Supreme Court Reviews Class Action Reform Law

883985_88818247.jpgClass action lawsuits have long provided a means for large numbers of claimants to consolidate their claims into a single action, when they might not have the resources to pursue individual lawsuits. This has allowed countless people to seek compensation in cases involving products liability, bad faith insurance practices, and other types of personal injury. Class actions are also common in areas like consumer protection law and certain types of securities litigation. For a variety of reasons, class action lawsuits have also been the subject of much controversy, and legislation supported by businesses, many of whom often appear as defendants in class action cases, has placed limits on the amount class action plaintiffs may recover. The U.S. Supreme Court recently heard arguments in a case, The Standard Fire Insurance Co. v. Knowles, No. 11-1450, that involves a federal statute regulating large state and federal class action lawsuits.

Congress passed the Class Action Fairness Act of 2005 (CAFA) in response to an alleged pattern among trial lawyers of filing class action lawsuits in specific state courts where they could obtain favorable verdicts. Calling this an “abuse” of the class action system, the Republican-led Congress passed the bill by a wide margin, and President Bush signed it into law in February 2005. CAFA applies to class action lawsuits that seek damages in excess of $5 million, and in which more than two-thirds of the plaintiffs are from a different state than the principal defendant. CAFA requires the automatic removal of lawsuits meeting these criteria to federal court, which supporters of the law believed would be less predisposed towards the plaintiffs. CAFA’s opponents called the law an assault on individuals’ legal rights.

Several Supreme Court rulings since CAFA’s passage have placed further limits on plaintiffs’ ability to recover through class action lawsuits. The Standard Fire case, which had oral arguments on January 7, 2013, involved a novel approach by the plaintiff’s lawyers to keep a class action lawsuit in state court. The dispute in the case involved an insurance company’s allegedly inadequate reimbursements to its insured for property damages claims. After filing suit in Miller County Arkansas, the lawyers entered a stipulation that the total claims in the lawsuit would not exceed $5 million. This effectively guaranteed that the case could not be removed to federal court under CAFA.

The defendant insurance company removed the case to federal court anyway, arguing that the plaintiff fraudulently misrepresented the potential total amount of claims in the case as less than $5 million. A defendant arguing that the plaintiff’s statement of damages was too low must be a rare event. The federal district court remanded the case back to Miller County, alleged to be one of the infamous plaintiff-friendly venues. The defendant appealed to the Supreme Court, which must now consider whether the plaintiff’s stipulation, which every court so far has stated did not violate the letter of CAFA, has somehow violated Congress’ intent. The Court’s decision could have a significant impact on how plaintiffs may use class action lawsuits in the future to protect their rights.

Lebowitz & Mzhen’s personal injury attorneys are skilled at pursuing justice for people in Maryland who have been injured or lost loved ones due to the negligent or illegal conduct of others. Contact us today online or at (800) 654-1949 for a free and confidential consultation.

More Blog Posts:

Court Denies Motion to Dismiss Brought by Manufacturer of Four Loko in Putative Class Action Lawsuit: Yourth v. Phusion Projects, LLC, Maryland Accident Law Blog, October 24, 2012
Federal Court Denies Class Certification in Medical Products Liability Claim, Maryland Accident Law Blog, July 25, 2012
Lawsuit Alleges Deliberate Exposure of Baltimore Children to Lead Poisoning, Maryland Accident Law Blog, October 6, 2012
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