Grants the district courts original jurisdiction of any civil action in which the matter in controversy exceeds $2 million, exclusive of interest and costs, and is a class action in which any member of a class of plaintiffs is: (1) a citizen of a State different from any defendant; (2) a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or (3) a citizen of a State and any defendant is a foreign state or a citizen or subject of a foreign state. Lists exceptions, such as where a class action brought by shareholders solely involves a claim concerning a covered security or relating to the internal governance of a corporation.
Sets forth procedures for removal of interstate class actions to U.S. district court and for review of orders remanding class actions to State courts.
Directs the Judicial Conference of the United States to report to the Senate and House Judiciary Committees on class action settlements.
[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1712 Introduced in Senate (IS)]
107th CONGRESS
1st Session
S. 1712
To amend the procedures that apply to consideration of interstate class
actions to assure fairer outcomes for class members and defendants, and
for other purposes.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
November 15, 2001
Mr. Grassley (for himself, Mr. Kohl, Mr. Hatch, Mr. Carper, Mr.
Thurmond, Mr. Chafee, and Mr. Specter) introduced the following bill;
which was read twice and referred to the Committee on the Judiciary
_______________________________________________________________________
A BILL
To amend the procedures that apply to consideration of interstate class
actions to assure fairer outcomes for class members and defendants, and
for other purposes.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CONTENTS.
(a) Short Title.--This Act may be cited as the ``Class Action
Fairness Act of 2001''.
(b) Reference.--Whenever in this Act reference is made to an
amendment to, or repeal of, a section or other provision, the reference
shall be considered to be made to a section or other provision of title
28, United States Code.
(c) Table of Contents.--The table of contents for this Act is as
follows:
Sec. 1. Short title; reference; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Consumer class action bill of rights and improved procedures
for interstate class actions.
Sec. 4. Federal district court jurisdiction for interstate class
actions.
Sec. 5. Removal of interstate class actions to Federal district court.
Sec. 6. Report on class action settlements.
Sec. 7. Effective date.
SEC. 2. FINDINGS AND PURPOSES.
(a) Findings.--Congress finds the following:
(1) Class action lawsuits are an important and valuable
part of the legal system when they permit the fair and
efficient resolution of legitimate claims of numerous parties
by allowing the claims to be aggregated into a single action
against a defendant that has allegedly caused harm.
(2) Over the past decade, there have been abuses of the
class action device that have--
(A) harmed class members with legitimate claims and
defendants that have acted responsibly; and
(B) undermined public respect for our judicial
system.
(3) Class members often receive little or no benefit from
class actions, and are sometimes harmed, such as where--
(A) counsel are awarded large fees, while leaving
class members with coupons or other awards of little or
no value;
(B) unjustified awards are made to certain
plaintiffs at the expense of other class members; and
(C) confusing notices are published that prevent
class members from being able to fully understand and
effectively exercise their rights.
(4) Abuses in class actions undermine the national judicial
system and the concept of diversity jurisdiction as intended by
the framers of the United States Constitution, in that State
and local courts are--
(A) keeping cases of national importance out of
Federal court;
(B) sometimes acting in ways that demonstrate bias
against out-of-State defendants; and
(C) making judgments that impose their view of the
law on other States and bind the rights of the
residents of those States.
(b) Purposes.--The purposes of this Act are to--
(1) assure fair and prompt recoveries for class members
with legitimate claims;
(2) restore the intent of the framers of the United States
Constitution by providing for Federal court consideration of
interstate cases of national importance under diversity
jurisdiction; and
(3) benefit society by encouraging innovation and lowering
consumer prices.
SEC. 3. CONSUMER CLASS ACTION BILL OF RIGHTS AND IMPROVED PROCEDURES
FOR INTERSTATE CLASS ACTIONS.
(a) In General.--Part V is amended by inserting after chapter 113
the following:
``CHAPTER 114--CLASS ACTIONS
``Sec.
``1711. Definitions.
``1712. Judicial scrutiny of coupon and other noncash settlements.
``1713. Protection against loss by class members.
``1714. Protection against discrimination based on geographic location.
``1715. Prohibition on the payment of bounties.
``1716. Clearer and simpler settlement information.
``1717. Notifications to appropriate Federal and State officials.
``Sec. 1711. Definitions
``In this chapter:
``(1) Class.--The term `class' means all of the class
members in a class action.
``(2) Class action.--The term `class action' means any
civil action filed in a district court of the United States
under rule 23 of the Federal Rules of Civil Procedure or any
civil action that is removed to a district court of the United
States that was originally filed under a State statute or rule
of judicial procedure authorizing an action to be brought by 1
or more representatives as a class action.
