United States: Proposed Legislation That Could Impact Class Action Litigation And Arbitration – The Fairness In Class Action Litigation Act Of 2017 And The Arbitration Fairness Act Of 2017

Two new pieces of proposed legislation could, if passed, change the architecture and requirements of class actions and outlaw mandatory arbitration clauses in employment and consumer contracts. But neither is a sure thing. Vocal critics as well as supporters are already lined up on both sides of each bill.

The Fairness in Class Action Litigation Act of 2017

On March 9, 2017, 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, who also introduced the Class Action Fairness Act of 2005 (CAFA) – 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 alters the class certification process, discovery, litigation funding and settlement. In particular, it makes the following changes:

  • Stricter Standards. Creates stricter standards for class certification by limiting class certification to actions in which the representative can demonstrate that each proposed class member "suffered the same type and scope of injury as the named class representative or representatives."
  • Direct Appeals. Permits a direct right of appeal, from an order certifying or refusing to certify a class action.
  • No Issue – Only Classes. The Act prohibits federal courts from granting certification to a class only for a specific issue under Rule 23(c)(4) of the Federal Rules of Civil Procedure unless the entirety of the cause of action from which the issue arises satisfies all the class certificate prerequisites of Rules 23(a) and (b). This provision is an attempt to limit class actions where there is no measurable classwide damage, as the Supreme Court required in Comcast v. Behrend, 133 S. Ct. 1426 (2013).Any order issued under 23(c)(4) that certifies a class with respect to particular issues must include a determination "based on a rigorous analysis of the evidence presented" that the requirement in Rule 23(a) has been met.
  • Required Conflict Disclosures. The Act 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.
  • Ascertainability. The Act 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."
  • Attorney Fees. The Act 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.
  • Mandatory Reporting. The Act also requires certain reporting about class action settlements. It 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.
  • Mandatory Discovery Stay. A stay of discovery is required while any motion to transfer, dismiss, strike or dispose of class allegations is pending, unless the court finds that specific discovery is needed "to preserve evidence or to prevent undue prejudice to that party."
  • Third-Party Litigation Funding. The Act also requires that class counsel disclose in writing to the court and other parties the identity of any person or entity (other than a class member or class counsel of record) who has any right to receive compensation from any settlement, judgment or other relief secured in the action.

If ultimately signed into law, the Act will be the most significant class action legislation since CAFA. But critics and supporters are already weighing in on the Act. For example, a Feb. 16, 2017, article by Daniel Fisher in Forbes stated, "Rep. Goodlatte's latest bill would go much further than [CAFA] to eliminate 'most of the tactics plaintiff lawyers used to extract large fees for themselves while delivering little or nothing to their clients.'"

On the opposite end of the ideological spectrum, Professors Chris Sagers and Joshua Davis wrote a March 13, 2017, piece for The New York Times declaring: "A chilling little bill is working its way through Congress. It could have the effect of ending the class action as an American Institution."

Only time will tell if the Act will make it through the Senate and, if so, what provisions it will contain.

The Arbitration Fairness Act of 2017

Sen. Al Franken of Minnesota and Rep. Hank Johnson of Georgia are introducing several pieces of legislation, including the Arbitration Fairness Act of 2017. The bill would amend the Federal Arbitration Act (FAA) by adding a new chapter invalidating agreements that require arbitration of employment, consumer, antitrust or civil rights disputes entered into before a dispute arises.

Sen. Franken's description of the bill acknowledges that "arbitration can be a suitable alternative to litigation if the consent to arbitration is truly voluntary and occurs after the dispute arises . . . ." Sen. Franken has previously attempted to curtail the use of mandatory arbitration agreements. We discussed his reintroduced Arbitration Fairness Act of 2011 in a May 24, 2011, article. The original bill was first introduced by Sen. Franken in 2009.

While no one knows what Congress will do in the future, it's hard to envision that the outcome for the 2017 bill will be different than that of prior versions. Importantly, the U.S. Supreme Court has granted certiorari in three cases which will determine the legality of arbitration agreements with class waivers in the employment arena. We covered those cases in a Jan. 17, 2017, blog post here.

BOTTOM LINE

Views differ on the value of class action litigation and mandatory arbitration agreements. The two bills addressed in this article reflect some of those political, economic and ideological differences. It is unlikely that the Arbitration Fairness Act of 2017 will make it into law. And while the Fairness in Class Action Litigation Act of 2017 has now made it through the House, challenges still abound.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Similar Articles
Relevancy Powered by MondaqAI
 
In association with
Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions