removal provisions currently 
contained in chapter 89 of title 28 would continue to apply to 
such class actions, except where inconsistent with the 
provisions of the act. For example, under new section 1453(b), 
the general requirement contained in section 1441(b) that an 
action be removable only if none of the defendants is a citizen 
of the State in which the action is brought would not apply to 
the removal of class actions. Imposing such a restriction on 
removal jurisdiction would subvert the intent of the act by 
allowing a plaintiff to defeat removal jurisdiction by suing 
both in-state and out-of-state defendants. This would 
essentially perpetuate the current ``complete diversity'' rule 
in class actions that the new section 1332(b) rejects. The act 
does not, however, disturb the general rule that a case may 
only be removed to the district court of the United States for 
the district and division embracing the place where the action 
is pending.\102\ In addition, the act does not change the 
application of the Erie doctrine, which requires Federal courts 
to apply the substantive law dictated by applicable choice-of-
law principles in actions arising under diversity jurisdiction
---------------------------------------------------------------------------
    \102\ See 28 U.S.C. 1441(a).
---------------------------------------------------------------------------
    New section 1453(b) also would permit removal by any 
plaintiff class member who is not a named or representative 
class member of the action for which removal is sought. 
Generally, removal by the plaintiff is not permissible, under 
the theory that as the instigator of the suit the plaintiff had 
the choice of forum from the outset. When a class action is 
filed, however, only the named plaintiffs and their counsel 
have control over the choice of forum; the vast majority of the 
real parties in interest--the unnamed class members on whose 
behalf the action is brought and the defendants--have no voice 
in that decision. This provision thus extends to those unnamed 
class members of class action that have been certified the same 
flexibility to choose the forum as offered to the defendant. 
Also, by operation of new section 1453(b), removal may occur 
without the consent of any other party. This revision will 
combat collusiveness between a corporate defendant and a 
plaintiffs' attorney who may attempt to settle on the cheap in 
a State court at the expense of the plaintiff class members. 
Similarly, it will prevent a plaintiffs' attorney from 
recruiting a ``friendly'' defendant (a local retailer, for 
example) who has no interest in joining a removal action and 
may therefore thwart the legitimate efforts of the primary 
corporate defendant in seeking removal.
    New section 1453(c) is intended to confirm that the 
provisions of section 1453 are to apply to any class action 
regardless of whether an order certifying classes or denying 
certification of classes has been entered. However, a plaintiff 
who is not a representative class member can only seek removal 
after the class has been certified. Named plaintiffs and 
defendants can remove at any time.
    New section 1453(d) provides that a plaintiff class member 
who wishes to remove a purported class action to Federal court 
must do so within 30 days after receiving the initial written 
notice of the class action. The provision also indicates that a 
class member who is not a named plaintiff in a class action may 
not remove the case until the State court has certified a class 
in the action.
    New section 1453(e) confirms that 28 U.S.C. Sec. 1447 
generally applies to the removal of a purported class action. 
However, the provisions of section 1447(d) shall not apply. 
That section states that ``an order remanding a case to the 
State court from which it was removed is not reviewable on 
appeal or otherwise. . . .'' The Committee wishes to ensure 
that the appellate courts have an opportunity to supervise the 
expansion of Federal jurisdiction over class action established 
by this legislation and to contribute to the precedents 
interpreting the provisions of this act. Therefore, the non-
reviewability provisions of section 1447(d) will not apply in 
the event of a removal of a class action to Federal court.
    In order to be consistent with the exceptions to Federal 
diversity jurisdiction granted under new section 1332(b), 
section 1453(f) provides that the new removal provisions shall 
not apply to claims involving covered securities, or corporate 
governance litigation. The parameters of this section and that 
of section 1332(b)(3) and (4) are intended to be coterminus.
    Section 5(b) amends current section 1446(b) to clarify that 
the 1-year limit otherwise imposed on removal of suits filed 
pursuant to section 1332 has no application to class actions; 
that is, the bill permits a defendant to remove to Federal 
court more than 1 year after commencement of a suit in State 
court. This change to present law is intended to prevent gaming 
of the current class action system by a plaintiffs' attorney. 
In the most extreme example, under current law a plaintiffs' 
attorney could file suit against a friendly defendant, and the 
1-year limit after which no removal may be sought under any 
condition would commence. On the 366th day from filing suit, 
the plaintiff's attorney serves an additional defendant. It is 
now too late for the new defendant to remove, regardless of 
whether diversity jurisdiction exists, and irrespective of the 
practical merits of the case. Similarly, after the expiration 
of the current 1-year period, amendments could be made to 
dismiss diverse parties, increase the amount of the damages 
pled, or otherwise change the case so that it would then fall 
within the jurisdiction of the Federal courts. Under new 
section 1446(b) these cases could be removed when changes to 
the pleadings are made which bring the case within Federal 
court jurisdiction.
    Section 6--Several years ago Federal Rule 23 was amended to 
add a provision, section (f) which authorized for the first 
time discretionary review of orders granting or denying class 
certification. In the Committee's view, that change has been 
very successful, allowing appellate courts to be a full 
participant in the development of the governing principles of 
class certification. The Committee is concerned, however, that 
the various Federal Circuit Courts of Appeal have been 
inconsistent in the extent to which they have exercised their 
discretion to review class certification orders. The Committee 
believes that both fairness to the parties and the need to 
develop stronger, clearer class certification precedents 
strongly favors the more frequent appellate review of class 
certification rulings. Section 6 of the bill therefore 
establishes that the parties to a class action may take an 
immediate appeal as of right from any district court ruling 
granting or denying a motion for class certification. While the 
matter is pending on appeal, the presumption shall be that 
other activity in the litigation shall be stayed. However, upon 
a finding that specific discovery must be taken to preserve 
evidence or to prevent undue prejudice to a party, the district 
court may order that such discovery may proceed.
    Section 7--Section 5 provides that the amendments made by 
the act shall apply to actions commenced on or after the date 
of its enactment.

                              Agency Views

         Changes in Existing Law Made by the Bill, as Reported

    In compliance with clause 3(e) of rule XIII of the Rules of 
the House of Representatives, changes in existing law made by 
the bill, as reported, are shown as follows (existing law 
proposed to be omitted is enclosed in black brackets, new 
matter is printed in italics, existing law in which no change 
is proposed is shown in roman):

                      TITLE 28, UNITED STATES CODE

           *       *       *       *       *       *       *
                    PART IV--JURISDICTION AND VENUE

           *       *       *       *       *       *       *

                     CHAPTER 83--COURTS OF APPEALS

           *       *       *       *       *       *       *

Sec. 1292. Interlocutory decisions

    (a) Except as provided in subsections (c) and (d) of this 
section, the courts of appeals shall have jurisdiction of 
appeals from:
            (1) * * *

           *       *       *       *       *       *       *

            (4) Orders of the district courts of the United 
        States granting or denying class certification under 
        rule 23 of the Federal Rules of Civil Procedure, if 
        notice of appeal is filed within 10 days after entry of 
        the order.

           *       *       *       *       *       *       *

               CHAPTER 85--DISTRICT COURTS; JURISDICTION

           *       *       *       *       *       *       *

Sec. 1332. Diversity of citizenship; amount in controversy; costs

    (a) * * *

           *       *       *       *       *       *       *

    (d)(1) In this subsection--
            (A) the term ``class'' means all of the class 
        members in a class action;
            (B) the term ``class action'' means any civil 
        action filed pursuant to rule 23 of the Federal Rules 
        of Civil Procedure or similar State statute or rule of 
        judicial procedure authorizing an action to be brought 
        by one or more representative persons on behalf of a 
        class;
            (C) the term ``class certification order'' means an 
        order issued by a court approving the treatment of a 
        civil action as a class action; and
            (D) the term ``class members'' means the persons 
        who fall within the definition of the proposed or 
        certified class in a class action.
    (2) The district courts shall have original jurisdiction of 
any civil action in which the matter in controversy exceeds the 
sum or value of $2,000,000, exclusive of interest and costs, 
and is a class action in which--
            (A) any member of a class of plaintiffs is a 
        citizen of a State different from any defendant;
            (B) any member of a class of plaintiffs is a 
        foreign state or a citizen or subject of a foreign 
        state and any defendant is a citizen of a State; or
            (C) any member of a class of plaintiffs is a 
        citizen of a State and any defendant is a foreign state 
        or a citizen or subject of a foreign state.
    (3) Paragraph (2) shall not apply to any civil action in 
which--
            (A)(i) the substantial majority of the members of 
        the proposed plaintiff class and the primary defendants 
        are citizens of the State in which the action was 
        originally filed; and
            (ii) the claims asserted therein will be governed 
        primarily by the laws of the State in which the action 
        was originally filed;
            (B) the primary defendants are States, State 
        officials, or other governmental entities against whom 
        the district court may be foreclosed from ordering 
        relief; or
            (C) the number of proposed plaintiff class members 
        is less than 100.
    (4) In any class action, the claims of the individual class 
members shall be aggregated to determine whether the matter in 
controversy exceeds the sum or value of $2,000,000, exclusive 
of interest and costs.
    (5) This subsection shall apply to any class action before 
or after the entry of a class certification order by the court 
with respect to that action.
    (6)(A) A district court shall dismiss any civil action that 
is subject to the jurisdiction of the court solely under this 
subsection if the court determines the action may not proceed 
as a class action based on a failure to satisfy the 
requirements of rule 23 of the Federal Rules of Civil 
Procedure.
    (B) Nothing in subparagraph (A) shall prohibit plaintiffs 
from filing an amended class action in Federal court or filing 
an action in State court, except that any such action filed in 
State court may be removed to the appropriate district court if 
it is an action of which the district courts of the United 
States have original jurisdiction.
    (C) In any action that is dismissed under this paragraph 
and is filed by any of the original named plaintiffs therein in 
the same State court venue in which the dismissed action was 
originally filed, the limitations periods on all reasserted 
claims shall be deemed tolled for the period during which the 
dismissed class action was pending. The limitations periods on 
any claims that were asserted in a class action dismissed under 
this paragraph that are subsequently asserted in an individual 
action shall be deemed tolled for the period during which the 
dismissed action was pending.
    (7) Paragraph (2) shall not apply to any class action 
brought by shareholders that solely involves a claim that 
relates to--
            (A) a claim concerning a covered security as 
        defined under section 16(f)(3) of the Securities Act of 
        1933 and section 28(f)(5)(E) of the Securities Exchange 
        Act of 1934;
            (B) the internal affairs or governance of a 
        corporation or other form of business enterprise and 
        arises under or by virtue of the laws of the State in 
        which such corporation or business enterprise is 
        incorporated or organized; or
            (C) the rights, duties (including fiduciary 
        duties), and obligations relating to or created by or 
        pursuant to any security (as defined under section 
        2(a)(1) of the Securities Act of 1933 and the 
        regulations issued thereunder).
    (8) For purposes of this subsection and section 1453 of 
this title, an unincorporated association shall be deemed to be 
a citizen of the State where it has its principal place of 
business and the State under whose laws it is organized.
    (9) For purposes of this section and section 1453 of this 
title, a civil action that is not otherwise a class action as 
defined in paragraph (1)(B) of this subsection shall 
nevertheless be deemed a class action if--
            (A) the named plaintiff purports to act for the 
        interests of its members (who are not named parties to 
        the action) or for the interests of the general public, 
        seeks a remedy of damages, restitution, disgorgement, 
        or any other form of monetary relief, and is not a 
        State attorney general; or
            (B) monetary relief claims in the action are 
        proposed to be tried jointly in any respect with the 
        claims of 100 or more other persons on the ground that 
        the claims involve common questions of law or fact.
In any such case, the persons who allegedly were injured shall 
be treated as members of a proposed plaintiff class and the 
monetary relief that is sought shall be treated as the claims 
of individual class members. The provisions of paragraphs (3) 
and (6) of this subsection and subsections (b)(2) and (d) of 
section 1453 shall not apply to civil actions described under 
subparagraph (A). The provisions of paragraph (6) of this 
subsection, and subsections (b)(2) and (d) of section 1453 
shall not apply to civil actions described under subparagraph 
(B).
    [(d)] (e) The word ``States'', as used in this section, 
includes the Territories, the District of Columbia, and the 
Commonwealth of Puerto Rico.

           *       *       *       *       *       *       *

Sec. 1335. Interpleader

    (a) The district courts shall have original jurisdiction of 
any civil action of interpleader or in the nature of 
interpleader filed by any person, firm, or corporation, 
association, or society having in his or its custody or 
possession money or property of the value of $500 or more, or 
having issued a note, bond, certificate, policy of insurance, 
or other instrument of value or amount of $500 or more, or 
providing for the delivery or payment or the loan of money or 
property of such amount or value, or being under any obligation 
written or unwritten to the amount of $500 or more, if
            (1) Two or more adverse claimants, of diverse 
        citizenship as defined in section 1332(a) or (d) of 
        this title, are claiming or may claim to be entitled to 
        such money or property, or to any one or more of the 
        benefits arising by virtue of any note, bond, 
        certificate, policy or other instrument, or arising by 
        virtue of any such obligation; and if (2) the plaintiff 
        has deposited such money or property or has paid the 
        amount of or the loan or other value of such instrument 
        or the amount due under such obligation into the 
        registry of the court, there to abide the judgment of 
        the court, or has given bond payable to the clerk of 
        the court in such amount and with such surety as the 
        court or judge may deem proper, conditioned upon the 
        compliance by the plaintiff with the future order or 
        judgment of the court with respect to the subject 
        matter of the controversy.

           *       *       *       *       *       *       *

CHAPTER 89--DISTRICT COURTS; REMOVAL OF CASES FROM STATE COURTS

           *       *       *       *       *       *       *

Sec.
1441.    Actions removable generally.
     * * * * * * *
1453.    Removal of class actions.

           *       *       *       *       *       *       *

Sec. 1446. Procedure for removal

    (a) * * *
    (b) The notice of removal of a civil action or proceeding 
shall be filed within thirty days after the receipt by the 
defendant, through service or otherwise, of a copy of the 
initial pleading setting forth the claim for relief upon which 
such action or proceeding is based, or within thirty days after 
the service of summons upon the defendant if such initial 
pleading has then been filed in court and is not required to be 
served on the defendant, whichever period is shorter. If the 
case stated by the initial pleading is not removable, a notice 
of removal may be filed within thirty days after receipt by the 
defendant, through service or otherwise, of a copy of an 
amended pleading, motion, order or other paper from which it 
may first be ascertained that the case is one which is or has 
become removable, except that a case may not be removed on the 
basis of jurisdiction conferred by section 1332(a) of this 
title more than 1 year after commencement of the action.

           *       *       *       *       *       *       *

Sec. 1453. Removal of class actions

    (a) Definitions.--In this section, the terms ``class'', 
``class action'', ``class certification order'', and ``class 
member'' have the meanings given these terms in section 
1332(d)(1).
    (b) In General.--A class action may be removed to a 
district court of the United States in accordance with this 
chapter, without regard to whether any defendant is a citizen 
of the State in which the action is brought, except that such 
action may be removed--
            (1) by any defendant without the consent of all 
        defendants; or
            (2) by any plaintiff class member who is not a 
        named or representative class member without the 
        consent of all members of such class.
    (c) When Removable.--This section shall apply to any class 
action before or after the entry of a class certification order 
in the action, except that a plaintiff class member who is not 
a named or representative class member of the action may not 
seek removal of the action before an order certifying a class 
of which the plaintiff is a class member has been entered.
    (d) Procedure for Removal.--The provisions of section 1446 
relating to a defendant removing a case shall apply to a 
plaintiff removing a case under this section, except that in 
the application of subsection (b) of such section the 
requirement relating to the 30-day filing period shall be met 
if a plaintiff class member files notice of removal within 30 
days after receipt by such class member, through service or 
otherwise, of the initial written notice of the class action.
    (e) Review of Orders Remanding Class Actions to State 
Courts.--The provisions of section 1447 shall apply to any 
removal of a case under this section, except that, 
notwithstanding the provisions of section 1447(d), an order 
remanding a class action to the State court from which it was 
removed shall be reviewable by appeal or otherwise.
    (f) Exception.--This section shall not apply to any class 
action brought by shareholders that solely involves--
            (1) a claim concerning a covered security as 
        defined under section 16(f)(3) of the Securities Act of 
        1933 and section 28(f)(5)(E) of the Securities Exchange 
        Act of 1934;
            (2) a claim that relates to the internal affairs or 
        governance of a corporation or other form of business 
        enterprise and arises under or by virtue of the laws of 
        the State in which such corporation or business 
        enterprise is incorporated or organized; or
            (3) a claim that relates to the rights, duties 
        (including fiduciary duties), and obligations relating 
        to or created by or pursuant to any security (as 
        defined under section 2(a)(1) of the Securities Act of 
        1933 and the regulations issued thereunder).

           *       *       *       *       *       *       *

CHAPTER 97--JURISDICTIONAL IMMUNITIES OF FOREIGN STATES

           *       *       *       *       *       *       *

Sec. 1603. Definitions

    For purposes of this chapter --
            (a) * * *
            (b) An ``agency or instrumentality of a foreign 
        state'' means any entity--
                    (1) * * *

           *       *       *       *       *       *       *

                    (3) which is neither a citizen of a State 
                of the United States as defined in section 1332 
                (c) and [(d)] (e) of this title, nor created 
                under the laws of any third country.

           *       *       *       *       *       *       *

                           PART V--PROCEDURE

Chap.                                                               Sec.
111.   General Provisions.........................................  1651
113.   Process....................................................  1691
114.   Class Actions..............................................  1711
     * * * * * * *

                       CHAPTER 114--CLASS ACTIONS

Sec.
1711. Judicial scrutiny of coupon and other noncash settlements.
1712. Protection against loss by class members.
1713. Protection against discrimination based on geographic location.
1714. Prohibition on the payment of bounties.
1715. Clearer and simpler settlement information.
1716. Definitions

Sec. 1711. Judicial scrutiny of coupon and other noncash settlements

    The court may approve a proposed settlement under which the 
class members would receive noncash benefits or would otherwise 
be required to expend funds in order to obtain part or all of 
the proposed benefits only after a hearing to determine 
whether, and making a written finding that, the settlement is 
fair, reasonable, and adequate for class members.

Sec. 1712. Protection against loss by class members

    The court may approve a proposed settlement under which any 
class member is obligated to pay sums to class counsel that 
would result in a net loss to the class member only if the 
court makes a written finding that nonmonetary benefits to the 
class member outweigh the monetary loss.

Sec. 1713. Protection against discrimination based on geographic 
                    location

    The court may not approve a proposed settlement that 
provides for the payment of greater sums to some class members 
than to others solely on the basis that the class members to 
whom the greater sums are to be paid are located in closer 
geographic proximity to the court.

Sec. 1714. Prohibition on the payment of bounties

    (a) In General.--The court may not approve a proposed 
settlement that provides for the payment of a greater share of 
the award to a class representative serving on behalf of a 
class, on the basis of the formula for distribution to all 
other class members, than that awarded to the other class 
members.
    (b) Rule of Construction.--The limitation in subsection (a) 
shall not be construed to prohibit any payment approved by the 
court for reasonable time or costs that a person was required 
to expend in fulfilling his or her obligations as a class 
representative.

Sec. 1715. Clearer and simpler settlement information

    (a) Plain English Requirements.--Any court with 
jurisdiction over a plaintiff class action shall require that 
any written notice concerning a proposed settlement of the 
class action provided to the class through the mail or 
publication in printed media contain--
            (1) at the beginning of such notice, a statement in 
        18-point Times New Roman type or other functionally 
        similar type, stating ``LEGAL NOTICE: YOU ARE A 
        PLAINTIFF IN A CLASS ACTION LAWSUIT AND YOUR LEGAL 
        RIGHTS ARE AFFECTED BY THE SETTLEMENT DESCRIBED IN THIS 
        NOTICE.''; and
            (2) a short summary written in plain, easily 
        understood language, describing--
                    (A) the subject matter of the class action;
                    (B) the members of the class;
                    (C) the legal consequences of being a 
                member of the class;
                    (D) if the notice is informing class 
                members of a proposed settlement agreement--
                            (i) the benefits that will accrue 
                        to the class due to the settlement;
                            (ii) the rights that class members 
                        will lose or waive through the 
                        settlement;
                            (iii) obligations that will be 
                        imposed on the defendants by the 
                        settlement;
                            (iv) the dollar amount of any 
                        attorney's fee class counsel will be 
                        seeking, or if not possible, a good 
                        faith estimate of the dollar amount of 
                        any attorney's fee class counsel will 
                        be seeking; and
                            (v) an explanation of how any 
                        attorney's fee will be calculated and 
                        funded; and
                    (E) any other material matter.
    (b) Tabular Format.--Any court with jurisdiction over a 
plaintiff class action shall require that the information 
described in subsection (a)--
            (1) be placed in a conspicuous and prominent 
        location on the notice;
            (2) contain clear and concise headings for each 
        item of information; and
            (3) provide a clear and concise form for stating 
        each item of information required to be disclosed under 
        each heading.
    (c) Television or Radio Notice.--Any notice provided 
through television or radio (including transmissions by cable 
or satellite) to inform the class members in a class action of 
the right of each member to be excluded from the class action 
or a proposed settlement of the class action, if such right 
exists, shall, in plain, easily understood language--
            (1) describe the persons who may potentially become 
        class members in the class action; and
            (2) explain that the failure of a class member to 
        exercise his or her right to be excluded from a class 
        action will result in the person's inclusion in the 
        class action or settlement.

Sec. 1716. Definitions

    In this chapter--
            (1) Class action.--The term ``class action'' means 
        any civil action filed in a district court of the 
        United States pursuant to rule 23 of the Federal Rules 
        of Civil Procedure or any civil action that is removed 
        to a district court of the United States that was 
        originally filed pursuant to a State statute or rule of 
        judicial procedure authorizing an action to be brought 
        by one or more representatives on behalf of a class.
            (2) Class counsel.--The term ``class counsel'' 
        means the persons who serve as the attorneys for the 
        class members in a proposed or certified class action.
            (3) Class members.--The term ``class members'' 
        means the persons who fall within the definition of the 
        proposed or certified class in a class action.
            (4) Plaintiff class action.--The term ``plaintiff 
        class action'' means a class action in which class 
        members are plaintiffs.
            (5) Proposed settlement.--The term ``proposed 
        settlement'' means an agreement that resolves claims in 
        a class action, that is subject to court approval and 
        that, if approved, would be binding on the class 
        members.

