IIB
107TH CONGRESS
2D SESSION
H. R. 2341
IN THE SENATE OF THE UNITED STATES
MARCH 14, 2002
Received; read twice and referred to the Committee on the Judiciary
AN ACT
To amend the procedures that apply to consideration of
interstate class actions to assure fairer outcomes for
class members and defendants, to outlaw certain prac-
tices that provide inadequate settlements for class mem-
bers, to assure that attorneys do not receive a dispropor-
tionate amount of settlements at the expense of class
members, to provide for clearer and simpler information
in class action settlement notices, to assure prompt con-
sideration of interstate class actions, to amend title 28,
United States Code, to allow the application of the prin-
ciples of Federal diversity jurisdiction to interstate class
actions, and for other purposes.
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Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CON-
TENTS.
(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 inter-
state 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. Report on class action settlements.
Sec. 8. 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 ag-
gregated into a single action against a defendant
that has allegedly caused harm.
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(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 cer-
tain 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, plain-
tiffs are able to avoid litigating class actions in Fed-
eral court, forcing businesses and other organiza-
tions to defend interstate class action lawsuits in
county and State courts where—
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(A) the lawyers, rather than the claimants,
are likely to receive the maximum benefit;
(B) less scrutiny may be given to the mer-
its 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 dem-
onstrate 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 par-
ties to settle cases rather than risk a huge judgment
by a local jury, thereby costing consumers billions of
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dollars in increased costs to pay for forced settle-
ments 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 consider-
ation 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 IM-
PROVED 
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. Disclosure of attorney’s fees.
‘‘1717. Sunshine in court records.
‘‘1718. Definitions.’’.
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‘‘§ 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 ade-
quate for class members.
‘‘§ 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 nonmone-
tary benefits to the class member outweigh the monetary
loss.
‘‘§ 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.
‘‘§ 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
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greater share of the award to a class representative serv-
ing 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 pay-
ment 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.
‘‘§ 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 state-
ment 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 
DE-
SCRIBED IN THIS NOTICE.’; and
‘‘(2) a short summary written in plain, easily
understood language, describing—
‘‘(A) the subject matter of the class action;
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‘‘(B) the members of the class;
‘‘(C) the legal consequences of being a
member of the class;
‘‘(D) if the notice is informing class mem-
bers 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 attor-
ney’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 attor-
ney’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 informa-
tion described in subsection (a)—
‘‘(1) be placed in a conspicuous and prominent
location on the notice;
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‘‘(2) contain clear and concise headings for
each item of information; and
‘‘(3) provide a clear and concise form for stat-
ing each item of information required to be disclosed
under each heading.
‘‘(c) TELEVISION OR RADIO NOTICE.—Any notice
provided through television or radio (including trans-
missions by cable or satellite) to inform the class members
in a class action of the right of each member to be ex-
cluded 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.
‘‘§ 1716. Disclosure of attorney’s fees
‘‘Any court with jurisdiction over a plaintiff class ac-
tion shall require that, if there is a settlement of the class
action or a judgment for the plaintiffs, the attorneys for
the plaintiffs shall disclose to each plaintiff—
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‘‘(1) at the time when any payment or other
award is transmitted to the plaintiff in accordance
with the settlement of judgment, or
‘‘(2) in a case in which no such payment or
award is made to a plaintiff, at the time when notice
of the final settlement or judgment is transmitted to
such plaintiff,
the full amount of the attorney’s fees charged by the attor-
neys for services rendered in the action.
‘‘§ 1717. Sunshine in court records
‘‘No order, opinion, or record of the court in the adju-
dication of a class action, including a record obtained
through discovery, whether or not formally filed with the
court, may be sealed or subjected to a protective order
unless the court makes a finding of fact—
‘‘(1) that the sealing or protective order is nar-
rowly tailored, consistent with the protection of pub-
lic health and safety, and is in the public interest;
and
‘‘(2) if the action by the court would prevent
the disclosure of information, that disclosing the in-
formation is clearly outweighed by a specific and
substantial interest in maintaining the confiden-
tiality of such information.
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‘‘§ 1718. 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 coun-
sel’ 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 mem-
bers’ means the persons who fall within the defini-
tion of the proposed or certified class in a class ac-
tion.
‘‘(4) PLAINTIFF
CLASS
ACTION.—The term
‘plaintiff class action’ means a class action in which
class members are plaintiffs.
