Friday, February 18, 2005

Courting Change, or Federal Courts get Classy

It's fairly rare that I agree with President Bush, but I feel it's appropriate to give credit where it's due. In this case, I mean the just-passed legislation on class-action lawsuits. It isn't necessarily the ideal solution, but it looks to be at least a step in the right direction.

I'm not "anti-consumer" (I'll save my rant about the use of the word "consumer" for another time) or "pro-big-business," but there were certainly aspects of the previous system that did not make sense. In particular, when the plaintiffs come from different states with different consumer-protection laws, the only state laws that can be universally relevant are those of a state in which the defendant is located. Anything else is fundamentally unfair.

We cannot expect judges to be expert in the law of jurisdictions outside of their own. State courts have as their purview the laws of their states, which might differ substantially from the comparable laws in other states. An aggrieved plaintiff and a defendant whose interaction had nothing to do with a state cannot adjudicate their differences under the laws of that state, but must rely on the home-state courts of one of the parties to the suit.

When potential plaintiffs span multiple states, there are three sensible options. The first is to try the case in the defendant's home state. If this is not feasible for some reason, then the appropriate jurisdiction is in the Federal courts under Article III, Section 2 of the Constitution. The only other sensible option is to break the class up into smaller classes each of which has plaintiffs from a single state, and pursue separate cases for each class.

The current legislation is more restrictive than this, but it makes the default jurisdiction Federal, which is appropriate for "Controversies...between Citizens of different States," which is arguably the most relevant jurisdiction. If the Federal courts are unwilling to take these cases, or if their judgements are not equitable, that is a separate matter which should be addressed. Using the claim that Federal payouts to plaintiffs are too small as an argument for moving suits to inappropriate jurisdictions is spurious, at best.

Given that roughly a quarter of the House Democrats (50 of 201) voted for this legislation, along with over 40% of Senate Democrats (18 of 44), it seems likely that many in the Democratic party view this issue in a manner similar to that outlined above. Changing jurisdicitional rules is a significant step, and requires overcoming a fair amount of inertia. Hopefully, this will be but the first step towards a completely rational basis for determining the jurisdiction of class-action lawsuits.

No comments: