Class-action suits reclassified

As official Washington plunges into the proposed budget for the 2006 fiscal year, there's a quieter race to move a decade of controversial judicial reforms through the Congress and to the president's desk.

Timing is critical. Looming battles over Social Security and judicial nominations could deepen partisan rancor. That's one reason key Senate negotiators and their highly mobilized business allies want to move quickly toward their goal of changing the rules of the game in US courts over everything from class actions and medical malpractice to how workers are compensated for exposure to asbestos.

To do it, they need bipartisan support, especially in the US Senate, and that could vanish quickly, as other issues heat up.

Exhibit A is the class action bill moving to the House this week. The Class Action Fairness Act, which passed the Senate on a 72-26 vote last week, had Democratic support in the previous Congress, as well. Some business backers say the Senate GOP squandered it by delay. Not this year.

"It was good that the Republican leadership brought it up early," says Lawrence Fineran, vice president for regulatory and competition policy for the National Association of Manufacturers. "Legal reform is back on the agenda in a big way."

Of all the legal reforms on the corporate wish list for the 109th Congress, class action reform had the most momentum. The key players in the US business community are solidly behind the bill, which would move multistate class-action lawsuits with claims over $5 million into federal courts. Business groups say the move will save US corporations billions in what the US Chamber of Commerce calls "excessive and frivolous litigation."

It's a bitter, if not unexpected, defeat for consumers groups and trial lawyers. Both groups concede there have been abuses in class-action lawsuits, most notably so-called coupon settlements that yielded little of value to consumers and big fees to trial lawyers. But the new law even could lock litigants out of federal courts, where critics say defendant companies have a wider range of procedural tools to block a case from ever getting certified. On an issue where litigants are often accused of "forum shopping" for the best jurisdiction in which to sue, critics say this is the ultimate forum-shopping bill for corporate wrongdoers.

"One of the most important aspects of class action is deterrence: A company that rips off consumers for $10 apiece, but there are 10 million of them, reaps a huge, undeserved windfall," says Carlton Carl, a spokesman for the Trial Lawyers Association of America. Now, consumers will have a rough time holding corporations accountable."

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