(Bloomberg Businessweek) -- Republicans and their business allies perennially push tort-reform bills aimed at restricting what’s sometimes called the litigation industry. They haven’t had much luck of late. It’s been 12 years since one of those measures succeeded. But with Donald Trump in the White House, pro-business groups see an opening for a series of bills moving through the House that would discourage class actions and generally make it harder to sue businesses.
It’s an issue the president has some experience with. Only days after his election, Trump agreed to pay $25 million to settle claims that his defunct Trump University cheated more than 6,000 students with false promises of teaching them his real estate secrets. On the other hand, Trump has frequently initiated suits against business adversaries, so it’s tricky to predict what position he’ll take. The White House did not respond to requests for comment.
Three bills, each of which would make life tougher for plaintiffs’ lawyers, were scheduled for votes by the full House on March 9 and 10. Several more are in the legislative pipeline. While House passage is a virtual certainty, the Senate presents a bigger challenge. With a 52-48 majority, Republicans would need to find eight Democratic votes to reach 60 and avoid a potential filibuster. Lisa Rickard, president of the Institute for Legal Reform, the U.S. Chamber of Commerce’s legal arm, says the chamber and other business advocates are focusing attention on 10 Democrats in red states who are up for reelection in 2018, including Bob Casey Jr. of Pennsylvania, Heidi Heitkamp of North Dakota, and Joe Manchin of West Virginia.
Plaintiffs’ advocates predict the legislation will stall in the Senate with little or no Democratic support. “These bills are driven by the U.S. Chamber of Commerce and the largest corporations, who want to escape responsibility for hurting people or other businesses,” says Pamela Gilbert, a consumer attorney in Washington.
The broadest bill, sponsored by Virginia Republican Bob Goodlatte, chairman of the House Judiciary Committee, would make it harder in several ways to bring class actions. The measure would bar plaintiffs’ firms from repeatedly representing the same client in class actions. The most obvious targets are prominent law firms that represent plaintiffs in securities suits. Such firms routinely represent institutional investors in multiple cases over time. Professor John Coffee Jr. of Columbia Law School wrote on his Blue Sky Blog that the restriction “seems either a death sentence for the large plaintiffs’ firm or the end of large public pension funds serving as lead plaintiff.”
Statistics on class actions are sparse, partly because there’s no central clearinghouse for state cases. But numbers are gathered for federal securities cases. Plaintiffs filed a record 270 federal class-action securities cases in 2016—44 percent more than the historical average of 188 filings from 1997 to 2015, according to Cornerstone Research.
Another part of Goodlatte’s bill would allow class actions to move forward only when a judge certifies that all plaintiffs have suffered the same type and scope of injury. Imposing such obligations at the outset of a case would encourage more preliminary skirmishing and deter some class actions from ever getting off the ground.
Yet another section of Goodlatte’s bill would restrict plaintiffs’ attorneys’ fees to a percentage of the amount actually distributed to the class. That could effectively kill off suits that seek a change in corporate behavior and pay class members little or nothing in damages. “The idea is to eliminate class actions that don’t make any sense from the start,” says John Beisner, a partner with Skadden, Arps, Slate, Meagher & Flom, a large corporate law firm. Of course, lawsuits that don’t “make sense” to a defendant are often the height of reasonableness to the other side.
The bottom line: A series of tort-reform bills seeks to curtail the litigation industry by limiting class-action suits and making it harder to sue businesses.
To contact the author of this story: Paul Barrett in New York at pbarrett17@bloomberg.net.
To contact the editor responsible for this story: Matthew Philips at mphilips3@bloomberg.net.
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