United States: House Passes Fairness In Class Action Litigation Act Of 2017

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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