May 22, 2003

The Honorable F. James Sensenbrenner, Jr.
Chairman
Committee on the Judiciary
U.S. House of Representatives
Washington, DC 20515

Dear Mr. Chairman,

I am writing you on behalf of the American Bar Association in connection with the hearings your Committee held on May 15, 2003, on H.R. 1115, legislation to expand the jurisdiction of the federal courts over class action cases. I request that this letter be included in the record of those hearings.

In the fall of 2001, the American Bar Association appointed a Task Force on Class Action Legislation to “study the issues related to the move toward directing large class action lawsuits into the federal courts instead of the state courts.” The Task Force’s primary focus has been on legislation such as H.R. 1115.

The Task Force, composed of sixteen lawyers and judges with broad experience with class actions, held a number of public meetings with testimony from a wide range of organizations and viewpoints. Its recommendation was adopted as policy by the House of Delegates at the Midyear Meeting of the American Bar Association this past February. A copy of the ABA resolution is attached.

The ABA believes that some concerns over class action practice could be addressed by expanded removal and “minimal diversity” federal court jurisdiction. In order to “preserve a balance between legitimate state-court interests and federal-court jurisdictional benefits,” the ABA believes that, in drafting such legislation, such factors as the following should be considered: the aggregate amount in controversy, the number of plaintiffs in the alleged class, the percentage of the class who are citizens or residents in the forum state, whether the defendants are all residents of the forum state, standards for removal and existence of overlapping classes or cases, and how the entire mix of all factors balance legitimate state-court interests and federal-court jurisdictional benefits.

In a similar vein, the Judicial Conference of the United States, in a March 26, 2003, letter to your Committee, recognized that “minimal diversity” might be appropriate with “sufficient limitations and threshold requirements so that federal courts are not unduly burdened and states’ jurisdiction over in-state class actions is left undisturbed.”

On April 11, 2003, the Senate Judiciary Committee approved S. 274, the Senate version of H.R. 1115, with amendments offered by Senators Feinstein, Hatch, Kohl and Grassley. The amendments reflected some of the factors set forth by the ABA by providing for a larger $5 million amount in controversy and expanding the exception from federal court jurisdictional for cases based on the forum state’s law in which two-thirds of the class members and “the primary defendants” are citizens of that state. The “Class Action Improvement Act of 2003,” recently introduced by Senator Leahy, also relies on a number of important criteria in going further to preserve state-court interests in retaining jurisdiction over appropriate cases.

We encourage your Committee to consider other factors mentioned in the ABA resolution as you refine your legislation. Likewise, consideration might be given to a factor listed by the Judicial Conference: expand the exception from removal to include as “primary defendants” not only citizens of the forum state but also those who have significant contacts with it. Consideration might also be given to the placing of discretionary remand power in the Judicial Panel for Multidistrict Litigation or a similar national body.

There are provisions in H.R. 1115 that are directly contrary to ABA policy – the non-jurisdictional provisions making changes in class action practice. There are legitimate concerns over the current administration of class actions, particularly relating to settlements, notice to class members, and appointment and compensation of attorneys. However, amendments to Rule 23 addressing many of these matters have been approved by the Committee on Rules of Practice and Procedure of the Judicial Conference and the Supreme Court of the United States and are now pending before Congress. The ABA believes that differences in language between legislation and rules could give rise to confusion and unnecessary litigation in class action practice, and, thus, we recommend that those provisions be dropped from the legislation.

Please let me know if you have any questions or if we can be of assistance to your Committee.

Sincerely,

Robert D. Evans

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