           *       *       *       *       *       *       *

                           Markup Transcript

                            BUSINESS MEETING

                        WEDNESDAY, MARCH 6, 2002

                  House of Representatives,
                                Committee on the Judiciary,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:54 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.
    [Intervening business.]
    Now, next on the agenda, pursuant to notice, I now call up 
the bill H.R. 2341, the ``Class Action Fairness Act of 2001,'' 
for purposes of markup and move its favorable recommendation to 
the House.
    Without objection, the bill will be considered as read and 
open for amendment at any point.
    [The bill, H.R. 2341, follows:]
      
      
    

    Chairman Sensenbrenner. And the Chair recognizes himself 
for 5 minutes for purposes of a statement.
    Last August, the Washington Post editorial board wrote 
that: ``No portion of the American civil justice system is more 
of a mess than the world of class actions. None is in more 
desperate need of policymakers' attention.''
    Today we are directing the overdue attention of this 
Congress to class action reform. The bill attempts to clean up 
the class action mess by expanding Federal diversity 
jurisdiction over interstate class actions to help curb the 
serious abuses that continue to take an enormous toll on our 
legal system and economy.
    This legislation also implements necessary safeguards 
against the unwieldy settlements that give lawyers millions of 
dollars in fees while individual class members receive a small 
fraction of any settlement award, leaving them forever bowed 
with little or no remedy.
    A quick examination of our current legal system shows that 
the need for this legislation is clear. Currently, attorneys 
lump thousands and sometimes millions of speculative claims 
into one class action and race to any available State 
courthouse in the hopes of a rubberstamp settlement. With the 
filing of State court class actions having increased 1,000 
percent over the past 10 years, it is an aspect of our civil 
justice system that has gone wild, and its results have been 
dreadful.
    The current system has transformed certain State courts 
into the epicenter for class action abuse. It is widely known 
that there are a handful of State courts notorious for 
processing even the most speculative class actions. This is 
particularly troubling because the impact of these cases is 
often contradictory to other State laws. This is exactly what 
diversity jurisdiction was intended to prevent.
    Because of the cost, distraction, and potential 
embarrassment associated with litigation, many defendants are 
willing to settle class actions regardless of their merit. The 
cost of these settlements is then passed off to the American 
consumer in the form of higher prices for goods and services 
and to employees in the form of diminished returns on their 
retirement plans.
    While some trial lawyers may improve their financial 
situation, the net effect of this is a drain on our national 
economy that prevents American consumers from realizing the 
benefits of unfettered innovation, then access to new markets.
    H.R. 2341 addresses some of these problems by updating 
antiquated Federal jurisdictional rules, which have led to 
State courts having jurisdiction over most class actions. 
Currently, the Federal rules provide Federal Court jurisdiction 
for disputes dealing with Federal laws and disputes based on 
complete diversity. That means that all plaintiffs and 
defendants are residents of different States and that every 
plaintiff's claim is valued at $75,000 or more.
    Not surprisingly, few class actions meet these 
requirements. This legislation would apply new diversity 
standards to class actions by changing the diversity 
requirements to any plaintiff and any defendant residing in 
different States where the aggregate of all claims is at least 
$2 million.
    Another important element of the bill is to provide long-
needed protections for class members from abusive settlements. 
Too often we have heard stories about how creative attorneys 
use class actions to game the system at their clients' expense. 
The Consumer Class Action Bill of Rights would prohibit the 
payment of bounties to class representatives, bar the approval 
of unreasonable net loss settlements, and establish a plain-
English requirement clarifying class members' rights.
    Additionally, the bill would require greater scrutiny of 
coupon settlements and settlements involving out-of-State class 
members.
    With regards to Enron, there are many ongoing 
investigations, and there certainly will be many lawsuits to 
follow. It is important to note that nothing in this bill will 
limit the right of Enron employees to seek redress in court.
    Under current law, lawsuits against the company will be 
heard in Federal bankruptcy court under the old bankruptcy law, 
for the same reasons Federal courts should be able to resolve 
many of these class actions.
    Federal courts protect the interests of all parties and, in 
addition, section 4 of the bill specifically excludes a number 
of Federal securities and State-based corporate fraud lawsuits.
    The bottom line is that this bill is a common-sense 
approach to promote national litigation, efficiency, and 
fairness to all potential plaintiffs. I urge my colleagues to 
put aside previous positions and support this legislation.
    I recognize the gentleman from Michigan, Mr. Conyers.
    Mr. Conyers. Thank you, Mr. Chairman. I appreciate the fact 
that so far trial lawyers have only been knocked a couple of 
times.
    This is a repeat of what we've done in the 105th Congress, 
and the 106th Congress, and now here we are in the 107th 
Congress, with essentially the same objective of, in effect, 
federalizing class actions. This--is this a good thing?
    This is not a good thing.
    This bill may not be leading consumers where they want to 
go. The bill I think has been placed on what could be called a 
fast track. And it goes on in the midst of, in effect, reducing 
the claims of people in a circumstance and in an environment 
where we ought to be providing more safeguards for citizens, 
consumers, and stockholders, employees. We're doing just the 
opposite.
    Now, is there some reason that this is going to help most 
people in the country? Or maybe this is just a simple rules 
change that doesn't go as far as I'm afraid--as I think it's 
going.
    Now, changes have been made by conservatives on behalf of 
corporations--this is not class warfare--in the last 5 years 
that have the result of making it much harder for employees, 
for example, who are scammed out of their retirement savings to 
get any relief. Great for Enron. They're in bankruptcy, so this 
doesn't apply. But what everybody else and all other 
corporations?
    I can remember back to the awful period of 1994 in which 
the Congress of that year reduced the consequences for 
corporate bad actors in the area of securities fraud. And what 
did the securities people who engaged in rip-off who were very 
grateful--and now we want to do it, in effect, from my point of 
view, for every irresponsible national and multinational 
company in the country.
    From this perspective, this would be a good time to put on 
more corporate responsibility, and not less. Our citizens need 
more protections against being swindled, not less.
    And this bill, seen from that point of view, takes us in 
exactly the opposite direction.
    Now, keep in mind, there's no crisis in the State courts. I 
don't know if I heard that asserted or not. We have not 
received any testimony--none--that class actions are 
overwhelming the State court system. The reason that you've not 
heard that is because they are not.
    However, we do know that because of Congress' recently 
increasing propensity to federalize State crimes, we're facing 
a real workload crisis in the Federal judiciary. The result for 
victims will be far slower access to justice, which may be 
precisely the result that some corporate defendants would 
desire.
    Now, what about the federalism concern? We're lawyers; 
constitutional questions reside in this Committee. And even 
though some may describe this as a procedural fix, a simple 
one, this measure before us could have the effect of wiping out 
virtually all State class action statutes. Now, you wouldn't 
want to do that, would you? This means that even if the vast 
majority of plaintiffs are even from the same State or a 
particular State is impacted by an action, citizens would be 
unable to obtain recourse in their own courts.
    If there are specific problems, then we ought to consider 
fixing the problems not doing what we're doing, which is, in 
effect, banning State class actions. We owe it to our 
constituents and our consumers to protect them from Firestone 
tires, the Dalkon Shield, the little storytelling tobacco CEOs 
and many others.
    And so, ladies and gentlemen of the Committee, please 
carefully consider the legislation that is before you.
    Chairman Sensenbrenner. The gentleman's time has expired.
    Are there amendments?
    The gentleman from----
    Mr. Watt. Mr. Chairman?
    Chairman Sensenbrenner.--Virginia, Mr. Boucher.
    Mr. Boucher. Mr. Chairman, I have an amendment----
    Mr. Watt. Mr. Chairman?
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R. 2341----
    Mr. Boucher. Mr. Chairman, I ask unanimous consent that the 
amendment be considered as read.
    Chairman Sensenbrenner. Without objection, so ordered.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. And the gentleman is recognized for 
5 minutes.
    Mr. Boucher. Thank you very much, Mr. Chairman.
    I am pleased to join with my Virginia colleague, Mr. 
Goodlatte, as principal co-sponsor of the legislation that is 
the subject of our markup today. And I'm pleased to offer this 
amendment on behalf of myself and Mr. Goodlatte.
    The amendment makes two changes in the Class Action 
Fairness Act, one that is technical in nature and another that 
is both important and substantive.
    First the amendment simply updates the short title of the 
bill to read the ``Class Action Fairness Act of 2002'' rather 
than 2001.
    Secondly, the amendment will delete all of section 1716, 
which had proposed specific pleading requirements in class 
action lawsuits. All of the language on page 10 of the bill--
the subsections on particularity, on State of mind, and on stay 
of discovery pending resolution of a motion to dismiss--will be 
removed from the bill under this amendment.
    During the Committee's hearing on this measure, some 
members were troubled by aspects of the bill that would 
establish specific pleading requirements in class actions. In 
response to the concerns that have been raised about the scope 
and the effect of this special pleading language, I'm offering 
this amendment that strikes that section of the bill.
    Some Members were concerned that the bill as introduced 
would have required that plaintiffs' counsel state with 
particularity how the class members allegedly were injured and 
the recovery that they are seeking.
    Some Members suggested that such a requirement would impede 
the filing of class action lawsuits.
    Some Members have also expressed concern about the state of 
mind pleading requirement. As introduced, the bill would have 
required the initial pleading, in cases involving a defendant's 
particular state of mind, to state with particularity the facts 
which, if proven, would demonstrate that the defendant acted 
with a required mental state.
    Some Members suggested that obtaining these facts at an 
early stage in the class action litigation would prove onerous 
and difficult.
    Concern was also expressed about the pleading provision 
that would stay discovery while a motion to dismiss on the 
pleadings was pending.
    In the end, while I think all of these special pleading 
provisions were defensible and were in pursuit of appropriate 
policy, they are clearly not at the core of this bill and are 
not essential to achieving the real purposes of the class 
action reform. A prolonged debate on heightened pleading 
requirements would simply cloud the discussion and distract the 
Committee from focusing on the real and practical benefits that 
class action reform will produce for litigants, for consumers, 
and for the American economy.
    In the effort to facilitate approval of the bill, both here 
and on the floor of the House, I urge adoption of this 
amendment, which will remove from the bill those provisions 
relating to pleading with particularity and stay of discovery 
pending consideration of motions to dismiss.
    These are the provisions that seem to be causing some 
hesitation among Members of Congress, and with these provisions 
removed, I hope we will enjoy the support of those Members when 
the bill comes to final passage.
    Thank you, Mr. Chairman. I urge adoption of this amendment, 
and I yield back.
    Chairman Sensenbrenner. Further discussion on the Boucher 
amendment?
    The other gentleman from Virginia, Mr. Goodlatte.
    Mr. Goodlatte. Mr. Chairman, move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Goodlatte. Thank you, Mr. Chairman. And I will be very 
brief.
    I join with the gentleman from Virginia in offering this 
amendment. The provisions which are struck from the bill by 
this amendment were not included in the legislation that passed 
this Committee in the last Congress. And while I think there 
are considerable merits to pleading with particularity, I also 
acknowledge that one of the purposes of this legislation is not 
to impede the ability of people to bring class action lawsuits, 
but rather to make sure that the lawsuits are brought properly 
and in the proper forum.
    This particular provision of the bill is not at the core of 
those provisions. And as such, I think it would be a wise step 
to remove them from the bill. And I urge my colleagues to 
support the amendment.
    Mr. Watt. Mr. Chairman?
    Chairman Sensenbrenner. For what purpose does the gentleman 
from North Carolina, Mr. Watt, seek recognition?
    Mr. Watt. I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Watt. Thank you, Mr. Chairman.
    I want to, at the risk of jeopardizing passage of the 
amendment, rise also in support of it. [Laughter.]
    It does a couple of things that I think are important, but 
illustrates a couple of things, too.
    Number one, the changing of the dates should remind us that 
this is not the first time we've seen this bill or some version 
of it. It's been around for a long time. So it's nice to update 
the dates on the bill when we have them.
    But more importantly and substantively, the second part of 
the proposed amendment is something that I was--in fact, I 
already had an amendment at the desk, planning to try to 
strike. And I'm sure it wasn't going to pass with me being the 
sponsor, so I want to thank the two gentlemen from Virginia for 
sparing me the indignity of having my amendment go down. 
[Laughter.]
    Thank you. I yield back.
    Chairman Sensenbrenner. The question is on the Boucher 
amendment.
    Mr. Conyers. Wait a minute, Mr. Chairman.
    Chairman Sensenbrenner. Does the gentleman from Michigan 
have more to say?
    Mr. Conyers. Yes, I do.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Conyers. I'm sorry for taking 5 whole minutes as we 
move on this bill, but Mr. Watt was going to have introduced 
this. I'm happy that he didn't. God knows what might have 
happened. [Laughter.]
    But the authors of the bill realize quite appropriately 
that this was way, way out of line. Too bad they can't bring 
that same kind of concern to the heart of the bill, the heart 
of the bill of federalizing class actions, in effect, through 
procedural actions of this kind--the particularity, state of 
mind, intent.
    And so I hope that nobody here thinks that this takes care 
of the problem, because it doesn't. It doesn't take care of the 
problem at all.
    But I just wanted everybody to know that sweetness and 
light is not flowing from this bill as a result of the Boucher 
and Goodlatte amendment.
    And I return the balance of my time.
    Ms. Jackson Lee. Mr. Chairman?
    Chairman Sensenbrenner. The gentlewoman from Texas, Ms. 
Jackson Lee.
    Ms. Jackson Lee. Thank you, Mr. Chairman.
    Let me add my appreciation for the improvement that this 
particular amendment offers to the legislation. I will have 
some subsequent amendments. And clearly, I think the passion 
with which the Ranking Member speaks is worthy of our 
consideration. And I guess it's because I have experienced in 
recent months the dilemma of thousands of employees now left 
without remedy, particularly in the Enron case. That case 
happens to be a case before the bankruptcy court, but it 
certainly begs the question of what happens when thousands of 
employees are plagued and victimized by actions which they 
cannot address because of their individual inadequacies, 
financial inadequacies, and need the structure of a viable 
class action, if you will, vehicle, that I don't consider to be 
abused by those who absolutely have the right and reason to 
access the court system.
    So I'm glad that we have moved in the direction of 
lessening the burden on constructive and innocent plaintiffs. 
But I do think that we should be concerned of whether we're 
barring the courthouse door by those who by necessity have to 
enter in the form of a class action.
    I yield back the balance of my time.
    Chairman Sensenbrenner. The question is on the amendment 
from the gentleman from Virginia, Mr. Boucher.
    Those in favor will say aye.
    Opposed, no.
    The ayes appear to have it. The ayes have it, and the 
amendment is agreed to.
    Are there further amendments?
    Mr. Conyers. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from Michigan, Mr. 
Conyers?
    Mr. Conyers. I do have an amendment at the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R. 2341, offered by Mr. Conyers 
and Ms. Jackson Lee. Page 17, line 10, strike the quotation 
marks and second period. Page 17----
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read and open for amendment at any point.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman from Michigan is 
recognized for 5 minutes.
    Mr. Conyers. Thank you, Mr. Chairman.
    This is an amendment to prevent companies who may try to 
use this legislation to avoid State liability by 
reincorporating as a foreign entity. Yes, corporations do that, 
and with increasing frequency they're doing it.
    And here's how it works: The corporations set up paper 
companies, and let's take Bermuda, which is a frequently used 
site, for a nominal fee.
    But the company--nothing else changes. The company 
continues to be owned by United States shareholders, continues 
to do business in the exact locations. The production goes on 
in the same place.
    The only thing different is that new foreign company 
escapes substantial tax liability under this bill, under this 
bill, under these economic circumstances that we find that 
we're reading about in the paper almost every day. We've got a 
bill here that would allow companies to escape their national 
liability by reincorporating in a foreign country.
    And this amendment attempts to prevent this. It is, I 
think, a modest amendment.
    The new so-called foreign company escapes substantial tax 
liability under this bill and could more easily avoid legal 
liability as well. And these are the same companies that are 
stamped ``made in the USA'' on their products and, at the same 
time, are avoiding United States taxes and minimizing or making 
more difficult those who may seek legal redress to bring them 
to court after merely shuffling around some corporate 
documents.
    I name a company: Stanley Works, which has made hammers and 
wrenches in the State of Connecticut for 159 years. According 
to a report last month in the New York Times, the company now 
plans to become a Bermuda corporation so it can cut its taxes 
by how much? $30 million each year.
    And so, clearly, there's a big rush to Bermuda with 
companies.
    And dare I raise the name Global Crossing? Yes, they're one 
of them. Foster Wheeler, Cooper Industries, Ingersoll-Rand, who 
are all announcing plans to reincorporate in Bermuda to avoid 
tax liability.
    Now, these companies are a slap in the face of every 
citizen who has to meet their tax obligations next month, to 
every person in our military who is sacrificing much more than 
money to defend our country and its citizens.
    So this amendment responds to this egregious behavior by 
treating the former U.S. company as a domestic corporation for 
class action purpose.
    And so I hope that this amendment will address the 
irresponsible conduct, unpatriotic conduct, of a handful of 
companies whom--we should not permit profits to trump in these 
kinds of situations.
    I thank you for the time, Mr. Chairman.
    Ms. Jackson Lee. Mr. Chairman?
    Chairman Sensenbrenner. Discussion on the Conyers 
amendment?
    The gentleman from Virginia, Mr. Goodlatte.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    Mr. Chairman, I must strongly oppose this amendment. This 
is not a modest amendment as described by the gentleman from 
Michigan.
    These are the very kinds of cases that most belong in 
Federal court. And attempting to redefine the home base of the 
corporation just for the purposes of class action lawsuit--
won't affect any other lawsuits brought against them--and it 
certainly will not affect their tax liability.
    I share the gentleman's concern that this is a tax dodges, 
but that should be dealt with in the Ways and Means Committee. 
And his amendment will not change that.
    All this is intended to do is to keep class action lawsuits 
with clearly nationwide implications involving decisions on 
plaintiffs in a multitude of States from being brought in 
Federal court. This whole--the premise of this entire 
legislation is to bring the kinds of lawsuits that our Founding 
Fathers intended to be heard in Federal court, involving not 
just diversity of jurisdiction but a wide degree of diversity 
of jurisdiction, in Federal court.
    And the fact of that matter is, it is simply a Federal rule 
that requires that you allege $75,000 per plaintiff that keeps 
most of these class actions from being heard in the 
jurisdiction where they should be heard.
    The primary purpose of this bill is to change that to 
require a $2 million aggregate allocation for all of the 
plaintiffs in the class. And the purpose of this amendment is 
to subvert the clear intent of the legislation to have complex 
litigation involving parties from many States, involving, in 
many instances, billions of dollars in dispute, brought in the 
courts that were designed to be able to handle those cases and 
to stop the forum shopping that takes place right now, where 
the plaintiffs' attorney can chose from literally 4,000 
different jurisdictions in the United States in which to bring 
the action.
    So I urge my colleagues to oppose this amendment. It is 
something that would give State courts jurisdiction over cases 
that involve U.S. companies that have been purchased by foreign 
companies. These are generally large, nationwide lawsuits that 
we're talking about that affect these companies. And they're 
precisely the kind of actions that should be brought in Federal 
court. It doesn't limit anybody's right to bring a class 
action. It simply limits their ability to forum shop, and it 
limits the ability of the plaintiffs to choose judges that are 
most favorable to certifying class actions and applies a more 
nationwide standard.
    I urge my colleagues to oppose the amendment.
    Chairman Sensenbrenner. The question is on the Conyers 
amendment.
    Ms. Jackson Lee. Mr. Chairman?
    Chairman Sensenbrenner. The gentlewoman from Texas, Ms. 
Jackson Lee.
    Ms. Jackson Lee. Thank you very much, Mr. Chairman. I rise 
to support the Conyers-Jackson Lee amendment, and I beg to 
differ from the distinguished colleague from Virginia.
    What is happening with the class action legislation that 
has been proposed and has now shown its face in a completely 
new year and possibly new look is that this legislation is 
about benefit with no burden.
    Clearly, it is giving a gift to major corporations, large 
entities, who have been upset by the number of successful 
plaintiff actions, few and far in-between, might I add? If you 
use the State court systems in Harris County, for example, a 
pretty litigious community, in Houston, you'll find that in 
most instances, the defense--defendants in civil cases prevail.
    So this is not a circumstance where we have a runaway court 
system and plaintiffs are winning in large numbers across the 
Nation. So we are excising an extra-added benefit where none is 
deserved. This legislation will probably get out of this 
Committee and, frankly, will help those who need little help.
    What we're saying in this legislation is that, in addition 
to the benefit that you're going to give, you're going to allow 
companies to abscond from the United States and benefit not 
only from running away from the courthouse, but they will also 
benefit by large dollars of tax relief.
    The Ranking Member mentioned Stanley Works. That was going 
to be about $30 million to about $80 million.
    Mr. Goodlatte. Will the gentlewoman yield?
    Ms. Jackson Lee. I'd be happy to yield in just a moment to 
my good friend.
    Tyco would be saving $400 million a year. And, obviously, 
coming from Houston, Texas, all of us are concerned about what 
we call SPEs, 2,800 to 3,000 that were utilized by own 
constituent, Enron.
    And so, to the distinguished gentleman, I'm not 
understanding why we're giving so much benefit with no burden.
    I'll be happy to yield to the gentleman for a moment.
    Mr. Goodlatte. Well, I thank the gentlewoman for yielding. 
But the fact of the matter is that this bill nor the amendment 
offered by the gentleman from Michigan has anything to do with 
the tax burden on the corporations. It has to do with whether 
or not we're going to have a fair and uniform standard for 
determining whether or not class action lawsuits that involve 
millions of plaintiffs in a multitude of States can be heard in 
a uniform fashion that prohibits plaintiff attorneys from 
shopping for the one favorable judge in the one rural county in 
one particular State that has a long track record of having 
certified class actions.
    If they choose to do that, that's fine. But then any party 
to the case, under this bill, would then be able to remove that 
case to Federal court provided they meet the diversity 
requirements provided in the legislation.
    And it has absolutely nothing to do with the matters that 
you describe. And you're simply trying to draw a distinction 
between different types of corporations that has no merit in 
class action law.
    Ms. Jackson Lee. Well, reclaiming my time, I thank the 
gentleman for his perspective on the amendment, but I believe 
that this is a legislative initiative. This legislation simply 
gives benefit with no burden.
    And what we're suggesting, that if these companies want to 
abscond to a foreign jurisdiction, then they should be governed 
by State laws. And they should not have the ability to benefit 
from not paying taxes.
    Most of us know that we are committed to death and taxes. 
Our corporate friends obviously don't find that kind of 
definitiveness. They can abscond and take money wherever they 
are and also take benefits.
    This class action legislation gives, as I believe, benefits 
where none are necessary. If you looked at the documentation of 
how many corporations were abused by class action lawsuits, 
you'd find a paltry number of victories.
    I happen to believe that the Microsoft case should've ended 
as it is. I believe that Microsoft is more productive unbroken-
up, if I may use bad English.
    I happen to support, hopefully, a resolution of that case. 
That is one example, however, of a class action case taken up 
by States and not by individuals.
    And so this, I believe, legislation is detrimental to the 
judicial system. And I frankly believe any amendment that we 
can utilize to suggest that anybody who takes advantage of 
this, therefore, cannot take advantage by absconding to a 
foreign territory and then also be advantaged by this 
particular legislation that you're passing.
    I would only ask my colleagues to consider the purposes of 
what we're doing, to look at the economics of it, to balance 
who is benefiting and who is being burdened by it. And I 
frankly think that here's another example of providing 
corporate opportunities for companies to leave the United 
States, be incorporated on foreign territories, not pay their 
taxes and take the benefit of class action legislation that 
they do not need.
    I yield back the balance of my time.
    [The prepared statement of Ms. Jackson Lee follows:]
       Prepared Statement of the Honorable Sheila Jackson Lee, a 
           Representative in Congress From the State of Texas
    Good morning Chairman Sensenbrenner and Ranking Member Conyers:
    I am proud to join Mr. Conyers in offering this amendment, which 
would deny corporations who relocate to foreign countries simply to 
avoid paying income taxes from enjoying the benefits of this bill.
    As the saying goes, ``death and taxes are the only guarantees in 
life''. You and I could never avoid paying taxes, but we try to 
minimize them to the best of our ability. The same philosophy applies 
to companies.
    However, there is a growing trend in this country where American 
companies are incorporating in Bermuda, or other countries that do not 
have income taxes, to avoid paying taxes altogether while maintaining 
the benefits and security of doing business in the United States. But 
these companies don't actually relocate to Bermuda. Rather, they are a 
Bermuda corporation only on paper.
    But the tax benefits are profound. Tyco International, a 
diversified manufacturer headquartered in New Hampshire but 
incorporated in Bermuda, saved more than $400 million last year in 
taxes alone. And Stanley Works, a Connecticut manufacturer for 159 
years, will cut its tax bill by $30 million a year to about $80 
million.
    Although it is a growing trend, some companies hesitate to 
incorporate in Bermuda because of patriotism issues, especially after 
the tragedies of September 11. But low and behold, ``profits trump 
patriotism''.
    Enron Corp had set up an estimated 2,800 to 3,000 ``special purpose 
entities'' (SPEs) in an attempt to hide amounting debt and losses and 
to avoid paying taxes. As a matter of fact, Enron had not paid any 
income taxes in the last five years. And due to the nature of these 
transactions, and the fact that these SPEs were created as a separate 
entity from Enron, government officials have been unable to acquire 
more information to determine the extent of liability.
    Allowing companies who relocate to foreign countries simply to 
avoid paying taxes and still benefit from class actions in a federal 
forum would enable a defendant corporation to avoid accountability and 
result in the plaintiff class having a more difficult time seeking 
redress.
    Again, Mr. Chairman, this amendment would attempt to bring justice 
within the reach of the victims aggrieved by these corporate giants.
    Thank you.

    Chairman Sensenbrenner. The time of the gentlewoman has 
expired.
    Mr. Watt. Mr. Chairman? Mr. Chairman?
    Chairman Sensenbrenner. For what purpose does the gentleman 
from North Carolina seek recognition?
    Mr. Watt. I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Watt. And I yield to Mr. Conyers.
    Mr. Conyers. I thank the gentleman for yielding.
    Not only is this bill disingenuous but this debate is 
disingenuous as well. The innocence of one of the authors from 
Virginia is not surprising. But consider the favorite 
relocation point in the immediate hemisphere: Bermuda. Members 
of the Committee, they have no corporate tax. They have no 
corporate tax.
    Now as crazy as it is, we already have a tax code that 
encourages corporations to relocate overseas. That ought to be 
disturbing. It encourages it. It isn't neutral. It encourages 
corporations to relocate.
    Now, what this bill does and what my amendment tries to 
correct, is the bill is now encouraging corporations to 
relocate for yet an additional reason. And that reason is to 
escape legal liability as well as escaping tax liability.
    So what we're doing here is continuing to encourage people 
to get out of the country and relocate.
    This is just a little innocent change here. What's wrong 
with companies relocating in Bermuda, folks? I mean, they've 
been here for many years, most of them, and now they want to go 
to Bermuda to avoid the class action situation.
    So one of the authors of the bill says, ``Not a problem. 
It'll stop forum shopping.'' But what it's doing is creating 
another reason--to me, another wrong reason--for companies to 
relocate in name only. We're not talking about plants moving 
out of the U.S.; they'll still be here.
    Are taxpayers going to be happy about this? I don't think 
so. And I don't think some of these complicated responses are 
going to work on ordinary people when they find out what the 
bottom line is.
    And so, I am not happy that this amendment is being 
resisted as something that's pernicious and that this bill is 
really, in fact, a good thing for companies and for citizens. I 
don't think it is for either one.
    And I return any time back to----
    Mr. Watt. I yield back, Mr. Chairman.
    Chairman Sensenbrenner. The gentleman from Texas, Mr. 
Smith.
    Mr. Smith. Mr. Chairman, I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Smith. Mr. Chairman, I yield my time to the gentleman 
from Virginia, Mr. Goodlatte.
    Mr. Goodlatte. I thank the gentleman for yielding.
    Very briefly, this is a most disingenuous amendment and the 
arguments offered for it are way off the mark.
    The legislation provides that if a lawsuit is brought 
against the company that the gentleman cited in the State of 
Connecticut as a plaintiff would have the right to do, any 
party, plaintiff or defendant in the suit, would be able to 
remove the case. Not to Bermuda but to the United States 
District Court for the State of Connecticut. And it has 
absolutely nothing to do with the tax status of any corporation 
or the State in which--or nation in which is or was or in the 
future will be incorporated. It simply has to do with having a 
fair and uniform standard applied for how class action lawsuits 
will be brought and making sure that the most complex cases are 
brought in the United States Federal courts, in the same 
jurisdiction in which the original lawsuit was brought.
    I yield back.
    Mr. Conyers. Would----
    Mr. Smith. Mr. Chairman, I yield back the balance of my 
time, too.
    Chairman Sensenbrenner. The question is on the Conyers 
amendment.
    Those in favor will say aye.
    Opposed, no.
    Noes appear to have it. Noes have it, and the amendment is 
not agreed to.
    Are there further amendments?
    Mr. Watt. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from North Carolina, 
Mr. Watt.
    Mr. Watt. Mr. Chairman, I have an amendment at the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    Mr. Watt. Watt number 4.
    The Clerk. Amendment to H.R. 2341----
    Mr. Watt. I ask unanimous consent the amendment be 
considered as read.
    Chairman Sensenbrenner. Have the clerk start passing it out 
a bit for----
    The Clerk.--offered by Mr. Watt. Page 18, line 13, insert--
--
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. And the gentleman from North 
Carolina is recognized for 5 minutes.
    Mr. Watt. Thank you, Mr. Chairman.
    I believe that this an amendment that the sponsors of the 
bill are planning to accept, so I'll very brief.
    The original bill that was introduced and passed the House 
floor one time before had a provision in it that allowed 
removal basically by anybody, even before they were determined 
to be a member of the class or even before the class had been 
certified. We were successful in amending the bill on the floor 
of the House to at least require that the removal wait until 
after the class was certified and that the person who was 
attempting to remove the case to Federal court be a member of 
the class. And Mr. Boucher agreed that that was probably a wise 
thing to do.
    Unfortunately, this new bill went back to the original 
language of the old bill rather than picking up the amended 
language that I think everybody had agreed to. And this just 
gets it back to the form that passed the House floor the last 
time.
    Mr. Boucher. Would the gentleman yield?
    Mr. Watt. I'm happy to yield to the gentleman from 
Virginia.
    Mr. Boucher. I thank the gentleman from North Carolina for 
yielding. I was pleased to work with the gentleman last year in 
structuring the language that he has offered in this amendment. 
It relates to plaintiff removal opportunities. It provides that 
plaintiffs who are not named or representative class members 
may remove the action to Federal court at a time prior to the 
State court entering a class certification order. Other 
plaintiff class members would only be able to remove after the 
certification order has been entered by the State court.
    I think this language strikes a reasonable balance. I 
commend the gentleman from North Carolina for bringing this 
matter to our attention once again. And I urge adoption of the 
amendment.
    Mr. Goodlatte. Would the gentleman yield further?
    Mr. Watt. I'm happy to yield to the gentleman from 
Virginia.
    Mr. Goodlatte. I have no objection to the amendment.
    Mr. Watt. I yield back, Mr. Chairman.
    Chairman Sensenbrenner. The question is on the adoption of 
the amendment by the gentleman from North Carolina, Mr. Watt.
    Those in favor will signify by saying aye.
    Opposed, no.
    The ayes appear to have it. They ayes have it.
    And the Committee will recess until 9:30 tomorrow morning. 
Please be prompt.
    [Whereupon, at 11:50 a.m., the Committee recessed, to 
reconvene at 9:30 a.m., Thursday, March 7, 2002.]

           *         *         *         *         *

    The Committee met, pursuant to notice, at 9:35 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.
    When the Committee recessed yesterday, the bill H.R. 2341, 
the Class Action Fairness Act, was being considered. A motion 
had been made to report the bill favorably, and the bill was 
open for amendment at any point. Are there further amendments?
    The gentleman from Massachusetts.
    Mr. Frank. Mr. Chairman, I have an amendment at the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R. 2341, offered by----
    Mr. Frank. I ask unanimous consent it be considered as 
read.
    Chairman Sensenbrenner. Let's look at it first.
    The Clerk.--offered by Mr. Frank and Mr. Meehan and Mr. 
Berman. Page 19, line 20, strike the quotation marks and second 
period. Page 19, insert the following after line 20----
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read.

    Chairman Sensenbrenner. The gentleman from Massachusetts is 
recognized for 5 minutes.
    Mr. Frank. Thank you, Mr. Chairman.
    When I was first approached and this issue was described to 
me, it was described, and I agreed with a major part of it, 
which was that if in fact you were dealing with an issue that 
involved nationwide issues, it would be better to have it tried 
in Federal court rather than in State court. That is, I agreed 
with an amendment to the diversity rule that would prevent 
technical obstacles to removal to Federal court when in fact 
subsequently the issue ought to be decided in Federal court.
    But as we looked at the bill, it became clear that it went 
further than that. I think there would be a good deal of 
support--there's a good deal of support for the current bill. 
But there would be even more support for a bill which said, 
when we are talking about a class action suit that has national 
implications, it ought to be tried in Federal court rather than 
State court.
    But the way bill is worded, if someone, a defendant, takes 
advantage of the removal proceedings, which are a change in the 
law, and moves it into Federal court, which would now encompass 
a much larger number of cases, and the Federal court finds that 
it does not meet the Federal class action standards, that then 
ends it, and it cannot be renewed in State court.
    And what the amendment says is that if it is removed under 
these changes to Federal court, and the Federal court finds 
insufficient basis for going forward, that's without prejudice 
to the ability of the plaintiffs to refile it in State court.
    So we have a bill that meets at least one of the stated 
objectives, which is, if there's going to be a trial on an 
issue like this, it ought to be in Federal court, not State 
court. But I don't think we ought to be acting now to prevent 
the States from trying State class action cases on these sorts 
of economic issues if the Federal courts don't want to do it.
    I must say, to go beyond that, it is one thing, I think, to 
say that when there's this kind of diversity, it should go to 
Federal court. It's another to say that if the Federal court 
decides it doesn't meet class action standards, we forbid the 
State to do it.
    I cannot think of a more massive vote of no confidence in 
the courts or the States. It is really quite extraordinary.
    We've commented from time to time about the variability of 
people's belief in States' rights. I think this makes it just 
conclusive, because what this says is, we will have the Federal 
courts decide not whether or not to try the case, but whether 
or not the case ought to be tried. And the only justification 
for that is the belief that the State courts are irresponsible; 
that the State courts, if left to their own devices, when the 
Federal courts have turned it down, will inappropriately deal 
with class action cases.
    And I am surprised that so many of my colleagues are 
prepared to write into law what is really a very severe 
condemnation of the courts of at least some States. It may not 
be--obviously, it's not of all States, but it is of some of the 
States.
    I also believe that, at this point in America's economic 
situation, the notion that the business sector needs more 
protection from the consumers is wrong. I have supported in the 
past efforts to change the balance. I have supported efforts to 
limit and prohibit frivolous suits or at least make them less 
likely. But this bill, if my amendment is defeated, says that 
we will, as a Congress, tell the States that there are 
apparently significant numbers of cases--because if it wasn't 
significant, we would not be taking the time of this Committee 
and bringing it to the floor next week--that there are 
significant number of cases where we will tell the States: No, 
you cannot do that. You cannot try this case. Citizens of your 
State may come before you and want to do something, but we will 
not let you do that. We, the Congress, will simply block that 
lawsuit.
    The alternative is to say that, as I said, if in fact the 
Federal courts find substantively that it ought to be dealt 
with because it's a multistate issue on the Federal level, it 
can be. But the Federal courts will not be empowered, as this 
law without the amendment would empower them simply to prevent 
the State courts from considering cases which they believe are 
in the interests of the citizens of their State to have 
litigated.
    Mr. Goodlatte. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from Virginia.
    Mr. Goodlatte. I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    I speak in strong opposition to this amendment. It would 
defeat the purpose of the legislation, which is to stop forum 
shopping amongst 4,000 different jurisdictions.
    Basically what the gentleman's amendment does, and he has 
expressed his concern previously and offered this amendment the 
last time the bill moved through the Committee, and we defeated 
it at that time, and I would urge my colleagues to defeat it 
again. But what the amendment does is give the plaintiff, the 
class action attorney and the named plaintiff, two bites of the 
apple. The purpose of this is to say, if you're going to pick a 
jurisdiction you want to bring this lawsuit in--and with a 
nationwide class action lawsuit, you can pick from thousands of 
different jurisdictions, and you pick your favorite judge and 
your favorite jurisdiction, and anybody in the case, plaintiff 
or defendant, who chooses to do so, can remove it to Federal 
court. If the Federal court says that the case does not rise to 
certification as a class, what the gentleman is suggesting is, 
okay, you go back to that favorite court that you picked and 
resume the process that you originally sought out to the bring 
the case in.
    That is entirely contrary to what we're trying to do here, 
which is to achieve some standardization in this process. I 
think this amendment constitutes a full endorsement, not a 
correction, of the rampant class action abuse that is occurring 
in State courts today. When I say that, I do not cast a 
condemnation on all State courts. I am simply observing what 
any good attorney representing a plaintiff in one of these 
cases would do: Look for the court that you think is most 
favorable to your cause.
    The problem is that, in these class actions, that 
constitutes several thousand jurisdictions. And all we're 
trying to do is say, look, you can go ahead and do that, but in 
order to achieve balance and fairness, we're going to allow any 
party in the case, plaintiff or defendant, to remove the case 
to Federal court.
    And we corrected the concern raised by the gentleman from 
North Carolina, Mr. Watt, to say that if someone has not yet 
been identified as a part of the class as a plaintiff, they 
can't remove the case to Federal court under those 
circumstances. But anybody who's a named party to the case, 
plaintiff or defendant, before certification, or anybody who 
has been certified as part of the class after certification, 
can remove the case to Federal court. That eliminates the forum 
shopping.
    The second thing that it does is that eliminates the abuses 
because it makes sure that we're going to have more standard 
application of class action rules. This amendment, I think, is 
based on the myth that most States have class action rules that 
are radically different from Federal class action rules, and 
that if a Federal judge says a case may not proceed as a class 
action under the Federal rule, counsel should be able to take 
their case back to State court and try their luck under State 
rule. The fact of the matter is that most States have very 
similar rules, but they have widely varying application of the 
rules based upon the judge who makes that application. And the 
plaintiffs' attorneys know, across the country, which of those 
judges--there aren't a huge number, but there are certainly 
plenty of alternatives amongst the States in which to bring 
these actions and get it in the hands of a judge or a 
jurisdiction that has historically been favorable to certifying 
class actions.
    And that is where we have seen most of the abuse, where we 
have seen most of the cases that result in coupon settlements 
or settlements where the plaintiffs even have to wind up paying 
money in the cases, and all the other abuses that we heard 
during the hearings and that we've heard during the first day 
of debate on this issue.
    Mr. Frank. Would the gentleman yield?
    Mr. Goodlatte. I would yield.
    Mr. Frank. The question I have is, does that not mean that, 
according to the gentleman from Virginia, the appellate courts 
of all the States are of no real value? You talk about 
thousands of jurisdictions. Those are the trial courts, I 
suppose, in the States. There are appellate systems. Does the 
gentleman mean that we should put no faith in the appellate 
systems of the 50 States to protect against these kinds of 
abuses?
    Mr. Goodlatte. Well, in cases that are truly State class 
action lawsuits, we should rely on that. But in cases where you 
have individuals from many, many jurisdictions, cases that 
really should be in Federal court under diversity because 
that's what the diversity provisions in the Constitution were 
intended for, under current rules, can't be brought in Federal 
court.
    Mr. Frank. I'm not changing that part of the bill.
    Mr. Goodlatte. Well, I----
    Mr. Boucher. Would the gentleman from Virginia yield to me?
    Mr. Goodlatte. Well, if the gentleman--I'm about out of my 
time, if he would seek time.
    The fact of the matter is----
    Chairman Sensenbrenner. The time of the gentleman has 
expired.
    For what purpose does the gentleman from Virginia seek 
recognition?
    Mr. Boucher. Mr. Chairman, I rise in opposition to the 
amendment.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Boucher. Thank you very much, Mr. Chairman.
    I'll be brief in my remarks in opposition to this 
amendment. First, to the point that was just raised by the 
gentleman from Massachusetts, with respect to appeals to State 
courts from decisions of the trial court to certify a class, in 
many if not most States, there is not interlocutory right of 
appeal, meaning that the sole decision to certify the class is 
not appealable until the entire trial has taken place.
    And so even in those instances where a certification 
wrongly occurs, all of the parties go to the expense of a full 
trial before the question of whether or not the certification 
was proper can be heard by the State court. And that is a major 
shortcoming in many States.
    Let me say a few other words about the difficulties that 
this amendment poses. Frankly, if it's adopted, the basic 
reform that we're seeking will simply not be achieved. Some 
cases should not be certified as class actions at all, either 
in State courts or in Federal courts.
    Federal Rule of Civil Procedure 23, which governs class 
actions in Federal courts, is narrowly drawn so as to protect 
the rights of both plaintiffs and defendants to traditional due 
process as their claims are litigated. Rule 23 says that cases 
that are overly broad because of conflicting laws that 
establish the rights of individual plaintiffs that are 
purported members of the class or because of factual 
differences in the circumstances of the individual class 
members will not be certified as class actions.
    To certify cases such as that, that are that broad, as 
class actions does violence to the rights of the plaintiffs who 
are the purported class members. And so rule 23 is narrowly 
drafted in such a way as to make sure that their rights are 
protected and that only those cases that should be certified 
because of clear commonality in the issues of law and fact will 
be certified as class actions.
    When cases are denied class action status, either in State 
or Federal court, the plaintiffs then are free to file their 
individual claims, and so no one will be denied a right to 
recover simply because the class that that person is 
purportedly a part of is denied class action status.
    Another class action could also be filed after the original 
certification of class action is denied. The case could be 
reconfigured as a State-centered class action under the terms 
of the bill that we've put forward and could go forward as a 
class action in State court. Or it could be reconfigured in 
such a way as to comply with the requirements of rule 23 and 
then proceed as a Federal class action.
    But if the gentleman's amendment is adopted, any case 
which, because of its broad scope cannot meet the requirements 
of Federal Rule 23, and, therefore, is dismissed as a class 
action in Federal court, could then be certified as a class 
action in the State court from which it was removed. That State 
court could then certify the class, and no further removal to 
Federal court would occur.
    Under this amendment, the cases that are truly national in 
scope, which it is our purpose to have removable to Federal 
court, would still be heard in State court. And that is the 
fundamental problem with the amendment that the gentleman has 
put forward.
    Some States would continue to apply their often unique laws 
in a way that governs the rights of plaintiff class members who 
live in States that have laws under which exactly the opposite 
result would be obtained.
    We have a long list of examples of situations where courts 
applying their unique law have bound plaintiffs who live in all 
50 States, even in instances where most of the other States 
have laws that would reach exactly the opposite result. And one 
of the major goals of this reform is to prevent that event from 
occurring.
    The extraterritorial application of State law that practice 
reflects does very serious damage to our traditional principles 
of federalism and actually constitutes a kind of reverse 
federalism in which one State can apply its law to the 
exclusion of the laws of other States that would dictate a 
contrary result for the residents of those States.
    Under the gentleman's amendment, this practice would 
continue. And that practice does serious damage to federalism 
and would assure that this reform is not achieved.
    And so I oppose the amendment, and I would urge Members of 
the Committee to reject it.
    Chairman Sensenbrenner. The gentleman's time has expired.
    Mr. Watt. Mr. Chairman?
    Chairman Sensenbrenner. For what purpose does the gentleman 
from North Carolina seek recognition?
    Mr. Watt. I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Watt. I won't take 5 minutes, Mr. Chairman. I actually 
was intending to stay out of this debate, but got provoked by 
my colleague from Virginia, whose definition of federalism is a 
fascinating one and a very convenient one, as many Members of 
this Committee and this Congress are prone to do.
    Basically what he said was, if we don't like the result at 
the State level or if federalism or if States actually have a 
different opinion or a different way of doing things, then we 
ought to federalize something. That is not an adequate 
justification, in my opinion, for federalizing something. And I 
think it's absolutely inconsistent with what I've heard a 
number of my colleagues on this Committee say they believe in.
    So I'll yield back.
    Chairman Sensenbrenner. The question is on the Frank 
amendment.
    Those in favor will say aye.
    Opposed, no.
    The noes appear to have it.
    Mr. Frank. rollcall, Mr. Chairman, please.
    Chairman Sensenbrenner. A rollcall is requested. The 
question is on the adoption of the amendment offered by the 
gentleman from Massachusetts, Mr. Frank. Those in favor will, 
as your names are called, answer aye. Those opposed, no. And 
the clerk will call the roll.
    The Clerk. Mr. Hyde?
    [No response.]
    The  Clerk Mr. Gekas?
    [No response.]
    The Clerk. Mr. Coble?
    Mr. Coble. No.
    The Clerk. Mr. Coble, no.
    Mr. Smith?
    [No response.]
    The Clerk. Mr. Gallegly?
    [No response.]
    The Clerk. Mr. Goodlatte?
    Mr. Goodlatte. No.
    The Clerk. Mr. Goodlatte, no.
    Mr. Bryant?
    Mr. Bryant. No.
    The Clerk. Mr. Byrant, no.
    Mr. Chabot?
    [No response.]
    The Clerk. Mr. Barr?
    [No response.]
    The Clerk. Mr. Jenkins?
    Mr. Jenkins. No.
    The Clerk. Mr. Jenkins, no.
    Mr. Cannon?
    Mr. Cannon. No.
    The Clerk. Mr. Cannon, no.
    Mr. Graham?
    [No response.]
    The Clerk. Mr. Bachus?
    [No response.]
    The Clerk. Mr. Hostettler?
    Mr. Hostettler. No.
    The Clerk. Mr. Hostettler, no.
    Mr. Green?
    [No response.]
    The Clerk. Mr. Keller?
    Mr. Keller. No.
    The Clerk. Mr. Keller, no.
    Mr. Issa?
    Mr. Issa. No.
    The Clerk. Mr. Issa, no.
    Ms. Hart?
    [No response.]
    The Clerk. Mr. Flake?
    [No response.]
    The Clerk. Mr. Pence?
    Mr. Pence. No.
    The Clerk. Mr. Pence, no.
    Mr. Conyers?
    Mr. Conyers. Aye.
    The Clerk. Mr. Conyers, aye.
    Mr. Frank?
    Mr. Frank. Aye.
    The Clerk. Mr. Frank, aye.
    Mr. Berman?
    Mr. Berman. Aye.
    The Clerk. Mr. Berman, aye.
    Mr. Boucher?
    Mr. Boucher. No.
    The Clerk. Mr. Boucher, no.
    Mr. Nadler?
    [No response.]
    The Clerk. Mr. Scott?
    Mr. Scott. Aye.
    The Clerk. Mr. Scott, aye.
    Mr. Watt?
    Mr. Watt. Aye.
    The Clerk. Mr. Watt, aye.
    Ms. Lofgren?
    [No response.]
    The Clerk. Ms. Jackson Lee?
    [No response.]
    The Clerk. Ms. Waters?
    Ms. Waters. Aye.
    The Clerk. Ms. Waters, aye.
    Mr. Meehan?
    [No response.]
    The Clerk. Mr. Delahunt?
    [No response.]
    The Clerk. Mr. Wexler?
    [No response.]
    The Clerk. Ms. Baldwin?
    Ms. Baldwin. Aye.
    The Clerk. Ms. Baldwin, aye.
    Mr. Weiner?
    [No response.]
    The Clerk. Mr. Schiff?
    Mr. Schiff. Aye.
    The Clerk. Mr. Schiff, aye.
    Mr. Chairman?
    Chairman Sensenbrenner. No.
    The Clerk. Mr. Chairman, no.
    Chairman Sensenbrenner. Are there additional Members who 
wish to cast or change their vote?
    The gentleman from Wisconsin?
    Mr. Green. Nay.
    The Clerk. Mr. Green, nay.
    Chairman Sensenbrenner. The gentlewoman from Pennsylvania?
    Ms. Hart. No.
    The Clerk. Ms. Hart, no.
    Chairman Sensenbrenner. The gentleman from Alabama?
    Mr. Bachus. No.
    The Clerk. Mr. Bachus, no.
    Chairman Sensenbrenner. The gentleman from Massachusetts?
    Mr. Meehan. Aye.
    The Clerk. Mr. Meehan, aye.
    Chairman Sensenbrenner. Are there further Members in the 
chamber who wish to cast or change their votes? If not, the 
clerk will report.
    The Clerk. Mr. Chairman, there are 9 ayes and 14 nays.
    Chairman Sensenbrenner. And the amendment is not agreed to.
    Are there further amendments?
    Mr. Watt. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from North Carolina, 
Mr. Watt.
    Mr. Watt. Mr. Chairman, I have an amendment at the desk. 
It's Watt 7.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    Mr. Watt. Number 7.
    Chairman Sensenbrenner. Watt 7.
    The Clerk. Amendment to H.R. 2341, offered by Mr. Watt. 
Beginning on page 17, omit line 16 through line 3 on page 20.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Watt. Thank you, Mr. Chairman.
    I ask unanimous consent that the word ``omit'' be changed 
to delete.
    Chairman Sensenbrenner. Without objection, the modification 
is agreed to.
    Mr. Watt. Thank you, Mr. Chairman.
    I, as the chairman of the ``States' Rights Caucus,'' and 
perhaps the only remaining Member on this Committee of it---- 
[Laughter.]
    --and as an unapologetic former plaintiffs' attorney, do 
not, obviously, feel as kindly toward this bill as the 
supporters of it, probably not even as kindly toward it as Mr. 
Frank has expressed that he might, with some changes being made 
to it.
    I considered kind of tampering with this around the edges 
and offering a series of amendments but decided that I should 
do this with integrity and honesty, and so I want to save my 
colleagues the trouble of saying this: This amendment will, in 
fact, if it is passed, gut this bill. [Laughter.]
    It would remove the removal provisions from the bill, and 
that is exactly what my intentions are.
    And I'm not going to be original about this. I want to just 
read from my 1999, September 23, 1999, statement on the floor 
about the last version of this bill.
    Chairman Sensenbrenner. Without objection, the statement 
will be included in the record.
    [The statement of Mr. Watt follows:]
Prepared Statement of the Honorable Melvin L. Watt, a Representative in 
               Congress From the State of North Carolina
  on september 23, 1999, mr. watt (n.c.) made the following statement
                          on the house floor:
    ``Mr. Watt of North Carolina. Mr. Chairman, I thank the gentleman 
for yielding time to me.
    Mr. Chairman, let me make several points, as many as my time will 
allow me to make, about this bill, and encourage my colleagues to vote 
against this proposal.
    First of all, I practiced law for a number of years before I ever 
thought about running for Congress. There is just a basic fairness 
argument that I think we all need to be aware of.
    If a plaintiff is injured, he goes and hires a lawyer, they 
cultivate, research, put together a case, decide where the appropriate 
place is to litigate that case, spend months and months preparing for 
the case, file the case. Two days later somebody who has done 
absolutely nothing to get that case to trial under this bill has the 
ability to walk in and move that case to another forum. There is just 
something patently unfair about that. I just want us to focus on that.
    The second point I would make is that in 1994 when my Republican 
colleagues came riding into the House, one of the principles that they 
gave major lip service to was the whole notion that there was too much 
going on at the Federal level, that we needed to decentralize 
government, that our whole system of Federalism was in jeopardy, and we 
needed to return power to the States.
    Time after time after time since 1994 we have seen our Republican 
colleagues say, well, we do not like the result that we got at the 
State level, so let us federalize this and let us juste take it over, 
an absolute erosion of States' right in the criminal law area.
    In the area of tort reform they have tried to do it, in the area of 
juvenile law they have tried to do it. We do not even have a juvenile 
court, a juvenile judge, a juvenile counselor, and yet, we have tried 
to federalize juvenile law, and the people who are behind that are the 
very same people who in 1994 were railing and rhetorically saying, this 
is terrible, to federalize all this stuff. We need to be returning 
rights and responsibilities to the most local level, to the State 
level, the local level, the individual level. Here we are again in this 
matter trying to bring something else into a Federal court.
    The third point I want to make, the Federal courts are hopelessly 
backlogged. The cannot handle the business they are doing now. We 
cannot get the Senate to confirm enough people to fill the vacancies 
that exist on the Federal bench. Even if they did fill them, there 
would not be enough judicial power to handle all of these cases.
    Yet, here we are in our infinite wisdom saying that the Federal 
courts know better; the State law, the Federal law, we know everything 
at this level. This is absolutely contrary to the horse that my 
colleagues rode into this House on, the States' rights horse. We should 
not sanction this. It is just a bad idea.
    The final point I want to make, and I will talk about this a little 
bit more in the context of an amendment that I have to offer, is that 
even if this were a good idea, this bill is so badly drafted, there are 
some irrationalities in the drafting of the bill, that we are going to 
try to correct some of them during the course of the debate, and 
hopefully we will get some of those things worked out.
    But there are some just severe unintended, or maybe they are 
intended. I never know whether my colleagues are accomplishing things 
that they intend or accomplishing things that they do not intend, since 
they told me they intended to preserve States' rights, and they keep 
cutting the legs from under it.''