``(3) Class counsel.--The term `class counsel' means the
persons who serve as the attorneys for the class members in a
proposed or certified class action.
``(4) Class members.--The term `class members' means the
persons (named or unnamed) who fall within the definition of
the proposed or certified class in a class action.
``(5) Plaintiff class action.--The term `plaintiff class
action' means a class action in which class members are
plaintiffs.
``(6) Proposed settlement.--The term `proposed settlement'
means an agreement regarding a class action that is subject to
court approval and that, if approved, would be binding on some
or all class members.
``Sec. 1712. Judicial scrutiny of coupon and other noncash settlements
``The court may approve a proposed settlement under which the class
members would receive noncash benefits or would otherwise be required
to expend funds in order to obtain part or all of the proposed benefits
only after a hearing to determine whether, and making a written finding
that, the settlement is fair, reasonable, and adequate for class
members.
``Sec. 1713. Protection against loss by class members
``The court may approve a proposed settlement under which any class
member is obligated to pay sums to class counsel that would result in a
net loss to the class member only if the court makes a written finding
that nonmonetary benefits to the class member substantially outweigh
the monetary loss.
``Sec. 1714. Protection against discrimination based on geographic
location
``The court may not approve a proposed settlement that provides for
the payment of greater sums to some class members than to others solely
on the basis that the class members to whom the greater sums are to be
paid are located in closer geographic proximity to the court.
``Sec. 1715. Prohibition on the payment of bounties
``(a) In General.--The court may not approve a proposed settlement
that provides for the payment of a greater share of the award to a
class representative serving on behalf of a class, on the basis of the
formula for distribution to all other class members, than that awarded
to the other class members.
``(b) Rule of Construction.--The limitation in subsection (a) shall
not be construed to prohibit a payment approved by the court for
reasonable time or costs that a person was required to expend in
fulfilling the obligations of that person as a class representative.
``Sec. 1716. Clearer and simpler settlement information
``(a) Plain English Requirements.--Any court with jurisdiction over
a plaintiff class action shall require that any written notice
concerning a proposed settlement of the class action provided to the
class through the mail or publication in printed media contain--
``(1) at the beginning of such notice, a statement in 18-
point or greater bold type, stating `LEGAL NOTICE: YOU ARE A
PLAINTIFF IN A CLASS ACTION LAWSUIT AND YOUR LEGAL RIGHTS ARE
AFFECTED BY THE SETTLEMENT DESCRIBED IN THIS NOTICE.';
``(2) a short summary written in plain, easily understood
language, describing--
``(A) the subject matter of the class action;
``(B) the members of the class;
``(C) the legal consequences of being a member of
the class action;
``(D) if the notice is informing class members of a
proposed settlement agreement--
``(i) the benefits that will accrue to the
class due to the settlement;
``(ii) the rights that class members will
lose or waive through the settlement;
``(iii) obligations that will be imposed on
the defendants by the settlement;
``(iv) the dollar amount of any attorney's
fee class counsel will be seeking, or if not
possible, a good faith estimate of the dollar
amount of any attorney's fee class counsel will
be seeking; and
``(v) an explanation of how any attorney's
fee will be calculated and funded; and
``(E) any other material matter.
``(b) Tabular Format.--Any court with jurisdiction over a plaintiff
class action shall require that the information described in subsection
(a)--
``(1) be placed in a conspicuous and prominent location on
the notice;
``(2) contain clear and concise headings for each item of
information; and
``(3) provide a clear and concise form for stating each
item of information required to be disclosed under each
heading.
``(c) Television or Radio Notice.--Any notice provided through
television or radio (including transmissions by cable or satellite) to
inform the class members in a class action of the right of each member
to be excluded from a class action or a proposed settlement, if such
right exists, shall, in plain, easily understood language--
``(1) describe the persons who may potentially become class
members in the class action; and
``(2) explain that the failure of a class member to
exercise his or her right to be excluded from a class action
will result in the person's inclusion in the class action.
``Sec. 1717. Notifications to appropriate Federal and State officials
``(a) Definitions.--
``(1) Appropriate federal official.--In this section, the
term `appropriate Federal official' means--
``(A) the Attorney General of the United States; or
``(B) in any case in which the defendant is a
Federal depository institution, a State depository
institution, a depository institution holding company,
a foreign bank, or a nondepository institution
subsidiary of the foregoing (as such terms are defined
in section 3 of the Federal Deposit Insurance Act (12
U.S.C. 1813)), the person who has the primary Federal
regulatory or supervisory responsibility with respect
to the defendant, if some or all of the matters alleged
in the class action are subject to regulation or
supervision by that person.
