Alliance Sees Class Action Reform as Top Priority When Congress Returns Next Month

August 15, 2003

In anticipation of an early vote on class action reform legislation when Congress returns in September, the Alliance of American Insurers is urging its member companies to contact Senators in support of S 274, the Class Action Fairness Act.

The move is reportedly part of a significant effort undertaken by the business community to show the need for this reform. The Senate leadership has indicated the legislation will be considered when Congress returns following its annual August recess.

“Essentially, inappropriate class action litigation has become a tax on the American economy,” said Ken Schloman, Alliance Washington Counsel. “It is a hidden tax that impacts everyone. By hindering the development of new products and increasing the cost of existing ones, such litigation is becoming a burden on local economies as well as the national economy.”

He noted that S 274 would “sharply curtail the abusive practice of forum shopping by assuring that class actions that affect the entire nation are heard by federal judges and not in a few carefully selected state courts. This legislation is procedural reform that affects process. It does not affect the substantive rights of class members. It should be characterized as ‘court’ rather than ‘tort’ reform.”

The bill also reportedly provides protections to consumers that currently do not exist in many instances. The legislation requires that legal notices sent to class members explaining their rights be written in “plain English.” It also prohibits settlements of class actions that result in a net loss to class members and requires coupon settlements to be carefully reviewed by the courts.

“The Class Action Fairness Act, along with medical malpractice reform and asbestos litigation reform, are key legislative priorities of the Congress. S 274 is ready for Senate action and we believe that the case for enactment of this needed reform has been made. Its passage will help the American economy grow,” Schloman said.

“The Alliance has sought significant reform of class action abuse since 1999,” added Ann Spragens, Alliance senior vice president and general counsel. “It has been one of the highest priorities on our civil justice reform agenda.”

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