Concerns over state courts allowing class actions to proceed, the impact on the U.S. economy, and the undue pressure on companies to settle for significant sums spurred Congress to pass the Class Action Fairness Act of 2005. Members of the U.S. House of Representatives, expressing these same concerns over class actions in federal courts, have now drafted legislation to prohibit federal courts from certifying class actions when the class is composed of individuals who have de minimis or nonexistent damages or injuries.
The “Fairness in Class Action Litigation Act of 2015,” House bill H.R. 1927, reported on November 5, 2015, addresses the Rule 23 (a)(3) prerequisite of “typicality” – i.e., “the claims or defenses of the representative parties are typical of the claims or defenses of the class.” Some federal courts have applied a much lower standard in evaluating typicality, relying on the allegations of the lawsuit made by the class representative(s)/named plaintiff(s) as related to the claims of class members. Many federal courts have refused to analyze or require evidence to prove that the members of the class also have a concrete injury – i.e., “standing” to seek the relief sought by the class representative(s) – holding that it is sufficient for class-certification purposes when only the class representative(s) had an injury; and thus had standing to assert the claims on behalf of all members of class. This bill provides the more stringent burden on the proposed class members to produce evidence of their own injury or damages. This bill further mandates federal courts to then rigorously analyze that evidence. Under H.R. 1927, not only must some injury or damage to all class members be established, but the injury or damage must also be of the same type and scope as that of the named representative(s).
Not surprisingly, class counsel have begun initiating efforts to defeat the bill. There are strong dissenting opinions by some House members, and President Obama has threatened to veto the measure if it reaches his desk. But defense lawyers opine that this bill merely codifies what the typicality prerequisite of Rule 23 has always required to be established. This bill, however, does create a heightened evidentiary burden of proof for the class. Opponents will argue that this bill transforms the class certification phase to a merits-based analysis, which is contrary to the present burden of proof at that stage of a class action.
It is thus apparent that this bill, should it pass and survive a potential veto, will change the landscape of class-action litigation in federal courts, providing defendant companies a fortified shield to ward off class-action litigation.