‘‘(5) PROPOSED SETTLEMENT.—The term ‘pro-
posed settlement’ means an agreement that resolves
claims in a class action, that is subject to court ap-
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proval 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 JURISDIC-
TION.—Section 1332 is amended—
(1) by redesignating subsection (d) as sub-
section (e); and
(2) by inserting after subsection (c) the fol-
lowing:
‘‘(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 ac-
tion 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
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‘‘(D) the term ‘class members’ means the per-
sons who fall within the definition of the proposed
or certified class in a class action.
‘‘(2) The district courts shall have original jurisdic-
tion of any civil action in which the matter in controversy
exceeds the sum or value of $2,000,000, exclusive of inter-
est 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 de-
fendants are citizens of the State in which the action
was originally filed; and
‘‘(ii) the claims asserted therein will be gov-
erned primarily by the laws of the State in which the
action was originally filed;
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‘‘(B) the primary defendants are States, State
officials, or other governmental entities against
whom the district court may be foreclosed from or-
dering 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 Pro-
cedure.
‘‘(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
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district courts of the United States have original jurisdic-
tion.
‘‘(C) In any action that is dismissed under this para-
graph and is filed by any of the original named plaintiffs
therein in the same State court venue in which the dis-
missed action was originally filed, the limitations periods
on all reasserted claims shall be deemed tolled for the pe-
riod 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 cor-
poration 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 in-
corporated or organized; or
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‘‘(C) the rights, duties (including fiduciary du-
ties), 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 regula-
tions 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 prin-
cipal 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 pub-
lic, 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.
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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 ac-
tions 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 FED-
ERAL DISTRICT COURT.
(a) IN GENERAL.—Chapter 89 is amended by adding
after section 1452 the following:
‘‘§ 1453. Removal of class actions
‘‘(a) DEFINITIONS.—In this section, the terms ‘class’,
‘class action’, ‘class certification order’, and ‘class mem-
ber’ have the meanings given these terms in section
1332(d)(1).
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‘‘(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 certifi-
cation order in the action, except that a plaintiff class
member who is not a named or representative class mem-
ber 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 re-
moval within 30 days after receipt by such class member,
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through service or otherwise, of the initial written notice
of the class action.
‘‘(e) REVIEW OF ORDERS REMANDING CLASS AC-
TIONS
TO STATE COURTS.—The provisions of section
1447 shall apply to any removal of a case under this sec-
tion, 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 busi-
ness enterprise and arises under or by virtue of the
laws of the State in which such corporation or busi-
ness 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 de-
fined under section 2(a)(1) of the Securities Act of
1933 and the regulations issued thereunder).’’.
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(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 OR-
DERS.
(a) IN GENERAL.—Section 1292(a) is amended by in-
serting 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 pro-
ceedings 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. REPORT ON CLASS ACTION SETTLEMENTS.
(a) IN GENERAL.—Not later than 12 months after
the date of the enactment of this Act, the Judicial Con-
ference of the United States, with the assistance of the
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Director of the Federal Judicial Center and the Director
of the Administrative Office of the United States Courts,
shall prepare and transmit to the Committees on the Judi-
ciary of the Senate and House of Representatives a report
on class action settlements in the Federal courts.
(b) CONTENT.—The report under subsection (a) shall
contain—
(1) recommendations on the best practices that
courts can use to ensure that proposed class action
settlements are fair to the class members whom the
settlements are supposed to benefit;
(2) recommendations on the best practices that
courts can use to ensure that—
(A) the fees and expenses awarded to
counsel in connection with a class action settle-
ment appropriately reflect the extent to which
counsel succeeded in obtaining full redress for
the injuries alleged and the time, expense, and
risk that counsel devoted to the litigation; and
(B) the class members on whose behalf the
settlement is proposed are the primary bene-
ficiaries of the settlement; and
(3) the actions that the Judicial Conference of
the United States has taken and intends to take to-
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ward having the Federal judiciary implement any or
all of the recommendations contained in the report.
(c) AUTHORITY OF FEDERAL COURTS.—Nothing in
this section shall be construed to alter the authority of
the Federal courts to supervise attorney’s fees.
SEC. 8. EFFECTIVE DATE.
The amendments made by this Act shall apply to any
civil action commenced on or after the date of the enact-
ment of this Act.
Passed the House of Representatives March 13,
2002.
Attest:
JEFF TRANDAHL,
Clerk.