Note on the Class Action Fairness Act and the Parity Debate

    In early 2005, Congress enacted the Class Action Fairness Act (CAFA).  Congress expressed its intent thusly:

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.

Part 2(a)(4), particularly, throws the spotlight on Congress's dissatisfaction with how some state courts have handled major class action litigation.  There have, in fact, come to be several state venues that act as "magnet forums" because they attract seemingly disproportionate numbers of nationwide class actions.  The magnet forums are not entire states, but particular courts within some of the states.  They have cropped up in areas that might surprise you—not necessarily densely populated states or even densely populated locales within smaller states.  The class-action-plaintiffs' bar has engaged in some highly visible forum shopping.  I do not mean to suggest that the bar did anything wrong in that respect; indeed, one of an attorney's obligations in zealously representing her client is to choose the forum in which the client is most likely to prevail.  Nationwide class actions offer enormous opportunities to forum shop, and the plaintiffs' bar has responded. 

    This did not all occur in the couple of years leading up to 2005, of course, but as we all know, Congress does not always bestir itself terribly promptly.  Whatever the reason, it did crank up the legislative machinery in 2004.  (Cynics might wonder if it is truly a coincidence that the entire House of Representatives and 1/3 of the Senate were up for elections and were dependant for major amounts of campaign funding on some of the nationwide class action corporate defendants whose oxen had been gored in state courtrooms, but as you know, I am not a cynic.)  Most, but not all, of the changes are codified in 28 U.S.C.A. § 1332.  Others appear in other scattered sections of Title 28.

    There is an irony in all of this.  One of the Supreme Court's mantras has been that state courts are no less competent to adjudicate important matters than are the federal courts.  One sees these declarations largely in the area of abstention, but not exclusively so.  The excerpts you have read on parity detail the essential features of this debate.  Well, it is no longer simply a matter of the civil-rights and criminal-defense bars voting with their feet; Congress has weighed in dramatically against the parity concept.  Whether this will have any effect on the Supreme Court's pronouncements about parity remains to be seen, but the Court can hardly fail to take notice of it.