On February 9, 2017, Judiciary Committee Chair Bob Goodlatte (R.-Va.), introduced H.R. 985, the Fairness in Class Action Litigation Act of 2017 (“the Act”). The Act aims to “amend the procedures used in federal court class actions and multidistrict litigation proceedings to assure fairer, more efficient outcomes for claimants and defendants.” Rep. Goodlatte issued a statement addressing the Act, stating that the legislation would “keep baseless class action suits away from innocent parties, while still keeping the doors to justice open for parties with real and legitimate claims, and maximizing their recoveries.”
In its current iteration, the Act could drastically change the landscape in class action litigation. The Act would apply retroactively, so its effects would be both sweeping and immediate. Specifically, the Act would impose considerable restrictions on class action lawyers and plaintiffs in a few key areas:
- Ascertainability: The Act would resolve the current circuit-split regarding the ascertainability requirement for class certification by requiring that classes be “defined with reference to objective criteria” and, further, that class counsel “affirmatively demonstrat[e ] that there is a reliable and administratively feasible mechanism” to identify class members and allocate monetary relief.
- Uniformity of Damages: In addition to the commonality and typicality requirements for class certification under Rule 23, the Act would also require class plaintiffs to demonstrate that each proposed class member “suffered the same type and scope of injury as the named class representative.” Courts must undertake a “rigorous analysis of the evidence presented” to ensure this requirement has been met.
- Issue Certification: The Act would extend the requirements of Rule 23(a) and (b) to issue certification, as well. Any court granting certification on an issue must also “include a determination, based on a rigorous analysis of the evidence presented,” that the action as a whole meets the requirements of Rule 23(a) and (b).
- Discovery Stay: The proposed legislation would also stay discovery during the pendency of a motion to transfer, to dismiss, or to strike class allegations. Yet, upon the motion of any party, the court may forego the stay if it determines “that particularized discovery is necessary to preserve evidence or to prevent undue prejudice.”
- Enhanced Requirements for Class Counsel: The Act would require class counsel to disclose any contractual or familial relationship, outside of the action, between class counsel and each named plaintiff. Class counsel would also be obligated to submit to the Federal Judicial Center a full accounting of any settlement, including the number of class members, the number of class members who received settlement funds, the total amount paid to class members, any amounts paid to non-class members, and an accounting of the smallest, median, mean, and largest amount paid to any class member. Until class counsel submits this accounting, the Act prevents the payment of attorneys’ fees to class counsel. The Act also would require class counsel to disclose any third-party funding of the litigation.
- Immediate Right of Appeal for Class Certification Orders: The Act would significantly expand the rights of appeal after a ruling on class certification. Rule 23(f) currently permits review of class certification orders on a discretionary basis, and appeals of class certification are usually denied. However, the Act would require the Courts of Appeal to “permit an appeal from an order granting or denying class-action certification under Rule 23.”
The proposed bill will now make its way to the Senate for consideration, where its passage is far from certain. Indeed, the last class action reform bill proposed by Rep. Goodlatte failed to pass the Republican Senate, despite House approval.
Troutman Sanders LLP will continue to monitor the progress of the bill, including any revisions proposed by the Senate.