The U.S. House of Representatives will hold a vote today on the Class Action Fairness Act of 2003. As noted previously in The 10b-5 Daily, the legislation applies some of the reform concepts in the PSLRA and SLUSA to all class actions. Notably, the House bill (a) requires most class action suits with more that $2 million at issue to be heard in federal court (unless the substantial majority of the plaintiffs are from the same state as the principal defendants), (b) allows parties to appeal class certification rulings, and (c) attempts to limit “coupon” settlements. The House is expected to pass the bill.
The New York Times, in a lengthy article on the bill, states that the class certification appeal provision “could cause delays in pending federal-court cases that seek to recover money lost through the corporate scandals at Enron and other large companies.” The newspaper evidently is not familiar with how securities class actions are usually resolved (i.e., before the class certification stage of the case). The Washington Post is also covering the story.
Quote of note (NY Times): “‘Just about every industry group is on the bandwagon on this because every industry is affected,’ said Lawrence Fineran, the vice president for regulatory and competition policy at the National Association of Manufacturers. For the business community, the bill is the most significant lawsuit-related legislation since Congress overrode President Bill Clinton’s 1995 veto of a bill to limit private lawsuits for securities fraud. ‘It’s the biggest thing in years,’ Mr. Fineran said.”
Addition: The House bill specifically excludes securities class actions from its jurisdiction provisions, presumably to avoid any conflict with SLUSA.
Addition: The final House bill changed its jurisdiction provision to match the jurisdiction provision in the Senate bill. As a result, it now provides for class action suits to be heard in federal court when fewer than one-third of the plaintiffs are from the same state and when the plaintiffs’ claims total at least $5 million.