    Mr. Watt. I don't object to it being included in the record 
in its totality. In fact, my plan is to offer it in its 
totality, but I want to read excerpts from it, with the 
Chairman's permission. And I'll do this quickly, just quickly.
    First of all, I practiced law for a number of years before 
I ever thought about running for Congress. There is just a 
basic fairness argument that I think we all need to be aware 
of.
    If a plaintiff is injured, he goes and hires a lawyer. They 
cultivate, research, put together a case, decide where the 
appropriate place is to litigate that case, spend months and 
months preparing for the case, file the case. Two days later, 
somebody who has done absolutely nothing to get that case to 
trial, under this bill, has the ability to walk in and move 
that case to another forum.
    There is something patently unfair about that.
    I just want us to focus on that.
    The second point I want to make is that in 1994, when my 
Republican colleagues came riding into the House, one of the 
principles that they gave major lip service to was the whole 
notion that there was too much going on at the Federal level, 
that we needed to decentralize government, that our whole 
system of federalism was in jeopardy, and we needed to return 
power to the State. But time after time after time since 1994, 
we have seen our Republican colleagues say, ``Well, we do not 
like the result that we got at the State level, so let us 
federalize this and let us just take it over,'' an absolute 
erosion of States' rights in the criminal area.
    And in the area of tort reform, they have tried to do it.
    In the area of juvenile law, they have tried to do it. We 
do not even have a juvenile court, a juvenile judge, a juvenile 
counselor, and yet we have tried to federalize juvenile law. 
And the people who are behind that are the very same people who 
in 1994 were railing and rhetorically saying, ``This is 
terrible, to federalize all this stuff.''
    We need to be returning rights and responsibilities to the 
most local level, to the State level, the local level, the 
individual level. Here we are again in this matter, trying to 
bring something else into a Federal court.
    The third point I want to make: The Federal courts are 
hopelessly backlogged. They cannot handle the business that 
they are doing now.
    And then I go on to talk about some of the drafting 
problems with this bill, and there are serious drafting 
problems with it that have not been resolved since it was 
introduced originally and reintroduced and again reintroduced 
this time.
    I think we're making a major mistake, both in terms of 
historical precedent and in terms of the federalism that many 
of the people on this Committee have given lip service to.
    And I encourage you to gut this bill. Pass this amendment. 
I yield back.
    Chairman Sensenbrenner. The gentleman's time has expired.
    The question is on the gutting amendment offered by the 
gentleman from North Carolina. [Laughter.]
    Those in favor will say aye.
    Opposed, no.
    The noes appear to have it.
    Mr. Watt. Recorded vote, Mr. Chairman.
    Chairman Sensenbrenner. The recorded vote is demanded. The 
question is on adoption of the amendment by the gentleman from 
North Carolina. Those in favor will, as your names are called, 
answer aye. Those opposed, no. And the clerk will call the 
roll.
    The Clerk. Mr. Hyde?
    [No response.]
    The Clerk. Mr. Gekas?
    Mr. Gekas. No.
    The Clerk. Mr. Gekas, no.
    Mr. Coble?
    [No response.]
    The Clerk. Mr. Smith?
    Mr. Smith. No.
    The Clerk. Mr. Smith, no.
    Mr. Gallegly?
    [No response.]
    The Clerk. Mr. Goodlatte?
    Mr. Goodlatte. No.
    The Clerk. Mr. Goodlatte, no.
    Mr. Bryant?
    [No response.]
    The Clerk. Mr. Chabot?
    [No response.]
    The Clerk. Mr. Barr?
    [No response.]
    The Clerk. Mr. Jenkins?
    [No response.]
    The Clerk. Mr. Cannon?
    [No response.]
    The Clerk. Mr. Graham?
    [No response.]
    The Clerk. Mr. Bachus?
    [No response.]
    The Clerk. Mr. Hostettler?
    Mr. Hostettler. No.
    The Clerk. Mr. Hostettler, no.
    Mr. Green?
    [No response.]
    The Clerk. Mr. Keller?
    Mr. Keller. No.
    The Clerk. Mr. Keller, no.
    Mr. Issa?
    Mr. Issa. No.
    The Clerk. Mr. Issa, no.
    Ms. Hart?
    [No response.]
    The Clerk. Mr. Flake?
    [No response.]
    The Clerk. Mr. Pence?
    [No response.]
    The Clerk. Mr. Conyers?
    Mr. Conyers. Aye.
    The Clerk. Mr. Conyers, aye.
    Mr. Frank?
    Mr. Frank. Aye.
    The Clerk. Mr. Frank, aye.
    Mr. Berman?
    Mr. Berman. Aye.
    The Clerk. Mr. Berman, aye.
    Mr. Boucher?
    Mr. Boucher. No.
    The Clerk. Mr. Boucher, no.
    Mr. Nadler?
    Mr. Nadler. Aye.
    The Clerk. Mr. Nadler, aye.
    Mr. Scott?
    Mr. Scott. Aye.
    The Clerk. Mr. Scott, aye.
    Mr. Watt?
    Mr. Watt. Aye.
    The Clerk. Mr. Watt, aye.
    Ms. Lofgren?
    [No response.]
    The Clerk. Ms. Jackson Lee?
    [No response.]
    The Clerk. Ms. Waters?
    Ms. Waters. Aye.
    The Clerk. Ms. Waters, aye.
    Mr. Meehan?
    [No response.]
    The Clerk. Mr. Delahunt?
    Mr. Delahunt. Aye.
    The Clerk. Mr. Delahunt, aye.
    Mr. Wexler?
    [No response.]
    The Clerk. Ms. Baldwin?
    [No response.]
    The Clerk. Mr. Weiner?
    [No response.]
    The Clerk. Mr. Schiff?
    Mr. Schiff. Aye.
    The Clerk. Mr. Schiff, aye.
    Mr. Chairman?
    Chairman Sensenbrenner. No.
    The Clerk. Mr. Chairman, no.
    Chairman Sensenbrenner. Are there additional Members who 
wish to cast or change their vote?
    The gentleman from North Carolina?
    Mr. Coble. No.
    The Clerk. Mr. Coble, no.
    Chairman Sensenbrenner. The gentleman from Tennessee?
    Mr. Bryant. I vote no.
    The Clerk. Mr. Bryant, no.
    Chairman Sensenbrenner. The gentleman from Wisconsin?
    Mr. Green. Mr. Green votes no.
    The Clerk. Mr. Green, no.
    Chairman Sensenbrenner. The gentleman from Georgia?
    Mr. Barr. No.
    The Clerk. Mr. Barr, no.
    Chairman Sensenbrenner. The other gentleman from Tennessee?
    Mr. Jenkins. No.
    The Clerk. Mr. Jenkins, no.
    Chairman Sensenbrenner. The gentlewoman from Pennsylvania?
    Ms. Hart. No.
    The Clerk. Ms. Hart, no.
    Chairman Sensenbrenner. The gentleman from Arizona?
    Mr. Flake. No.
    The Clerk. Mr. Flake, no.
    Chairman Sensenbrenner. Are there additional Members who 
wish to cast or change their votes? If not, the clerk will 
report.
    The Clerk. Mr. Chairman, there are 9 ayes and 15 nays.
    Chairman Sensenbrenner. And the amendment is not agreed to.
    Are there further amendments?
    The gentleman from California, Mr. Schiff.
    Mr. Schiff. Mr. Chairman, I have a modest, nongutting 
amendment at the desk. [Laughter.]
    Chairman Sensenbrenner. The clerk will report the 
amendment, and the Members will decide whether his statement is 
accurate. [Laughter.]
    Mr. Schiff. Okay, it may not be modest. [Laughter.]
    The Clerk. Amendment to H.R. 2341, offered by Mr. Schiff 
and Ms. Lofgren.
    Chairman Sensenbrenner. Without objection, the amendment is 
considered as read.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. and the gentleman is recognized for 
5 minutes.
    Mr. Schiff. Mr. Chairman, this bill, while attempting to 
reform class action law has a far more reaching effect on 
California, and perhaps at least one other State, because of 
our current statutes.
    Californians have chosen to enact strong unfair competition 
laws that protect consumers by prohibiting deceptive business 
practices. These laws are often enforced by the California 
attorney general, but sometimes the attorney general does not 
act and California laws allow a citizen to act as a private 
attorney general.
    These cases are not class action lawsuits. They're lawsuits 
brought by private citizens and based entirely on California 
law. They have more limited rights and remedies than class 
actions, and there's no certification of a class in these 
private attorney general lawsuits.
    Unfortunately, this bill would force all of these cases 
into Federal court as well. It does so because of an expansive 
definition of class action, which includes private citizens 
that represent the interests of the general public.
    This amendment would merely amend the definition of class 
action lawsuits so that laws like that in California, and I 
believe at least one other State, would not be negated.
    And so this is, I think, a modest States' rights amendment. 
It would allow these private attorney general lawsuits to go 
forward in State court.
    Attempting to eliminate class action abuses is certainly an 
admirable goal. But allowing a corporation that does millions 
of dollars of business in California and avails itself of all 
the protections of California law, and then may easily avoid 
California State courts when it comes to a consumer protection 
action brought by a California private attorney general, is an 
unjust result for California consumers.
    And I would urge the Committee to consider this amendment, 
its limited scope, the fact that it does not gut the bill, but 
does preserve the ability of States like California to enact 
private attorney general laws.
    Mr. Goodlatte. Mr. Chairman?
    Chairman Sensenbrenner. Does the gentleman yield back?
    Mr. Schiff. Yes.
    Chairman Sensenbrenner. The gentleman from Virginia?
    Mr. Goodlatte. I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    This is the gutting-over-time amendment, and I must 
strongly oppose it. A rose by any other name would smell as 
sweet, and a class action suit by any other name is still a 
class action suit.
    It is true that only a few States have this private 
attorney general action. However, if this amendment were 
passed, it would open the door for any State to adopt a similar 
provision and pursue it in that fashion.
    The fact of the matter is, if this is a truly California 
private attorney general action, with only California parties, 
it could not be removed to Federal court if this legislation 
were enacted into law. But if it includes a multitude of 
parties, not only California citizens but citizens of other 
States and defendants of other States, it fits into the same 
diversity jurisdiction concept that was written into our 
Constitution and which this bill seeks to fulfill by changing 
the statutory requirement from $75,000 per plaintiff to $2 
million for the entire class.
    And the fact of the matter is, if you have a multitude of 
plaintiffs seeking action in this regard, it is effectively the 
same thing as a class. When those actions seek monetary relief, 
they are basically the same as class actions. Thus, H.R. 2341 
would treat such cases as class actions for jurisdictional 
purposes. This amendment would seek to strike that language in 
an effort to prevent the removal of such cases to Federal 
court.
    This bill is designed to make sure that Federal court, the 
court best able to handle a multitude of jurisdictions involved 
in the case, has the opportunity to do so where appropriate. 
And I'd also point out to the gentleman that the U.S. district 
judge has, under this legislation, wide latitude in remanding 
back to State court any actions that that judge feels are 
inappropriately brought into Federal court. And, therefore, I 
don't see the need for this amendment.
    I would urge my colleagues to oppose it.
    Chairman Sensenbrenner. Does the gentleman yield back?
    Mr. Goodlatte. I do.
    Mr. Watt. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from North Carolina, 
Mr. Watt.
    Mr. Watt. Thank you, Mr. Chairman. I move to strike the 
last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Watt. Thank you, Mr. Chairman. I think I'd be remiss as 
the chairman of the ``States' Rights Caucus'' not to rise in 
support of the gentleman's amendment. And I yield the balance 
of my time to Mr. Schiff.
    Mr. Schiff. I thank the gentleman for yielding, and I'm 
proud to join the ``States' Rights Caucus'' of the Judiciary 
Committee. [Laughter.]
    I want to respond just very briefly to the comment that 
this doesn't gut the bill, but it is the first step on a long, 
multistate conspiracy that eventually could gut the bill.
    The fact of the matter is, the amendment simply provides 
that a State like California that passes a private attorney 
general law to protect its consumers ought not to have that 
right taken away by the Federal Government and certainly ought 
not to have that right taken away by Federal Government without 
any proof of abuse of that law, merely by the speculation that 
49 other States may decide to follow that same course and then 
there would pandemonium.
    The fact of the matter is, under this bill, if a 
corporation that does 90 percent of its business decides to 
incorporate in Delaware instead of California, it does 90 
percent of its business in California and undertakes actions 
which are injuring the consumers in California, and a private 
attorney general brings a lawsuit to enjoin that action, to 
seek restitution for the damage done to Californians, this 
Committee is prepared to say no, the States don't have the 
right to do that; we're going to take that away.
    Mr. Goodlatte. Would the gentleman yield?
    Mr. Schiff. I will be glad to yield to the gentleman in 
just a moment.
    It seems to me that that is an extraordinary action to take 
for a Committee that is normally very respectful of the rights 
of States, particularly vis-a-vis protecting their consumers. 
And while this may only affect California and one other State 
currently, we are effectively cutting off this method of 
recompense in the future for others.
    And I'd be delighted to yield.
    Mr. Watt. I'm happy to yield to the gentleman from 
Virginia.
    Mr. Goodlatte. I appreciate the gentleman.
    I'd just ask the gentleman if he thinks it appropriate that 
a $75,000 slip and fall case involving a California resident 
and a Nevada company, which can be brought in Federal court, if 
the gentleman thinks it isn't appropriate that a multimillion 
dollar case involving a multitude of plaintiffs ought also to 
be able to be brought in Federal court.
    Mr. Watt. Just reclaiming my time, I'll tell the gentleman 
that, really, if you believe in the principles that we've been 
operating under in this country for years and years, there 
really shouldn't be a different answer on those. The amount of 
money really shouldn't be driving this and that's----
    Mr. Goodlatte. If the gentleman yield further, are you----
    Mr. Watt. That's really where you have this going now.
    Mr. Goodlatte. Are you saying that you would eliminate the 
diversity----
    Mr. Watt. No, I'm not saying that. I'm saying we've had the 
diversity rules in place for years and years and years, and 
this goes so far beyond any diversity rules that are in place 
now, you are radicalizing and revolutionizing the whole process 
here.
    And this bill doesn't have anything to do with the 
diversity rules. If you believed in the diversity rules, you 
wouldn't need this bill. The diversity rules stay in place and 
continue to be in place.
    And this novel argument that you're making, that over time, 
the States will decide to do something that we don't like, is 
exactly what the Founding Fathers decided was important for the 
States to be able to do.
    And you're coming in, making it sound like you are the 
defender of good here. The Founding Fathers set up this system 
so that exactly what you're saying might happen over time can 
happen over time, because they believed that the States had as 
much sense as the people up here, sitting in this Judiciary 
Committee.
    Mr. Frank. Will the gentleman yield?
    Mr. Watt. I yield to the gentleman from Massachusetts.
    Mr. Frank. I thank the gentleman from North Carolina.
    The gentleman from North Carolina is one of the Members I 
admire most, and I hate to think of him as ever being lonely, 
so I have a suggestion. Namely, as Chair of the ``States' 
Rights Caucus,'' I suggest that he establish memberships by the 
week, unlike other caucuses. [Laughter.]
    And I think that's the only way he can avoid being the 
continuing only member of his caucus. [Laughter.]
    Mr. Watt. I think membership by the week, unfortunately, is 
way, way too long.
    Mr. Frank. By the bill?
    Mr. Watt. It ebbs and flows by the moment----
    Mr. Delahunt. Will the gentlemen yield?
    Mr. Watt.--depending on whether they think it's convenient 
to their cause or not or convenient to their purpose. They want 
to change the laws of federalism if they don't agree with the 
States are doing.
    And that's exactly what Mr. Goodlatte has just admitted his 
concern is about this amendment.
    Mr. Delahunt. Will the gentleman yield?
    Mr. Watt. And we're sitting here accepting it, as if that's 
something that is good.
    I yield to the other gentleman from Massachusetts.
    Mr. Delahunt. Yes, I just want to remind the gentleman from 
North Carolina that I am the co-chair of the ``States' Rights 
Caucus,'' and I want to be acknowledged----
    Mr. Watt. On which day? [Laughter.]
    Mr. Delahunt.--as such.
    And I'm beginning to think my friend and colleague from 
Massachusetts is right, but maybe we can make it hourly, as 
opposed to weekly.
    I'd just like to----
    Chairman Sensenbrenner. The gentleman's time has----
    Mr. Delahunt. I move to strike the last word.
    Chairman Sensenbrenner. The gentleman from Texas, Mr. 
Smith.
    Mr. Smith. Thank you, Mr. Chairman. I move to strike the 
last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Smith. Mr. Chairman, I oppose this amendment and yield 
to the gentleman from Virginia, Mr. Goodlatte.
    Mr. Goodlatte. I thank the gentleman for yielding to me to 
allow me the opportunity to defend myself against this assault.
    I would just say to the purported chairman of the ``States' 
Rights Caucus'' that he has States' rights turned on its head, 
if you think that it's appropriate for one State court judge to 
decide the laws of the 49 other States. What about the rights 
of those States to have their laws determined in the very forum 
that our Founding Fathers recognized as the appropriate place 
to determine disputes between residents of different States--
the Federal courts.
    That's why diversity jurisdiction was created. Class action 
lawsuits were not known at that time. There's only been an 
explosion of class action lawsuits in the last couple of 
decades.
    And this legislation is long overdue to address the problem 
that those cases most needing to be heard in Federal court, to 
resolve disputes among citizens of a variety of States, can be 
heard in the jurisdiction appropriate for it.
    This legislation has everything to do with States' rights, 
and that is protecting the rights of States to be heard in an 
independent forum.
    Mr. Watt. Will the gentleman from Texas yield?
    Mr. Smith. I'll be happy to yield to the gentleman from 
North Carolina.
    Mr. Watt. I just--I don't want to disagree with my 
colleague from Virginia. There are some abuses taking place.
    The problem I have is that this bill will allow manifold 
abuses in the opposite direction than the ones that are taking 
place now.
    And this is one of the cases--the amendment that's under 
debate is one of those cases. The attorney general in this 
State files a lawsuit in California, and that lawsuit is going 
to end up in Delaware or Mississippi or Massachusetts or 
somewhere, just because of the provisions of this bill.
    And you say you are defending the integrity of the system. 
That's not defending the integrity of the system. That's 
corrupting the system.
    Mr. Smith. Mr. Chairman, I'll reclaim my time and yield to 
the gentleman from Virginia.
    Mr. Goodlatte. Just to respond briefly, the gentleman has 
completely mischaracterized how the bill will operate. If the 
lawsuit can be removed, it's going to be removed to the U.S. 
District Court for the Southern or Northern District of 
California. It's not going to be removed to Mississippi or 
Alabama or any other place.
    And that Federal court judge, if he believes it is more 
appropriately heard in the California State courts, has an 
abundance of discretion in this legislation to remand the case 
back to the State courts, if he feels it's primarily a State 
court action.
    All this bill does is allow for the removal to Federal 
courts of truly Federal diversity questions involving 
plaintiffs from a multitude of different States and defendants 
from a multitude of different States. And it certainly is not 
going to accomplish what the gentleman describes.
    I think it's a very fair and reasonable measure to give 
real meaning to diversity in class action lawsuits.
    Mr. Smith. Mr. Chairman, I'll yield back the balance of my 
time.
    Chairman Sensenbrenner. The question----
    Mr. Delahunt. Mr. Chairman?
    Chairman Sensenbrenner. For what purpose does the 
gentleman----
    Mr. Delahunt. I move to strike the last word.
    Chairman Sensenbrenner.--from the Commonwealth of 
Massachusetts seek recognition?
    Mr. Delahunt. I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Delahunt. I intend to yield to my friend from North 
Carolina----
    Mr. Watt. If you yield to me on the front end, I'll get out 
of your way. I just want to read----
    Mr. Delahunt. Okay.
    Mr. Watt.--the language that the gentleman----
    Chairman Sensenbrenner. Would the gentleman turn his mike 
on so the reporter can hear every word you're saying?
    Mr. Watt. On the top of page 18, let me read exactly what 
this bill says: A class action may be removed to a district 
court of the United States.
    That can be in Mississippi, Delaware, Alabama.
    So this--if the gentleman is saying I'm misstating what the 
bill does, he needs to read the bill.
    I yield back. Thank you.
    Mr. Boucher. Would the gentleman yield to me, the gentleman 
from Massachusetts? Just for a moment? [Laughter.]
    I accept silence as consent. [Laughter.]
    Mr. Delahunt. For the gentleman from Virginia, I will 
yield, for a moment.
    Mr. Boucher. Thank you very much.
    Let me simply say to the gentleman from North Carolina that 
venue is a separate requirement and also would have to be 
observed in these matters. And so you can look at the language 
that the gentleman from North Carolina has cited, and, yes, it 
does not designate a specific United States district code, but 
the venue rules clearly do.
    Mr. Watt. Will the gentleman yield briefly to me?
    Mr. Delahunt. I yield to Mr. Watt.
    Mr. Watt. And the point I'm making is, if you've got a 
class member who has done absolutely nothing, who lives in 
Alabama, an appropriate venue for that case may well be 
Alabama, even though the attorney general is representing 80 
percent of the people in the class in the State of California.
    So that doesn't address this. You may like for this problem 
to go away, but that's one of those issues that--I mean, I 
didn't go item-by-item, as I did in the last markup, and try to 
amend this bill. I just did one fell swoop, and I did it 
honestly and on top of the table.
    Mr. Berman. Would the gentleman yield for----
    Mr. Delahunt. I'll yield to the gentleman.
    Mr. Berman. Thank you.
    The gentleman from North Carolina refers to the attorney 
general. I thought this amendment was focused on private 
attorney generals. Does this bill have the impact of affecting 
actions brought by the elected attorney general? Does the bill 
which the gentleman from California seeks to amend--in other 
words, I guess I'm asking the gentleman from North Carolina, 
when you say ``the attorney general,'' do you mean under the 
private attorney general concept or the actual elected attorney 
general?
    Mr. Watt. I assume that this bill applies to any class 
action.
    Mr. Berman. Including those----
    Mr. Watt. I don't see anything contrary in the bill.
    Mr. Delahunt. I yield to the gentleman from California, Mr. 
Schiff.
    Mr. Schiff. I thank the gentleman for yielding.
    The California business and professional code section 
dealing with unfair competition empowers the attorney general 
to take action or, in the absence of attorney general action, a 
city or a county or a person acting in the public interest. The 
bill does have a provision in it that says--that excludes an 
action by a State attorney general. So this would only, as I 
read it, negate that section of the California law applies when 
a citizen becomes a private attorney general, not the State 
attorney general himself or herself.
    Mr. Delahunt. Reclaiming my time, I just want to mention to 
my friend from California that the concept of devolution in 
States' rights used to be in vogue here in this particular 
institution back in 1994, '95, '96. And it's really been in 
decline over the course of the past several years. We might 
just put it--might as well just call it the end of federalism, 
the way we're heading.
    But it was--an observation was made relative to your 
amendment that this is gutting over time. If you had served on 
this particular Committee during the course of the last six 
years, you would have seen that proposals continue to come 
forward that erode the entire concept of class action, because 
they have really become a nuisance, class action suits, for 
corporate America. And maybe it's just about time we get 
legislation before us just to abolish them.
    With that, I'll----
    Mr. Frank. Will the gentleman yield to me?
    Mr. Delahunt. I'll yield back to my friend from 
Massachusetts.
    Mr. Frank. Historically, let me make the record clear, 
because I was here in '95. It has never been the mainstream 
Republican argument to be for States' rights. They want to 
decide it at whatever level of government the business 
community is likeliest to get its----
    Chairman Sensenbrenner. The time of the gentleman to make 
Republican arguments is expired. [Laughter.]
    The question is on the----
    Mr. Weiner. Mr. Chairman?
    Chairman Sensenbrenner. For what purpose does the gentleman 
from New York, Mr. Weiner, seek recognition?
    Mr. Weiner. I move to strike the last word to yield to the 
gentleman from California, Mr. Schiff.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Schiff. I thank the gentleman for yielding.
    A very brief clarification on the point that was raised: 
The bill proposes to exclude this--its application when the 
State attorney general acts; however, it does not make 
reference to other provisions that are within the California 
code.
    So actions under California law for unfair competition that 
are brought not only by a person acting in the interest of a 
public who is not attorney general, but also by the district 
attorney or by the city attorney--would appear to be swept 
within the ambit of the bill.
    So the bottom line is, although this bill might not impact 
an action brought by the California attorney general himself, 
if an action was brought by the district attorney or the city 
attorney or by a private person acting as an attorney general, 
then it could be removed out of a California court, even though 
the claim is purely based on California law and diversity is 
incomplete.
    So it does have fairly broad action in negating the work of 
the California Legislature.
    And I yield back to the gentleman.
    Mr. Weiner. I yield the balance of my time to the gentleman 
from New York, Mr. Nadler.
    Mr. Nadler. And I yield my time to the gentleman from 
Massachusetts, who didn't have a chance to finish his remark, 
pointing out that Republican Members----
    Chairman Sensenbrenner. The time belongs to the other 
gentleman from New York, Mr. Weiner----
    Mr. Nadler. He yielded to me.
    Chairman Sensenbrenner.--and only he can yield it.
    Mr. Nadler. He yielded it to me.
    Chairman Sensenbrenner. Yes.
    Mr. Nadler. Fine. Mr. Chairman, reclaiming the time we just 
wasted---- [Laughter.]
    Mr. Chairman, I simply want to point out--I want to 
complete the remark I assume Mr. Frank had started to make 
before he was cut off, which is that the Republican reverence 
for States' rights is not constant but is very consistent. That 
is, they want power at whatever level of government, on any 
given subject, that would be more hostile to consumers, most 
hostile to anyone trying to enforce safety regulations, and 
most friendly to big business and corporations trying to evade 
regulation.
    And that's what the record shows, and that's what this bill 
is all about. And I'll yield back.
    Chairman Sensenbrenner. The gentleman from New York, Mr. 
Weiner, has 2 minutes and 32 seconds left. Do you wish to yield 
back or use it?
    Mr. Weiner. I will gladly yield back, Mr. Chairman.
    Chairman Sensenbrenner. Okay.
    Mr. Bryant. Mr. Chairman? Mr. Chairman, I have a brief 
statement.
    Chairman Sensenbrenner. For what purpose does the gentleman 
from Tennessee seek recognition?
    Mr. Bryant. Move to strike the requisite number of words.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Bryant. Let me say that what the proponents of this 
amendment are saying is that when a State adopts a statute that 
creates a cause of action, they should not--we should not be 
able to remove that Federal court even though the law allows 
that. And that's essentially an argument to eliminate 
completely the diversity jurisdiction provisions of Article 
III.
    And I know our States' rights folks over there on that side 
don't like to recognize the existence of the Constitution, but 
it is there. And Article III does allow this diversity or this 
removal process.
    And any case that is brought pursuant to diversity, removed 
to Federal court, is, by definition, a State claim. And that's 
exactly what we're talking about here. Otherwise it would be a 
Federal claim with exclusive jurisdiction in the Federal 
courts.
    Without this provision, there'd be a giant loophole in the 
bill. And I just think it's a bad amendment.
    And I would like to correct one point that's being made 
over there, that a case could be removed from a State court in 
California to a Federal court in Mississippi or Alabama or any 
State under this proceeding. That's simply not the cases.
    Mr. Watt. Would the gentleman yield?
    Mr. Bryant. Well, let me make my point here, and I'll be 
happy to yield.
    Under the bill, it says that, on page 18, line 1, it 
begins: A class action may be removed to a district court of 
the United States in accordance with this chapter.
    Now, you're reading only--you stopped reading awhile ago 
about ``to a district court of the United States.'' You didn't 
read the rest of the sentence, which said: with this--in 
accordance with this chapter.
    Now, this chapter is chapter 89, title 28, chapter 89, 
which says, in addition to 30 days and all that, and it sets 
parameters for how you remove a case, it says a defendant or a 
defendant's desire to remove any civil action or criminal 
prosecution from a State court shall file in the district court 
of the United States or the district and division within which 
such action is pending notice of removal.
    In other words, if a State--if a private action is filed in 
the Northern District of California in, let's say, San 
Francisco court, if you were to remove that, you'd be limited 
to removing that only to the Northern District Federal court of 
California, not even the Southern District.
    So I think that is an incorrect assessment of this law. And 
if that's the only reason you're going to vote against it, then 
you should vote for it.
    Mr. Watt. Would the gentleman yield?
    Mr. Bryant. I would yield my time back--or, I would yield 
my time to Mr. Watt.
    Mr. Watt. I thank the gentleman for yielding.
    And I have to advise the gentleman that is he is guilty of 
exactly what he has accused me of, because he stopped reading 
in the middle sentence, too.
    He should read the rest of the sentence, which says, 
``without regard to whether any defendant is a citizen of the 
State in which the action is brought.'' Which means that, 
basically, you can remove it wherever you want to. You don't 
even have to have diversity anymore.
    So this argument that this about diversity jurisdiction is 
shot down by the very language of--that you stopped reading in 
the middle of the sentence on, just like you accused me of 
stopping reading in the middle of the sentence. You don't even 
have to have diversity because this is done without regard to 
where the citizen lives.
    Mr. Bryant. Well, let me reclaim my time. And I would just 
say, I think you're misreading that completely. We're talking 
about the defendant here. It's done without regard to where the 
defendant is located. The chapter that will decide where this 
case is to be determined, that provision is in the chapter of 
the existing code, which says that it only can be removed to 
the district and division of that district where the action, 
the State action, is pending.
    So I don't think there's any question. We have, perhaps----
    Mr. Schiff. Will the gentleman yield?
    Mr. Bryant.--a legitimate disagreement.
    But I think the law is clear that it will only be, in the 
example I gave, to the Northern District of California.
    So I think it's----
    Mr. Schiff. Will the gentleman yield?
    Mr. Bryant. Yes, I'd be happy to yield to the gentleman 
from California.
    Mr. Schiff. I thank the gentleman for yielding.
    I think both the strengths and weaknesses of this amendment 
are being overstated. We come back to the fact, at the end of 
this debate, that it is a modest amendment, after all.
    What this is really about is not removing diversity 
jurisdiction. Diversity jurisdiction remains. What is at stake 
in the bill and in the amendment is what happens when there is 
incomplete diversity, when there are parties from different 
States but not completely different States, so that the 
plaintiff may be a Californian, bringing a private attorney 
general action in California, against a majority of defendants 
what are Californians, but because the diversity is not 
complete, because one of the defendants that does 90 percent of 
their business in California is actually incorporated in 
Delaware, it can be taken out of the California courtroom.
    So you have quintessentially California action with a 
California cause of action----
    Mr. Bryant. Let me reclaim my time.
    Mr. Schiff.--removed to Federal court.
    Mr. Bryant. Let me reclaim my time so that I can say that--
--
    Chairman Sensenbrenner. The gentleman's time has expired.
    Mr. Bryant.--is not the case. That's not the case.
    Chairman Sensenbrenner. The question is on the amendment 
offered by the gentleman from California, Mr. Schiff.
    Those in favor will signify by saying aye.
    Opposed, no.
    The noes appear to have it.
    Mr. Schiff. Mr. Chairman, I request a rollcall.
    Chairman Sensenbrenner. The rollcall will be ordered.
    The question is on the adoption of the Schiff amendment. 
Those in favor will, as your names are called, answer aye. 
Those opposed, no. And the clerk will call the roll.
    The Clerk. Mr. Hyde?
    Mr. Gekas?
    Mr. Gekas. No.
    The Clerk. Mr. Gekas, no.
    Mr. Coble?
    Mr. Coble. No.
    The Clerk. Mr. Coble, no.
    Mr. Smith?
    Mr. Smith. No.
    The Clerk. Mr. Smith, no.
    Mr. Gallegly?
    [No response.]
    The Clerk. Mr. Goodlatte?
    Mr. Goodlatte. No.
    The Clerk. Mr. Goodlatte, no.
    Mr. Bryant?
    Mr. Bryant. No.
    The Clerk. Mr. Byrant, no.
    Mr. Chabot?
    [No response.]
    The Clerk. Mr. Barr?
    Mr. Barr. No.
    The Clerk. Mr. Barr, no.
    Mr. Jenkins?
    Mr. Jenkins. No.
    The Clerk. Mr. Jenkins, no.
    Mr. Cannon?
    [No response.]
    The Clerk. Mr. Graham?
    [No response.]
    The Clerk. Mr. Bachus?
    [No response.]
    The Clerk. Mr. Hostettler?
    Mr. Hostettler. No.
    The Clerk. Mr. Hostettler, no.
    Mr. Green?
    Mr. Green. No.
    The Clerk. Mr. Green, no.
    Mr. Keller?
    Mr. Keller. No.
    The Clerk. Mr. Keller, no.
    Mr. Issa?
    Mr. Issa. No.
    The Clerk. Mr. Issa, no.
    Ms. Hart?
    Ms. Hart. No.
    The Clerk. Ms. Hart, no.
    Mr. Flake?
    [No response.]
    The Clerk. Mr. Pence?
    [No response.]
    The Clerk. Mr. Conyers?
    Mr. Conyers. Aye.
    The Clerk. Mr. Conyers, aye.
    Mr. Frank?
    Mr. Frank. Aye.
    The Clerk. Mr. Frank, aye.
    Mr. Berman?
    Mr. Berman. Aye.
    The Clerk. Mr. Berman, aye.
    Mr. Boucher?
    Mr. Boucher. No.
    The Clerk. Mr. Boucher, no.
    Mr. Nadler?
    Mr. Nadler. Aye.
    The Clerk. Mr. Nadler, aye.
    Mr. Scott?
    Mr. Scott. Aye.
    The Clerk. Mr. Scott, aye.
    Mr. Watt?
    Mr. Watt. Aye.
    The Clerk. Mr. Watt, aye.
    Ms. Lofgren?
    [No response.]
    The Clerk. Ms. Jackson Lee?
    [No response.]
    The Clerk. Ms. Waters?
    Ms. Waters. Aye.
    The Clerk. Ms. Waters, aye.
    Mr. Meehan?
    [No response.]
    The Clerk. Mr. Delahunt?
    Mr. Delahunt. Aye.
    The Clerk. Mr. Delahunt, aye.
    Mr. Wexler?
    [No response.]
    The Clerk. Ms. Baldwin?
    Ms. Baldwin. Aye.
    The Clerk. Ms. Baldwin, aye.
    Mr. Weiner?
    Mr. Weiner. Aye.
    The Clerk. Mr. Weiner, aye.
    Mr. Schiff?
    Mr. Schiff. Aye.
    The Clerk. Mr. Schiff, aye.
    Mr. Chairman?
    Chairman Sensenbrenner. No.
    The Clerk. Mr. Chairman, no.
    Chairman Sensenbrenner. Are there additional Members in the 
chamber who wish to change or cast their vote?
    The gentleman from Ohio?
    Mr. Chabot. No.
    The Clerk. Mr. Chabot, no.
    Chairman Sensenbrenner. The gentleman from South Carolina?
    Mr. Graham. No.
    The Clerk. Mr. Graham, no.
    Chairman Sensenbrenner. The gentleman from Arizona?
    Mr. Flake. No.
    The Clerk. Mr. Flake, no.
    Chairman Sensenbrenner. Further Members who wish to cast or 
change their vote? If not, the clerk will report.
    The Clerk. Mr. Chairman, there are 11 ayes and 17 nays.
    Chairman Sensenbrenner. And the amendment is not agreed to.
    Are there further amendments?
    The gentleman from New York, Mr. Nadler.
    Mr. Nadler. Thank you, Mr. Chairman. I have an amendment at 
the desk.
    Chairman Sensenbrenner. The clerk will report the 
amendment.
    The Clerk. Amendment to H.R. 2341, offered by Mr. Nadler. 
Page 10, add the following after line 23 and redesignate the 
succeeding section accordingly:
    Mr. Nadler. Mr. Chairman, I ask unanimous consent that 
reading of the amendment be dispensed with.
    Chairman Sensenbrenner. Without objection, so ordered.
    [The amendment follows:]
    
