Goodlatte Wants to End Court Shopping for Class Action Suits

Goodlatte proposed sending cases with damages to the class over $2 million to federal courts.

Trial lawyers are virtually extorting handsome fees from businesses by filing class action suits in carefully selected, friendly courts where businesses promptly throw in the towel rather than defend themselves, according to Congressman Bob Goodlatte (R-Va. 6th) of Roanoke. He has introduced a bill that would allow such suits to be removed to federal court if the damages to the class are at least $2 million.

"We want to prevent abusive forum shopping and the way to do that is to provide an opportunity to remove a class action suit to federal court," Goodlatte told the Law School's Federalist Society Nov. 11.

As an example, Goodlatte cited a case against Mass Mutual, an insurance company. The company was accused of not informing policyholders clearly that if they paid their annual premium in monthly installments they would pay slightly more than if they made one lump payment. Feeling trapped in a hostile court, Mass Mutual chose to settle. One of the suit's named defendants was paid $100,000 and the heirs of the other were given $50,000. The attorney representing them received $13 million.

Goodlatte's proposal is based on the U.S. Constitution's diversity jurisdiction provision.

"The crux of the legislation is to redefine diversity jurisdiction so that cases may be removed to federal courts if damages to the class are at least $2 million," Goodlatte said.

His bill would also prohibit paying bounties to the suit's named plaintiffs and give extra scrutiny in cases where awards are made in coupons to plaintiffs. He cited the example of a settlement where plaintiffs received a 33-cent discount coupon on the firm's products that plaintiffs had to request by mail in order to receive. "So they spend more for the stamp than they get back with the coupon," said Goodlatte.

He has been pressing for passage of the bill for four years and predicted that fewer class actions would stay in state courts if the bill is made a law, which he considers more likely now that Republicans control Congress. Goodlatte said legal reform proposals have been tough to pass in Congress in recent years.

In comments on Goodlatte's proposal, law professor Laurens Walker observed that class actions are private law enforcement devices in which the only government actor present is the judge and that fewer class actions would likely mean a larger enforcement role for the government. He also observed that Goodlatte's bill would enhance the authority of federal courts, as compared to state courts. Walker expressed curiosity that Republicans approve of such legislation and Democrats oppose it. "Everybody is riding a different horse," he said. Walker's complex civil litigation course was due to cover the topic the next day.