II

106TH CONGRESS

1ST 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, and Mr. THURMOND) introduced the

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

Judiciary

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’’.

6 SEC. 2. NOTIFICATION REQUIREMENT OF CLASS ACTION

7 CERTIFICATION OR SETTLEMENT.

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

9 Code, is amended by inserting after chapter 113 the fol10 lowing new chapter:
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1 ‘‘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.

2 ‘‘§ 1711. Definitions

3 ‘‘In this chapter the term—

4 ‘‘(1) ‘class’ means a group of persons that com5 prise parties to a civil action brought by 1 or more

6 representative persons;

7 ‘‘(2) ‘class action’ means a civil action filed pur8 suant to rule 23 of the Federal Rules of Civil Proce9 dure or similar State rules of procedure authorizing

10 an action to be brought by 1 or more representative

11 persons on behalf of a class;

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

13 issued by a court approving the treatment of a civil

14 action as a class action;

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

16 within the definition of the class;

17 ‘‘(5) ‘class counsel’ means the attorneys rep18 resenting the class in a class action;

19 ‘‘(6) ‘plaintiff class action’ means a class action

20 in which class members are plaintiffs; and

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

22 agreement between or among the parties in a class
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1 action that is subject to court approval before the

2 settlement becomes binding on the parties.

3 ‘‘§ 1712. Application

4 ‘‘This chapter shall apply to—

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

6 court; and

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

8 court in which—

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

10 State in which the action is filed; and

11 ‘‘(B) the transaction or occurrence that

12 gave rise to the class action occurred in more

13 than 1 State.

14 ‘‘§ 1713. Notification of class action certifications and

15 settlements

16 ‘‘(a) Not later than 10 days after a proposed settle17 ment in a class action is filed in court, class counsel shall

18 serve the State attorney general of each State in which

19 a class member resides and the Attorney General of the

20 United States as if such attorneys general and the Depart21 ment of Justice were parties in the class action with—

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

23 filed with the complaint and any amended com24 plaints (except such materials shall not be required

25 to be served if such materials are made electronically
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1 available through the Internet and such service in2 cludes notice of how to electronically access such

3 material);

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

5 the class action;

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

7 members of—

8 ‘‘(A)(i) the members’ rights to request ex9 clusion from the class action; or

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

11 a statement that no such right exists; and

12 ‘‘(B) a proposed settlement of a class ac13 tion;

14 ‘‘(4) any proposed or final class action settle15 ment;

16 ‘‘(5) any settlement or other agreement contem17 poraneously made between class counsel and counsel

18 for the defendants;

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

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

21 who reside in each State attorney general’s respec22 tive State and the estimated proportionate claim of

23 such members to the entire settlement; or

24 ‘‘(B) if the provision of information under sub25 paragraph (A) is not feasible, a reasonable estimate
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1 of the number of class members residing in each at2 torney general’s State and the estimated propor3 tionate claim of such members to the entire settle4 ment; and

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

6 materials described under paragraphs (3) through

7 (6).

8 ‘‘(b) A hearing to consider final approval of a pro9 posed settlement may not be held earlier than 120 days

10 after the date on which the State attorneys general and

11 the Attorney General of the United States are served no12 tice under subsection (a).

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

14 action shall require that—

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

16 through the mail or publication in printed media

17 contain a short summary written in plain, easily un18 derstood language, describing—

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

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

21 member of the class action;

22 ‘‘(C) the ability of a class member to seek

23 removal of the class action to Federal court if—

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

25 court; and
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1 ‘‘(ii) Federal jurisdiction would apply

2 to such action under section 1332(d);

3 ‘‘(D) if the notice is informing class mem4 bers of a proposed settlement agreement—

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

6 the class due to the settlement;

7 ‘‘(ii) the rights that class members

8 will lose or waive through the settlement;

9 ‘‘(iii) obligations that will be imposed

10 on the defendants by the settlement;

11 ‘‘(iv) the dollar amount of any attor12 ney’s fee class counsel will be seeking, or

13 if not possible, a good faith estimate of the

14 dollar amount of any attorney’s fee class

15 counsel will be seeking; and

16 ‘‘(v) an explanation of how any attor17 ney’s fee will be calculated and funded;

18 and

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

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

21 radio to inform the class members of the right of

22 each member to be excluded from a class action or

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

24 plain, easily understood language—
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1 ‘‘(A) describe the persons who may poten2 tially become class members in the class action;

3 and

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

5 falling within the definition of the class to exer6 cise such person’s right to be excluded from a

7 class action will result in the person’s inclusion

8 in the class action.

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

10 immunity to any party from any legal action under Fed11 eral or State law, including actions for malpractice or

12 fraud.

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

14 and may choose not to be bound by a settlement agree15 ment or consent decree in a class action if the class mem16 ber resides in a State where the State attorney general

17 has not been provided notice and materials under sub18 section (a).

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

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

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

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

23 settlement.

