II

Calendar No. 732

106TH CONGRESS

2D SESSION S. 353

To provide for class action reform, and for other purposes.

IN THE SENATE OF THE UNITED STATES

FEBRUARY 3, 1999

Mr. GRASSLEY (for himself, Mr. KOHL, Mr. THURMOND, Mr. SESSIONS, Mr.

HELMS, Mr. ABRAHAM, Mr. COVERDELL, and Mr. GRAMM) introduced

the following bill; which was read twice and referred to the Committee

on the Judiciary

JULY 27, 2000

Reported by Mr. HATCH, with an amendment

[Strike out all after the enacting clause and insert the part printed in italic]

A BILL

To provide for class action reform, and for other purposes.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Class Action Fairness

5 Act of 1999’’.
2

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1 SEC. 2. NOTIFICATION REQUIREMENT OF CLASS ACTION

2 CERTIFICATION OR SETTLEMENT.

3 (a) IN GENERAL.—Part V of title 28, United States

4 Code, is amended by inserting after chapter 113 the fol5 lowing new chapter:

6 ‘‘CHAPTER 114—CLASS ACTIONS

‘‘Sec.

‘‘1711. Definitions.

‘‘1712. Application.

‘‘1713. Notification of class action certifications and settlements.

‘‘1714. Limitation on attorney’s fees in class actions.

7 ‘‘§ 1711. Definitions

8 ‘‘In this chapter the term—

9 ‘‘(1) ‘class’ means a group of persons that com10 prise parties to a civil action brought by 1 or more

11 representative persons;

12 ‘‘(2) ‘class action’ means a civil action filed pur13 suant to rule 23 of the Federal Rules of Civil Proce14 dure or similar State rules of procedure authorizing

15 an action to be brought by 1 or more representative

16 persons on behalf of a class;

17 ‘‘(3) ‘class certification order’ means an order

18 issued by a court approving the treatment of a civil

19 action as a class action;

20 ‘‘(4) ‘class member’ means a person that falls

21 within the definition of the class;

22 ‘‘(5) ‘class counsel’ means the attorneys rep23 resenting the class in a class action;
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1 ‘‘(6) ‘plaintiff class action’ means a class action

2 in which class members are plaintiffs; and

3 ‘‘(7) ‘proposed settlement’ means a settlement

4 agreement between or among the parties in a class

5 action that is subject to court approval before the

6 settlement becomes binding on the parties.

7 ‘‘§ 1712. Application

8 ‘‘This chapter shall apply to—

9 ‘‘(1) all plaintiff class actions filed in Federal

10 court; and

11 ‘‘(2) all plaintiff class actions filed in State

12 court in which—

13 ‘‘(A) any class member resides outside the

14 State in which the action is filed; and

15 ‘‘(B) the transaction or occurrence that

16 gave rise to the class action occurred in more

17 than 1 State.

18 ‘‘§ 1713. Notification of class action certifications and

19 settlements

20 ‘‘(a) Not later than 10 days after a proposed settle21 ment in a class action is filed in court, class counsel shall

22 serve the State attorney general of each State in which

23 a class member resides and the Attorney General of the

24 United States as if such attorneys general and the Depart25 ment of Justice were parties in the class action with—
4

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1 ‘‘(1) a copy of the complaint and any materials

2 filed with the complaint and any amended com3 plaints (except such materials shall not be required

4 to be served if such materials are made electronically

5 available through the Internet and such service in6 cludes notice of how to electronically access such

7 material);

8 ‘‘(2) notice of any scheduled judicial hearing in

9 the class action;

10 ‘‘(3) any proposed or final notification to class

11 members of—

12 ‘‘(A)(i) the members’ rights to request ex13 clusion from the class action; or

14 ‘‘(ii) if no right to request exclusion exists,

15 a statement that no such right exists; and

16 ‘‘(B) a proposed settlement of a class ac17 tion;

