Article by Edward F. Sherman
The Class Action Fairness Act of 2005 (CAFA) is the most significant change in class action practice since the federal class action rule (Rule 23) was amended in 1966. That amendment created two new class action categories: a Rule 23(b)(2) class action for injunctive or declaratory relief against defendants who had acted on grounds applicable to the class, and a Rule 23(b)(3) class action for money damages on behalf of a grouping of persons who had a question of law or fact in common. The former lead to the civil rights and institutional reform class actions of the 1970s and 1980s that resulted in significant changes in certain practices of both governmental institutions and private businesses. The latter lead initially to class actions based on federal laws such as antitrust, securities fraud, and employment discrimination, but, by the 1980s and 1990s, migrated to a broad spectrum of commercial, consumer protection, environmental, product liability, and mass tort cases. State class action rules generally mirrored the federal rule, and “entrepreneurial” class action lawyers increasingly filed class actions in state courts. In response to the ballooning of class actions, business interests began a crusade to limit class actions with a message reflected in a Fortune magazine headline: “Lawyers From Hell: Slip Up and Guys Like These Can Bankrupt Your Company.”
CAFA, some six years in the making, was originally directed at prominent abuses in class action practice such as unreadable notices to class members and settlements that resulted in large fees to attorneys with little benefit to class members. But these provisions, termed “The Consumer Class Action Bill of Rights,” became less pressing due to court decisions, judicial oversight, and 2003 amendments to the federal rules. Given these reforms, by 2005 the main thrust of CAFA was no longer practice abuses but alleged forum shopping. In recent years, federal courts had been perceived by both plaintiff and defendant lawyers as less sympathetic to class actions and to plaintiffs' cases than certain state courts. As federal court judges became more critical of class actions, class action attorneys increasingly filed in state courts. Businesses especially complained that an undue proportion of class actions were filed in certain “magnet venue” state courts (such as Madison County, Illinois, and certain Texas counties in the Rio Grande Valley) where the judges, usually elected, were more likely to certify a class action and the juries were likely to be more pro-plaintiff. In addition, corporations that do business in multiple states complained that they were subjected to national or multistate class actions in state courts that could thereby establish legal standards that would govern their activities throughout the country. These kinds of concerns led to focusing the legislation on expanding federal court “diversity jurisdiction” and defendants' right to remove state class actions to federal court.
About the Author
Edward F. Sherman. Professor of Law, Tulane University School of Law. S.J.D. 1981, LL.B. 1962, Harvard Law School; M.A. 1962, 1967, University of Texas; A.B. 1959, Georgetown University.
Citation
80 Tul. L. Rev. 1593 (2006)