United States: Proposed Legislation May Significantly Limit Class Action Litigation In Federal Court

Twelve years after he introduced the Class Action Fairness Act of 2005, Representative Bob Goodlatte (R-VA) has introduced the Fairness in Class Action Litigation Act of 2017 ("the Act"), which would significantly change the federal class action landscape by creating several procedural mechanisms designed to head off lawyer-driven class action litigation.  The stated purpose of the Act is to "(1) assure fair and prompt recoveries for class members and multidistrict litigation plaintiffs with legitimate claims; (2) diminish abuses in class action and mass tort litigation that are undermining the integrity of the U.S. legal system; and (3) restore the intent of the framers of the United States Constitution by ensuring Federal court consideration of interstate controversies of national importance consistent with diversity jurisdiction principles."  The Act contains many game-changing provisions, five of which are detailed below.

Limits on and Timing of Payment of Attorney's Fees

Perhaps the most important provision of the Act, which is likely to disincentivize plaintiffs' lawyers from bringing class action claims, is the new rule regarding how much attorneys could recover for themselves.  Under the proposed legislation, "the portion of any attorneys' fee award to class counsel that is attributed to the monetary recovery shall be limited to a reasonable percentage of any payments directly distributed to and received by class members."  In addition, plaintiffs' attorneys would be unable to collect their fees unless and until "the distribution of any monetary recovery to class members has been completed."

Discovery Stay

The Act provides for a stay on discovery during the pendency of any motions to dismiss, transfer, or strike class allegations.  In employment cases, this would prevent plaintiffs' lawyers from filing lawsuits and immediately serving written discovery demands seeking information about putative class members, including their contact information, time records and payroll records.

Avoiding Conflicts of Interest

To avoid potential conflicts, and the recurrence of career plaintiffs, the Act would require disclosures about the relationship between the proposed class representative and class counsel.  Specifically, the Act would mandate that the named plaintiff plead whether he or she is "a relative of, is a present or former employee of, is a present or former client of (other than with respect to the class action), or has any contractual relationship with (other than with respect to the class action) class counsel."  The complaint must also detail the circumstances under which the named plaintiff became involved in the lawsuit, in addition to listing any other class actions in which he or she has played a similar role.

Uniform Injury Requirement

Another feature of the Act would make it more difficult for federal court judges to certify a class, unless it is demonstrated that "each proposed class member suffered the same type and scope of injury as the named class representative or representatives."  This would make it easier to oppose motions for class certification where defendants can show that the nature and amount of damages vary, and ensure that Plaintiff's counsel cannot inflate the putative class size with individuals who otherwise have no damages and/or little in common with the named class representative.

Ascertainability Requirement

Another barrier to certification would be the "ascertainability" requirement, which, in addition to the requirement of uniform damages, would prohibit judges from certifying a class unless plaintiffs can pinpoint a "reliable and administratively feasible mechanism (a) for the court to determine whether putative class members fall within the class definition and (b) for distributing directly to a substantial majority of class members any monetary relief secured for the class."  This would help narrow class definitions and prevent plaintiffs' lawyers from crafting broadly-worded, unwieldly class definitions that make it virtually impossible to determine exactly who is actually included in the class.

While the Fairness in Class Action Litigation Act of 2017 has quite a way to go before it becomes law, on February 15, 2017, the legislation made its way through the U.S. House Judiciary Committee with a vote of 19 to 12.  Only time will tell whether it will garner enough support to continue to a full vote and eventually become the law of the land.  We will be monitoring this proposed legislation closely and reporting any developments.

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