18 ‘‘(4) any proposed or final class action settle19 ment;

20 ‘‘(5) any settlement or other agreement contem21 poraneously made between class counsel and counsel

22 for the defendants;

23 ‘‘(6) any final judgment or notice of dismissal;

24 ‘‘(7)(A) if feasible the names of class members

25 who reside in each State attorney general’s respec-
5

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1 tive State and the estimated proportionate claim of

2 such members to the entire settlement; or

3 ‘‘(B) if the provision of information under sub4 paragraph (A) is not feasible, a reasonable estimate

5 of the number of class members residing in each at6 torney general’s State and the estimated propor7 tionate claim of such members to the entire settle8 ment; and

9 ‘‘(8) any written judicial opinion relating to the

10 materials described under paragraphs (3) through

11 (6).

12 ‘‘(b) A hearing to consider final approval of a pro13 posed settlement may not be held earlier than 120 days

14 after the date on which the State attorneys general and

15 the Attorney General of the United States are served no16 tice under subsection (a).

17 ‘‘(c) Any court with jurisdiction over a plaintiff class

18 action shall require that—

19 ‘‘(1) any written notice provided to the class

20 through the mail or publication in printed media

21 contain a short summary written in plain, easily un22 derstood language, describing—

23 ‘‘(A) the subject matter of the class action;

24 ‘‘(B) the legal consequences of being a

25 member of the class action;
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1 ‘‘(C) the ability of a class member to seek

2 removal of the class action to Federal court if—

3 ‘‘(i) the action is filed in a State

4 court; and

5 ‘‘(ii) Federal jurisdiction would apply

6 to such action under section 1332(d);

7 ‘‘(D) if the notice is informing class mem8 bers of a proposed settlement agreement—

9 ‘‘(i) the benefits that will accrue to

10 the class due to the settlement;

11 ‘‘(ii) the rights that class members

12 will lose or waive through the settlement;

13 ‘‘(iii) obligations that will be imposed

14 on the defendants by the settlement;

15 ‘‘(iv) the dollar amount of any attor16 ney’s fee class counsel will be seeking, or

17 if not possible, a good faith estimate of the

18 dollar amount of any attorney’s fee class

19 counsel will be seeking; and

20 ‘‘(v) an explanation of how any attor21 ney’s fee will be calculated and funded;

22 and

23 ‘‘(E) any other material matter; and

24 ‘‘(2) any notice provided through television or

25 radio to inform the class members of the right of
7

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1 each member to be excluded from a class action or

2 a proposed settlement, if such right exists, shall, in

3 plain, easily understood language—

4 ‘‘(A) describe the persons who may poten5 tially become class members in the class action;

6 and

7 ‘‘(B) explain that the failure of a person

8 falling within the definition of the class to exer9 cise such person’s right to be excluded from a

10 class action will result in the person’s inclusion

11 in the class action.

12 ‘‘(d) Compliance with this section shall not provide

13 immunity to any party from any legal action under Fed14 eral or State law, including actions for malpractice or

15 fraud.

16 ‘‘(e)(1) A class member may refuse to comply with

17 and may choose not to be bound by a settlement agree18 ment or consent decree in a class action if the class mem19 ber resides in a State where the State attorney general

20 has not been provided notice and materials under sub21 section (a).

22 ‘‘(2) The rights created by this subsection shall apply

23 only to class members or any person acting on a class

24 member’s behalf, and shall not be construed to limit any
8

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1 other rights affecting a class member’s participation in the

2 settlement.

