Insurance Industry, Republicans See Big Win in Senate Bipartisan Approval of Class Action Reform

February 11, 2005

The U.S. Senate rejected what could have been damaging amendments and approved by a vote of 72-26 historic changes to the way class action lawsuits are handled.

The vote almost assures enactment since the Senate measure, The Class Action Fairness Act, is similar to bills previously passed by the House of Representatives on several occasions. President Bush has also backed similar reforms. House Majority Leader Tom DeLay (R-Tex.) of Texas said he plans to send the bill to the House floor next week.

Supporters, including the insurance industry, contend that bill will limit lawsuit abuse, which they maintain drives up the costs of doing business. Opponents had argued that the measure unfairly restricts the ability of consumers to sue.

The bill’s key provision redirects many class action lawsuits from state courts into the federal court system. It is intended to curtail what is known as “venue shopping” whereby lawyers bring large national class action suits in more favorable state courts. The bill establishes federal authority over interstate cases in which plaintiffs’ claims are over $5 million in the aggregate, while maintaining exclusive state authority over strictly intrastate cases.

The bill passed with help from every Republican except two who did not vote along with 18 Democrats and the Senate’s lone independent, James M. Jeffords of Vermont.

“Today’s passage of the Class Action Fairness Act is a victory for the American people,” said Senate Majority Leader Bill Frist (R-Tenn.). “The bill protects plaintiff’s rights while reining in rampant abuse of America’s courts.”

House Majority Leader DeLay, House Judiciary Committee Chairman F. James Sensenbrenner, Jr. (R-Wis.), and House Agriculture Chairman Bob Goodlatte (R-Va.), the sponsor of class action reform legislation in the House, hailed the Senate’s rejection of all weakening amendments and final passage. The three issued the following statement:

“With today’s Senate passage, the last remaining obstacle to class action reform legislation has finally been cleared. We welcome this legislation back to the House, where the class action reform effort began, and where most of its staunchest and longest enduring proponents reside.

“The House has previously passed this important legal reform in the 106th, 107th, and 108th Congresses. Those efforts died variously at the hands of a minority of Democrat senators and former President Clinton. This time, with a solid bipartisan majority of senators and a reform-minded president, the outcome will be different.

“We look forward to this legislation coming to the House floor next week so we can send it to President Bush, who has made its enactment a top priority.”

Insurance companies also praised the Senate action.

“Melissa Shelk, vice president of federal affairs for the American Insurance Association (AIA), called it a “tremendous, meaningful step forward in the fight to tame an out-of-control court system.”

Previous class action reform efforts in the Senate have come close, but fallen just short of passage. While the final vote on S. 5 showed bipartisan support for the legislation, “it also is very important to note that this bipartisan cooperation resulted in proponents’ ability to successfully fight off amendments to the bill. Sending a clean bill to the House is critical for swift action and success on that side of the Hill,” Shelk said.

The Hartford Financial Services Group, Inc. also applauded the vote, noting that Connecticut’s two Senators, Christopher Dodd and Joseph Lieberman, helped steer the most recent version of this bill through the Senate.

“Today is an important day for all Americans, for the companies who make products for them and for the insurers whose policies protect those companies,” said Ramani Ayer, chairman and chief executive officer of The Hartford.

Republicans hope the Senate success creates momentum for passage of other tort reforms.

Democrats who opposed the class action bill decried the vote.

“It slams the courthouse doors on a wide range of injured plaintiffs,” said Senate Minority Leader Harry Reid of Nevada. “It turns federalism upside down by preventing state courts from hearing state law claims. And it limits corporate accountability at a time of rampant corporate scandals.”

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