I 

109TH CONGRESS 

1ST SESSION H. R. 516 

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 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. 

IN THE HOUSE OF REPRESENTATIVES 

FEBRUARY 2, 2005 

Mr. GOODLATTE (for himself, Mr. BOUCHER, Mr. SENSENBRENNER, Mr. 

SMITH of Texas, Mr. DELAY, Mr. BLUNT, Mr. CANTOR, Ms. PRYCE of 

Ohio, Mr. DREIER, Mr. MANZULLO, Mr. KINGSTON, Mr. FEENEY, Mr. 

COBLE, Mr. CHABOT, Mr. FORBES, Mr. PENCE, Mr. ISSA, Mr. KELLER, 

Mr. BACHUS, Mr. HOSTETTLER, Mr. GALLEGLY, Mr. DANIEL E. LUNGREN of California, Mr. FLAKE, Mr. BRADLEY of New Hampshire, Mr. 

CARTER, Mr. SESSIONS, Mr. ROGERS of Michigan, Mr. KUHL of New 

York, Ms. HART, Mr. NORWOOD, Mr. PEARCE, Mr. GILCHREST, Mr. 

CHOCOLA, Mr. HENSARLING, Mr. BAKER, Mrs. BIGGERT, Mr. KENNEDY

of Minnesota, Mr. BURGESS, Mr. GINGREY, Mr. COX, Mr. DENT, Mr. 

WICKER, Mr. CANNON, Mr. CUNNINGHAM, Mr. MILLER of Florida, Mr. 

FITZPATRICK of Pennsylvania, Mr. MCCRERY, Mr. STEARNS, Ms. FOXX, 

Mr. CONAWAY, Mr. MORAN of Virginia, Mr. MATHESON, Mr. HOLDEN, 

Mr. BOYD, Mr. TANNER, Mr. COOPER, Mr. CRAMER, Mr. SCOTT of Georgia, Mr. DAVIS of Tennessee, Mr. MOORE of Kansas, Ms. GINNY BROWNWAITE of Florida, and Mr. BOREN) introduced the following bill; which 

was referred to the Committee on the Judiciary 

A BILL 

To amend the procedures that apply to consideration of 

interstate class actions to assure fairer outcomes for 
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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 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. 

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; REFERENCE; TABLE OF CON4 TENTS. 

5 (a) SHORT TITLE.—This Act may be cited as the 

6 ‘‘Class Action Fairness Act of 2005’’. 

7 (b) REFERENCE.—Whenever in this Act reference is 

8 made to an amendment to, or repeal of, a section or other 

9 provision, the reference shall be considered to be made to 

10 a section or other provision of title 28, United States 

11 Code. 

12 (c) TABLE OF CONTENTS.—The table of contents for 

13 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. 
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1 SEC. 2. FINDINGS AND PURPOSES. 

2 (a) FINDINGS.—The Congress finds as follows: 

3 (1) Class action lawsuits are an important and 

4 valuable part of our legal system when they permit 

5 the fair and efficient resolution of legitimate claims 

6 of numerous parties by allowing the claims to be ag7 gregated into a single action against a defendant 

8 that has allegedly caused harm. 

9 (2) For many years there have been abuses of 

10 the class action device that have— 

11 (A) harmed class members with legitimate 

12 claims and defendants that have acted respon13 sibly; 

14 (B) adversely affected interstate commerce; 

15 and 

16 (C) undermined public respect for the judi17 cial system in the United States. 

18 (3) Class members have been harmed by a 

19 number of actions taken by plaintiffs’ lawyers, which 

20 provide little or no benefit to class members as a 

21 whole, including— 

22 (A) plaintiffs’ lawyers receiving large fees, 

23 while class members are left with coupons or 

24 other awards of little or no value; and 
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1 (B) unjustified rewards being made to cer2 tain plaintiffs at the expense of other class 

3 members. 

4 (4) Through the use of artful pleading, plain5 tiffs are able to avoid litigating class actions in Fed6 eral court, forcing businesses and other organiza7 tions to defend interstate class action lawsuits in 

8 county and State courts where— 

9 (A) the lawyers, rather than the claimants, 

10 are likely to receive the maximum benefit; 

11 (B) less scrutiny may be given to the mer12 its of the case; and 

13 (C) defendants are effectively forced into 

14 settlements, in order to avoid the possibility of 

15 huge judgments that could destabilize their 

16 companies. 

17 (5) These abuses undermine the Federal judi18 cial system, the free flow of interstate commerce, 

19 and the intent of the framers of the Constitution in 

20 creating diversity jurisdiction, in that county and 

21 State courts are— 

22 (A) handling interstate class actions that 

23 affect parties from many States; 
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1 (B) sometimes acting in ways that dem2 onstrate bias against out-of-State defendants; 

3 and 

4 (C) making judgments that impose their 

5 view of the law on other States and bind the 

6 rights of the residents of those States. 

7 (6) Abusive interstate class actions have 

8 harmed society as a whole by forcing innocent par9 ties to settle cases rather than risk a huge judgment 

10 by a local jury, thereby costing consumers billions of 

11 dollars in increased costs to pay for forced settle12 ments and excessive judgments. 

13 (b) PURPOSES.—The purposes of this Act are— 

14 (1) to assure fair and prompt recoveries for 

15 class members with legitimate claims; 

16 (2) to protect responsible companies and other 

17 institutions against interstate class actions in State 

18 courts; 

19 (3) to restore the intent of the framers of the 

20 Constitution by providing for Federal court consider21 ation of interstate class actions; and 

22 (4) to benefit society by encouraging innovation 

23 and lowering consumer prices. 
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1 SEC. 3. CONSUMER CLASS ACTION BILL OF RIGHTS AND IM2 PROVED PROCEDURES FOR INTERSTATE 

3 CLASS ACTIONS. 

4 (a) IN GENERAL.—Part V is amended by inserting 

5 after chapter 113 the following: 

6 ‘‘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. Definitions. 

7 ‘‘§ 1711. Judicial scrutiny of coupon and other 

8 noncash settlements 

9 ‘‘The court may approve a proposed settlement under 

10 which the class members would receive noncash benefits 

11 or would otherwise be required to expend funds in order 

12 to obtain part or all of the proposed benefits only after 

13 a hearing to determine whether, and making a written 

14 finding that, the settlement is fair, reasonable, and ade15 quate for class members. 

16 ‘‘§ 1712. Protection against loss by class members 

17 ‘‘The court may approve a proposed settlement under 

18 which any class member is obligated to pay sums to class 

19 counsel that would result in a net loss to the class member 

20 only if the court makes a written finding that nonmone21 tary benefits to the class member outweigh the monetary 

22 loss. 
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1 ‘‘§ 1713. Protection against discrimination based on 

2 geographic location 

3 ‘‘The court may not approve a proposed settlement 

4 that provides for the payment of greater sums to some 

5 class members than to others solely on the basis that the 

6 class members to whom the greater sums are to be paid 

7 are located in closer geographic proximity to the court. 

8 ‘‘§ 1714. Prohibition on the payment of bounties 

9 ‘‘(a) IN GENERAL.—The court may not approve a 

10 proposed settlement that provides for the payment of a 

11 greater share of the award to a class representative serv12 ing on behalf of a class, on the basis of the formula for 

13 distribution to all other class members, than that awarded 

14 to the other class members. 

15 ‘‘(b) RULE OF CONSTRUCTION.—The limitation in 

16 subsection (a) shall not be construed to prohibit any pay17 ment approved by the court for reasonable time or costs 

18 that a person was required to expend in fulfilling his or 

19 her obligations as a class representative. 

20 ‘‘§ 1715. Definitions 

21 ‘‘In this chapter: 

22 ‘‘(1) CLASS ACTION.—The term ‘class action’ 

23 means— 

24 ‘‘(A) any civil action filed in a district 

25 court of the United States pursuant to rule 23 

26 of the Federal Rules of Civil Procedure; or 
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1 ‘‘(B) any civil action that is removed to a 

2 district court of the United States and that was 

3 originally filed pursuant to a State statute or 

4 rule of judicial procedure authorizing an action 

5 to be brought by one or more representatives on 

6 behalf of a class. 

7 ‘‘(2) CLASS COUNSEL.—The term ‘class coun8 sel’ means the persons who serve as the attorneys 

9 for the class members in a proposed or certified 

10 class action. 