24 ‘‘(f) Nothing in this section shall be construed to im25 pose any obligations, duties, or responsibilities upon State
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1 attorneys general or the Attorney General of the United

2 States.

3 ‘‘§ 1714. Limitation on attorney’s fees in class actions

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

5 expenses awarded by the court to counsel for the plaintiff

6 class may not exceed a reasonable percentage of the

7 amount of—

8 ‘‘(1) any damages and prejudgment interest ac9 tually paid to the class;

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

11 based on the cessation of alleged improper conduct

12 by the defendants; and

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

14 complying with the terms of an injunctive order or

15 settlement agreement.

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

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

18 and expenses to counsel for the plaintiff class based on

19 a reasonable lodestar calculation.’’.

20 (b) TECHNICAL AND CONFORMING AMENDMENT.—

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

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

23 chapter 113 the following:

‘‘114. Class Actions ............................................................................. 1711’’.
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1 SEC. 3. DIVERSITY JURISDICTION FOR CLASS ACTIONS.

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

3 amended—

4 (1) by redesignating subsection (d) as sub5 section (e); and

6 (2) by inserting after subsection (c) the follow7 ing:

8 ‘‘(d)(1) In this subsection, the terms ‘class’, ‘class ac9 tion’, and ‘class certification order’ have the meanings

10 given such terms under section 1711.

11 ‘‘(2) The district courts shall have original jurisdic12 tion of any civil action where the matter in controversy

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

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

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

16 citizen of a State different from any defendant;

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

18 foreign state or a citizen or subject of a foreign state

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

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

21 citizen of a State and any defendant is a foreign

22 state or a citizen or subject of a foreign state.

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

24 civil action described under paragraph (2) if—

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

26 members of the proposed plaintiff class are citi-
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1 zens of a single State of which the primary de2 fendants are also citizens; and

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

4 primarily by the laws of that State; or

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

6 State officials, or other governmental entities

7 against whom the district court may be fore8 closed from ordering relief.

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

10 members of any class shall be aggregated to determine

11 whether the matter in controversy exceeds the sum or

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

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

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

15 the court.

16 ‘‘(6)(A) A district court shall dismiss, or, if after re17 moval, strike the class allegations and remand, any civil

18 action if—

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

20 the court solely under this subsection; and

21 ‘‘(ii) the court determines the action may not

22 proceed as a class action based on a failure to sat23 isfy the conditions of rule 23 of the Federal Rules

24 of Civil Procedure.
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1 ‘‘(B) Nothing in subparagraph (A) shall prohibit

2 plaintiffs from filing an amended class action in Federal

3 or State court.

4 ‘‘(C) Upon dismissal or remand, the period of limita5 tions for any claim that was asserted in an action on be6 half of any named or unnamed member of any proposed

7 class shall be deemed tolled to the full extent provided

8 under Federal law.

9 ‘‘(7) Paragraph (2) shall not apply to any class ac10 tion, regardless of which forum any such action may be

11 filed in, involving any claim relating to—

12 ‘‘(A) the internal affairs or governance of a cor13 poration or other form of entity or business associa14 tion arising under or by virtue of the statutory, com15 mon, or other laws of the State in which such cor16 poration, entity, or business association is incor17 porated (in the case of a corporation) or organized

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

19 ‘‘(B) the rights, duties (including fiduciary du20 ties), and obligations relating to or created by or

21 pursuant to any security (as defined under section

22 2(a)(1) of the Securities Act of 1933 or the rules

23 and regulations adopted under such Act).’’.
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1 SEC. 4. REMOVAL OF CLASS ACTIONS TO FEDERAL COURT.

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

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

4 following:

5 ‘‘§ 1453. Removal of class actions

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

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

8 under section 1711.

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

10 of the United States in accordance with this chapter, ex11 cept that such action may be removed—

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

13 all defendants; or

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

15 a named or representative class member without the

16 consent of all members of such class.

17 ‘‘(c) This section shall apply to any class action be18 fore or after the entry of any order certifying a class.

19 ‘‘(d) The provisions of section 1446 relating to a de20 fendant removing a case shall apply to a plaintiff removing

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

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

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

24 member files notice of removal within 30 days after receipt

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

26 initial written notice of the class action.
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1 ‘‘(e) This section shall not apply to any class action,

2 regardless of which forum any such action may be filed

3 in, involving any claim relating to—

4 ‘‘(1) the internal affairs or governance of a cor5 poration or other form of entity or business associa6 tion arising under or by virtue of the statutory, com7 mon, or other laws of the State in which such cor8 poration, entity, or business association is incor9 porated (in the case of a corporation) or organized

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

11 ‘‘(2) the rights, duties (including fiduciary du12 ties), and obligations relating to or created by or

13 pursuant to any security (as defined under section

14 2(a)(1) of the Securities Act of 1933 or the rules

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

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

17 28, United States Code, is amended in the second sentence

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

19 (c) TECHNICAL AND CONFORMING AMENDMENTS.—

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

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

22 to section 1452 the following:

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

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