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Senate Nears Revision of Class Actions

Passage of Legislation Backed by Bush and Business Appears Certain

By John F. Harris and Jim VandeHei
Washington Post Staff Writers
Thursday, February 10, 2005; Page A04

President Bush and his business supporters won a large and long-sought victory yesterday with a series of Senate votes that virtually guarantee enactment of legislation restructuring rules for class-action lawsuits.

Consumer groups -- which warned that the new rules would result in far fewer class-action cases being heard by courts -- had pinned their hopes on amendments they said would soften the impact of the Class Action Fairness Act. But the amendments failed, in votes that highlighted the potency of the lobbying coalition behind the bill as well as the more conservative balance of power in Congress.

President Bush listens to a consumer complaint from Alita Ditkowsky while speaking about class-action lawsuits during an event at the Commerce Department. (Mark Wilson -- Getty Images)

The measure is designed to funnel class-action suits with plaintiffs in different states out of state courts and into the federal court system, which is historically much less sympathetic to such litigation. It is the first installment of several measures Bush is seeking this year to curb what he described in a speech yesterday as excessive lawsuits that sap the risk-taking spirit on which a "capitalist society" depends.

Business groups have sought for years to create what they called a more rational system for class-action suits, which are waged amid a patchwork of state laws. Critics say plaintiffs' lawyers often shop for local courts where judges and juries have reputations for acting favorably on the class-action suits, even if there is no logical reason for cases to be heard in these venues.

But the practical effect of the change, according to opponents, is that many cases will never be heard. Federal judges, facing overburdened dockets and ambiguities about applying state laws in a federal court, often refuse to grant standing to class-action plaintiffs.

"It's a bill that's going to significantly harm small consumers who want to hold large companies accountable for defrauding them," said Frank Clemente, director of the Congress Watch division of the consumer group Public Citizen.

Advocates on both sides of the issue regarded yesterday's votes as the crucial test for the bill's passage. The House Republican leadership announced last week that the GOP majority in that chamber will pass the Senate's version of class-action litigation -- provided it arrives without amendments.

The most important of several amendments was a measure crafted by Democratic Sens. Jeff Bingaman (N.M) and Dianne Feinstein (Calif.) that was designed to ensure that federal judges do hear class-action suits, rather than dismiss them on procedural grounds. But backers of the class-action measure warned that the amendment "defeats the purpose" of restructuring the rules, as Sen. Charles E. Grassley (R-Iowa) put it, and several cautioned that to accept changes was to risk letting the legislation die -- as it has in recent years -- in parliamentary standoffs.

In the end, the Bingaman-Feinstein amendment garnered only 38 votes, most from Democrats, with 61 against. Other amendments -- including a measure by Sen. Edward M. Kennedy (D-Mass.) to exempt civil rights and wage disputes, and one by Sen. Mark Pryor (D-Ark.) to exempt cases brought by state attorneys general -- also failed.

Among those celebrating was Stan Anderson, an official with the U.S. Chamber of Commerce and the leader of a coalition pushing the lawsuit measure. Like others familiar with the battle, he predicted easy final passage -- a victory he attributed in part to the strengthened GOP majority in the Senate after last fall's elections.

He said there has been a "tonal change" in how the idea of curbing alleged class-action excesses is being received, even among opponents.

Pamela Gilbert, a former executive director of the Consumer Product Safety Commission who tried to stop the legislation, said opponents also faced hurdles explaining their argument against the bill. Most people regarded the change as procedural, she said, adding: "It's hard to get a lot of passion stirred about state court versus federal court."

The result, however, could be large. "It's probably going to be the death knell for most consumer class actions except for the very, very big ones," Gilbert said. "Going to federal court is just a more expensive ordeal, with more procedural hoops to go through."

Both sides labored to put a human face on a debate that turned on legal principles unfamiliar to most citizens. Public Citizen this week held a news conference featuring an Alabama man who launched a class-action suit against a credit card company that insisted he pay $263 and unleashed a collection agency on him even though he never used the card. There was a Florida couple who joined a class action against an insurance company that raised premiums to $22,000 a year after the husband got sick, and a Washington woman who charged that Wal-Mart forced her to work "off the clock" without pay or face termination.

Supporters highlighted another side. Sen. Orrin G. Hatch (R-Utah), denouncing "jackpot justice," noted a class action in which lawyers made $1.5 million suing K-B Toys, while the plaintiffs got an offer to buy more merchandise at a 30 percent discount.

In a speech at the Commerce Department yesterday, Bush portrayed the bill as part of a broader fight that he hopes will lead to limits on awards in asbestos cases and to caps on pain-and-suffering awards in medical malpractice cases.

"A capitalist society depends on the capacity for people willing to take risks and to say there's a better future," Bush said. "I'm deeply concerned that too many lawsuits make it too difficult for people to do that. . . . Legal reform is part of a larger agenda to make sure this economy of ours continues to grow."

© 2005 The Washington Post Company