3 ‘‘(f) Nothing in this section shall be construed to im4 pose any obligations, duties, or responsibilities upon State

5 attorneys general or the Attorney General of the United

6 States.

7 ‘‘§ 1714. Limitation on attorney’s fees in class actions

8 ‘‘(a) In any class action, the total attorney’s fees and

9 expenses awarded by the court to counsel for the plaintiff

10 class may not exceed a reasonable percentage of the

11 amount of—

12 ‘‘(1) any damages and prejudgment interest ac13 tually paid to the class;

14 ‘‘(2) any future financial benefits to the class

15 based on the cessation of alleged improper conduct

16 by the defendants; and

17 ‘‘(3) costs actually incurred by all defendants in

18 complying with the terms of an injunctive order or

19 settlement agreement.

20 ‘‘(b) Notwithstanding subsection (a), to the extent

21 that the law permits, the court may award attorney’s fees

22 and expenses to counsel for the plaintiff class based on

23 a reasonable lodestar calculation.’’.

24 (b) TECHNICAL AND CONFORMING AMENDMENT.—

25 The table of chapters for part V of title 28, United States
9

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1 Code, is amended by inserting after the item relating to

2 chapter 113 the following:

‘‘114. Class Actions ............................................................................. 1711’’.

3 SEC. 3. DIVERSITY JURISDICTION FOR CLASS ACTIONS.

4 Section 1332 of title 28, United States Code, is

5 amended—

6 (1) by redesignating subsection (d) as sub7 section (e); and

8 (2) by inserting after subsection (c) the fol9 lowing:

10 ‘‘(d)(1) In this subsection, the terms ‘class’, ‘class ac11 tion’, and ‘class certification order’ have the meanings

12 given such terms under section 1711.

13 ‘‘(2) The district courts shall have original jurisdic14 tion of any civil action where the matter in controversy

15 exceeds the sum or value of $75,000, exclusive of interest

16 and costs, and is a class action in which—

17 ‘‘(A) any member of a class of plaintiffs is a

18 citizen of a State different from any defendant;

19 ‘‘(B) any member of a class of plaintiffs is a

20 foreign state or a citizen or subject of a foreign state

21 and any defendant is a citizen of a State; or

22 ‘‘(C) any member of a class of plaintiffs is a

23 citizen of a State and any defendant is a foreign

24 state or a citizen or subject of a foreign state.
10

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1 ‘‘(3) The district court shall abstain from hearing a

2 civil action described under paragraph (2) if—

3 ‘‘(A)(i) the substantial majority of the

4 members of the proposed plaintiff class are citi5 zens of a single State of which the primary de6 fendants are also citizens; and

7 ‘‘(ii) the claims asserted will be governed

8 primarily by the laws of that State; or

9 ‘‘(B) the primary defendants are States,

10 State officials, or other governmental entities

11 against whom the district court may be fore12 closed from ordering relief.

13 ‘‘(4) In any class action, the claims of the individual

14 members of any class shall be aggregated to determine

15 whether the matter in controversy exceeds the sum or

16 value of $75,000, exclusive of interest and costs.

17 ‘‘(5) This subsection shall apply to any class action

18 before or after the entry of a class certification order by

19 the court.

20 ‘‘(6)(A) A district court shall dismiss, or, if after re21 moval, strike the class allegations and remand, any civil

22 action if—

23 ‘‘(i) the action is subject to the jurisdiction of

24 the court solely under this subsection; and
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1 ‘‘(ii) the court determines the action may not

2 proceed as a class action based on a failure to sat3 isfy the conditions of rule 23 of the Federal Rules

4 of Civil Procedure.

5 ‘‘(B) Nothing in subparagraph (A) shall prohibit

6 plaintiffs from filing an amended class action in Federal

7 or State court.

8 ‘‘(C) Upon dismissal or remand, the period of limita9 tions for any claim that was asserted in an action on be10 half of any named or unnamed member of any proposed

11 class shall be deemed tolled to the full extent provided

12 under Federal law.

