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The U.S. Class Action Fairness Act of 2005, 28 U.S.C. Sections 1332(d), 1453, and 1711–1715, expanded federal subject-matter jurisdiction over many large class-action lawsuits and mass actions taken in the United States.

The bill was the first major piece of legislation of the second term of the Bush Administration. Business groups and tort reform supporters had lobbied for the legislation, arguing that it was needed to prevent class-action lawsuit abuse.[1] President George W. Bush had vowed to support this legislation.

The Act permits federal courts to preside over certain class actions in diversity jurisdiction where the aggregate amount in controversy exceeds $5 million; where the class comprises at least 100 plaintiffs; and where there is at least "minimal diversity" between the parties (i.e., at least one plaintiff class member is diverse from at least one defendant). The court, however, may decline jurisdiction under certain circumstances, and is required to decline jurisdiction in certain others. The Act also directs the Courts to give greater scrutiny to class action settlements, especially those involving corporations.

Support

The Act accomplished two key goals of tort reform advocates:

  1. Reduce "forum-shopping" by plaintiffs in friendly state courts by extending federal diversity jurisdiction to class actions where there is not "complete diversity", thereby giving federal subject-matter jurisdiction over a broader set of class action claims. Proponents argued that "magnet jurisdictions" such as Madison County, Illinois were rife with abuse of the class action procedure.
  2. Requires greater federal scrutiny procedures for the review of class action settlements and changes the rules for evaluating coupon settlements, often reducing attorney's fees that are deemed excessive relative to the benefits actually afforded class members. For example, in an infamous Alabama class action involving Bank of Boston, the attorneys' fees exceeded the relief to the class members, and class members lost money paying attorneys for the "victory."[2]

The Act passed the Senate 72 to 26, with all 53 Republicans voting in favor, and the Act passed the House 279 to 149, with the support of 50 Democrats and all but one of the Republicans. President George W. Bush signed the act into law on February 18, 2005.

The bill was the first major piece of legislation of the second term of the Bush Administration. Business groups and tort reform supporters had lobbied for the legislation, arguing that it was needed to prevent class-action lawsuit abuse.[1] President George W. Bush had vowed to support this legislation.

The Act permits federal courts to preside over certain class actions in diversity jurisdiction where the aggregate amount in controversy exceeds $5 million; where the class comprises at least 100 plaintiffs; and where there is at least "minimal diversity" between the parties (i.e., at least one plaintiff class member is diverse from at least one defendant). The court, however, may decline jurisdiction under certain circumstances, and is required to decline jurisdiction in certain others. The Act also directs the Courts to give greater scrutiny to class action settlements, especially those involving corporations.

The Act accomplished two key goals of tort reform advocates:

  1. Reduce "forum-shopping" by plaintiffs in friendly state courts by extending federal diversity jurisdiction to class actions where there is not "complete diversity", thereby giving federal subject-matter jurisdiction over a broader set of class action claims. Proponents argued that "magnet jurisdictions" such as Madison County, Illinois were rife with abuse of the class action procedure.
  2. Requires greater federal scrutiny procedures for the review of class action settlements and changes the rules for evaluating coupon settlements, often reducing attorney's fees that are deemed excessive relative to the benefits actually afforded class members. For example, in an infamous Alabama class action involving Bank of Boston, the attorneys' fees exceeded the relief to the class members, and class members lost money paying attorneys for the "victory."[2]

The Act passed the Senate 72 to 26, with all 53 Republicans voting in favor, and the Act passed the House 279 to 149, with the support of 50 Democrats and all but one of the Republicans. President George W. Bush signed the act into law on February 18, 2005.

George W. Bush signed the act into law on February 18, 2005.