``(2) Appropriate state official.--In this section, the
term `appropriate State official' means the person in the State
who has the primary regulatory or supervisory responsibility
with respect to the defendant, or who licenses or otherwise
authorizes the defendant to conduct business in the State, if
some or all of the matters alleged in the class action are
subject to regulation by that person. If there is no primary
regulator, supervisor, or licensing authority, or the matters
alleged in the class action are not subject to regulation or
supervision by that person, then the appropriate State official
shall be the State attorney general.
``(b) In General.--Not later than 10 days after a proposed
settlement of a class action is filed in court, each defendant that is
participating in the proposed settlement shall serve upon the
appropriate State official of each State in which a class member
resides and the appropriate Federal official, a notice of the proposed
settlement consisting of--
``(1) a copy of the complaint and any materials filed with
the complaint and any amended complaints (except such materials
shall not be required to be served if such materials are made
electronically available through the Internet and such service
includes notice of how to electronically access such material);
``(2) notice of any scheduled judicial hearing in the class
action;
``(3) any proposed or final notification to class members
of--
``(A)(i) the members' rights to request exclusion
from the class action; or
``(ii) if no right to request exclusion exists, a
statement that no such right exists; and
``(B) a proposed settlement of a class action;
``(4) any proposed or final class action settlement;
``(5) any settlement or other agreement contemporaneously
made between class counsel and counsel for the defendants;
``(6) any final judgment or notice of dismissal;
``(7)(A) if feasible, the names of class members who reside
in each State and the estimated proportionate share of the
claims of such members to the entire settlement to that State's
appropriate State official; or
``(B) if the provision of information under subparagraph
(A) is not feasible, a reasonable estimate of the number of
class members residing in each State and the estimated
proportionate share of the claims of such members to the entire
settlement; and
``(8) any written judicial opinion relating to the
materials described under subparagraphs (3) through (6).
``(c) Depository Institutions Notification.--
``(1) Federal and other depository institutions.--In any
case in which the defendant is a Federal depository
institution, a depository institution holding company, a
foreign bank, or a non-depository institution subsidiary of the
foregoing, the notice requirements of this section are
satisfied by serving the notice required under subsection (b)
upon the person who has the primary Federal regulatory or
supervisory responsibility with respect to the defendant, if
some or all of the matters alleged in the class action are
subject to regulation or supervision by that person.
``(2) State depository institutions.--In any case in which
the defendant is a State depository institution (as that term
is defined in section 3 of the Federal Deposit Insurance Act
(12 U.S.C. 1813)), the notice requirements of this section are
satisfied by serving the notice required under subsection (b)
upon the State bank supervisor (as that term is defined in
section 3 of the Federal Deposit Insurance Act (12 U.S.C.
1813)) of the State in which the defendant is incorporated or
chartered, if some or all of the matters alleged in the class
action are subject to regulation or supervision by that person,
and upon the appropriate Federal official.
``(d) Final Approval.--An order giving final approval of a proposed
settlement may not be issued earlier than 90 days after the later of
the dates on which the appropriate Federal official and the appropriate
State official are served with the notice required under subsection
(b).
``(e) Noncompliance if Notice Not Provided.--
``(1) In general.--A class member may refuse to comply with
and may choose not to be bound by a settlement agreement or
consent decree in a class action if the class member
demonstrates that the notice required under subsection (b) has
not been provided.
``(2) Limitation.--A class member may not refuse to comply
with or to be bound by a settlement agreement or consent decree
under paragraph (1) if the notice required under subsection (b)
was directed to the appropriate Federal official and to either
the State attorney general or the person that has primary
regulatory, supervisory, or licensing authority over the
defendant.
``(3) Application of rights.--The rights created by this
subsection shall apply only to class members or any person
acting on a class member's behalf, and shall not be construed
to limit any other rights affecting a class member's
participation in the settlement.
``(f) Rule of Construction.--Nothing in this section shall be
construed to expand the authority of, or impose any obligations,
duties, or responsibilities upon, Federal or State officials.''.
(b) Technical and Conforming Amendment.--The table of chapters for
part V is amended by inserting after the item relating to chapter 113
the following:
``114. Class Actions........................................ 1711''.
SEC. 4. FEDERAL DISTRICT COURT JURISDICTION FOR INTERSTATE CLASS
ACTIONS.