    
    Chairman Sensenbrenner. And the gentleman is recognized for 
5 minutes.
    Mr. Nadler. Mr. Chairman, this amendment is about sealing 
secret information that could be used to protect the health and 
safety of others. This amendment would prohibit a court from 
sealing the records of a class action case if the records are 
relevant to public health and safety.
    I've been concerned for a number of years about records 
from lawsuits that affect public health and safety being sealed 
off from the public in the settlement of a lawsuit. To me, 
there's no justification for this practice.
    More often than not, the whole reason--the reason why a 
class action lawsuit is filed is because a number of people 
have been harmed by a large corporation. They come together to 
recover damages by proving that a company behaved in a way that 
is harmful to their health and safety.
    So what happens? The company settles the lawsuit, pays the 
people it harms, and then tells them to shut up and continues 
with the dangers, people figuring a few every now and then, 
we'll bring a class action suit, they'll pay off the people 
bringing the suit, and they'll continue. And the cost of 
settlements is a cost of doing business.
    But meanwhile, many hundreds of thousands of people 
continue being harm by the secret practice that continues to go 
on. They force the plaintiffs never to discuss the problems 
with anyone else. More people end up getting hurt. This is 
reprehensible.
    The Firestone tire situation is a case in point. One of the 
main reasons why there was not timely public disclosure of the 
dangers of Firestone tires is because Firestone insisted on a 
series of gag orders when settling product liability lawsuits. 
And let me read here from an article in the September 
something-or-other--September 25th, 2000, addition of the Legal 
Times article on Firestone. It says: ``One of the principle 
roadblocks to timely public disclosure of the danger of 
Firestone tires has been a series of gag orders the company 
insisted on as a condition of settling product liability 
lawsuits in the early 1990's.''
    ``Simply put, Firestone made a calculated determination 
that they would compensate victims so long as the plaintiffs 
agreed not to share their stories with other victims or the 
public. Congress was given the opportunity to address this very 
problem in 1995 when an amendment was offered that would 
prevent such gag orders if the public safety need outweighed 
the privacy interests of the litigants.''
    ``Unfortunately, the amendment was defeated, with opponents 
arguing that the information was proprietary information that 
does not belong in the public domain.''
    The reality is that the release of such information in the 
Firestone case 7 or 8 years ago potentially could've saved 
scores of human lives.
    We should not allow this to happen again. We can't blame 
the people who settled their cases for recovering damages and 
agreeing to the gag orders as a condition of getting the money. 
But as a result, the public was kept in the dark, and many more 
people were injured.
    This should not happen again. It's important for the people 
to be aware of the health and safety hazards that may exist so 
that other people can make informed choices about their lives, 
and, I might add, so that public agencies, perhaps, can crack 
down on such dangers.
    Too often, critical information is sealed from the public 
and other people are harmed as a result. When it comes to 
health and safety, public access to the information that is 
adduced in class action lawsuits is absolutely essential.
    I urge my colleagues to accept this amendment. I yield 
back.
    Mr. Goodlatte. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from Virginia, Mr. 
Goodlatte.
    Mr. Goodlatte. I move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Goodlatte. Thank you, Mr. Chairman.
    I must oppose this amendment. I think that this discretion 
should be left in the hands of the judge. Settlements often 
include private information that deter individuals from 
entering settlements. Publicizing these details would have a 
chilling effect on individuals interested in settlement rather 
than protracted and expensive litigation.
    Furthermore, settlements are reviewed by the court. 
Releasing details will have the effect of opening judicial 
determination to public scrutiny----
    Mr. Nadler. Well, that's terrible.
    Mr. Goodlatte.--possibly affecting the outcome or judgment 
from the bench in future settlements with similar facts.
    This amendment would eliminate an effective negotiating 
tool for plaintiffs and force more cases to be litigated at the 
expense of the client and to the benefit of his or her lawyer.
    There are plenty of cases where the information that the 
gentleman describes definitely should be made public. And I 
share the gentleman's concern in that regard.
    But there are also plenty of cases in which terms of 
settlement do not need to be made public and always requiring, 
as a matter of law, that it be done so, handcuffing the judge 
in the case and creating a chilling effect on the ability of 
the parties to settle is not a good idea.
    I urge opposition to the amendment.
    Chairman Sensenbrenner. The question is on the----
    Mr. Scott. Mr. Chairman? Move to strike the last word.
    Chairman Sensenbrenner. The Committee is recessed.
    [Recess.]
    Chairman Sensenbrenner. The Committee will be in order.
    Pending when the Committee recessed was the amendment of 
the gentleman from New York, Mr. Nadler, to the bill H.R. 2341.
    For what purpose does the gentleman from Virginia seek 
recognition?
    Mr. Scott. Move to strike the last word.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Scott. Mr. Chairman, I rise in support of the 
amendment, and yield the balance of the time to the gentleman 
from New York.
    Mr. Nadler. Thank you, Mr. Chairman.
    I just wanted to comment or reply to the comments of, I 
think it was the gentleman Virginia, who first of all said that 
one of problems with this amendment was that it would open 
judicial rulings to public scrutiny, which I think it might 
very well do, and I don't think it's a terrible thing. I think, 
in fact, it's one of the things we normally like to do with 
judicial rulings.
    But second of all, his other major point was that he agrees 
that gag orders should not be issued when it would affect the 
public health and safety, but sometimes have to be, and you 
have to leave that to the discretion of the judge. And 
unfortunately, he said, we can't have an amendment that doesn't 
leave it to the discretion of the judge. But this amendment, 
sir, does leave it to the discretion of the judge.
    And maybe it hasn't been read in its entirety. Let me read 
the relevant part. It says: Any access to such record may not 
otherwise be restricted--and I'm reading line 7 now--except by 
a court order issued pursuant to a finding of fact by the court 
that one such order would not restrict the disclosure of 
information which is relevant to public health or safety, or, 
two, the public--A, the public interest in disclosing potential 
health or safety hazards is clearly outweighed by a specific 
and substantial interests in maintaining the confidentially of 
the information or records in question; and, B, the order is no 
broader than necessary to protect the privacy interests 
asserted.
    So in other words, what this amendment does is command the 
judge that he must make a finding of fact where a gag order is 
requested. And if he finds that the privacy interest is broader 
than the public interest or the order, then he must issue the 
gag order. If he finds that the public interest in health and 
safety outweighs the privacy interests asserted, he may not 
issue the gag order. He also has to find out that the gag order 
is drafted as tightly as possible.
    So this amendment seems to do exactly what the gentleman 
from Virginia thinks is the proper thing to do, so I hope he 
and the other Members on both sides of the aisle will vote for 
this amendment.
    I thank the gentleman for yielding, and I yield back to 
him.
    Chairman Sensenbrenner. The question is----
    Mr. Delahunt. Mr. Chairman?
    Chairman Sensenbrenner. Has the gentleman from 
Massachusetts been recognized earlier on this amendment?
    Mr. Delahunt. No, I have not.
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Delahunt. I move to strike the last word.
    Mr. Chairman, I find it interesting that the argument is 
put forth that when it comes to settlements, we can encourage 
discretion and trust those judges. Yet, there has been a 
history, a record, that this Committee, when it comes to 
imposing criminal sentences, we really can't trust those same 
judges. And that's why, again and again and again, from this 
Committee, we continue to report out favorably proposals for 
mandatory sentences.
    I really find an inconsistency there. But then again, 
earlier, in the previous amendment, we talked about the 
inconsistency when it comes to States' rights. So I guess 
there's a consistency in terms of the inconsistency.
    But maybe, I don't know, maybe the sponsor of the amendment 
can help me with that? I just find it amazing--amazing.
    And of course, we hear from the opponent of the amendment 
that it will have a chilling effect, in terms of settlement. I 
don't know, maybe the gentleman from Virginia or maybe the 
gentleman from New York can point us to some----
    Mr. Nadler. Will the gentleman yield?
    Mr. Delahunt. Yes, I yield to the gentleman from New York.
    Mr. Nadler. First of all, I find it amazing, too.
    But, second of all, I think the only chilling effect the 
amendment might have is that a corporation that is really 
grossly ashamed of shameful and terrible conduct would be, 
might be, reluctant to allow that to go public as part of a 
settlement.
    But I frankly think that in such a case----
    Mr. Delahunt. Reclaiming my time, you mean, for example, in 
the case of Firestone? Is that what the gentleman is 
suggesting?
    Mr. Nadler. Yes. I mean, that was a clear case. There are 
other cases, too. But that's the only conceivable chilling 
effect. If the conduct that is admitted, in effect, or even not 
admitted--because a settlement can say, listen, just let's get 
this off our heads without admitting any facts.
    That conduct might not be so opprobrious and then they----
    Mr. Delahunt. Reclaiming my time, is the gentleman from New 
York aware of any survey, any data, any research done in terms 
of a chilling effect?
    Mr. Nadler. No, sir.
    Mr. Delahunt. In terms of settlements?
    Mr. Nadler. No, sir.
    Mr. Delahunt. If there were somehow disclosure?
    Mr. Nadler. No, sir.
    Mr. Delahunt. I see. Well, I guess my questions go 
unanswered, and I'll yield back my time.
    Chairman Sensenbrenner. The question is on the Nadler 
amendment----
    Mr. Watt. Mr. Chairman? Mr. Chairman?
    Chairman Sensenbrenner. For what purpose does the gentleman 
from North Carolina seek----
    Mr. Watt. I move to strike the last word, briefly.
    Chairman Sensenbrenner. The gentleman is--was the gentleman 
recognized on this amendment before?
    Mr. Watt. I haven't even been here on this amendment, so I 
know I wasn't----
    Chairman Sensenbrenner. The gentleman is recognized for 5 
minutes.
    Mr. Watt. I thank the Chairman for yielding time. And I 
just wanted to ask Mr. Nadler, perhaps, if he would make the 
first sentence of his amendment also subject to the same 
requirements that he has made the rest of it.
    There is an absolute bar to sealing a class action opinion 
or order, which I think may go--I could conceive of situations 
where that would go too far. And I'm wondering if the gentleman 
might consider making the first part of the amendment also 
subject to the same finding of fact order that the second part 
of the amendment is subject to?
    Mr. Nadler. Would the gentleman yield?
    Mr. Watt. I yield.
    Mr. Nadler. Thank you. I don't think you're reading it 
correctly, sir. And that's certainly not the intent.
    The first sentence says: No order or opinion may be sealed.
    The second sentence goes on to say under what circumstances 
it can't be sealed. Any court reading this would understand 
that the first sentence is subject to the second sentence, 
because the whole point of the amendment is to do that.
    And if you read the first sentence to be independent of the 
rest of the amendment, the rest--the amendment would have no 
meaning at all; the rest of the amendment would have no 
meaning. So I see no possibility of reading it that way.
    But if it concerns you, I'll be happy to make that more 
clear after it gets out of Committee.
    Mr. Watt. I do think that the first sentence could be read 
independently, because the second sentence really is dealing 
with discovery and other things, not necessarily the opinion 
itself. And I do think it's important----
    Mr. Nadler. Would the gentleman yield?
    Mr. Watt. I'll yield, yes.
    Mr. Nadler. Mr. Chairman, I ask unanimous consent to amend 
the amendment by adding the following phrase at the conclusion 
of the first sentence--let me read the first sentence as I 
would amend it: No order or opinion of the court in the 
adjudication of a class action may be sealed except as provided 
in this section.
    Chairman Sensenbrenner. Without objection, the amendment is 
so modified.
    Mr. Watt. I thank the gentleman. I think that clears it up.
    Mr. Nadler. Thank you.
    Mr. Watt. And I think it makes it a better amendment.
    Chairman Sensenbrenner. Does the gentleman yield back? The 
gentleman from North Carolina?
    Mr. Watt. I yield back, yes.
    Chairman Sensenbrenner. The question is on the Nadler 
amendment as modified.
    Those in favor will say aye.
    Opposed, no.
    The noes appear to have it.
    Mr. Nadler. Mr. Chairman?
    Chairman Sensenbrenner. The gentleman from New York.
    Mr. Nadler. rollcall vote, please.
    Chairman Sensenbrenner. rollcall is ordered. Those in favor 
of the Nadler amendment will, as your name is called, answer 
aye. Those opposed, no. And the clerk will call the roll.
    The Clerk. Mr. Hyde?
    [No response.]
    The Clerk. Mr. Gekas?
    [No response.]
    The Clerk. Mr. Coble?
    Mr. Coble. No.
    The Clerk. Mr. Coble, no.
    Mr. Smith?
    Mr. Smith. No.
    The Clerk. Mr. Smith, no.
    Mr. Gallegly?
    [No response.]
    The Clerk. Mr. Goodlatte?
    Mr. Goodlatte. No.
    The Clerk. Mr. Goodlatte, no.
    Mr. Bryant?
    Mr. Bryant. No.
    The Clerk. Mr. Byrant, no.
    Mr. Chabot?
    Mr. Chabot. No.
    The Clerk. Mr. Chabot, no.
    Mr. Barr?
    [No response.]
    The Clerk. Mr. Jenkins?
    [No response.]
    The Clerk. Mr. Cannon?
    [No response.]
    The Clerk. Mr. Graham?
    [No response.]
    The Clerk, Mr. Bachus?
    [No response.]
    The Clerk. Mr. Hostettler?
    Mr. Hostettler. No.
    The Clerk. Mr. Hostettler, no.
    Mr. Green?
    [No response.]
    The Clerk. Mr. Keller?
    Mr. Keller. No.
    The Clerk. Mr. Keller, no.
    Mr. Issa?
    [No response.]
    The Clerk. Ms. Hart?
    [No response.]
    The Clerk. Mr. Flake?
    [No response.]
    The Clerk. Mr. Pence?
    Mr. Pence. No.
    The Clerk. Mr. Pence, no.
    Mr. Conyers?
    [No response.]
    The Clerk. Mr. Frank?
    [No response.]
    The Clerk. Mr. Berman?
    Mr. Berman. Aye.
    The Clerk. Mr. Berman, aye.
    Mr. Boucher?
    Mr. Boucher. No.
    The Clerk. Mr. Boucher, no.
    Mr. Nadler?
    Mr. Nadler. Aye.
    The Clerk. Mr. Nadler, aye.
    Mr. Scott?
    Mr. Scott. Aye.
    The Clerk. Mr. Scott, aye.
    Mr. Watt?
    Mr. Watt. Aye.
    The Clerk. Mr. Watt, aye.
    Ms. Lofgren?
    [No response.]
    The Clerk. Ms. Jackson Lee?
    [No response.]
    The Clerk. Ms. Waters?
    [No response.]
    The Clerk. Mr. Meehan?
    [No response.]
    The Clerk. Mr. Delahunt?
    Mr. Delahunt. Aye.
    The Clerk. Mr. Delahunt, aye.
    Mr. Wexler?
    [No response.]
    The Clerk. Ms. Baldwin?
    Ms. Baldwin. Aye.
    The Clerk. Ms. Baldwin, aye.
    Mr. Weiner?
    [No response.]
    The Clerk. Mr. Schiff?
    Mr. Schiff. Aye.
    The Clerk. Mr. Schiff, aye.
    Mr. Chairman?
    Chairman Sensenbrenner. No.
    The Clerk. Mr. Chairman, no.
    Chairman Sensenbrenner. Are there further Members in the 
room who wish to cast or change their vote?
    The gentleman from Utah, Mr. Cannon?
    Mr. Cannon. No.
    The Clerk. Mr. Cannon, no.
    Chairman Sensenbrenner. The gentleman from South Carolina, 
Mr. Graham?
    Mr. Graham. No.
    The Clerk. Mr. Graham, no.
    Chairman Sensenbrenner. The gentleman from Tennessee, Mr. 
Jenkins?
    Mr. Jenkins. No.
    The Clerk. Mr. Jenkins, no.
    Chairman Sensenbrenner. The gentlewoman from Pennsylvania, 
Ms. Hart?
    Ms. Hart. No.
    The Clerk. Ms. Hart, no.
    Chairman Sensenbrenner. Further Members who wish to--the 
gentleman from Arizona, Mr. Flake?
    Mr. Flake. No.
    The Clerk. Mr. Flake, no.
    Chairman Sensenbrenner. The gentleman from Massachusetts, 
Mr. Meehan?
    Mr. Meehan. Yes.
    The Clerk. Mr. Meehan, aye.
    Chairman Sensenbrenner. The gentleman from Wisconsin, Mr. 
Green.
    Mr. Green. No.
    The Clerk. Mr. Green, no.
    Chairman Sensenbrenner. The gentleman from New York, Mr. 
Weiner?
    Mr. Weiner. Aye.
    The Clerk. Mr. Weiner, aye.
    Chairman Sensenbrenner. Anybody else who wishes to cast or 
change their vote? If not, the clerk will report.
    The Clerk. Mr. Chairman, there are 9 ayes and 16 nays.
    Chairman Sensenbrenner. And the amendment is not agreed to. 
Are there further amendments? If not, the question occurs on 
the motion to report the bill H.R. 2341 favorably as amended. 
The Chair notes a reporting quorum is present.
    All in favor will say aye.
    Opposed, no.
    The ayes appear to have it.
    Mr. Nadler. Mr. Chairman, a recorded vote, please?
    Chairman Sensenbrenner. A recorded vote on the motion to 
report favorably is ordered. Those in favor will, as your names 
are called, answer aye. Those opposed, no. And the clerk will 
call the roll.
    The Clerk. Mr. Hyde?
    [No response.]
    The Clerk. Mr. Gekas?
    [No response.]
    The Clerk. Mr. Coble?
    Mr. Coble. Aye.
    The Clerk. Mr. Coble, aye.
    Mr. Smith?
    Mr. Smith. Aye.
    The Clerk. Mr. Smith, aye.
    Mr. Gallegly?
    [No response.]
    The Clerk. Mr. Goodlatte?
    Mr. Goodlatte. Aye.
    The Clerk. Mr. Goodlatte, aye.
    Mr. Bryant?
    [No response.]
    The Clerk. Mr. Chabot?
    Mr. Chabot. Aye.
    The Clerk. Mr. Chabot, aye.
    Mr. Barr?
    [No response.]
    The Clerk. Mr. Jenkins?
    Mr. Jenkins. Aye.
    The Clerk. Mr. Jenkins, aye.
    Mr. Cannon?
    [No response.]
    The Clerk. Mr. Graham?
    [No response.]
    The Clerk. Mr. Bachus?
    [No response.]
    The Clerk. Mr. Hostettler?
    Mr. Hostettler. Aye.
    The Clerk. Mr. Hostettler, aye.
    Mr. Green?
    Mr. Green. Aye.
    The Clerk. Mr. Green, aye.
    Mr. Keller?
    Mr. Keller. Aye.
    The Clerk. Mr. Keller, aye.
    Mr. Issa?
    [No response.]
    The Clerk. Ms. Hart?
    Ms. Hart. Aye.
    The Clerk. Ms. Hart, aye.
    Mr. Flake?
    [No response.]
    The Clerk. Mr. Pence?
    Mr. Pence. Aye.
    The Clerk. Mr. Pence, aye.
    Mr. Conyers?
    [No response.]
    The Clerk. Mr. Frank?
    [No response.]
    The Clerk. Mr. Berman?
    Mr. Berman. No.
    The Clerk. Mr. Berman, no.
    Mr. Boucher?
    Mr. Boucher. Aye.
    The Clerk. Mr. Boucher, aye.
    Mr. Nadler?
    Mr. Nadler. No.
    The Clerk. Mr. Nadler, no.
    Mr. Scott?
    Mr. Scott. No.
    The Clerk. Mr. Scott, no.
    Mr. Watt?
    Mr. Watt. No.
    The Clerk. Mr. Watt, no.
    Ms. Lofgren?
    [No response.]
    The Clerk. Ms. Jackson Lee?
    [No response.]
    The Clerk. Ms. Waters?
    [No response.]
    The Clerk. Mr. Meehan?
    Mr. Meehan. No.
    The Clerk. Mr. Meehan, no.
    Mr. Delahunt?
    Mr. Delahunt. No.
    The Clerk. Mr. Delahunt, no.
    Mr. Wexler?
    [No response.]
    The Clerk. Ms. Baldwin?
    Ms. Baldwin. No.
    The Clerk. Ms. Baldwin, no.
    Mr. Weiner?
    Mr. Weiner. No.
    The Clerk. Mr. Weiner, no.
    Mr. Schiff?
    Mr. Schiff. No.
    The Clerk. Mr. Schiff, no.
    Mr. Chairman?
    Chairman Sensenbrenner. Aye.
    The Clerk. Mr. Chairman, aye.
    Chairman Sensenbrenner. Other Members in the room who wish 
to cast or change their vote?
    The gentleman from Utah, Mr. Cannon?
    Mr. Cannon. Aye.
    The Clerk. Mr. Cannon, aye.
    Chairman Sensenbrenner. The gentleman from South Carolina, 
Mr. Graham?
    Mr. Graham. Aye.
    The Clerk. Mr. Graham, aye.
    Chairman Sensenbrenner. The gentleman from Tennessee, Mr. 
Bryant?
    Mr. Bryant. Aye.
    The Clerk. Mr. Bryant, aye.
    Chairman Sensenbrenner. Anybody else who wish to cast or 
change their vote?
    The gentleman from Arizona, Mr. Flake?
    Mr. Flake. Aye.
    The Clerk. Mr. Flake, aye.
    Chairman Sensenbrenner. The gentleman from Massachusetts, 
Mr. Frank?
    Mr. Frank. Aye. No. [Laughter.]
    Chairman Sensenbrenner. Anybody else who wish to cast or 
change their vote?
    Can we make sure that Mr. Frank is recorded how he really 
wants to vote?
    The Clerk. Mr. Frank, no.
    Chairman Sensenbrenner. Okay, the clerk will report.
    The Clerk. Mr. Chairman, there are 16 ayes and 10 nays.
    Chairman Sensenbrenner. And the motion to report favorably 
is agreed to. Without objection, the bill will be reported 
favorably to the House in the form of a single amendment in the 
nature of a substitute incorporating the amendments adopted. 
Without objection, the Chair is authorized to move to go to 
conference pursuant to House Rules. Without objection, the 
staff is directed to make any technical and conforming changes. 
And all Members will be given 2 days as provided by the House 
Rules in which to submit additional dissenting, supplemental, 
or minority views.
                            Additional Views

    Section 4 of this bill has a far more reaching effect than 
``federalizing'' Consumer Protection Class Actions. Section 4 
``federalizes'' any State cause of action that is brought on 
behalf of the general public.
    California, like many other States, has enacted strong 
antitrust laws that prohibit unfair combinations and unlawful 
restraints of trade.\1\ California has chosen to allow its 
District Attorneys, along with the California Attorney General, 
to enforce these laws in State courts.
---------------------------------------------------------------------------
    \1\ See California Business and Professions Code sections 16700, et 
seq. and 17000, et seq.
---------------------------------------------------------------------------
    This bill usurps California's choice. Under Section 4(a)'s 
expansive definition of ``class action,'' a District Attorney 
who attempts to enforce State antitrust laws on behalf of the 
general public is subject to the act's constraints.
    The Federal Government should not be forcing local 
prosecutors to try state antitrust lawsuits in Federal court. 
Nor should the Federal Government force local prosecutors to 
comply with Federal class certification requirements or risk 
dismissal of their State antitrust actions.
    Put simply, H.R. 2341 is a stealthy attempt to chill State 
and local antitrust law enforcement. That effort is contrary to 
long-standing legal doctrines of our nation. It will also 
adversely impact competition and business development in the 
high tech sector, which is vital to this nation's future. I, 
therefore, strongly oppose H.R. 2341.

