One Hundred Ninth Congress
of the
United States of America
AT THE FIRST SESSION
Begun and held at the City of Washington on Tuesday,
the fourth day of January, two thousand and five
An Act
To amend the procedures that apply to consideration of interstate
class actions to assure fairer outcomes for class members and defendants,
and for other purposes.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. SHORT TITLE; REFERENCE; TABLE OF CONTENTS.
(a) SHORT TITLE- This Act may be cited as the `Class Action Fairness Act
of 2005'.
(b) REFERENCE- Whenever in this Act reference is made to an amendment to,
or repeal of, a section or other provision, the reference shall be considered
to be made to a section or other provision of title 28, United States Code.
(c) TABLE OF CONTENTS- The table of contents for this Act is as follows:
Sec. 1. Short title; reference; table of contents.
Sec. 2. Findings and purposes.
Sec. 3. Consumer class action bill of rights and improved procedures for
interstate class actions.
Sec. 4. Federal district court jurisdiction for interstate class actions.
Sec. 5. Removal of interstate class actions to Federal district court.
Sec. 6. Report on class action settlements.
Sec. 7. Enactment of Judicial Conference recommendations.
Sec. 8. Rulemaking authority of Supreme Court and Judicial Conference.
SEC. 2. FINDINGS AND PURPOSES.
(a) FINDINGS- Congress finds the following:
(1) Class action lawsuits are an important and valuable part of the legal
system when they permit the fair and efficient resolution of legitimate
claims of numerous parties by allowing the claims to be aggregated into
a single action against a defendant that has allegedly caused harm.
(2) Over the past decade, there have been abuses of the class action device
that have--
(A) harmed class members with legitimate claims and defendants that
have acted responsibly;
(B) adversely affected interstate commerce; and
(C) undermined public respect for our judicial system.
(3) Class members often receive little or no benefit from class actions,
and are sometimes harmed, such as where--
(A) counsel are awarded large fees, while leaving class members with
coupons or other awards of little or no value;
(B) unjustified awards are made to certain plaintiffs at the expense
of other class members; and
(C) confusing notices are published that prevent class members from
being able to fully understand and effectively exercise their rights.
(4) Abuses in class actions undermine the national judicial system, the
free flow of interstate commerce, and the concept of diversity jurisdiction
as intended by the framers of the United States Constitution, in that
State and local courts are--
(A) keeping cases of national importance out of Federal court;
(B) sometimes acting in ways that demonstrate bias against out-of-State
defendants; and
(C) making judgments that impose their view of the law on other States
and bind the rights of the residents of those States.
(b) PURPOSES- The purposes of this Act are to--
(1) assure fair and prompt recoveries for class members with legitimate
claims;
(2) restore the intent of the framers of the United States Constitution
by providing for Federal court consideration of interstate cases of national
importance under diversity jurisdiction; and
(3) benefit society by encouraging innovation and lowering consumer prices.
SEC. 3. CONSUMER CLASS ACTION BILL OF RIGHTS AND IMPROVED PROCEDURES FOR
INTERSTATE CLASS ACTIONS.
(a) IN GENERAL- Part V is amended by inserting after chapter 113 the following:
`CHAPTER 114--CLASS ACTIONS
`Sec.
`1712. Coupon settlements.
`1713. Protection against loss by class members.
`1714. Protection against discrimination based on geographic location.
`1715. Notifications to appropriate Federal and State officials.
`Sec. 1711. Definitions
`(1) CLASS- The term `class' means all of the class members in a class
action.
`(2) CLASS ACTION- The term `class action' means any civil action filed
in a district court of the United States under rule 23 of the Federal
Rules of Civil Procedure or any civil action that is removed to a district
court of the United States that was originally filed under a State statute
or rule of judicial procedure authorizing an action to be brought by 1
or more representatives as a class action.
`(3) CLASS COUNSEL- The term `class counsel' means the persons who serve
as the attorneys for the class members in a proposed or certified class
action.
`(4) CLASS MEMBERS- The term `class members' means the persons (named
or unnamed) who fall within the definition of the proposed or certified
class in a class action.