(a) Application of Federal Diversity Jurisdiction.--Section 1332 is
amended--
(1) by redesignating subsection (d) as subsection (e); and
(2) by inserting after subsection (c) the following:
``(d)(1) In this subsection--
``(A) the term `class' means all of the class members in a
class action;
``(B) the term `class action' means any civil action filed
under rule 23 of the Federal Rules of Civil Procedure or
similar State statute or rule of judicial procedure authorizing
an action to be brought by 1 or more representative persons as
a class action;
``(C) the term `class certification order' means an order
issued by a court approving the treatment of some or all
aspects of a civil action as a class action; and
``(D) the term `class members' means the persons (named or
unnamed) who fall within the definition of the proposed or
certified class in a class action.
``(2) The district courts shall have original jurisdiction
of any civil action in which the matter in controversy exceeds
the sum or value of $2,000,000, exclusive of interest and
costs, and is a class action in which--
``(A) any member of a class of plaintiffs is a
citizen of a State different from any defendant;
``(B) any member of a class of plaintiffs is a
foreign state or a citizen or subject of a foreign
state and any defendant is a citizen of a State; or
``(C) any member of a class of plaintiffs is a
citizen of a State and any defendant is a foreign state
or a citizen or subject of a foreign state.
``(3) Paragraph (2) shall not apply to any civil action in
which--
``(A)(i) the substantial majority of the members of
the proposed plaintiff class and the primary defendants
are citizens of the State in which the action was
originally filed; and
``(ii) the claims asserted therein will be governed
primarily by the laws of the State in which the action
was originally filed;
``(B) the primary defendants are States, State
officials, or other governmental entities against whom
the district court may be foreclosed from ordering
relief; or
``(C) the number of members of all proposed
plaintiff classes in the aggregate is less than 100.
``(4) In any class action, the claims of the individual
class members shall be aggregated to determine whether the
matter in controversy exceeds the sum or value of $2,000,000,
exclusive of interest and costs.
``(5) This subsection shall apply to any class action
before or after the entry of a class certification order by the
court with respect to that action.
``(6)(A) A district court shall dismiss any civil action
that is subject to the jurisdiction of the court solely under
this subsection if the court determines the action may not
proceed as a class action based on a failure to satisfy the
prerequisites of rule 23 of the Federal Rules of Civil
Procedure.
``(B) Nothing in subparagraph (A) shall prohibit plaintiffs
from filing an amended class action in Federal court or filing
an action in State court, except that any such action filed in
State court may be removed to the appropriate district court if
it is an action of which the district courts of the United
States have original jurisdiction.
``(C) In any action that is dismissed under this paragraph
and is filed by any of the original named plaintiffs therein in
the same State court venue in which the dismissed action was
originally filed, the limitations periods on all reasserted
claims shall be deemed tolled for the period during which the
dismissed class action was pending. The limitations periods on
any claims that were asserted in a class action dismissed under
this paragraph that are subsequently asserted in an individual
action shall be deemed tolled for the period during which the
dismissed action was pending.
``(7) Paragraph (2) shall not apply to any class action
that solely involves a claim--
``(A) concerning a covered security as defined
under 16(f)(3) of the Securities Act of 1933 and
section 28(f)(5)(E) of the Securities Exchange Act of
1934;
``(B) that relates to the internal affairs or
governance of a corporation or other form of business
enterprise and that arises under or by virtue of the
laws of the State in which such corporation or business
enterprise is incorporated or organized; or
``(C) that relates to the rights, duties (including
fiduciary duties), and obligations relating to or
created by or pursuant to any security (as defined
under section 2(a)(1) of the Securities Act of 1933 and
the regulations issued thereunder).
``(8) For purposes of this subsection and section 1453 of
this title, an unincorporated association shall be deemed to be
a citizen of the State where it has its principal place of
business and the State under whose laws it is organized.
``(9)(A) For purposes of this section and section 1453 of
this title, a civil action that is not otherwise a class action
as defined in paragraph (1)(B) shall nevertheless be deemed a
class action if--
``(i) the named plaintiff purports to act for the
interests of its members (who are not named parties to
the action) or for the interests of the general public,
seeks a remedy of damages, restitution, disgorgement,
or any other form of monetary relief, and is not a
State attorney general; or
``(ii) monetary relief claims in the action are
proposed to be tried jointly in any respect with the
claims of 100 or more other persons on the ground that
the claims involve common questions of law or fact.
``(B)(i) In any civil action described under subparagraph
(A)(ii), the persons who allegedly were injured shall be
treated as members of a proposed plaintiff class and the
monetary relief that is sought shall be treated as the claims
of individual class members.