11 ‘‘(3) CLASS MEMBER.—The term ‘class mem12 ber’ means any of the persons who fall within the 

13 definition of the proposed or certified class in a class 

14 action. 

15 ‘‘(4) PROPOSED SETTLEMENT.—The term ‘pro16 posed settlement’ means an agreement that resolves 

17 claims in a class action, that is subject to court ap18 proval, and that, if approved, would be binding on 

19 the class members.’’. 

20 (b) TECHNICAL AND CONFORMING AMENDMENT.— 

21 The table of chapters for part V is amended by inserting 

22 after the item relating to chapter 113 the following: 

‘‘114. Class Actions ............................................................................ 1711’’. 
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1 SEC. 4. FEDERAL DISTRICT COURT JURISDICTION OF 

2 INTERSTATE CLASS ACTIONS. 

3 (a) APPLICATION OF FEDERAL DIVERSITY JURISDIC4 TION.—Section 1332 is amended— 

5 (1) by redesignating subsection (d) as sub6 section (e); and 

7 (2) by inserting after subsection (c) the fol8 lowing: 

9 ‘‘(d)(1) In this subsection— 

10 ‘‘(A) the term ‘class’ means all of the class 

11 members in a class action; 

12 ‘‘(B) the term ‘class action’ means any civil ac13 tion filed pursuant to rule 23 of the Federal Rules 

14 of Civil Procedure or similar State statute or rule of 

15 judicial procedure authorizing an action to be 

16 brought by one or more representative persons on 

17 behalf of a class; 

18 ‘‘(C) the term ‘class certification order’ means 

19 an order issued by a court approving the treatment 

20 of a civil action as a class action; and 

21 ‘‘(D) the term ‘class member’ means any of the 

22 persons who fall within the definition of the pro23 posed or certified class in a class action. 

24 ‘‘(2) The district courts shall have original jurisdic25 tion of any civil action in which the matter in controversy 
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1 exceeds the sum or value of $5,000,000, exclusive of inter2 est and costs, and is a class action in which— 

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

4 citizen of a State different from any defendant; 

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

6 foreign state or a citizen or subject of a foreign state 

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

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

9 citizen of a State and any defendant is a foreign 

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

11 ‘‘(3) A district court may, in the interests of justice, 

12 decline to exercise jurisdiction under paragraph (2) over 

13 a class action in which greater than one-third but less than 

14 two-thirds of the members of all proposed plaintiff classes 

15 in the aggregate and the primary defendants are citizens 

16 of the State in which the action was originally filed based 

17 on consideration of the following factors: 

18 ‘‘(A) Whether the claims asserted involve mat19 ters of national or interstate interest. 

20 ‘‘(B) Whether the claims asserted will be gov21 erned by laws other than those of the State in which 

22 the action was originally filed. 

23 ‘‘(C) In the case of a class action originally 

24 filed in a State court, whether the class action has 
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1 been pleaded in a manner that seeks to avoid Fed2 eral jurisdiction. 

3 ‘‘(D) Whether the number of citizens of the 

4 State in which the action was originally filed in all 

5 proposed plaintiff classes in the aggregate is sub6 stantially larger than the number of citizens from 

7 any other State, and the citizenship of the other 

8 members of the proposed class is dispersed among a 

9 substantial number of States. 

10 ‘‘(E) Whether 1 or more class actions asserting 

11 the same or similar claims on behalf of the same or 

12 other persons have been or may be filed. 

13 ‘‘(4) Paragraph (2) shall not apply to any class action 

14 in which— 

15 ‘‘(A) two-thirds or more of the members of all 

16 proposed plaintiff classes in the aggregate and the 

17 primary defendants are citizens of the State in 

18 which the action was originally filed; 

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

20 officials, or other governmental entities against 

21 whom the district court may be foreclosed from or22 dering relief; or 

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

24 plaintiff classes in the aggregate is less than 100. 
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1 ‘‘(5) In any class action, the claims of the individual 

2 class members shall be aggregated to determine whether 

3 the matter in controversy exceeds the sum or value of 

4 $5,000,000, exclusive of interest and costs. 

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

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

7 the court with respect to that action. 

