Congress Approves Class Action Limits

February 17, 2005
Legislation long sought by the business community to curb class action lawsuits was approved by Congress today and will now go to President Bush for his signature.

The measure, which cleared the House of Representatives in a 279-149 vote, would shift most class action lawsuits from state to federal courts, making it more difficult for consumers to sue under the laws of their own state.

Here's how the voting broke down:

The Senate passed the bill Feb. 10. President Bush and large corporations have long wanted to limit consumers' access to the courts. They argue that lawyers have taken advantage of the state system of class action lawsuits and have filed "frivolous" cases in some state courts where they can win big verdicts.

Good News for Tobacco Industry

Among those applauding Congress' action was a major financial analyst for the tobacco industry.

"The practical effect of the change could be that many cases will never be heard, which might also be positive for tobacco companies," writes analyst Bonnie Herzog of Citigroup/Smith Barney in a corporate Industry Note.

"Federal judges, facing overburdened dockets and ambiguities about applying state laws in a federal court, often refuse to grant standing to class action plaintiffs. Therefore, tobacco stocks have rallied on this favorable news given that this bill could have a positive impact on potential future tobacco litigation."

Consumer class action cases are traditionally brought to seek redress for corporate fraud and wrongdoing, such as environmental damage, wage and hour violations, and faulty or malfunctioning products.

Last year, Philip Morris was found guilty of marketing its "light" cigarettes as being safer than regular cigarettes, which the company knew to be untrue for 30 years, and yet continued to sell them to millions of people.

"The bill will deprive citizens of a state of the right to have their cases heard in their own courts, further overburden the federal court and make it more difficult for tobacco companies to be held accountable for years of misleading Americans about the dangers of tobacco," said Matthew L. Myers, president, Campaign for Tobacco-Free Kids and a member of the Coalition to Preserve Access to Justice.

"The tobacco industry does not need more protection against citizen suits. If anything, citizens need more protection against tobacco industry wrongdoing," he said.

The U.S. Chamber of Commerce has been lobbying heavily for the bill and has even become a financial supporter of a daily newspaper that pushes the anti-class action position.

"Industry analysts for big tobacco are already popping champagne corks at the class action bill's likely effects: denying groups of consumers the ability to have their day in court," said Sally Greenberg of Consumers Union and a member of the Coalition to Preserve Access to Justice.

"This bill is a fraud. Far from simply offering consumers another forum, it is intended to block class actions altogether," Greenberg said.