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House of Representatives Passes Class Action Reform Measure

House Bill Seeks to Reform Class Action Litigation

New-Development-IconBy Christina Aryafar

On February 9, 2017, House Judiciary Committee Chairman Bob Goodlatte introduced the “Fairness in Class Action Litigation Act of 2017” (H.R. 985), which seeks to amend the procedures used in Federal court class actions and multidistrict litigation proceedings.  Representatives Pete Sessions and Glenn Grothman signed on as cosponsors of the bill earlier this week. 

According to Representative Goodlatte, the proposed reforms would “protect innocent individuals and small businesses who have become the targets of frivolous suits by attorneys who have found loopholes in our civil litigation system.”  He asserts that the provisions of the bill would “maximize recoveries by deserving victims, and weed out unmeritorious claims that would otherwise siphon resources away from innocent parties.”  See Press Release from the Office of Bob Goodlatte, Feb. 10, 2017 (available here).

Among other things, H.R. 985 proposes the following measures: 

  • Class Action Injury Allegations – The bill would prohibit certification of a class seeking monetary relief for personal injury or economic loss “unless the party seeking to maintain such a class action affirmatively demonstrates that each proposed class member suffered the same type and scope of injury as the named class representative or representatives.”  The bill would also require that courts engage in “rigorous analysis of the evidence” in determining whether this requirement has been met. 
  • Conflicts of Interest – The bill would prohibit certification of any class action “in which any proposed class representative or named plaintiff 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.”  Class counsel would be required to disclose any such relationships in the class action complaint, and to “describe the circumstances under which each class representative or named plaintiff agreed to be included in the complaint,” and to “identify any other class action in which any proposed class representative or named plaintiff has a similar role.”  
  • Attorneys’ Fees – In a class action seeking monetary relief, the bill mandates that “no attorneys’ fees may be determined or paid…until the distribution of any monetary recovery to class members has been completed.”  The bill also limits attorneys’ fees to “a reasonable percentage” of the money distributed to class members or the value of the equitable relief awarded. 
  • Stay of Discovery – The bill would stay discovery and other proceedings “during the pendency of any motion to transfer, motion to dismiss, motion to strike class allegations, or other motion to dispose of the class allegations, unless the court finds upon the motion of any party that particularized discovery is necessary to preserve evidence or to prevent undue prejudice to that party.” 
  • Appeals – The bill would permit an appeal from an order granting or denying class certification. 

H.R. 985 has been referred to the House Committee on the Judiciary.  The text of the bill is available here