At first glance a bill that would shift most class-action suits from state to federal courts looks like something of a power grab by federal authorities. Democratic Senate leader Harry Reid of Nevada put it this way: The bill the Senate approved last week “turns federalism on its head by preventing state courts from hearing state law claims.”
There is another way of looking at it, however. Michael Greve, who heads the Federalism Project at the American Enterprise Institute, said, “We had gotten to a point where county and state judges were making decisions that affected the entire country. That’s the kind of interference with interstate commerce the founders hoped to prevent.”
What brought about the situation Greve deplores is the practice by trial lawyers of assembling a large “class” of people aggrieved by some real or imagined corporate malfeasance and then going forum-shopping — finding a state court system or judge who is sympathetic to class-action suits and winning huge damages from juries in localities known for such awards.
Because of forum shopping, consumers throughout the country can be affected by a ruling from a judge in a different state. Greve says the founders didn’t intend that, and cases that had an impact on interstate commerce have been heard in federal courts from early on.
Under the new legislation — which the House is expected to pass this week — class actions can be kept in a state court only if two-thirds of the plaintiffs are from that state. That seems reasonable.
To be sure, the argument that federal courts are already handling so many cases that some consumer-protection cases will take a long time to be heard has some validity. The way to handle this problem is to take a hard look at some of the crimes that have needlessly been made federal in recent years and start eliminating them. But it impedes interstate commerce if companies that market nationally are subject to radically different state judicial systems.
The class action legislation passed last week will not guarantee a relatively uniform judicial regime, but it will be an important step in that direction.