President Bush on Friday signed a bill that he says will curtail multimillion-dollar class action lawsuits against companies and help end "the lawsuit culture in our country."
The legislation aims to discourage class action lawsuits by having federal judges take them away from state courts. It was a victory for conservatives who hope it will lead to other lawsuit limits and for businesses that have complained for decades that state judges and juries have been too generous to plaintiffs.
The president has described class action suits, in which a single person or a small group can represent the interests of thousands in court, as often frivolous. He said greedy lawyers have taken advantage of the state class action suit system by filing cases in places where they know they can win big-dollar verdicts — while their clients get only small sums or coupons giving them discounts for products of the company they just sued.
"This bill helps fix the system," Bush said in the East Room of the White House, surrounded by Democratic and Republican lawmakers for his first bill-signing ceremony of the year. "Congress has done it's duty."
Consumer groups and trial lawyers fought against the bill, but lost their struggle when Republicans gained seats in last fall's elections and Democrats defected on the issue.
"The House of Representatives joined the Senate in sending a clear message to the nation: the rights of large corporations that take advantage of seniors, low-wage workers and local communities are more important than the rights of average American citizens," said Helen Gonzales of USAction, a liberal, pro-consumer activist group.
During the brief ceremony, Bush repeatedly described the bill as just a beginning in his drive to place much broader restraints on the American legal system. Next up, he said, should be curbs on asbestos litigation and medical malpractice awards.
The president, the GOP and businesses have criticized what they see as a litigation crisis that enables lawyers to reap huge profits while businesses — and thus consumers — are stuck with the bill.
"We're making important progress toward a better legal system," he said. "There's more to do. ... We have a responsibility to confront frivolous lawsuits head-on."
Under the legislation Bush signed, class-action suits seeking $5 million or more would be heard in state court only if the primary defendant and more than one-third of the plaintiffs are from the same state. But if fewer than one-third of the plaintiffs are from the same state as the primary defendant, and more than $5 million is at stake, the case would go to federal court.
Businesses failed to get the measure to apply to suits already in the courts.
The bill also would limit lawyers' fees in settlements where plaintiffs get discounts on products instead of financial settlements. The measure links the fees to the coupon's redemption rate or the actual hours spent working on a case.
House Majority Whip Roy Blunt, R-Mo., said that moving those cases to federal court will ensure that state judges will no longer "routinely approve settlements in which the lawyers receive large fees and the class members receive virtually nothing."
But Democrats say Republicans just want to protect corporations from taking responsibility for their wrongdoing by keeping them clear of state courts that might issue multimillion-dollar verdicts against them.
Federal courts are expected to allow fewer large class action suits to go forward, which Democrats say means more businesses will get away with wrongdoing and fewer ordinary people will be protected.
"It's the final payback to the tobacco industry, to the asbestos industry, to the oil industry, to the chemical industry at the expense of ordinary families who need to be able go to court to protect their loved ones when their health has been compromised," said Rep. Ed Markey, D-Mass. "And these people are saying that your state isn't smart enough, your jurors aren't smart enough" to hear those cases.