13 ‘‘(7) Paragraph (2) shall not apply to any class ac14 tion, regardless of which forum any such action may be

15 filed in, involving any claim relating to—

16 ‘‘(A) the internal affairs or governance of a cor17 poration or other form of entity or business associa18 tion arising under or by virtue of the statutory, com19 mon, or other laws of the State in which such cor20 poration, entity, or business association is incor21 porated (in the case of a corporation) or organized

22 (in the case of any other entity); or

23 ‘‘(B) the rights, duties (including fiduciary du24 ties), and obligations relating to or created by or

25 pursuant to any security (as defined under section
12

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1 2(a)(1) of the Securities Act of 1933 or the rules

2 and regulations adopted under such Act).’’.

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

4 (a) IN GENERAL.—Chapter 89 of title 28, United

5 States Code, is amended by adding after section 1452 the

6 following:

7 ‘‘§ 1453. Removal of class actions

8 ‘‘(a) In this section, the terms ‘class’, ‘class action’,

9 and ‘class member’ have the meanings given such terms

10 under section 1711.

11 ‘‘(b) A class action may be removed to a district court

12 of the United States in accordance with this chapter, ex13 cept that such action may be removed—

14 ‘‘(1) by any defendant without the consent of

15 all defendants; or

16 ‘‘(2) by any plaintiff class member who is not

17 a named or representative class member without the

18 consent of all members of such class.

19 ‘‘(c) This section shall apply to any class action be20 fore or after the entry of any order certifying a class.

21 ‘‘(d) The provisions of section 1446 relating to a de22 fendant removing a case shall apply to a plaintiff removing

23 a case under this section, except that in the application

24 of subsection (b) of such section the requirement relating

25 to the 30-day filing period shall be met if a plaintiff class
13

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1 member files notice of removal within 30 days after receipt

2 by such class member, through service or otherwise, of the

3 initial written notice of the class action.

4 ‘‘(e) This section shall not apply to any class action,

5 regardless of which forum any such action may be filed

6 in, involving any claim relating to—

7 ‘‘(1) the internal affairs or governance of a cor8 poration or other form of entity or business associa9 tion arising under or by virtue of the statutory, com10 mon, or other laws of the State in which such cor11 poration, entity, or business association is incor12 porated (in the case of a corporation) or organized

13 (in the case of any other entity); or

14 ‘‘(2) the rights, duties (including fiduciary du15 ties), and obligations relating to or created by or

16 pursuant to any security (as defined under section

17 2(a)(1) of the Securities Act of 1933 or the rules

18 and regulations adopted under such Act).’’.

19 (b) REMOVAL LIMITATION.—Section 1446(b) of title

20 28, United States Code, is amended in the second sentence

21 by inserting ‘‘(a)’’ after ‘‘section 1332’’.

22 (c) TECHNICAL AND CONFORMING AMENDMENTS.—

23 The table of sections for chapter 89 of title 28, United

24 States Code, is amended by adding after the item relating

25 to section 1452 the following:

‘‘1453. Removal of class actions.’’.
14

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1 SEC. 5. REPRESENTATIONS AND SANCTIONS UNDER RULE

2 11 OF THE FEDERAL RULES OF CIVIL PROCE3 DURE.

4 Rule 11(c) of the Federal Rules of Civil Procedure

5 is amended—

6 (1) in the first sentence by striking ‘‘may, sub7 ject to the conditions stated below,’’ and inserting

8 ‘‘shall’’;

9 (2) in paragraph (2) by striking the first and

10 second sentences and inserting ‘‘A sanction imposed

11 for violation of this rule may consist of reasonable

12 attorneys’ fees and other expenses incurred as a re13 sult of the violation, directives of a nonmonetary na14 ture, or an order to pay penalty into court or to a

15 party.’’; and

16 (3) in paragraph (2)(A) by inserting before the

17 period ‘‘, although such sanctions may be awarded

18 against a party’s attorneys’’.

19 SEC. 6. EFFECTIVE DATE.

20 The amendments made by this Act shall apply to any

21 civil action commenced on or after the date of enactment

22 of this Act.