                                   Zoe Lofgren.
                            Dissenting Views

    We strongly oppose H.R. 2341, the ``Class Action Fairness 
Act of 2001.'' Although the legislation is described by its 
proponents as a simple procedural fix, in actuality it 
represents a major rewrite of the class action rules that would 
bar most forms of state class actions. H.R. 2341 (or its 
predecessor version) \1\ is opposed by both the state \2\ and 
federal \3\ judiciaries, as well as consumer and public 
interest groups, including Public Citizen \4\ and Consumers 
Union.\5\
---------------------------------------------------------------------------
    \1\ H.R. 2341 is the third time class action legislation has been 
offered in Congress. During the 105th Congress, the Full Committee 
marked-up and reported out on a party line vote the ``Class Action 
Jurisdiction Act of 1998,'' which was also similar in most respects to 
H.R. 2341. The bill, however, was never considered by the Full House 
during the 105th Congress. In 1999, after a hearing and mark-up, the 
House Committee on the Judiciary reported out, by a 15-12 vote, the 
``Interstate Class Action Jurisdiction Act of 1999,'' which was similar 
in most respects to H.R. 2341 under consideration today. On September 
23, 1999 the House passed the legislation 22-207. It was never voted on 
in the Senate.
    \2\ See Letter from David A. Brock, President, Conference of Chief 
Justices (July 19, 1999) (on file with the minority staff of the House 
Judiciary Committee) [hereinafter Conference of Chief Justices letter] 
(stating that ``H.R. 1875, in its present form, is an unwarranted 
incursion on the principles of judicial federalism.'').
    \3\ See Letters from Leonias Ralph Mecham, Secretary, Judicial 
Conference of the United States (July 26, 1999 & August 23, 1999) 
(letters on file with the minority staff of the House Judiciary 
Committee) [hereinafter Judicial Conference letter] (stating that on 
July 23, 1999, the Executive Committee of the Conference voted to 
express its opposition to the class action provisions in H.R. 1875).
    \4\ See Letter from Joan Claybrook, President, Public Citizen 
(March 5, 2002)(letter on file with minority staff of the House 
Judiciary Committee).
    \5\ See Letter from Sally J. Greenberg, Senior Product Safety 
Counsel, Consumers Union (March 5, 2002)[hereinafter Consumers Union 
Letter](letter on file with minority staff of the House Judiciary 
Committee).
---------------------------------------------------------------------------
    By providing plaintiffs access to the courts in cases where 
a defendant may have caused small injuries to a large number of 
persons, class action procedures have traditionally offered a 
valuable mechanism for aggregating small claims that otherwise 
might not warrant individual litigation. This legislation will 
undercut that important principle by making it far more 
burdensome, expensive, and time-consuming for groups of injured 
persons to obtain access to justice. Thus, it would be more 
difficult to protect our citizens against violations of fraud, 
consumer health and safety, and environmental laws, to name but 
a few important laws. The legislation goes so far as to prevent 
state courts from considering class action cases which involve 
solely violations of state laws, such as state consumer 
protection laws.
    As Consumers Union has written, ``This `class action 
reform' legislation is especially inappropriate and ill-timed 
right now. With the bankruptcy of Enron leaving many investors 
and employees of the company with vastly diminished retirement 
savings, while Enron's executives sold stock and made millions 
of dollars months before the stock value plummeted, these 
investors deserve the right to hold any corporate wrongdoers 
accountable. This is no time to constrict legal remedies by 
curtailing access to the courts, including state courts.\6\
---------------------------------------------------------------------------
    \6\ See Consumers Union Letter
---------------------------------------------------------------------------
    H.R. 2341 provides for the removal of state class action 
claims to Federal court in cases involving violations of state 
law where any member of the plaintiff class is a citizen of a 
different state than any defendant.\7\ The only exceptions 
provided in H.R. 2341 are that Federal courts are directed to 
abstain from hearing a class action where (1) a ``substantial 
majority'' of the members of the proposed class are citizens of 
a single state of which the primary defendants are citizens and 
the claims asserted will be governed primarily by laws of that 
state (``an intrastate case''); (2) all matters in controversy 
do not exceed $2,000,000 or the membership of the proposed 
class is less than 100 (``a limited scope case''); or (3) the 
primary defendants are states, state officials, or other 
government entities against whom the district court may be 
foreclosed from ordering relief (``a state action case'').\8\ 
In the event the district court determines that the action 
subject to its jurisdiction does not satisfy the requirements 
of Federal Rule of Procedure 23, under the bill the court must 
dismiss the action,\9\ which has the effect of striking the 
class action claim.\10\
---------------------------------------------------------------------------
    \7\ H.R. 2341, Sec. 4(a). Current law requires there to be complete 
diversity before a state law case is eligible for removal to Federal 
court, that is to say that all of the plaintiffs must be citizens 
residing in different states than all of the defendants. See Stawbridge 
v. Curtiss, 7 U.S. (3 Cranch) 267 (1806). In Snyder v. Harris, 394 U.S. 
332 (1969), the Supreme Court held that the court should only consider 
the citizenship of named plaintiffs for diversity purposes, and not the 
citizenship of absent class members.
    \8\ H.R. 2341, Sec. 4(a). The legislation also excludes securities-
related and corporate governance class actions from coverage and makes 
of number of other procedural changes, such as easing the procedural 
requirements for removing a class action to Federal court (i.e., 
permitting removal to be sought by any plaintiff or defendant and 
eliminating the 1-year deadline for filing removal actions) and tolling 
the statute of limitation periods for dismissed class actions.
    \9\ H.R. 2341, Sec. 4(a).
    \10\ While the class action may be refiled again, any such refiled 
action may be removed again if the district court has original 
jurisdiction.
---------------------------------------------------------------------------
    H.R. 2341 also contains a so-called ``Consumer Class Action 
Bill of Rights.'' This includes some nominal safeguards, such 
as judicial scrutiny of coupon and other noncash settlements, 
protection against a proposed settlement that would result in a 
net loss to a class member, protection against discrimination 
based on geographic location, prohibition on class 
representatives receiving a greater share of the award and 
plain English requirements. However, the bill fails to do 
anything to address the greatest consumer abuse ``sweetheart'' 
deals which payoff one class in order to eradicate future 
claims which were not even before the court.\11\
---------------------------------------------------------------------------
    \11\ These include collusive settlements, in which the parties 
agree to a far broader settlement than was originally sought in order 
to insulate defendants from future liability, and coupon and other 
deficient settlements which provide little in the way of real relief to 
plaintiffs. For example, In re Prudential Insurance Company of America 
Sales Practice Litigation, 962 F. Supp. 450 (D. N.J. 1997) (class 
action based on misrepresentations to customers regarding future 
premiums for which settlement was approved releasing defendant from any 
abusive sales practice), involved a class action case which as filed 
was based only on misrepresentations to customers regarding future 
premiums, but as settled, released defendants from all claims 
concerning abusive sales practices.
---------------------------------------------------------------------------
    H.R. 2341 will damage both the Federal and state courts. As 
a result of Congress' increasing propensity to federalize state 
crimes, the Federal courts are already facing a dangerous 
workload crisis. By forcing resource intensive class actions 
into Federal court, H.R. 2341 will further aggravate these 
problems and cause victims to wait in line for as much as 3 
years or more to obtain a trial. Alternatively, to the extent 
class actions are remanded to state court, the legislation 
effectively only permits case-by-case adjudications, 
potentially draining away precious state court resources. For 
these and the other reasons set forth herein, we dissent from 
H.R. 2341.

      I. H.R. 2341 Will Damage the Federal and State Court Systems

A. Impact on Federal Courts
    Expanding Federal class action jurisdiction to include most 
state class actions, as H.R. 2341 does, will inevitably result 
in a significant increase in the Federal courts' workload. As 
the Justice Department observed last Congress, ``[c]lass action 
cases are among the most resource-intensive litigation before 
the judiciary [and enactment of the bill] could move most of 
this litigation into the Federal judicial system. Addressing 
the resulting caseload could require substantial additional 
Federal resources.'' \12\
---------------------------------------------------------------------------
    \12\ See Letter from L. Anthony Sutin, Acting Assistant Attorney 
General, U.S. Department of Justice Office of Legislative Affairs, to 
the Honorable Howard Coble, Chairman, Subcommittee on Courts and 
Intellectual Property, House Judiciary Committee 1 (June 18, 1998) (on 
file with the minority staff of the House Judiciary Committee).
---------------------------------------------------------------------------
    In actuality, the workload problem in the Federal courts 
continues to be at an acute stage. For example, in 2001, the 
Federal courts faced the following:

         On February 2, 2002, 68 judicial vacancies 
        existed, or over 10% of the Federal judicial 
        positions.\13\
---------------------------------------------------------------------------
    \13\ See generally Judicial Nominations, Department of Justice, 
Office of Legal Policy, available at http://www.usdoj.gov/olp/
judicialnominations.htm (last viewed February 2, 2002).

         On average, Federal district court judges had 
        416 civil filings pending.\14\
---------------------------------------------------------------------------
    \14\ See Admin. Office of the U.S. Courts, Annual Report of the 
Director of the Administrative Office of the United States Courts 
(2000).

    It is because of these and other workload problems that 
Chief Justice Rehnquist took the important step of criticizing 
Congress for taking actions which have exacerbated the courts' 
---------------------------------------------------------------------------
workload problem:

        I also criticized Congress and the president for their 
        propensity to enact more and more legislation which 
        brings more and more cases into the Federal court 
        system. This criticism received virtually no public 
        attention. . . . [I]f Congress enacts, and the 
        president signs, new laws allowing more cases to be 
        brought into the Federal courts, just filling the 
        vacancies will not be enough. We will need additional 
        judgeships.\15\
---------------------------------------------------------------------------
    \15\ Chief Justice William Rehnquist, An Address to the American 
Law Institute, Rehnquist: Is Federalism Dead? (May 11, 1998), in Legal 
Times (May 18, 1998).

    Further, the Judicial Conference of the United States also 
has serious reservations regarding this legislation. In a 
letter last Congress opposing class action legislation, the 
---------------------------------------------------------------------------
Judicial Conference stated the following:

        While it is difficult to predict with precision the 
        impact that the federalization of class actions will 
        have on the Federal judicial system, one can predict 
        with confidence that it will impose a very substantial 
        burden . . . the federalization of class actions holds 
        the potential for increasing significantly the number 
        of such cases currently being litigated in the Federal 
        system.\16\
---------------------------------------------------------------------------
    \16\ See supra note 2.
---------------------------------------------------------------------------
B. Impact on the State Courts
    In addition to its impact on the Federal courts, the 
legislation will also undermine state courts. This is because 
in cases where the 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. 
It is important to recall the context in which this legislation 
arises--a class action has been filed in state court involving 
numerous state law claims, each of which if filed separately 
would not be subject to Federal jurisdiction (either because 
the parties are not considered to be diverse or the amount in 
controversy for each claim does not exceed $75,000). When these 
individual cases are returned to the state courts upon remand, 
hundreds if not thousands of potential new cases may be 
unleashed.\17\
---------------------------------------------------------------------------
    \17\ To counter this problem, Congressman Berman, Frank, and Meehan 
offered an amendment at the Judiciary Committee markup that provided 
that if after removal, the Federal court determines that no aspect of 
an action that is subject to its jurisdiction may be maintained as a 
Federal class action, the court shall remand the action to the State 
court without prejudice. This amendment would respond to the most 
serious complaint leveled by class action defendants by allowing the 
Federal court the first opportunity of certifying but not denying the 
State court jurisdiction over the class action if the court determined 
it did not meet the Federal requirement. The amendment was defeated 9 
to 14.
---------------------------------------------------------------------------
    In addition to these workload problems, the legislation 
raises constitutional issues. H.R. 2341 does not merely operate 
to preempt an area of state law, rather it unilaterally strips 
the state courts of their ability to use the class action 
procedural device to resolve state law disputes. As the 
Conference of Chief Justices stated, the legislation in essence 
``unilaterally transfer[s] jurisdiction of a significant 
category of cases from state to Federal courts'' and is a 
``drastic'' distortion and disruption of traditional notions of 
judicial federalism.\18\
---------------------------------------------------------------------------
    \18\ See id.
---------------------------------------------------------------------------
    In this regard, the courts have previously found that 
efforts by Congress to dictate such state court procedures 
implicate important Tenth Amendment federalism issues and 
should be avoided. For example, in Felder v. Casey \19\ the 
Supreme Court observed that it is an ``unassailable proposition 
. . . that States may establish the rules of procedure 
governing litigation in their own courts.'' Similarly in 
Johnson v. Fankell \20\ the Court reiterated what it termed 
``the general rule `bottomed deeply in belief in the importance 
of State control of State judicial procedure . . . that Federal 
law takes State courts as it finds them' '' \21\ and observed 
that judicial respect for the principal of federalism ``is at 
its apex when we confront a claim that Federal law requires a 
State to undertake something as fundamental as restructuring 
the operation of its courts'' and ``it is a matter for each 
State to decide how to structure its judicial system.'' \22\
---------------------------------------------------------------------------
    \19\ 487 U.S. 131, 138 (1988) (finding Wisconsin notice-of-claim 
statute to be preempted by 42 U.S.C. Sec. 1983, which holds anyone 
acting under color of law liable for violating constitutional rights of 
others).
    \20\ 520 U.S. 911 (1997) (holding that Idaho procedural rules 
concerning appealability of orders are not preempted by 42 U.S.C. 
Sec. 1983).
    \21\ Id. at 919 (quoting Henry M. Hart, Jr., The Relations Between 
State and Federal Law, 54 Colum. L. Rev. 489, 508 (1954)).
    \22\ Id. at 922. See also Howlett v. Rose, 496 U.S. 356, 372 (1990) 
(quoting Henry M. Hart, Jr., The Relations Between State and Federal 
Law, 54 Colum. L. Rev. 489, 508 (1954) for the proposition that Federal 
law should not alter the operation of the state courts); New York v. 
United States, 505 U.S. 144, 161 (1992) (stating that a law may be 
struck down on federalism grounds if it ``commandeer[s] the legislative 
processes of the States by directly compelling them to enact and 
enforce a Federal regulatory program''); Printz v. United States, 117 
S.Ct. 2365 (1997) (invalidating portions of the Brady Handgun Violence 
Protection Act requiring local law enforcement officials to conduct 
background checks on prospective gun purchasers).
---------------------------------------------------------------------------
    These same constitutional concerns were highlighted by 
Professor Laurence Tribe in his testimony regarding the 
constitutionality of a proposed Federal class action rule 
applicable to state courts included in tobacco legislation 
proposed during the 105th Congress. He observed, ``[f]or 
Congress directly to regulate the procedures used by state 
courts in adjudicating state-law tort claims--to forbid them, 
for example, from applying their generally applicable class 
action procedures in cases involving tobacco suits--would raise 
serious questions under the Tenth Amendment and principles of 
federalism.'' \23\
---------------------------------------------------------------------------
    \23\ The Global Tobacco Settlement: Hearings Before the Senate 
Comm. on the Judiciary, 105th Cong., (1997) (statement of Laurence H. 
Tribe, Tyler Professor of Law, Harvard Law School).
---------------------------------------------------------------------------
    Arguments that the bill is nonetheless justified because 
state courts are ``biased'' against out of state defendants in 
class action suits also lacks foundation.\24\ First, 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. In 
Phillips Petroleum Co. v. Shutts,\25\ the Supreme Court held 
that in class action cases, state courts must assure that: (1) 
the defendant receives notice plus an opportunity to be heard 
and participate in the litigation; \26\ (2) an absent plaintiff 
must be provided with an opportunity to remove himself or 
herself from the class; (3) the named plaintiff must at all 
times adequately represent the interests of the absent class 
members; and (4) the forum state must have a significant 
relationship to the claims asserted by each member of the 
plaintiff class.\27\
---------------------------------------------------------------------------
    \24\ Of course the entire premise of the argument would need to be 
based on bias by the judges, since the juries would be derived from 
citizens of the state where the suit is brought, whether the case is 
considered in state or Federal court.
    \25\ 472 U.S. 797 (1985).
    \26\ The notice must be the ``best practicable, reasonably 
calculated, under all the circumstances, to appraise interested parties 
of the pendency of the action and afford them an opportunity to present 
their objections.'' Id. at 812 (quoting Mullane v. Central Hanover Bank 
& Trust Co., 339 U.S. 306, 314-15 (1950)).
    \27\ See id. at 806-810. These findings were reiterated by the 
Supreme Court in 1995 in Matshusita Elec. Indust. Co. v Epstein, 516 
U.S. 367 (1995) (state class actions entitled to full faith and credit 
so long as, inter alia, the settlement was fair, reasonable, and 
adequate and in the best interests of the settlement class; notice to 
the class was in full compliance with due process; and the class 
representatives fairly and adequately represented class interests).
---------------------------------------------------------------------------
    Secondly, it is important to note that as fears of local 
court prejudice have subsided and concerns about diverting 
Federal courts from their core responsibilities increased, the 
policy trend in recent years has been towards limiting Federal 
diversity jurisdiction.\28\ For example, less than 6 years ago 
Congress enacted the Federal Courts Improvement Act of 
1996,\29\ which increased the amount in controversy requirement 
needed to remove a diversity case to Federal court from $50,000 
to $75,000. This statutory change was based on the Judicial 
Conference's determination that fear of local prejudice by 
state courts was no longer relevant \30\ and that it was 
important to keep the Federal judiciary's efforts focused on 
Federal issues.\31\ In this same regard, the American Law 
Institute has found ``there is no longer the kind of prejudice 
against citizens of other states that motivated the creation of 
diversity jurisdiction,'' \32\ and the most recent Federal 
Courts Study Committee report on the subject concluded that 
local bias ``is no longer a major threat to litigation 
fairness'' particularly when compared to other types of 
prejudice that litigants may face, such as on account of 
religion, race or economic status.\33\ Indeed, in 1978, the 
House twice passed legislation that would have abolished 
general diversity jurisdiction.\34\
---------------------------------------------------------------------------
    \28\ Ironically, during the 105th Congress, the Republican Party 
was extolling the virtues of state courts in the context of their 
efforts to limit habeas corpus rights, which permit individuals to 
challenge unconstitutional state law convictions in Federal court. At 
that time Chairman Hyde stated:

      I simply say the state judge went to the same law school, 
      studied the same law and passed the same bar exam that the 
      Federal judge did. The only difference is the Federal judge 
      was better politically connected and became a Federal 
      judge. But I would suggest . . . when the judge raises his 
      hand, State court or Federal court, they swear to defend 
      the U.S. Constitution, and it is wrong, it is unfair to 
      assume, ipso facto, that a State judge is going to be less 
      sensitive to the law, less scholarly in his or her decision 
---------------------------------------------------------------------------
      than a Federal judge.

