After House OK, President Bush Signs Class Action Reform into Law

By | February 18, 2005

Just one day after the U.S. House of Representatives passed the Class Action Fairness Act by a vote of 279-149, President Bush has signed the bill into law.

The House vote followed last week’s passage by the Senate.

“This bill is an important step forward in our efforts to reform the litigation system and to continue creating jobs and growing our economy. I look forward to signing the bill into law,” Bush said in a statement.

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.

After the vote, House Speaker Dennis Hastert (R- IL) called passage an “historic first step” towards curtailing lawsuit abuse.

“Today’s action takes a step in the right direction to end the so-called Tort Tax. The Tort Tax makes consumers pay more for the goods and services they use. The Tort Tax is basically imputed into everything we buy because businesses and manufacturers have to cover themselves and their employees — just in case they get sued by a greedy personal injury lawyer,” Hastert said.

He said the so-called “Tort Tax” cost the nation’s economy $246 billion a year, and by 2006, it will cost the average American nearly $1,000 more each year on their purchases because of defensive business practices.

House Democrats were not so enthusiastic. House Democratic Leader Nancy Pelosi called the measure “an injustice to consumers and a windfall for irresponsible corporations.”

“The Republican agenda is to ensure that some Americans do not get their day in court,” she said in opposition to the bill.

“Make no mistake: the class action bill before us today is an extreme bill. It is not a compromise bill, as some have claimed. It is an extreme bill that is an injustice to consumers, and a windfall for irresponsible corporations,” Pelosi added.

“Consumers will be hit hard by this bill. It lumps together individual personal injury cases such as those involving Vioxx, which are not class actions under current procedures, and forces them into the federal courts. Doing so will greatly increase the likelihood that such cases will never be heard.”

Pelosi maintained that “special interests have even admitted that the real intent of this bill is to clog the federal courts and therefore stop the cases.

She said Democrats support “sensible approaches that weed out frivolous lawsuits, but not meritorious claims.”

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