23 SECTION 1. SHORT TITLE.

24 This Act may be cited as the ‘‘Class Action Fairness

25 Act of 2000’’.
15

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1 SEC. 2. NOTIFICATION REQUIREMENT OF CLASS ACTION

2 CERTIFICATION OR SETTLEMENT.

3 (a) IN GENERAL.—Part V of title 28, United States

4 Code, is amended by inserting after chapter 113 the fol5 lowing:

6 ‘‘CHAPTER 114—CLASS ACTIONS

‘‘Sec.

‘‘1711. Definitions.

‘‘1712. Application.

‘‘1713. Notification of class action certifications and settlements.

7 ‘‘§ 1711. Definitions

8 ‘‘In this chapter the term—

9 ‘‘(1) ‘class’ means a group of persons that com10 prise parties to a civil action brought by 1 or more

11 representative persons;

12 ‘‘(2) ‘class action’ means a civil action filed pur13 suant to rule 23 of the Federal Rules of Civil Proce14 dure or similar State statutes or rules of procedure

15 authorizing an action to be brought by 1 or more rep16 resentative persons on behalf of a class;

17 ‘‘(3) ‘class certification order’ means an order

18 issued by a court approving the treatment of a civil

19 action as a class action;

20 ‘‘(4) ‘class member’ means a person that falls

21 within the definition of the class;

22 ‘‘(5) ‘class counsel’ means the attorneys rep23 resenting the class in a class action;
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1 ‘‘(6) ‘plaintiff class action’ means a class action

2 in which class members are plaintiffs; and

3 ‘‘(7) ‘proposed settlement’ means a settlement

4 agreement regarding a class action that is subject to

5 court approval and would be binding on the class.

6 ‘‘§ 1712. Application

7 ‘‘This chapter shall apply to all plaintiff class actions

8 filed in or removed to Federal court, except any such class

9 action solely involving—

10 ‘‘(1) claims concerning a covered security as de11 fined under section 16(f)(3) of the Securities Act of

12 1933 and section 28(f)(5)(E) of the Securities Ex13 change Act of 1934;

14 ‘‘(2) claims that relate to the internal affairs or

15 governance of a corporation or other form of business

16 enterprise and arises under or by virtue of the laws

17 of the State in which such corporation or business en18 terprise is incorporated or organized; or

19 ‘‘(3) claims that relate to the rights, duties (in20 cluding fiduciary duties), and obligations relating to

21 or created by or pursuant to any security (as defined

22 under section 2(a)(1) of the Securities Act of 1933

23 and the regulations issued thereunder).
17

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1 ‘‘§ 1713. Notification of class action certifications and

2 settlements

3 ‘‘(a) Not later than 10 days after a proposed settlement

4 in a class action is filed in court, class counsel shall serve

5 the State attorney general of each State in which a class

6 member resides and the Attorney General of the United

7 States as if such attorneys general and the Department of

8 Justice were parties in the class action with—

9 ‘‘(1) a copy of the complaint and any materials

10 filed with the complaint and any amended com11 plaints (except such materials shall not be required to

12 be served if such materials are made electronically

13 available through the Internet and such service in14 cludes notice of how to electronically access such ma15 terial);

16 ‘‘(2) notice of any scheduled judicial hearing in

17 the class action;

18 ‘‘(3) any proposed or final notification to class

19 members of—

20 ‘‘(A)(i) the members’ rights to request exclu21 sion from the class action; or

22 ‘‘(ii) if no right to request exclusion exists,

23 a statement that no such right exists; and

24 ‘‘(B) a proposed settlement of a class action;

25 ‘‘(4) any proposed or final class action settle26 ment;
18

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1 ‘‘(5) any settlement or other agreement contem2 poraneously made between class counsel and counsel

3 for the defendants;

4 ‘‘(6) any final judgment or notice of dismissal;

5 ‘‘(7)(A) if feasible the names of class members

6 who reside in each State attorney general’s respective

7 State and the estimated proportionate claim of such

8 members to the entire settlement; or

9 ‘‘(B) if the provision of information under sub10 paragraph (A) is not feasible, a reasonable estimate

11 of the number of class members residing in each attor12 ney general’s State and the estimated proportionate

13 claim of such members to the entire settlement; and

14 ‘‘(8) any written judicial opinion relating to the

15 materials described under paragraphs (3) through (6).

