Sunday, February 27, 2005

more on the Class Action Fairness Act

Here's an update to my previous article about the Class Action Fairness Act of 2005. The final version of the law hasn't come out yet, but when it does, you'll be able to find it here. This info is based on the version the Senate passed on Feb 10th, bill "S 5".

First off, the new law goes into effect as soon as it's enacted.

The law changes the amount-in-controversy and diversity requirements for class actions by changing the statute that controls those things, 28 USC 1332. Now, if the total amount in the class action, adding up all the plaintiffs, is more than $5 million, and at least one plaintiff and one defendant are from different states, the class action can go into federal court. Being from a different country counts as being from a different state. So, if the rogue DVD maker from the previous article were from a different country, the class action against them would be a candidate for federal court.

The federal court doesn't always have to accept the case, though.
  • if more than 2/3 of the plaintiffs are from out of state, then the federal court (generally) can't turn it down
  • if 1/3 to 2/3 of the plaintiffs are from out of state, the federal court may turn it down "in the interests of justice".
  • if fewer than 1/3 of the plaintiffs are from out of state, the federal court has to turn it down, except there are some exceptions I don't quite understand yet
The law also applies to something called a "mass action". As far as I can tell, a "mass action" is 100 or more people suing about the same thing, where all of them have an individual claim of at least $75K. In that case, someone (presumably the defendant) can try to combine all the cases into a "mass action" and apply the class action laws to it.

Finally, the bill changes something called "removal". Removal is where you sue someone in state court, and the person you sue says "no, I'd rather be in federal court". Under certain circumstances, they can move the suit out of the state court and into the federal court, where different rules apply. This law adds a new statute, 28 USC 1453, that basically says that, in a class action, any defendant can remove to federal court without the consent of the other defendants, so the net effect is that the class action will almost certainly end up in federal court.

What's it all mean? I don't know, yet, except that, overall, class actions are going to wind up in federal court more often.

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