`(5) PLAINTIFF CLASS ACTION- The term `plaintiff class action' means a
class action in which class members are plaintiffs.
`(6) PROPOSED SETTLEMENT- The term `proposed settlement' means an agreement
regarding a class action that is subject to court approval and that, if
approved, would be binding on some or all class members.
`Sec. 1712. Coupon settlements
`(a) CONTINGENT FEES IN COUPON SETTLEMENTS- If a proposed settlement in
a class action provides for a recovery of coupons to a class member, the
portion of any attorney's fee award to class counsel that is attributable
to the award of the coupons shall be based on the value to class members
of the coupons that are redeemed.
`(b) OTHER ATTORNEY'S FEE AWARDS IN COUPON SETTLEMENTS-
`(1) IN GENERAL- If a proposed settlement in a class action provides for
a recovery of coupons to class members, and a portion of the recovery
of the coupons is not used to determine the attorney's fee to be paid
to class counsel, any attorney's fee award shall be based upon the amount
of time class counsel reasonably expended working on the action.
`(2) COURT APPROVAL- Any attorney's fee under this subsection shall be
subject to approval by the court and shall include an appropriate attorney's
fee, if any, for obtaining equitable relief, including an injunction,
if applicable. Nothing in this subsection shall be construed to prohibit
application of a lodestar with a multiplier method of determining attorney's
fees.
`(c) ATTORNEY'S FEE AWARDS CALCULATED ON A MIXED BASIS IN COUPON SETTLEMENTS-
If a proposed settlement in a class action provides for an award of coupons
to class members and also provides for equitable relief, including injunctive
relief--
`(1) that portion of the attorney's fee to be paid to class counsel that
is based upon a portion of the recovery of the coupons shall be calculated
in accordance with subsection (a); and
`(2) that portion of the attorney's fee to be paid to class counsel that
is not based upon a portion of the recovery of the coupons shall be calculated
in accordance with subsection (b).
`(d) SETTLEMENT VALUATION EXPERTISE- In a class action involving the awarding
of coupons, the court may, in its discretion upon the motion of a party,
receive expert testimony from a witness qualified to provide information
on the actual value to the class members of the coupons that are redeemed.
`(e) JUDICIAL SCRUTINY OF COUPON SETTLEMENTS- In a proposed settlement under
which class members would be awarded coupons, the court may approve the
proposed settlement only after a hearing to determine whether, and making
a written finding that, the settlement is fair, reasonable, and adequate
for class members. The court, in its discretion, may also require that a
proposed settlement agreement provide for the distribution of a portion
of the value of unclaimed coupons to 1 or more charitable or governmental
organizations, as agreed to by the parties. The distribution and redemption
of any proceeds under this subsection shall not be used to calculate attorneys'
fees under this section.
`Sec. 1713. Protection against loss by class members
`The court may approve a proposed settlement under which any class member
is obligated to pay sums to class counsel that would result in a net loss
to the class member only if the court makes a written finding that nonmonetary
benefits to the class member substantially outweigh the monetary loss.
`Sec. 1714. Protection against discrimination based on geographic location
`The court may not approve a proposed settlement that provides for the payment
of greater sums to some class members than to others solely on the basis
that the class members to whom the greater sums are to be paid are located
in closer geographic proximity to the court.
`Sec. 1715. Notifications to appropriate Federal and State officials
`(1) APPROPRIATE FEDERAL OFFICIAL- In this section, the term `appropriate
Federal official' means--
`(A) the Attorney General of the United States; or
`(B) in any case in which the defendant is a Federal depository institution,
a State depository institution, a depository institution holding company,
a foreign bank, or a nondepository institution subsidiary of the foregoing
(as such terms are defined in section 3 of the Federal Deposit Insurance
Act (12 U.S.C. 1813)), the person who has the primary Federal regulatory
or supervisory responsibility with respect to the defendant, if some
or all of the matters alleged in the class action are subject to regulation
or supervision by that person.
`(2) APPROPRIATE STATE OFFICIAL- In this section, the term `appropriate
State official' means the person in the State who has the primary regulatory
or supervisory responsibility with respect to the defendant, or who licenses
or otherwise authorizes the defendant to conduct business in the State,
if some or all of the matters alleged in the class action are subject
to regulation by that person. If there is no primary regulator, supervisor,
or licensing authority, or the matters alleged in the class action are
not subject to regulation or supervision by that person, then the appropriate
State official shall be the State attorney general.