16 ‘‘(b) A hearing to consider final approval of a proposed

17 settlement may not be held earlier than 120 days after the

18 date on which the State attorneys general and the Attorney

19 General of the United States are served notice under sub20 section (a).

21 ‘‘(c) Any court with jurisdiction over a plaintiff class

22 action shall require that—

23 ‘‘(1) any written notice provided to the class

24 through the mail or publication in printed media
19

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1 contain a short summary written in plain, easily un2 derstood language, describing—

3 ‘‘(A) the subject matter of the class action;

4 ‘‘(B) the legal consequences of being a mem5 ber of the class action;

6 ‘‘(C) if the notice is informing class mem7 bers of a proposed settlement agreement—

8 ‘‘(i) the benefits that will accrue to the

9 class due to the settlement;

10 ‘‘(ii) the rights that class members will

11 lose or waive through the settlement;

12 ‘‘(iii) obligations that will be imposed

13 on the defendants by the settlement;

14 ‘‘(iv) the dollar amount of any attor15 ney’s fee class counsel will be seeking, or if

16 not possible, a good faith estimate of the

17 dollar amount of any attorney’s fee class

18 counsel will be seeking; and

19 ‘‘(v) an explanation of how any attor20 ney’s fee will be calculated and funded; and

21 ‘‘(D) any other material matter; and

22 ‘‘(2) any notice provided through television or

23 radio to inform the class members of the right of each

24 member to be excluded from a class action or a pro-
20

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1 posed settlement, if such right exists, shall, in plain,

2 easily understood language—

3 ‘‘(A) describe the persons who may poten4 tially become class members in the class action;

5 and

6 ‘‘(B) explain that the failure of a person

7 falling within the definition of the class to exer8 cise such person’s right to be excluded from a

9 class action will result in the person’s inclusion

10 in the class action.

11 ‘‘(d) Compliance with this section shall not provide

12 immunity to any party from any legal action under Fed13 eral or State law, including actions for malpractice or

14 fraud.

15 ‘‘(e)(1) A class member may refuse to comply with and

16 may choose not to be bound by a settlement agreement or

17 consent decree in a class action if the class member resides

18 in a State where the State attorney general has not been

19 provided notice and materials under subsection (a).

20 ‘‘(2) The rights created by this subsection shall apply

21 only to class members or any person acting on a class mem22 ber’s behalf, and shall not be construed to limit any other

23 rights affecting a class member’s participation in the settle24 ment.
21

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1 ‘‘(f) Nothing in this section shall be construed to ex2 pand the authority of, or impose any obligations, duties,

3 or responsibilities upon, State attorneys general or the At4 torney General of the United States.’’.

5 (b) TECHNICAL AND CONFORMING AMENDMENT.—The

6 table of chapters for part V of title 28, United States Code,

7 is amended by inserting after the item relating to chapter

8 113 the following:

‘‘114. Class Actions ................................................................................... 1711’’.

9 SEC. 3. DIVERSITY JURISDICTION FOR CLASS ACTIONS.

10 Section 1332 of title 28, United States Code, is

11 amended—

12 (1) by redesignating subsection (d) as subsection

13 (e); and

14 (2) by inserting after subsection (c) the fol15 lowing:

16 ‘‘(d)(1) In this subsection, the terms ‘class’, ‘class ac17 tion’, and ‘class certification order’ have the meanings given

18 such terms under section 1711.

