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  2d Session
                                S. 3123

              To provide for Federal class action reform.



           September 27 (legislative day, September 22), 2000

   Mr. Grams introduced the following bill; which was read twice and 
               referred to the Committee on the Judiciary


                                 A BILL

              To provide for Federal class action reform.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,


    This Act may be cited as the ``Consumer Rights in Federal Class 
Actions Act of 2000''.


    (a) In General.--Part V of title 28, United States Code, is amended 
by inserting after chapter 113 the following:

                  ``CHAPTER 114--FEDERAL CLASS ACTIONS

``1711. Definitions.
``1712. Application.
``1713. Pleading requirements and notification of class upon 
``Sec. 1711. Definitions
    ``In this chapter, the term--
            ``(1) `class' means a group of persons that comprise 
        parties to a civil action brought by 1 or more representative 
            ``(2) `class action' means a civil action filed pursuant to 
        rule 23 of the Federal Rules of Civil Procedure;
            ``(3) `class member' means a person that falls within the 
        definition of the class;
            ``(4) `class counsel' means the attorneys representing the 
        class in a class action; and
            ``(5) `proposed settlement' means a settlement agreement 
        regarding a class action that is subject to court approval and 
        would be binding on the class.
``Sec. 1712. Application
    ``This chapter shall apply to all plaintiff class actions filed in 
or removed to Federal court, except any such class action solely 
            ``(1) claims concerning a covered security as defined under 
        section 16(f)(3) of the Securities Act of 1933 and section 
        28(f)(5)(E) of the Securities Exchange Act of 1934;
            ``(2) claims that relate to the internal affairs or 
        governance of a corporation or other form of business 
        enterprise and arises under or by virtue of the laws of the 
        State in which such corporation or business enterprise is 
        incorporated or organized; or
            ``(3) claims that relate to the rights, duties (including 
        fiduciary duties), and obligations relating to or created by or 
        pursuant to any security (as defined under section 2(a)(1) of 
        the Securities Act of 1933 and the regulations issued 
``Sec. 1713. Pleading requirements and notification of class upon 
    ``(a) Pleading Requirements.--The complaint in a class action shall 
include a disclosure of the recovery sought for class members and the 
anticipated attorney's fees including an explanation of how any 
attorney's fees will be calculated.
    ``(b) Settlement Requirements.--
            ``(1) In general.--Not later than 10 days after a proposed 
        settlement in a class action is filed in court, the class 
        counsel shall provide notice to class members of a proposed 
        settlement agreement, written in plain, easily understood 
        language, informing the members of--
                    ``(A) the benefits that will accrue to the class 
                due to the settlement;
                    ``(B) the rights that class members will lose or 
                waive through the settlement;
                    ``(C) obligations that will be imposed on the 
                defendants by the settlement;
                    ``(D) the dollar amount of any attorney's fee class 
                counsel will be seeking, or if not possible, a good 
                faith estimate of the dollar amount of any attorney's 
                fee class counsel will be seeking;
                    ``(E) an explanation of how any attorney's fee will 
                be calculated and funded; and
                    ``(F) the right of any class member to enter 
                comments as a part of the court record not later than 
                60 days after receiving notice about the proposed 
        The court may not accept or reject the settlement agreement 
        before the expiration of the period provided in subparagraph 
            ``(2) Settlements involving coupons or recovery from a 
        class fund.--If a proposed settlement involves a coupon or 
        requires a class member to obtain a recovery from a fund set 
        aside for the class, the defendant shall provide the court 
and class members with regular reports (not more than 90 days apart) as 
to how many members of the class are participating in the settlement. 
The reports required by this paragraph shall be posted on the Internet 
by the defendant and continue until expiration of the coupons, in the 
event of a coupon settlement, or until disposition of the fund, in the 
event of a class fund. The Internet website address for the reports 
shall be made part of the court record and shall be printed in all 
notices to class members.''.
    (b) Technical and Conforming Amendment.--The table of chapters for 
part V of title 28, United States Code, is amended by inserting after 
the item relating to chapter 113 the following:

``114. Federal Class Actions................................... 1711''.


    (a) Findings.--Congress finds that--
            (1) there have been abuses of class action lawsuits whereby 
        few members of the class pursue and benefit from the 
            (2) use of surveys by plaintiffs' attorneys to determine 
        utilization of settlements are often biased;
            (3) judges often do not examine written comments sent in by 
        class members who may dispute the settlement or need for the 
        action; and
            (4) attorney's fees are often based on inaccurate 
        information regarding how many class members actually 
        participate in the settlement.
    (b) Report.--Not later than 12 months after the date of enactment 
of this Act, the Judicial Conference of the United States, with the 
assistance of the Director of the Federal Judicial Center and the 
Director of the Administrative Office of the United States Courts, 
shall prepare and transmit to the Committees on the Judiciary of the 
Senate and the House of Representatives a report on class action 
    (c) Content.--The report under subsection (b) shall contain--
            (1) a recommendation for a method to measure actual class 
        member utilization of settlement funds or coupons, with regular 
        reporting requirements;
            (2) recommendations on the best practices that courts can 
        use to ensure that proposed class action settlements are fair 
        to the class members that the settlements are supposed to 
            (3) recommendations on the best practices that courts can 
        use to ensure that--
                    (A) the fees and expenses awarded to counsel in 
                connection with a class action settlement appropriately 
                reflect the extent to which counsel succeeded in 
                obtaining full redress for the injuries alleged and the 
                time, expense, and risk that counsel devoted to the 
                    (B) the fees and expenses awarded to counsel 
                accurately reflect the utilization of class action 
                settlements by class members, class member comments 
                received, and review of actual usage of similar 
                previous settlements as indicators of what attorney's 
                fees should be; and
                    (C) the class members on whose behalf the 
                settlement is proposed are the primary beneficiaries of 
                the settlement; and
            (4) the actions that the Judicial Conference of the United 
        States has taken and intends to take toward having the Federal 
        judiciary implement any or all of the recommendations contained 
        in the report.

Pages: 1

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