`(b) IN GENERAL- Not later than 10 days after a proposed settlement of a
class action is filed in court, each defendant that is participating in
the proposed settlement shall serve upon the appropriate State official
of each State in which a class member resides and the appropriate Federal
official, a notice of the proposed settlement consisting of--
`(1) a copy of the complaint and any materials filed with the complaint
and any amended complaints (except such materials shall not be required
to be served if such materials are made electronically available through
the Internet and such service includes notice of how to electronically
access such material);
`(2) notice of any scheduled judicial hearing in the class action;
`(3) any proposed or final notification to class members of--
`(A)(i) the members' rights to request exclusion from the class action;
or
`(ii) if no right to request exclusion exists, a statement that no such
right exists; and
`(B) a proposed settlement of a class action;
`(4) any proposed or final class action settlement;
`(5) any settlement or other agreement contemporaneously made between
class counsel and counsel for the defendants;
`(6) any final judgment or notice of dismissal;
`(7)(A) if feasible, the names of class members who reside in each State
and the estimated proportionate share of the claims of such members to
the entire settlement to that State's appropriate State official; or
`(B) if the provision of information under subparagraph (A) is not feasible,
a reasonable estimate of the number of class members residing in each
State and the estimated proportionate share of the claims of such members
to the entire settlement; and
`(8) any written judicial opinion relating to the materials described
under subparagraphs (3) through (6).
`(c) DEPOSITORY INSTITUTIONS NOTIFICATION-
`(1) FEDERAL AND OTHER DEPOSITORY INSTITUTIONS- In any case in which the
defendant is a Federal depository institution, a depository institution
holding company, a foreign bank, or a non-depository institution subsidiary
of the foregoing, the notice requirements of this section are satisfied
by serving the notice required under subsection (b) upon the person who
has the primary Federal regulatory or supervisory responsibility with
respect to the defendant, if some or all of the matters alleged in the
class action are subject to regulation or supervision by that person.
`(2) STATE DEPOSITORY INSTITUTIONS- In any case in which the defendant
is a State depository institution (as that term is defined in section
3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)), the notice requirements
of this section are satisfied by serving the notice required under subsection
(b) upon the State bank supervisor (as that term is defined in section
3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)) of the State
in which the defendant is incorporated or chartered, if some or all of
the matters alleged in the class action are subject to regulation or supervision
by that person, and upon the appropriate Federal official.
`(d) FINAL APPROVAL- An order giving final approval of a proposed settlement
may not be issued earlier than 90 days after the later of the dates on which
the appropriate Federal official and the appropriate State official are
served with the notice required under subsection (b).
`(e) NONCOMPLIANCE IF NOTICE NOT PROVIDED-
`(1) IN GENERAL- A class member may refuse to comply with and may choose
not to be bound by a settlement agreement or consent decree in a class
action if the class member demonstrates that the notice required under
subsection (b) has not been provided.
`(2) LIMITATION- A class member may not refuse to comply with or to be
bound by a settlement agreement or consent decree under paragraph (1)
if the notice required under subsection (b) was directed to the appropriate
Federal official and to either the State attorney general or the person
that has primary regulatory, supervisory, or licensing authority over
the defendant.
`(3) APPLICATION OF RIGHTS- The rights created by this subsection shall
apply only to class members or any person acting on a class member's behalf,
and shall not be construed to limit any other rights affecting a class
member's participation in the settlement.
`(f) RULE OF CONSTRUCTION- Nothing in this section shall be construed to
expand the authority of, or impose any obligations, duties, or responsibilities
upon, Federal or State officials.'.
(b) TECHNICAL AND CONFORMING AMENDMENT- The table of chapters for part V
is amended by inserting after the item relating to chapter 113 the following:
1711'.
SEC. 4. FEDERAL DISTRICT COURT JURISDICTION FOR INTERSTATE CLASS ACTIONS.