19 ‘‘(2) The district courts shall have original jurisdiction

20 of any civil action where the matter in controversy exceeds

21 the sum or value of $2,000,000, exclusive of interest and

22 costs, and is a class action in which—

23 ‘‘(A) any member of a class of plaintiffs is a cit24 izen of a State different from any defendant;
22

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1 ‘‘(B) any member of a class of plaintiffs is a for2 eign state or a citizen or subject of a foreign state and

3 any defendant is a citizen of a State; or

4 ‘‘(C) any member of a class of plaintiffs is a cit5 izen of a State and any defendant is a foreign state

6 or a citizen or subject of a foreign state.

7 ‘‘(3) Paragraph (2) shall not apply to any civil action

8 in which—

9 ‘‘(A)(i) the substantial majority of the members

10 of the proposed plaintiff class and the primary de11 fendants are citizens of the State in which the action

12 was originally filed; and

13 ‘‘(ii) the claims asserted therein will be governed

14 primarily by the laws of the State in which the action

15 was originally filed;

16 ‘‘(B) the primary defendants are States, State

17 officials, or other governmental entities against whom

18 the district court may be foreclosed from ordering re19 lief; or

20 ‘‘(C) the number of members of all proposed

21 plaintiff classes in the aggregate is less than 100.

22 ‘‘(4) In any class action, the claims of the individual

23 members of any class shall be aggregated to determine

24 whether the matter in controversy exceeds the sum or value

25 of $2,000,000, exclusive of interest and costs.
23

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1 ‘‘(5) This subsection shall apply to any class action

2 before or after the entry of a class certification order by

3 the court.

4 ‘‘(6)(A) A district court shall dismiss any civil action

5 that is subject to the jurisdiction of the court solely under

6 this subsection if the court determines the action may not

7 proceed as a class action based on a failure to satisfy the

8 conditions of rule 23 of the Federal Rules of Civil Proce9 dure.

10 ‘‘(B) Nothing in subparagraph (A) shall prohibit

11 plaintiffs from filing an amended class action in Federal

12 court or filing an action in State court, but any such filed

13 action may be removed if it is an action of which the dis14 trict courts of the United States have original jurisdiction.

15 ‘‘(C) In any action that is dismissed under this sub16 section and is filed by any of the original named plaintiffs

17 therein in the same State court venue in which the dis18 missed action was originally filed, the limitations periods

19 on all reasserted claims shall be deemed tolled for the period

20 during which the dismissed class action was pending. The

21 limitations periods on any claims that were asserted in a

22 class action dismissed under this subsection that are subse23 quently asserted in an individual action shall be deemed

24 tolled for the period during which the dismissed action was

25 pending.
24

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1 ‘‘(7) Paragraph (2) shall not apply to any class action

2 solely involving a claim that relates to—

3 ‘‘(A) the internal affairs or governance of a cor4 poration or other form of business enterprise and

5 arises under or by virtue of the laws of the State in

6 which such corporation or business enterprise is in7 corporated or organized; or

8 ‘‘(B) the rights, duties (including fiduciary du9 ties), and obligations relating to or created by or pur10 suant to any security (as defined under section

11 2(a)(1) of the Securities Act of 1933 and the regula12 tions issued thereunder).

13 ‘‘(8) For purposes of this subsection and section 1453

14 of this title, an unincorporated association shall be deemed

15 to be a citizen of the State where it has its principal place

16 of business and the State under whose laws it is organized.’’.

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

18 (a) IN GENERAL.—Chapter 89 of title 28, United

19 States Code, is amended by adding after section 1452 the

20 following:

21 ‘‘§ 1453. Removal of class actions

22 ‘‘(a) In this section, the terms ‘class’, ‘class action’,

23 and ‘class member’ have the meanings given such terms

24 under section 1711.
25

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1 ‘‘(b) A class action may be removed to a district court

2 of the United States in accordance with this chapter, with3 out regard to whether any defendant is a citizen of the State

4 in which the action is brought, except that such action may

5 be removed—

6 ‘‘(1) by any defendant without the consent of all

7 defendants; or

8 ‘‘(2) by any plaintiff class member who is not a

9 named or representative class member without the

10 consent of all members of such class.