8 ‘‘(7)(A) A district court shall dismiss any civil action 

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

10 this subsection if the court determines that the action may 

11 not proceed as a class action based on a failure to satisfy 

12 the requirements of rule 23 of the Federal Rules of Civil 

13 Procedure. 

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

15 plaintiffs from filing an amended class action in Federal 

16 court or filing an action in State court, except that any 

17 such action filed in State court may be removed to the 

18 appropriate district court if it is an action of which the 

19 district courts of the United States have original jurisdic20 tion. 

21 ‘‘(C) In any action that is dismissed under this para22 graph and is filed by any of the original named plaintiffs 

23 therein in the same State court venue in which the dis24 missed action was originally filed, the limitations periods 

25 on all reasserted claims shall be deemed tolled for the pe-
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1 riod during which the dismissed class action was pending. 

2 The limitations periods on any claims that were asserted 

3 in a class action dismissed under this paragraph that are 

4 subsequently asserted in an individual action shall be 

5 deemed tolled for the period during which the dismissed 

6 action was pending. 

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

8 brought by shareholders that solely involves a claim that 

9 relates to— 

10 ‘‘(A) a claim concerning a covered security as 

11 defined under section 16(f)(3) of the Securities Act 

12 of 1933 and section 28(f)(5)(E) of the Securities 

13 Exchange Act of 1934; 

14 ‘‘(B) the internal affairs or governance of a cor15 poration or other form of business enterprise and 

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

17 which such corporation or business enterprise is in18 corporated or organized; or 

19 ‘‘(C) 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 and the regula23 tions issued thereunder). 

24 ‘‘(9) For purposes of this subsection and section 

25 1453 of this title, an unincorporated association shall be 
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1 deemed to be a citizen of the State where it has its prin2 cipal place of business and the State under whose laws 

3 it is organized. 

4 ‘‘(10) For purposes of this section and section 1453 

5 of this title, a civil action that is not otherwise a class 

6 action as defined in paragraph (1)(B) of this subsection 

7 shall nevertheless be deemed a class action if— 

8 ‘‘(A) the named plaintiff purports to act for the 

9 interests of its members (who are not named parties 

10 to the action) or for the interests of the general pub11 lic, seeks a remedy of damages, restitution, 

12 disgorgement, or any other form of monetary relief, 

13 and is not a State attorney general; or 

14 ‘‘(B) monetary relief claims in the action are 

15 proposed to be tried jointly in any respect with the 

16 claims of 100 or more other persons on the ground 

17 that the claims involve common questions of law or 

18 fact. 

19 In any such case, the persons who allegedly were injured 

20 shall be treated as members of a proposed plaintiff class 

21 and the monetary relief that is sought shall be treated as 

22 the claims of individual class members. The provisions of 

23 paragraph (7) of this subsection and subsections (b)(2) 

24 and (d) of section 1453 shall not apply to civil actions 

25 described under subparagraph (A). The provisions of para-
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1 graph (7) of this subsection, and subsections (b)(2) and 

2 (d) of section 1453 shall not apply to civil actions de3 scribed under subparagraph (B).’’. 

4 (b) CONFORMING AMENDMENTS.— 

5 (1) Section 1335(a)(1) is amended by inserting 

6 ‘‘(a) or (d)’’ after ‘‘1332’’. 

7 (2) Section 1603(b)(3) is amended by striking 

8 ‘‘(d)’’ and inserting ‘‘(e)’’. 

9 SEC. 5. REMOVAL OF INTERSTATE CLASS ACTIONS TO FED10 ERAL DISTRICT COURT. 

11 (a) IN GENERAL.—Chapter 89 is amended by adding 

12 after section 1452 the following: 

13 ‘‘§ 1453. Removal of class actions 

14 ‘‘(a) DEFINITIONS.—In this section, the terms ‘class’, 

15 ‘class action’, ‘class certification order’, and ‘class mem16 ber’ have the meanings given these terms in section 

17 1332(d)(1). 

18 ‘‘(b) IN GENERAL.—A class action may be removed 

19 to a district court of the United States in accordance with 

20 this chapter, without regard to whether any defendant is 

21 a citizen of the State in which the action is brought, except 

22 that such action may be removed— 

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

24 all defendants; or 
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1 ‘‘(2) by any plaintiff class member who is not 

2 a named or representative class member without the 

3 consent of all members of such class. 