(a) APPLICATION OF FEDERAL DIVERSITY JURISDICTION- Section 1332 is amended--
(1) by redesignating subsection (d) as subsection (e); and
(2) by inserting after subsection (c) the following:
`(d)(1) In this subsection--
`(A) the term `class' means all of the class members in a class action;
`(B) the term `class action' means any civil action filed under rule 23
of the Federal Rules of Civil Procedure or similar State statute or rule
of judicial procedure authorizing an action to be brought by 1 or more
representative persons as a class action;
`(C) the term `class certification order' means an order issued by a court
approving the treatment of some or all aspects of a civil action as a
class action; and
`(D) the term `class members' means the persons (named or unnamed) who
fall within the definition of the proposed or certified class in a class
action.
`(2) The district courts shall have original jurisdiction of any civil action
in which the matter in controversy exceeds the sum or value of $5,000,000,
exclusive of interest and costs, and is a class action in which--
`(A) any member of a class of plaintiffs is a citizen of a State different
from any defendant;
`(B) any member of a class of plaintiffs is a foreign state or a citizen
or subject of a foreign state and any defendant is a citizen of a State;
or
`(C) any member of a class of plaintiffs is a citizen of a State and any
defendant is a foreign state or a citizen or subject of a foreign state.
`(3) A district court may, in the interests of justice and looking at the
totality of the circumstances, decline to exercise jurisdiction under paragraph
(2) over a class action in which greater than one-third but less than two-thirds
of the members of all proposed plaintiff classes in the aggregate and the
primary defendants are citizens of the State in which the action was originally
filed based on consideration of--
`(A) whether the claims asserted involve matters of national or interstate
interest;
`(B) whether the claims asserted will be governed by laws of the State
in which the action was originally filed or by the laws of other States;
`(C) whether the class action has been pleaded in a manner that seeks
to avoid Federal jurisdiction;
`(D) whether the action was brought in a forum with a distinct nexus with
the class members, the alleged harm, or the defendants;
`(E) whether the number of citizens of the State in which the action was
originally filed in all proposed plaintiff classes in the aggregate is
substantially larger than the number of citizens from any other State,
and the citizenship of the other members of the proposed class is dispersed
among a substantial number of States; and
`(F) whether, during the 3-year period preceding the filing of that class
action, 1 or more other class actions asserting the same or similar claims
on behalf of the same or other persons have been filed.
`(4) A district court shall decline to exercise jurisdiction under paragraph
(2)--
`(A)(i) over a class action in which--
`(I) greater than two-thirds of the members of all proposed plaintiff
classes in the aggregate are citizens of the State in which the action
was originally filed;
`(II) at least 1 defendant is a defendant--
`(aa) from whom significant relief is sought by members of the plaintiff
class;
`(bb) whose alleged conduct forms a significant basis for the claims
asserted by the proposed plaintiff class; and
`(cc) who is a citizen of the State in which the action was originally
filed; and
`(III) principal injuries resulting from the alleged conduct or any
related conduct of each defendant were incurred in the State in which
the action was originally filed; and
`(ii) during the 3-year period preceding the filing of that class action,
no other class action has been filed asserting the same or similar factual
allegations against any of the defendants on behalf of the same or other
persons; or
`(B) two-thirds or more of the members of all proposed plaintiff classes
in the aggregate, and the primary defendants, are citizens of the State
in which the action was originally filed.
`(5) Paragraphs (2) through (4) shall not apply to any class action in which--
`(A) the primary defendants are States, State officials, or other governmental
entities against whom the district court may be foreclosed from ordering
relief; or
`(B) the number of members of all proposed plaintiff classes in the aggregate
is less than 100.
`(6) In any class action, the claims of the individual class members shall
be aggregated to determine whether the matter in controversy exceeds the
sum or value of $5,000,000, exclusive of interest and costs.
`(7) Citizenship of the members of the proposed plaintiff classes shall
be determined for purposes of paragraphs (2) through (6) as of the date
of filing of the complaint or amended complaint, or, if the case stated
by the initial pleading is not subject to Federal jurisdiction, as of the
date of service by plaintiffs of an amended pleading, motion, or other paper,
indicating the existence of Federal jurisdiction.
