Just a week before Congress began its first extended recess of 2017, the Chairman of the House Judiciary Committee took a step towards dramatically changing the landscape of class action litigation. On Thursday, February 9, Representative Bob Goodlatte (R-Va.) introduced a bill (H.R. 985) that would “amend the procedures used in Federal court class actions” by adding a number of new hurdles to class certification in federal court.
Chairman Goodlatte was a principal author of the Class Action Fairness Act of 2005, which considerably expanded federal diversity jurisdiction over interstate class actions. He was also behind another class action reform bill introduced in 2015 that failed to clear the Senate. His new bill, dubbed the Fairness in Class Action Litigation Act of 2017, is in much the same vein—and, if passed, would represent the most sweeping revision of federal class action law to date.
Highlights from the bill:
Injury and Damages: Under the new bill, plaintiffs seeking “monetary relief” would have to “affirmatively demonstrate that each proposed class member suffered the same type and scope of injury as the named class representative.”
- Practical Impact: It is not immediately clear how this change would affect the certification inquiry in practice; federal courts already require a high degree of uniformity in the type of injury that class members have suffered in order to find that common questions predominate. In theory, though, the new language has at least two stated aims: (1) to ensure that no certified classes include uninjured absent class members, and (2) to prevent the certification of classes that require widely diverging calculations of individual damages awards.
Conflicts of Interest: The new bill would require class action complaints to disclose:
- whether any proposed class representative “is a relative of, is a present or former employee of, is a present or former client of (other than with respect to the class action), or has any contractual relationship with (other than with respect to the class action) class counsel,” and
- “the circumstances under which each class representative or named plaintiff agreed to be included in the complaint,” including “any other class action in which any proposed class representative or named plaintiff has a similar role.”
- Practical Impact: Under the new bill, if a named plaintiff has a pre-existing relationship with class counsel, then the court “shall not issue an order granting certification”—plainly targeting the trend of “repeat offenders” filing multiple class action complaints against multiple defendants using the same counsel.
Ascertainability: In a direct response to recent circuit court decisions, the bill would enshrine in statute the implied “ascertainability” requirement recognized by the Third Circuit in Carrera v. Bayer and rejected by the Sixth, Seventh, Eighth, and Ninth Circuits. Specifically, the bill would prohibit certification of damages classes “unless the class is defined with reference to objective criteria and the party seeking to maintain such a class action affirmatively demonstrates that there is a reliable and administratively feasible mechanism” for identifying class members and distributing individual damages awards.
- Practical Impact: In practice, this provision could, for example, authorize courts to demand that consumers come forward with records or proofs of purchase showing they meet the class definition—even in class actions involving inexpensive consumer goods.
Attorneys’ Fees: The bill seeks to prevent disproportionately large fee awards by limiting class counsel’s fees “to a reasonable percentage of any payments directly distributed to and received by class members.” In addition, the provision would cap the fee award at “the total amount of money directly distributed to and received by all class members.”
- Practical Impact: This provision is ostensibly designed to make it more difficult for plaintiffs’ counsel to recover fee awards—and thus to discourage them from filing class actions in the first instance. By the same token, however, the bill would also make it harder for defendants to negotiate—and get approval for—class action settlements.
Appeals: Finally, the bill would require federal circuit courts to accept any appeals of district court orders granting or denying class certification.
- Practical Impact: Given the inherently high stakes of a certification ruling, this provision would likely increase appellate litigation over Rule 23 issues dramatically: currently, under Rule 23(f), appellate review is only available at the court’s discretion.
Of course, the new bill faces a long road to becoming law; the most recent class-action reform bill proposed by Chairman Goodlatte, for example, failed to pass the Republican Senate after making it out of the House. But given what a sea change this legislation would represent for class action practice in the federal courts, its progress in Congress is worth monitoring closely.