4 ‘‘(c) WHEN REMOVABLE.—This section shall apply to 

5 any class action before or after the entry of a class certifi6 cation order in the action, except that a plaintiff class 

7 member who is not a named or representative class mem8 ber of the action may not seek removal of the action before 

9 an order certifying a class of which the plaintiff is a class 

10 member has been entered. 

11 ‘‘(d) PROCEDURE FOR REMOVAL.—The provisions of 

12 section 1446 relating to a defendant removing a case shall 

13 apply to a plaintiff removing a case under this section, 

14 except that, in the application of subsection (b) of such 

15 section, the requirement relating to the 30-day filing pe16 riod shall be met if a plaintiff class member files notice 

17 of removal within 30 days after receipt by such class mem18 ber, through service or otherwise, of the initial written no19 tice of the class action. 

20 ‘‘(e) REVIEW OF ORDERS REMANDING CLASS AC21 TIONS TO STATE COURTS.—The provisions of section 

22 1447 shall apply to any removal of a case under this sec23 tion, except that, notwithstanding the provisions of section 

24 1447(d), an order remanding a class action to the State 
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1 court from which it was removed shall be reviewable by 

2 appeal or otherwise. 

3 ‘‘(f) EXCEPTION.—This section shall not apply to any 

4 class action brought by shareholders that solely involves— 

5 ‘‘(1) a claim concerning a covered security as 

6 defined under section 16(f)(3) of the Securities Act 

7 of 1933 and section 28(f)(5)(E) of the Securities 

8 Exchange Act of 1934; 

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

10 or governance of a corporation or other form of busi11 ness enterprise and arises under or by virtue of the 

12 laws of the State in which such corporation or busi13 ness enterprise is incorporated or organized; or 

14 ‘‘(3) a claim that relates to the rights, duties 

15 (including fiduciary duties), and obligations relating 

16 to or created by or pursuant to any security (as de17 fined under section 2(a)(1) of the Securities Act of 

18 1933 and the regulations issued thereunder).’’. 

19 (b) REMOVAL LIMITATION.—Section 1446(b) is 

20 amended in the second sentence by inserting ‘‘(a)’’ after 

21 ‘‘section 1332’’. 

22 (c) TECHNICAL AND CONFORMING AMENDMENTS.— 

23 The table of sections for chapter 89 is amended by adding 

24 after the item relating to section 1452 the following: 

‘‘1453. Removal of class actions.’’. 
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1 SEC. 6. APPEALS OF CLASS ACTION CERTIFICATION OR2 DERS. 

3 (a) IN GENERAL.—Section 1292(a) is amended by in4 serting after paragraph (3) the following: 

5 ‘‘(4) Orders of the district courts of the United 

6 States granting or denying class certification under 

7 rule 23 of the Federal Rules of Civil Procedure, if 

8 notice of appeal is filed within 10 days after entry 

9 of the order.’’. 

10 (b) DISCOVERY STAY.—All discovery and other pro11 ceedings shall be stayed during the pendency of any appeal 

12 taken pursuant to the amendment made by subsection (a), 

13 unless the court finds upon the motion of any party that 

14 specific discovery is necessary to preserve evidence or to 

15 prevent undue prejudice to that party. 

16 SEC. 7. EFFECTIVE DATE. 

17 (a) IN GENERAL.—The amendments made by this 

18 Act shall apply to— 

19 (1) any civil action commenced on or after the 

20 date of the enactment of this Act; and 

21 (2) any civil action commenced before such date 

22 of enactment in which a class certification order (as 

23 defined in section 1332(d)(1)(C) of title 28, United 

24 States Code, as amended by section 4 of this Act) 

25 is entered on or after such date of enactment. 
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1 (b) FILING OF NOTICE OF REMOVAL.—In the case 

2 of any civil action to which subsection (a)(2) applies, the 

3 requirement relating to the 30-day period for the filing 

4 of a notice of removal under section 1446(b) and section 

5 1453(d) of title 28, United States Code, shall be met if 

6 the notice of removal is filed within 30 days after the date 

7 on which the class certification order referred to in sub8 section (a)(2) is entered. 

Æ