``(ii) Paragraphs (3) and (6) of this subsection and
subsections (b)(2) and (d) of section 1453 shall not apply to
any civil action described under subparagraph (A)(i).
``(iii) Paragraph (6) of this subsection, and subsections
(b)(2) and (d) of section 1453 shall not apply to any civil
action described under subparagraph (A)(ii).''.
(b) Conforming Amendments.--
(1) Section 1335 (a)(1) is amended by inserting ``(a) or
(d)'' after ``1332''.
(2) Section 1603 (b)(3) is amended by striking ``(d)'' and
inserting ``(e)''.
SEC. 5. REMOVAL OF INTERSTATE CLASS ACTIONS TO FEDERAL DISTRICT COURT.
(a) In General.--Chapter 89 is amended by adding after section 1452
the following:
``Sec. 1453. Removal of class actions
``(a) Definitions.--In this section, the terms `class', `class
action', `class certification order', and `class member' shall have the
meanings given such terms under section 1332(d)(1).
``(b) In General.--A class action may be removed to a district
court of the United States in accordance with this chapter, without
regard to whether any defendant is a citizen of the State in which the
action is brought, except that such action may be removed--
``(1) by any defendant without the consent of all
defendants; or
``(2) by any plaintiff class member who is not a named or
representative class member without the consent of all members
of such class.
``(c) When Removable.--This section shall apply to any class action
before or after the entry of a class certification order in the action.
``(d) Procedure for Removal.--Section 1446 relating to a defendant
removing a case shall apply to a plaintiff removing a case under this
section, except that in the application of subsection (b) of such
section the requirement relating to the 30-day filing period shall be
met if a plaintiff class member files notice of removal within 30 days
after receipt by such class member, through service or otherwise, of
the initial written notice of the class action.
``(e) Review of Orders Remanding Class Actions to State Courts.--
Section 1447 shall apply to any removal of a case under this section,
except that notwithstanding section 1447(d), an order remanding a class
action to the State court from which it was removed shall be reviewable
by appeal or otherwise.
``(f) Exception.--This section shall not apply to any class action
that solely involves--
``(1) a claim concerning a covered security as defined
under section 16(f)(3) of the Securities Act of 1933 and
section 28(f)(5)(E) of the Securities Exchange Act of 1934;
``(2) a claim that relates to the internal affairs or
governance of a corporation or other form of business
enterprise and arises under or by virtue of the laws of the
State in which such corporation or business enterprise is
incorporated or organized; or
``(3) a claim that relates to the rights, duties (including
fiduciary duties), and obligations relating to or created by or
pursuant to any security (as defined under section 2(a)(1) of
the Securities Act of 1933 and the regulations issued
thereunder).''.
(b) Removal Limitation.--Section 1446(b) is amended in the second
sentence by inserting ``(a)'' after ``section 1332''.
(c) Technical and Conforming Amendments.--The table of sections for
chapter 89 is amended by adding after the item relating to section 1452
the following:
``1453. Removal of class actions.''.
SEC. 6. REPORT ON CLASS ACTION SETTLEMENTS.
(a) In General.--Not later than 12 months after the date of
enactment of this Act, the Judicial Conference of the United States,
with the assistance of the Director of the Federal Judicial Center and
the Director of the Administrative Office of the United States Courts,
shall prepare and transmit to the Committees on the Judiciary of the
Senate and the House of Representatives a report on class action
settlements.
(b) Content.--The report under subsection (a) shall contain--
(1) recommendations on the best practices that courts can
use to ensure that proposed class action settlements are fair
to the class members that the settlements are supposed to
benefit;
(2) recommendations on the best practices that courts can
use to ensure that--
(A) the fees and expenses awarded to counsel in
connection with a class action settlement appropriately
reflect the extent to which counsel succeeded in
obtaining full redress for the injuries alleged and the
time, expense, and risk that counsel devoted to the
litigation; and
(B) the class members on whose behalf the
settlement is proposed are the primary beneficiaries of
the settlement; and
(3) the actions that the Judicial Conference of the United
States has taken and intends to take toward having the Federal
judiciary implement any or all of the recommendations contained
in the report.
(c) Authority of Federal Courts.--Nothing in this section shall be
construed to alter the authority of the Federal courts to supervise
attorneys' fees.
SEC. 7. EFFECTIVE DATE.
The amendments made by this Act shall apply to any civil action
commenced on or after the date of enactment of this Act.
<all>
Introduced in Senate
Sponsor introductory remarks on measure. (CR S11946-11947)
Read twice and referred to the Committee on the Judiciary. (text of measure as introduced: CR S11947-11950)
Committee on the Judiciary. Hearings held.
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