President George W. Bush signed a bill to curb multi-state class-action lawsuits by shifting most of them from state to federal courts, a victory for business that also fulfills one of Bush’s second-term goals.
The new law is “a critical step toward ending the lawsuit culture in our country,” Bush said at a White House signing ceremony. The law “will “begin restoring common sense and balance to America’s legal system,” he said.
The “Class Action Fairness Act” makes it tougher for lawyers to go “forum shopping,” choosing to file cases in state courts such as Madison County, Illinois, that are known for awarding plaintiffs large judgments. Class-action claims of more than $5 million will be shifted to federal courts, where legal precedents are more uniform and judges are appointed for life, compared with many state court judges who
Claims already filed aren’t affected.
Bush signed the bill just one day after it passed the U.S. House, 279-149. The Senate approved it last week, 72-26.
Stanton Anderson, chief lobbyist for the U.S. Chamber of Commerce, said he expects the lawsuit restrictions will lead to higher profits for corporations and lower costs for consumers.
“The impact is going to be immediate because many of these cases are going to stop being filed in these local county courts,” Anderson said in an interview after the House vote yesterday. “Companies are going to see over the next couple of quarters that they don’t have to settle these cases in these problematic jurisdictions.”
Win for Business, Insurers
A coalition of companies and insurers including Ford Motor Co., Intel Corp., Pfizer Inc., Allstate Corp. and Hartford Financial Services Group Inc. pressed Congress to tighten the law to reduce legal costs and reduce what Bush calls “frivolous lawsuits.”
“Passage of this important legislation means a legal system that is simpler, fairer and faster,” Edward Liddy, chief executive of Allstate, the second-largest U.S. auto and home insurer, said in a statement yesterday. “Lawsuit abuse places a major drag on the U.S. economy and hurts the competitiveness of our businesses.”
The legislation topped Bush’s agenda for curbing what he has called “frivolous lawsuits” that “drive up the cost of doing business.”
Anderson said he hopes Congress and the White House will turn quickly to other steps, such as capping non-economic damages for medical malpractice and compensating asbestos-exposure victims from a $140 billion trust fund aimed at ending lawsuits that have bankrupted more than 70 companies.
Mike Mueller, head of a nationwide class-action team at Akin Gump Strauss Hauer & Feld LLP, predicted that plaintiffs’ lawyers will challenge the new class-action law as an unconstitutional expansion of federal power.
