The Class Action Fairness Act's impact on state consumer protection laws: an overview of the act's effect on forum-shopping.

• Author: Seeney, Emilia L.

CLAIMING that it will prevent trial lawyers from shopping around for courts where they expect to win the most money, keep out-of-state businesses from being dragged before unfriendly local juries, and provide new safeguards for the consumer, President Bush signed into law the "Consumer Class Action Bill of Rights and Improved Procedures for Interstate Class Actions," commonly referred to as the "Class Action Fairness Act" ("CAFA") on February 18, 2005. (1) But will CAFA address the issues that gave rise to its enactment? To answer that question, this article synthesizes the likely impact CAFA will have on various state liability statutes designed to protect the consumer. Additionally, the article surveys business's perceptions states' ability to provide a fair litigation environment, to determine whether CAFA will prevent forum-shopping in consumer class actions.

1) Impetus for Change: Growing Perception of Unfairness in Our States' Civil Justice Systems

The majority of respondents in a recent survey concluded that the state court liability system was doing an increasingly poor job of creating a fair and reasonable litigation environment. While different state statutes across the United States produce varying outcomes, popular sentiment and informed opinion view the different outcomes that a litigant may obtain as not purely a result of the substantive law. Instead, there is a growing perception that unfairness in our state courts influences the outcome.

The Institute for Legal Reform (2) ("ILR") has surveyed the business and legal community to determine individuals' attitudes toward each states' legal systems since 2002. The aim of the surveys is to quantify how in-house general counsel and other senior litigators view the state court systems by asking respondents to grade several different areas of the states' civil justice systems. The last study surveyed nearly 1,500 litigators, all of whom graded their states on the following criteria: treatment of tort and contract litigation, class action suits, punitive damages, timeliness of summary judgment dismissal, discovery, scientific and technical evidence, judges' impartiality and competence, and juries' predictability and fairness. The ILR then combined these grades to arrive at an overall ranking of state liability systems.

The 2005 ILR/Harris Poll State Liability Systems Ranking Study was released March 8, 2005. Of those surveyed, sixty percent ranked the state court liability system in America fair or poor, a slight increase over the previous year. The five states rated as doing the poorest job of providing a fair and reasonable litigation environment were Mississippi, West Virginia, Alabama, Louisiana, and Illinois. Respondents perceived these states as having the least number of impartial and competent state court judges. These five states, with the exception of Illinois, were deemed to do the most dissatisfactory job with respect to the treatment of tort and contract litigation. Alabama, California, Illinois, Louisiana, and West Virginia were ranked the lowest with respect to class action suits. Alabama, California, Illinois, Mississippi, and West Virginia were deemed the most unsatisfactory in punitive damages treatment.

The survey also revealed that certain cities and counties had the capacity to impact a state's overall ranking. The local jurisdiction identified as having the worst reputation was Los Angeles, followed by various jurisdictions in Texas. Tied for third were local jurisdictions in the New York greater metropolitan area, San Francisco, California, and Cook County, Illinois. Madison County, Illinois, followed close behind. CAFA was enacted against this backdrop.

2) Class Action Fairness Act of 2005

In enacting CAFA, Congress found that state courts were sometimes acting in ways that demonstrated bias against out-of-state defendants and that abuses of the class action practice in state courts undermined the free flow of interstate commerce. (3) Congress also found that class members often received little or no benefit from class actions, while class counsel were awarded large fees. Seeking to assure prompt and fair recovery for class members, restore the intent of the framers by providing federal court consideration of interstate cases of national importance, and benefit society by encouraging innovation and consumer prices, Congress enacted CAFA.

CAFA changes class action practice in two principal ways: First, it expands federal diversity jurisdiction over most class and some mass actions, and second, CAFA changes the procedure and substance for settling class actions in federal court. Specifically, CAFA amends 28 U.S.C. [section] 1332(d) to confer federal jurisdiction over any class action (with some limited exceptions) if (i) the claims of all plaintiffs, aggregated together, exceed $5 million, and (ii) at least one plaintiff is diverse from at least one defendant. (4) In conjunction with the expansion of federal diversity jurisdiction over class actions, CAFA also eliminates the prohibition against removing a state court class or mass action more than one year after the action was commenced. Additionally, CAFA allows a defendant who is a citizen of the state in which the action is brought to remove it to a federal court. (5)

CAFA also provides that where a settlement provides for recovery of coupons to a class member, any contingent fee award shall be based upon the value to the class member of the coupons redeemed. (6) Attorney fees cannot be calculated until the time for redemption has expired, which necessarily delays awarding attorney fees. (7) Among other things, CAFA also provides for judicial scrutiny of coupon settlements and notifications of class settlements to federal and state officials.

3) State Consumer Protection Laws

a) Background

All fifty states have enacted legislation...