Fate of House bill to change class action procedures could be barometer for CFPB arbitration rule

by Ballard Spahr LLP
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On February 9, 2017, the House Judiciary Committee by a vote of 19-12 passed the Fairness in Class Action Litigation Act of 2017, a bill that would make significant changes to the procedures for class actions in federal court. The bill’s passage by the House and Senate with strong Republican support would seem to augur well for the enactment of a joint resolution under the Congressional Review Act to nullify a final arbitration rule should one be issued by the CFPB.

Intended to combat abuses in class action and mass tort litigation, the bill includes provisions that would:

  • Prohibit a court from certifying a class action seeking monetary relief for personal injury or economic loss unless “the party seeking to maintain such class action affirmatively demonstrates that each proposed class member suffered the same type and scope of injury as the named class representative or representatives.”
  • Prohibit a court from certifying a class action “in which any proposed class representative or named plaintiff is a relative of, is a present or former employee of, is a present or former client of (other than with respect to the class action), or has any contractual relationship with (other than with respect to the class action) class counsel.
  • Prohibit a court from certifying a class action seeking monetary relief unless the class is defined with reference to objective criteria and the party seeking to maintain the class action “affirmatively demonstrates that there is a reliable and administratively feasible mechanism (a) for the court to determine whether putative class members fall within the class definition and (b) for distributing directly to a substantial majority of class members any monetary relief secured for the class.”
  • Prohibit payment of attorneys’ fees in a class action seeking monetary relief until the distribution of monetary recovery to class members has been completed and limit the portion of an attorneys’ fee award to class counsel that is attributed to the monetary recovery to a reasonable percentage of any payments directly distributed to and received by class members, with the attorneys’ fee award in no event to exceed the total amount of money directly distributed to and received by class members.
  • Allow appeals to a circuit court from an order granting or denying class action certification under Rule 23 of the Federal Rules of Civil Procedure

A group of public interest and consumer advocacy groups have sent a letter to Representative Bob Goodlatte, Chairman of the House Judiciary Committee, and Representative John Conyers, Jr., the Ranking Member, expressing their strongly opposition to the bill.  In their letter, the groups reference the requirement that “each proposed class member suffered the same type and scope of injury as the named class representative or representatives” for a court to certify a class action and state that “[t]his alone would sound the death knell for most class actions.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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