142 Cong. Rec. H3604. (daily ed. April 18, 1996).
---------------------------------------------------------------------------
    \29\ 28 U.S.C. Sec. 1332(a) (West Supp. 1998).
    \30\ The Judicial Conference of the United States, Long Range Plan 
for the Federal Courts, Recommendation 7 at 30 (1995).
    \31\ Id.
    \32\ American Law Institute, Study of the Division of Jurisdiction 
Between State and Federal Courts 101, 106 (1996).
    \33\ Federal Courts Study Committee, Report of the Federal Courts 
Study Committee 40 (April 2, 1990). See also, Ball, Revision of Federal 
Diversity Jurisdiction, 28 Ill. L. Rev. 356 (1988); Bork, Dealing with 
the Overload in Article III Courts, 1976, 70 F.R.D. 231, 236-237 
(1976); Butler & Eure, Diversity in the Court System: Let's Abolish It, 
11 Va.B.J. 4, (1995); Coffin, Judicial Gridlock: The Case for 
Abolishing Diversity Jurisdiction, 10 Brookings Rev. 34 (1992); Currie, 
The Federal Courts and the American Law Institute, 36 U. Chi. L. Rev. 
1, 1-49 (1968); Feinberg, Is Diversity Jurisdiction An Idea Whose Time 
Has Passed?, N. Y. St. B. J. 14 (1989); Frankfurter, Distribution of 
Judicial Power Between United States and State Courts, 13 Corn. L. Q. 
499 (1928); Frankfurter, A Note on Diversity Jurisdiction--In Reply to 
Professor Yntema, 79 U. Pa. L. Rev. 1097 (1931); Haynsworth, Book 
Review, 87 Harv. L. Rev. 1082, 1089-1091 (1974); Hunter, Federal 
Diversity Jurisdiction: The Unnecessary Precaution, 46 UMKC L. Rev. 347 
(1978); Jackson, The Supreme Court in the American System of 
Government, 38 (1955); Sheran & Isaacman, State Cases Belong In State 
Courts, 12 Creighton L. Rev. 1 (1978).
    \34\ See 124 Cong. Rec. 5008 (1978); 124 Cong. Rec. 33, 546 (1978). 
The legislation was not considered in the Senate.
---------------------------------------------------------------------------
    Thirdly, as the legislation is currently written, it 
assumes a defendant will be automatically subject to prejudice 
in any state where the corporation is not formally incorporated 
(typically Delaware) or maintains its principal place of 
business. In so doing, it can be said the bill ignores the fact 
that many large businesses have a substantial commercial 
presence in more than one state, through factories, business 
facilities or employees. For example, if General Motors or Ford 
were to be sued by a class of plaintiffs in Ohio, where they 
have numerous factories and tens of thousands of employees, it 
does not seem reasonable to expect the defendants to face any 
great risk of bias.\35\ Similarly, if the Disney Corporation, 
one of Florida's largest employers, were to face a class action 
brought by a class of plaintiffs in a Florida court, it would 
make little sense to involve the Federal courts of concern of 
local prejudice.\36\ Yet under H.R. 2341, both of these 
hypothetical cases would be subject to removal to Federal 
court.\37\
---------------------------------------------------------------------------
    \35\ General Motors and Ford both have their principal place of 
business in Michigan and are incorporated in Delaware.
    \36\ Disney's corporate headquarters are located in Burbank, 
California, and it is incorporated in Delaware.
    \37\ With increasing frequency, companies are setting up paper 
companies in places like Bermuda for a nominal fee. The company 
continues to be owned by the U.S. shareholder and continues to do 
business in the exact same U.S. locations. This allows the company to 
escape substantial tax liability and possibly avoid legal liability. To 
stop this abuse, Representative John Conyers, Jr. offered an amendment 
at the Judiciary Committee markup, which would allow former U.S. 
companies to be treated as domestic corporations for class action 
purposes. This amendment was defeated by voice vote.
---------------------------------------------------------------------------
    It is for these reasons that the State courts believe that 
the enactment of the legislation goes against the underlying 
judicial principles of our system of government. Specifically, 
the Conference of Chief Justices said in a letter opposing a 
predecessor version of the bill, ``So drastic a distortion and 
disruption of judicial federalism is not justified, absent 
clear evidence of the inability of the state judicial systems 
to process and decide class action cases in a fair and 
impartial manner and in timely fashion.'' \38\
---------------------------------------------------------------------------
    \38\ Letter from Chief Justice David A. Brock , President of the 
Conference of Chief Justices to Congressman Henry J. Hyde, Chairman of 
the Committee on the Judiciary (July 19, 1999)(on file with the House 
Judiciary Committee Democratic Staff).
---------------------------------------------------------------------------

   II. H.R. 2341 Will Weaken Enforcement of Laws Concerning Consumer 
          Health and Safety, the Environment, and Civil Rights

    H.R.2341 will have a serious adverse impact on the ability 
of consumers and other harmed individuals to obtain 
compensation in cases involving widespread harm. At a minimum, 
the legislation will force most state class action claims into 
Federal courts where it is likely to be far more expensive for 
plaintiffs to litigate cases and where defendants could force 
plaintiffs to travel long distances to attend proceedings.
    It is also likely to be far more difficult and time 
consuming to certify a class action in Federal court. In 1999, 
fourteen states, representing some 29% of the nation's 
population,\39\ adopted different criteria for class action 
rules than Rule 23 of the Federal rules of civil procedure.\40\ 
In addition, with respect to those states which have enacted a 
counterpart to Rule 23, the Federal courts are likely to 
represent a far more difficult forum for class certification to 
occur. This is because, as noted above, in recent years a 
series of adverse Federal precedent, has made it more difficult 
to establish the predominance requirement of rule 23(b)(3) 
necessary to establish a class action under the Federal rules.
---------------------------------------------------------------------------
    \39\ See Hearing on H.R. 1875 Before the House Comm. On the 
Judiciary, 106th Cong. (1999)(statement of Brian Wolfman, Staff 
Attorney, Public Citizen)[hereinafter Wolfman testimony](stating ``H.R. 
1875 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 alleged `crisis' in state-
court class action litigation.'').
    \40\ See supra note 2.
---------------------------------------------------------------------------
    Further, the legislation will inevitably result in 
substantial delay before civil class action claimants are able 
to obtain a trial date in Federal court. Given the backlog in 
the Federal courts and the fact that the Federal courts are 
obligated to resolve criminal matters on an expedited basis 
before civil matters,\41\ even where plaintiffs are able to 
successfully certify a class action in Federal court, it will 
take longer to obtain a trial on the merits than it would in 
state court.
---------------------------------------------------------------------------
    \41\ Speedy Trial Act of 1974, 18 U.S.C. Sec. Sec. 3161-3174 
(1994).
---------------------------------------------------------------------------
    The legislation also poses unique risks and obstacles for 
plaintiffs that they do not face under current law. Because the 
Federal courts are required to dismiss cases they choose not to 
certify, plaintiffs will be foreclosed from forming a 
reconstituted class in state court upon remand which conforms 
to the legislation's requirements.\42\
---------------------------------------------------------------------------
    \42\ For example, if certification had been denied by the Federal 
court because a particular conflict among the class members made it 
impossible to meet the ``adequate representation'' requirement of 
Federal Rule of Civil Procedure 23(a)(4), the plaintiffs in the 
remanded action would likely be prohibited from narrowing the class in 
an effort to resolve that conflict.
---------------------------------------------------------------------------
    Consumers may also be disadvantaged by the vague terms used 
in the legislation. The terms ``substantial majority'' of 
plaintiffs, ``primary defendants,'' and claims ``primarily'' 
governed by a state's laws \43\ are new and undefined phrases 
with no precedent in the United States Code or the case law. It 
will take many years and conflicting decisions before these 
critical terms can begin to be sorted out. The vagueness 
problems will be particularly acute for plaintiffs--if they 
guess incorrectly regarding the meaning of a particular phrase, 
their class action could be permanently preempted and barred. 
However, if a defendant guesses wrong and jurisdiction does not 
lie in the Federal courts, the defendant will be no worse off 
than they are under present law, and will have benefitted from 
the additional time delays caused by the failed removal motion.
---------------------------------------------------------------------------
    \43\ H.R. 2341 Sec. 4, 107th Cong. (2001).
---------------------------------------------------------------------------
    The legislation goes so far as to federalize all consumer 
protection actions, regardless of whether or not they involve 
large classes of nationwide plaintiffs, or even a class of 
plaintiffs at all. For instance, some states have laws that 
protect consumers by prohibiting deceptive business 
practices.\44\ These laws may be enforced by the State Attorney 
General or, if the State Attorney General does not act, the 
state citizens may act as a private attorney general. Although 
such a suit may have been brought by private citizens, this 
legislation may force the case into Federal court because the 
private citizen also represents the interest of the ``general 
public''.\45\
---------------------------------------------------------------------------
    \44\ Michigan and California are two states that have ``private 
attorney general'' suits.
    \45\ H.R. 2341 Sec. 4(a). Representatives Lofgren and Schiff 
introduced an amendment to address this issue. The amendment limited 
the bill to affect only consumer class actions. This amendment failed 
11 to 17.
---------------------------------------------------------------------------
    The net result of these various changes is that under the 
legislation it will be far more difficult for consumers and 
other harmed individuals to obtain justice in class action 
cases at the state or Federal level. This means, as noted 
above, it will be far more difficult for consumers to bring 
class actions in state court involving violations of fraud, 
health and safety laws, and environmental laws.\46\
---------------------------------------------------------------------------
    \46\ For example, in an incident in Washington state, the parent 
company of Jack-in-the-Box restaurants agreed to pay $14 million in a 
class-action settlement. The class included 500 people, mostly 
children, who became sick in early 1993 after eating undercooked 
hamburgers tainted with E. coli bacteria. The Washington Superior Court 
in King County approved the settlement on September 25, 1996.
---------------------------------------------------------------------------
  Another example of a state class action is a recent case in Richmond, 
California. On July 26, 1993, a railroad tank car filled with Oleum, a 
sulfuric acid compound, leaked from General Chemical's Richmond, 
California plant when a valve malfunctioned during unloading. A cloud 
of chemicals formed over a heavily-populated community in North 
Richmond, and over 24,000 people sought medical treatment in the days 
immediately following the leak. Individual plaintiffs received up to 
$3,500 in compensation.
    H.R. 2341 also poses unique risks and obstacles for 
plaintiffs that they do not face under current law. Under H.R. 
2341, if the district court determines that the action subject 
to its jurisdiction does not satisfy the requirements of 
Federal Rule of Civil Procedure 23, the court must dismiss the 
action. This has the effect of striking the class action claim 
and forcing all states to conform to Federal class actions 
standards.\47\ While the class action may be refiled again, any 
such refiled action may be removed again to Federal court. 
Therefore, even if a state court would subsequently certify the 
class, it could be removed again, creating a revolving door 
between Federal and state court--hardly a desirable result. As 
Consumers Union has written about this feature of the bill 
stating, ``This legal `ping-pong' could well deprive consumers 
of access to their own state courts, and ultimately deny them 
their day in court through the class action process--in many 
cases their only effective remedy.'' \48\
---------------------------------------------------------------------------
    \47\ In this regard, it is unfortunate the Majority rejected an 
amendment offered by Representatives Conyers, Berman and Meehan which 
would have largely eliminated the federalism problem by amending the 
bill to simply allow the Federal courts the first opportunity of 
certifying a class action, but not to deny state court jurisdiction 
over the class action if the court determined it did not meet Federal 
requirements. This would have responded to the most serious complaint 
leveled by corporate defendants, that class actions encourage a race to 
the court house by permitting the Federal courts to use their powers to 
consolidate class actions into a single forum in the appropriate 
circumstances.
    \48\ See Consumers Union letter.
---------------------------------------------------------------------------
    Consumers will also be disadvantaged by the vague terms 
used in the legislation. The terms ``substantial majority'' of 
plaintiffs, ``primary defendants,'' and claims ``primarily'' 
governed by a state's laws \49\ are new and undefined phrases 
with no antecedent in the United States Code or the case law. 
It will take many years and conflicting decisions before these 
critical terms can begin to be sorted out.
---------------------------------------------------------------------------
    \49\ H.R. 2341, Sec. 4(a).
---------------------------------------------------------------------------
    The net result is that under the legislation it will be far 
more difficult for consumers and other harmed individuals to 
obtain justice in class action cases at the state or Federal 
level. The types of cases affected by this legislation range 
from consumer fraud and health and safety to environmental and 
civil rights actions. The following are examples of important 
class actions previously brought at the state level, but which 
could have been forced into Federal court under H.R. 2341, 
where the actions may be delayed or rejected:

         In the Baptist Foundation of Arizona case, a 
        mirror image of the Enron scandal, the Foundation 
        issued worthless notes and sold them in many Arizona 
        communities. Approximately 13,00 investors in Baptist 
        Foundation of Arizona case loss millions of dollars in 
        this scheme in ``off the books'' transactions with sham 
        companies that were controlled by the Foundation and 
        corporate insiders. As it was, the victims were able to 
        bring a successful state class action suit against 
        Arthur Anderson which resulted in a $217 million 
        settlement. If H.R. 2341 was law, this case would have 
        been forced into Federal court because the legislation 
        provides no exemption for state securities claims.\50\
---------------------------------------------------------------------------
    \50\ Craig Harris, Andersen settles Baptist Suit, azcentral.com 
(March 2, 2002), http://www.arizonarepublic.com; Settlement Sum Revives 
Hope for Baptist Investors: Andersen to pay $217 million (March 3, 
2002)http://www.arizonarepublic.com.

         The proposed legislation would also make it 
        far more difficult to maintain class action cases such 
        as the Firestone/Ford Explorer tire liability case. A 
        lawsuit is currently pending in South Carolina state 
        court against Firestone and Ford charging that the two 
        companies were ``negligent and careless'' in producing 
        and distributing tires that went on Ford vehicles. On 
        December 28, 2001, the Circuit Court in Greenville, 
        South Carolina certified the lawsuit as a class action, 
        allowing South Carolina residents to join the lawsuit 
        against Firestone and Ford. If the proposed legislation 
        was enacted, this case could automatically be removed 
        from state court to federal court at the election of 
        the defendant making it difficult to keep the lawsuit 
---------------------------------------------------------------------------
        as a class action.

         Foodmaker Inc., a Delaware corporation and 
        the parent company of Jack-in-the-Box restaurants, 
        agreed to pay $14 million in a state class-action 
        settlement involving a violation of Washington's 
        negligence law. The class included 500 people, mostly 
        children and Washington residents, who became sick in 
        early 1993 after eating undercooked hamburgers tainted 
        with E. coli 0157:H7 bacteria. The victims suffered 
        from a wide range of illnesses, from more benign 
        sicknesses to those that required kidney dialysis. 
        Three children died.\51\
---------------------------------------------------------------------------
    \51\ The settlement was approved on 25 September 1996 in King 
County, Washington Superior Court. ``Last Jack in the Box Suit 
Settled,'' Seattle Times, October 30, 1997 at B3.

         Equitable Life Assurance Company, an Iowa 
        corporation, agreed to a $20 million settlement of two 
        class-action lawsuits involving 130,000 persons filed 
        in Pennsylvania and Arizona state courts. The class 
        action alleged that Equitable misled consumers, in 
        violation of state insurance fraud law, when trying to 
        sell ``vanishing premium'' life insurance policies in 
        the 1980's. Equitable sold the policies when interest 
        rates were high, informing potential customers that 
        after a few years, once the interest generated by their 
        premiums was sufficiently high, their premium 
        obligations would be terminated. However, when interest 
        rates dropped, customers ended up having to continue to 
        pay the premium in full.\52\
---------------------------------------------------------------------------
    \52\ See David Elbert, ``Lawsuits to Cost Equitable $20 Mill,'' Des 
Moines Register, July 19, 1997 at 12 and ``Cost of Settling Lawsuits 
Pulls Equitable Earnings Down,'' Des Moines Register, August 6, 1997 at 
10.

         On July 26, 1993, a California plant operated 
        by General Chemical, a Delaware corporation with 
        offices in New Jersey, erupted leading to a hazardous 
        pollution cloud when a valve malfunctioned during the 
        unloading of a railroad tank car filled with Oleum, a 
        sulfuric acid compound. The cloud settled directly over 
        North Richmond, California, a heavily-populated 
        community, resulting in over 24,000 residents needing 
        medical attention. General Chemical entered into a 
        settlement for violation of California negligence law 
        with 60,000 North Richmond residents who were injured 
        or sought treatment for the effects of the cloud, or 
        were forced to evacuate their homes. Individual 
        plaintiffs received up to $3,500 in compensation.\53\
---------------------------------------------------------------------------
    \53\ See Mealey's Litigation Reports: Toxic Torts, $180 Million 
Settlement of Toxic Cloud Claims Wins Judges O.K., November 17, 1995 at 
8.

         On April 21 of this year, Nationwide entered 
        into a state class action settlement concerning a 
        redlining discrimination claim with the Toledo, Ohio 
        Fair Housing Center. The lawsuit had been brought in 
        Ohio state court by residents living in Toledo's 
        predominately black neighborhoods, and charged that 
        Nationwide redlined African-American neighborhoods by 
        discouraging homeowners in minority neighborhoods from 
        buying insurance and by denying coverage to houses 
        under a certain value or a certain age. As a result of 
        the settlement, Nationwide agreed to modify its 
        underwriting criteria, increase its agency presence, 
        step up its marketing in Toledo's black neighborhoods. 
        Nationwide also agreed to place up to $2 million in an 
        interest-bearing account to provide compensation to 
        qualified class members, and agreed to deposit $500,000 
        with a bank willing to offer low-interest loans to 
        residents buying homes in Toledo's black 
        neighborhoods.\54\
---------------------------------------------------------------------------
    \54\ See Toledo Fair Hous. Ctr. v. Nationwide Mut. Ins. Co., No 
CI93-1685, Ohio Comm. Pls, Lucas County; see also ``Nationwide and Ohio 
Fairhousing Announce Attempt to Settle Class Action,'' Mealey's 
Insurance Law Weekly, April 27, 1998 at 3.

         Under current law, class action claims 
        against managed care must often distinguish between 
        ERISA and non-ERISA patients. Non-ERISA patients have a 
        full range of remedies available to them under state 
        law. On the other hand, ERISA patients have a very 
        limited set of remedies--the cost of the benefit 
        denied, which in most cases is woefully inadequate. The 
        managed care reform debate in Congress includes the 
        elimination of the ERISA preemption which would allow 
        patients who receive their health care from their 
        employer to hold their HMO accountable if it denies 
        care. However, legislation such as H.R. 2341 would move 
        in the opposite direction by enacting legislation which 
        would deny more patients access to justice in state 
        court.\55\ Moreover, the House passed the Patients Bill 
        of Rights legislation, H.R. 2653, which contained 
        severe restrictions on class actions against HMO's such 
        as limiting class action lawsuits under ERISA and RICO 
        to participants in a group health plan established by a 
        sign plan sponsor. This restriction was contained in 
        the Norwood Amendment to the Patients Bill of Rights.
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    \55\ One example is Kaitlin v. Tremoglie, et al., No. 002703 (Pa. 
Comm. Pls., Philadelphia Co. 1997). On June 23, 1997, Harold Kaitlin 
filed a class action in Pennsylvania State court against his 
psychiatrist, David Tremoglie, and Keystone Health Plan East Inc., his 
HMO, alleging that thee psychiatrist had treated hundreds of patients 
without a medical license. The case was filed on behalf of himself and 
all other patients treated by Tremoglie at the Bustleton Guidance 
Center. The suit alleges that the class was treated by an unlicenced 
and fraudulent psychiatrist who unlawfully prescribed powerful 
medications not suitable for their illness and that the HMO failed to 
verify that Tremoglie was a licensed psychiatrist, failed to supervise 
him, and referred patients to him.

         The regulation of funeral homes, cemeteries 
        and crematoria should remain an issue best handled by 
        state courts. However, federalizing of such class 
        actions under this bill likely would force these 
        families to travel untold miles from their homes--in 
        some cases into entirely different states--just to 
        exercise their legal rights. For example, the largest 
        operator of funeral homes in the United States is the 
        defendant in a state class action in Florida accuses 
        Services Corporation International, a Texas Corporation 
        and owner of Menorah Gardens, of breaking open burial 
        vaults and dumping the remains in a wooded area, 
        crushing vaults to make room for others, mixing body 
        parts from different individuals, and digging up and 
        reburying remains in locations other than the plots 
        purchased.\56\ Similarly, in Georgia, Tri-State 
        Crematory failed to cremate bodies and return remains 
        to loved ones. Although the issues raised in this class 
        action are clearly state issues, such a class action 
        would be removable to Federal court under H.R. 2341.
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    \56\ Joel Engelhardt, State Seeks Control of Menorah Gardens, The 
Palm Beach Post, March 2, 2002 at 1A.
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                               Conclusion

    H.R. 2341 will remove class actions involving state law 
issues from state courts--the forum most convenient for victims 
of wrongdoing to litigate and most familiar with the 
substantive law involved--to the Federal courts--where the 
class is less likely to be certified and the case will take 
longer to resolve. In our view, this incursion into state court 
prerogatives is no less dangerous to the public than many of 
the radical forms of ``tort reform'' and ``court stripping'' 
legislation previously rejected by the Congress.
    Contrary to supporters' assertions, H.R. 2341 will not 
serve to prevent state courts from unfairly certifying class 
actions without granting defendants an opportunity to respond. 
This is already barred by the Constitution,\57\ and the few 
state trial court decisions to the contrary have been 
overturned.\58\ H.R. 2341 also cannot be seen as merely 
prohibiting nationwide class actions filed in state court. The 
legislation goes much further and bars state class actions 
filed solely on behalf of residents of a single state, which 
solely involve matters of that state's law, so long as one 
plaintiff resides in a different state than one defendant--an 
extreme and distorted definition of diversity which does not 
apply in any other legal proceeding.
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    \57\ See supra notes 26-28 and accompanying text.
    \58\ See Ex Parte State Mut. Ins. Co., 715 So.2d 207 (Ala. 1997); 
Ex Parte Am. Bankers Life Assurance Co. of Florida, 715 So.2d 207 (Ala. 
1997) (holding 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).
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    This legislation would seriously undermine the delicate 
balance between our Federal and state courts. At the same time 
it would threaten to overwhelm Federal courts by causing the 
removal of resource intensive state class action cases to 
Federal district courts, it also will increase the burdens on 
state courts as class actions rejected by Federal courts 
metamorphasize into numerous additional individual state 
actions. We therefore strongly oppose H.R. 2341.

                                   John Conyers, Jr.
                                   Howard L. Berman.
                                   Jerrold Nadler.
                                   Robert C. Scott.
                                   Melvin L. Watt.
                                   Zoe Lofgren.
                                   Sheila Jackson Lee.
                                   Maxine Waters.
                                   Martin T. Meehan.
                                   William D. Delahunt.
                                   Tammy Baldwin.

                                  
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