`(8) This subsection shall apply to any class action before or after the
entry of a class certification order by the court with respect to that action.
`(9) Paragraph (2) shall not apply to any class action that solely involves
a claim--
`(A) concerning a covered security as defined under 16(f)(3) of the Securities
Act of 1933 (15 U.S.C. 78p(f)(3)) and section 28(f)(5)(E) of the Securities
Exchange Act of 1934 (15 U.S.C. 78bb(f)(5)(E));
`(B) that relates to the internal affairs or governance of a corporation
or other form of business enterprise and that arises under or by virtue
of the laws of the State in which such corporation or business enterprise
is incorporated or organized; or
`(C) that relates to the rights, duties (including fiduciary duties),
and obligations relating to or created by or pursuant to any security
(as defined under section 2(a)(1) of the Securities Act of 1933 (15 U.S.C.
77b(a)(1)) and the regulations issued thereunder).
`(10) For purposes of this subsection and section 1453, an unincorporated
association shall be deemed to be a citizen of the State where it has its
principal place of business and the State under whose laws it is organized.
`(11)(A) For purposes of this subsection and section 1453, a mass action
shall be deemed to be a class action removable under paragraphs (2) through
(10) if it otherwise meets the provisions of those paragraphs.
`(B)(i) As used in subparagraph (A), the term `mass action' means any civil
action (except a civil action within the scope of section 1711(2)) in which
monetary relief claims of 100 or more persons are proposed to be tried jointly
on the ground that the plaintiffs' claims involve common questions of law
or fact, except that jurisdiction shall exist only over those plaintiffs
whose claims in a mass action satisfy the jurisdictional amount requirements
under subsection (a).
`(ii) As used in subparagraph (A), the term `mass action' shall not include
any civil action in which--
`(I) all of the claims in the action arise from an event or occurrence
in the State in which the action was filed, and that allegedly resulted
in injuries in that State or in States contiguous to that State;
`(II) the claims are joined upon motion of a defendant;
`(III) all of the claims in the action are asserted on behalf of the general
public (and not on behalf of individual claimants or members of a purported
class) pursuant to a State statute specifically authorizing such action;
or
`(IV) the claims have been consolidated or coordinated solely for pretrial
proceedings.
`(C)(i) Any action(s) removed to Federal court pursuant to this subsection
shall not thereafter be transferred to any other court pursuant to section
1407, or the rules promulgated thereunder, unless a majority of the plaintiffs
in the action request transfer pursuant to section 1407.
`(ii) This subparagraph will not apply--
`(I) to cases certified pursuant to rule 23 of the Federal Rules of Civil
Procedure; or
`(II) if plaintiffs propose that the action proceed as a class action
pursuant to rule 23 of the Federal Rules of Civil Procedure.
`(D) The limitations periods on any claims asserted in a mass action that
is removed to Federal court pursuant to this subsection shall be deemed
tolled during the period that the action is pending in Federal court.'.
(b) CONFORMING AMENDMENTS-
(1) Section 1335(a)(1) is amended by inserting `subsection (a) or (d)
of' before `section 1332'.
(2) Section 1603(b)(3) is amended by striking `(d)' and inserting `(e)'.
SEC. 5. REMOVAL OF INTERSTATE CLASS ACTIONS TO FEDERAL DISTRICT COURT.
(a) IN GENERAL- Chapter 89 is amended by adding after section 1452 the following:
`Sec. 1453. Removal of class actions
`(a) DEFINITIONS- In this section, the terms `class', `class action', `class
certification order', and `class member' shall have the meanings given such
terms under section 1332(d)(1).
`(b) IN GENERAL- A class action may be removed to a district court of the
United States in accordance with section 1446 (except that the 1-year limitation
under section 1446(b) shall not apply), without regard to whether any defendant
is a citizen of the State in which the action is brought, except that such
action may be removed by any defendant without the consent of all defendants.
`(c) REVIEW OF REMAND ORDERS-
`(1) IN GENERAL- Section 1447 shall apply to any removal of a case under
this section, except that notwithstanding section 1447(d), a court of
appeals may accept an appeal from an order of a district court granting
or denying a motion to remand a class action to the State court from which
it was removed if application is made to the court of appeals not less
than 7 days after entry of the order.
