A Look at CAFA: Seven Years in the Making

June 06, 2012

In 2005, Congress passed the Class Action Fairness Act (“CAFA” or the “Act”). The Act was supposedly drafted to prevent class action lawsuit abuse, but it threw the baby out with the bathwater by making it more difficult for all cases, no matter how meritorious, to be fairly decided through judicial proceedings. Specifically, CAFA was designed to reduce plaintiffs’ ability to file class actions in state court and require greater federal control over class action settlements.

Yet, in the seven years since its introduction, there can be no doubt that CAFA’s biggest impact has been to divest consumers of access to the courts.  You can draw your own conclusions about whether this was an intended or unintended consequence of CAFA.  Keep in mind, however, that it was business groups and tort reform advocates which lobbied for the bill.

On June 1, Hagens Berman Sobol Shapiro LLP partner, Thomas Sobol, testified before the Subcommittee on the Constitution of the Committee on the Judiciary, U.S. House of Representatives. At the hearing, titled “Class Actions, Seven Years After the Class Action Fairness Act,” Mr. Sobol focused much of his testimony on how CAFA’s expansion of federal jurisdiction over class actions has negatively impacted consumers and their ability to bring a claim.

CAFA usurped from state courts the ability to interpret their own laws and protect their own citizens. It vested the federal judiciary with virtually sole authority over nationwide or multistate class actions. But CAFA did not provide any instruction as to how the federal judiciary was to handle these numerous, largely state law based consumer protection class actions. It did not explain how a single federal judge was to handle what previously had been the work of numerous state court judges addressing many separate state class actions involving state law. By failing to do so, CAFA presented the federal judiciary with a problem for which there was no immediate solution. As a result, federal courts routinely deny certification of multistate classes when multiple states’ laws are at play. The denial of access to justice is not based on the merits of the case but on a technical procedural issue under the Federal Rules of Civil Procedure – manageability. These denials leave consumers with no recourse.

The federal courts’ denials are not surprising; proponents of CAFA expected the Act would reduce the power of class actions and, with it, American citizens’ abilities to combat unfair and deceptive practices. Only America’s consumers and workers have suffered. Every day, the public continues to be harmed by the corporate wrongdoing. Every day, the refusal of the federal courts to allow class actions challenging such behavior under state laws makes it easier and easier for companies to shirk corporate accountability and avoid any legal consequences for their misconduct.

Wexler Wallace has worked with Hagens Berman over the years, bringing several national class actions in furtherance of the firms’ shared goals of fairness, justice and corporate accountability.  In recent years, however, both firms have watched the doors to the courthouse slam shut on individuals and businesses seeking redress for others’ fraudulent conduct.   The passage of CAFA, combined with the AT&T Mobility v. Concepcion and Dukes v. Wal-Mart decisions, have made the path through the judicial system increasingly more difficult to navigate for the average litigant.  Tom Sobol’s testimony in this regard hit the nail on the head, and one can only hope that members of Congress actually heard what he said.

For a full transcript of Mr. Sobol’s testimony, please click here.

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