11 ‘‘(c) This section shall apply to any class action before

12 or after the entry of any order certifying a class.

13 ‘‘(d) The provisions of section 1446 relating to a de14 fendant removing a case shall apply to a plaintiff removing

15 a case under this section, except that in the application of

16 subsection (b) of such section the requirement relating to

17 the 30-day filing period shall be met if a plaintiff class

18 member files notice of removal within 30 days after receipt

19 by such class member, through service or otherwise, of the

20 initial written notice of the class action.

21 ‘‘(e) This section shall not apply to any class action

22 solely involving—

23 ‘‘(1) a claim concerning a covered security as de24 fined under section 16(f)(3) of the Securities Act of
26

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1 1933 and section 28(f)(5)(E) of the Securities Ex2 change Act of 1934;

3 ‘‘(2) a claim that relates to the internal affairs

4 or governance of a corporation or other form of busi5 ness enterprise and arises under or by virtue of the

6 laws of the State in which such corporation or busi7 ness enterprise is incorporated or organized; or

8 ‘‘(3) a claim that relates to the rights, duties (in9 cluding fiduciary duties), and obligations relating to

10 or created by or pursuant to any security (as defined

11 under section 2(a)(1) of the Securities Act of 1933

12 and the regulations issued thereunder).’’.

13 (b) REMOVAL LIMITATION.—Section 1446(b) of title

14 28, United States Code, is amended in the second sentence

15 by inserting ‘‘(a)’’ after ‘‘section 1332’’.

16 (c) TECHNICAL AND CONFORMING AMENDMENTS.—The

17 table of sections for chapter 89 of title 28, United States

18 Code, is amended by adding after the item relating to sec19 tion 1452 the following:

‘‘1453. Removal of class actions.’’.

20 SEC. 5. REPORT ON CLASS ACTION SETTLEMENTS.

21 (a) IN GENERAL.—Not later than 12 months after the

22 date of enactment of this Act, the Judicial Conference of

23 the United States, with the assistance of the Director of the

24 Federal Judicial Center and the Director of the Administra25 tive Office of the United States Courts, shall prepare and
27

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1 transmit to the Committees on the Judiciary of the Senate

2 and the House of Representatives a report on class action

3 settlements.

4 (b) CONTENT.—The report under subsection (a) shall

5 contain—

6 (1) recommendations on the best practices that

7 courts can use to ensure that proposed class action

8 settlements are fair to the class members that the set9 tlements are supposed to benefit;

10 (2) recommendations on the best practices that

11 courts can use to ensure that—

12 (A) the fees and expenses awarded to coun13 sel in connection with a class action settlement

14 appropriately reflect the extent to which counsel

15 succeeded in obtaining full redress for the inju16 ries alleged and the time, expense, and risk that

17 counsel devoted to the litigation; and

18 (B) the class members on whose behalf the

19 settlement is proposed are the primary bene20 ficiaries of the settlement; and

21 (3) the actions that the Judicial Conference of

22 the United States has taken and intends to take to23 ward having the Federal judiciary implement any or

24 all of the recommendations contained in the report.
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1 (c) AUTHORITY OF FEDERAL COURTS.—Nothing in

2 this section shall be construed to alter the authority of the

3 Federal courts to supervise attorneys’ fees.

4 SEC. 6. EFFECTIVE DATE.

5 The amendments made by this Act shall apply to any

6 civil action commenced on or after the date of enactment

7 of this Act.

Calendar No. 732

106TH CONGRESS

2D SESSION S. 353

A BILL

To provide for class action reform, and for other

purposes.

JULY 27, 2000

Reported with an amendment