`(2) TIME PERIOD FOR JUDGMENT- If the court of appeals accepts an appeal
under paragraph (1), the court shall complete all action on such appeal,
including rendering judgment, not later than 60 days after the date on
which such appeal was filed, unless an extension is granted under paragraph
(3).
`(3) EXTENSION OF TIME PERIOD- The court of appeals may grant an extension
of the 60-day period described in paragraph (2) if--
`(A) all parties to the proceeding agree to such extension, for any
period of time; or
`(B) such extension is for good cause shown and in the interests of
justice, for a period not to exceed 10 days.
`(4) DENIAL OF APPEAL- If a final judgment on the appeal under paragraph
(1) is not issued before the end of the period described in paragraph
(2), including any extension under paragraph (3), the appeal shall be
denied.
`(d) EXCEPTION- This section shall not apply to any class action that solely
involves--
`(1) a claim concerning a covered security as defined under section 16(f)(3)
of the Securities Act of 1933 (15 U.S.C. 78p(f)(3)) and section 28(f)(5)(E)
of the Securities Exchange Act of 1934 (15 U.S.C. 78bb(f)(5)(E));
`(2) a claim that relates to the internal affairs or governance of a corporation
or other form of business enterprise and arises under or by virtue of
the laws of the State in which such corporation or business enterprise
is incorporated or organized; or
`(3) a claim that relates to the rights, duties (including fiduciary duties),
and obligations relating to or created by or pursuant to any security
(as defined under section 2(a)(1) of the Securities Act of 1933 (15 U.S.C.
77b(a)(1)) and the regulations issued thereunder).'.
(b) TECHNICAL AND CONFORMING AMENDMENTS- The table of sections for chapter
89 is amended by adding after the item relating to section 1452 the following:
`1453. Removal of class actions.'.
SEC. 6. REPORT ON CLASS ACTION SETTLEMENTS.
(a) IN GENERAL- Not later than 12 months after the date of enactment of
this Act, the Judicial Conference of the United States, with the assistance
of the Director of the Federal Judicial Center and the Director of the Administrative
Office of the United States Courts, shall prepare and transmit to the Committees
on the Judiciary of the Senate and the House of Representatives a report
on class action settlements.
(b) CONTENT- The report under subsection (a) shall contain--
(1) recommendations on the best practices that courts can use to ensure
that proposed class action settlements are fair to the class members that
the settlements are supposed to benefit;
(2) recommendations on the best practices that courts can use to ensure
that--
(A) the fees and expenses awarded to counsel in connection with a class
action settlement appropriately reflect the extent to which counsel
succeeded in obtaining full redress for the injuries alleged and the
time, expense, and risk that counsel devoted to the litigation; and
(B) the class members on whose behalf the settlement is proposed are
the primary beneficiaries of the settlement; and
(3) the actions that the Judicial Conference of the United States has
taken and intends to take toward having the Federal judiciary implement
any or all of the recommendations contained in the report.
(c) AUTHORITY OF FEDERAL COURTS- Nothing in this section shall be construed
to alter the authority of the Federal courts to supervise attorneys' fees.
SEC. 7. ENACTMENT OF JUDICIAL CONFERENCE RECOMMENDATIONS.
Notwithstanding any other provision of law, the amendments to rule 23 of
the Federal Rules of Civil Procedure, which are set forth in the order entered
by the Supreme Court of the United States on March 27, 2003, shall take
effect on the date of enactment of this Act or on December 1, 2003 (as specified
in that order), whichever occurs first.
SEC. 8. RULEMAKING AUTHORITY OF SUPREME COURT AND JUDICIAL CONFERENCE.
Nothing in this Act shall restrict in any way the authority of the Judicial
Conference and the Supreme Court to propose and prescribe general rules
of practice and procedure under chapter 131 of title 28, United States Code.
SEC. 9. EFFECTIVE DATE.
The amendments made by this Act shall apply to any civil action commenced
on or after the date of enactment of this Act.
Speaker of the House of Representatives.
Vice President of the United States and
President of the Senate.
END
