Class Action Fairness Act

When a person harms another, the harmed party has the option of filing a lawsuit to seek damages. However, certain harms affect large groups of people, sometimes reaching into the thousands. In these cases, state and federal civil procedure rules provide for class action lawsuits. A class action lawsuit is brought by a group of parties who have all suffered a similar harm from a defendant’s actions. The defendants can also make up a class where several defendants contributed to the harms at issue. In 2005, in an effort to provide greater protection for harmed plaintiffs, Congress passed the Class Action Fairness Act (“CAFA”) revolutionizing class action procedures.

What Are the Terms of the Class Action Fairness Act?

First, CAFA dramatically expands federal jurisdiction to include a larger body of class action claims. There are two federal class action jurisdiction requirements. First, the case must be for more than $5 million. Second, at least one plaintiff must be from a different state than one defendant. There are exceptions to the second requirement. For example, if at least two-thirds of the plaintiffs are from the same state as the main defendant, federal courts may not have jurisdiction. By expanding jurisdiction, CAFA changed the class action landscape. In turn, this led to several ambiguities in the case law. This also meant that attorneys skilled in traditional class action procedures had to reinvent their practices to comply with CAFA’s new requirements. The American Bar Association provides resources to demonstrate the applications of CAFA.

How Has the Class Action Fairness Act Affected this Area of Lawsuits?

CAFA helped to reduce forum shopping among state courts. Forum shopping is the practice of filing a lawsuit in a court that is more likely to issue a favorable decision. Certain state courts across the country are notorious for issuing rulings that typically favor either plaintiffs or defendants. This is because certain state laws are more favorable to one party than another. By expanding federal jurisdiction, CAFA has made class actions more uniform because these cases all fall under the same federal law. This way, class actions do not focus in jurisdictions that typically favor plaintiffs. Under CAFA, federal courts also grant greater scrutiny (or a more thorough review of the terms and conditions) to class action settlements.

Critics of this law argue that it provides too much protection to defendants, which are typically large corporations. They argue that since class action suits may now proceed in federal court, it is more difficult to bring such a lawsuit. This also adds to federal courts’ caseload, making class actions take even longer to reach a resolution. However, a study by the Federal Judicial Center did show that since CAFA there has been an increase in class action suits. This is consistent with the legislative intent behind the law—i.e., to make it easier for consumers to bring such suits for their damages. Additionally, since federal judges are appointed, not elected, there is a concern the federal government could manipulate class action outcomes by appointing judges with certain political sentiments. There is also controversy about whether class actions suits appropriately fall under federal court jurisdiction. Opponents argue that instead state laws should decide class action suits.

At our law firm, we help guide our clients from the decision to file a class action lawsuit through the various steps of litigation. You may contact us to discuss your legal options with an attorney.