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Yesterday, the U.S. House of Representatives passed the Fairness
in Class Action Litigation Act of 2017
(H.R. 985) (the Act).
The Act – introduced by Chairman of the House Judiciary
Committee Bob Goodlatte – makes several significant changes
to class action practice. In passing this Act, the House asserted
these changes were intended to "diminish abuses in class
action and mass tort litigation that are undermining the integrity
of the U.S. legal system" and "ensure Federal court
consideration of interstate controversies of national importance
consistent with diversity jurisdiction principles."
Generally, the Act makes significant changes to the class
certification process, discovery, litigation funding and
settlement. In particular, it:
Creates stricter standards for class certification by limiting
class certification to actions where the representative can
demonstrate that each proposed class member "suffered the same
type and scope of injury as the named class representative or
representatives."
Permits a direct appeal, by right, from an order certifying or
refusing to certify a class action.
Requires detailed conflict disclosures from proposed class
counsel that outline whether any proposed class representative or
named plaintiff has a relationship with class counsel outside of
the proposed class action. If there is a conflict, the Act
prohibits certification. Prohibited conflicts include relatives,
present or former employees, present or former clients, and other
contractual relationships.
Mandates an ascertainability requirement for class
certification, under which plaintiffs must "affirmatively
demonstrate that there is 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."
Affects the calculation, determination and distribution of
attorney fees. Among other provisions, the Act limits fees to
either a reasonable percentage of payments directly distributed and
received by class members or a reasonable percentage of the value
of any equitable relief awarded (including injunctive relief). The
Act further caps fees at the total amount distributed to class
members. Finally, the Act prohibits calculation or distribution of
attorney fees until distributions to class members are
complete.
Requires certain reporting around class action settlement. The
Act requires class counsel to submit a
settlement accounting to the director of the Federal Judicial
Center and the director of the Administrative Office of the United
States Courts that identifies how all monies paid by the defendant
are distributed. This data will then be reported annually. Class
counsel cannot receive any attorney fees until this data is
submitted.
Some other notable provisions include disclosure of
third-party litigation funding and a mandatory discovery stay
while any motion to transfer, dismiss, strike class allegations, or
dispose of the class allegations is pending. Also, certain changes
were made to multidistrict litigation practice, including
requirements regarding the timing and procedure for evidence
submission by plaintiffs, requirements regarding consent and
requirements regarding jurisdiction in appeals procedure.
If signed into law, the Act will be the most significant class
action legislation since the Class Action Fairness Act of 2005, and
it has already caused much debate. But for now, supporters and
opponents alike will have to wait as the Act advances to the Senate
for additional consideration. Check back for updates as we continue
to track the Fairness in Class Action Litigation Act of 2017 as it
makes its way through Congress.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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