Proposed Legislation May Significantly Limit Class Action Litigation In Federal Court

Author:Mr John-Paul Deol
Profession:Sheppard Mullin Richter & Hampton

Twelve years after he introduced the Class Action Fairness Act of 2005, Representative Bob Goodlatte (R-VA) has introduced the Fairness in Class Action Litigation Act of 2017 ("the Act"), which would significantly change the federal class action landscape by creating several procedural mechanisms designed to head off lawyer-driven class action litigation.  The stated purpose of the Act is to "(1) assure fair and prompt recoveries for class members and multidistrict litigation plaintiffs with legitimate claims; (2) diminish abuses in class action and mass tort litigation that are undermining the integrity of the U.S. legal system; and (3) restore the intent of the framers of the United States Constitution by ensuring Federal court consideration of interstate controversies of national importance consistent with diversity jurisdiction principles."  The Act contains many game-changing provisions, five of which are detailed below.

Limits on and Timing of Payment of Attorney's Fees

Perhaps the most important provision of the Act, which is likely to disincentivize plaintiffs' lawyers from bringing class action claims, is the new rule regarding how much attorneys could recover for themselves.  Under the proposed legislation, "the portion of any attorneys' fee award to class counsel that is attributed to the monetary recovery shall be limited to a reasonable percentage of any payments directly distributed to and received by class members."  In addition, plaintiffs' attorneys would be unable to collect their fees unless and until "the distribution of any monetary recovery to class members has been completed."

Discovery Stay

The Act provides for a stay on discovery during the pendency of any motions to dismiss, transfer, or strike class allegations.  In employment cases, this would prevent plaintiffs' lawyers from filing lawsuits and immediately serving written discovery demands seeking information about putative class members, including their contact information, time records and payroll records.

Avoiding Conflicts of Interest

To avoid potential conflicts, and the recurrence of career plaintiffs, the Act would require disclosures about the relationship between the proposed class representative and class counsel.  Specifically, the Act would mandate that the named plaintiff plead whether he or she is "a relative of, is a present or former employee of, is a present or former client of (other than with respect to the class action), or has any contractual relationship...

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