How to limit frivolous class action lawsuits brought in Colorado state courts.

BACKGROUND

A class action is a procedural device that, under certain circumstances, allows a number of individual claims and the rights of a large number of people to be decided in one lawsuit. A class action joins numerous parties and related claims. The class action also represents the interests of persons not before the court. As a result, not all class members must become parties to the lawsuit in order to have their rights adjudicated. Usually, only a few members of the class actually appear in court.

Class actions are designed to promote efficiency and fairness in handling large numbers of similar claims, ensuring that similar claims are decided uniformly, without sacrificing procedural fairness. Oftentimes, by combining numerous claims in a single class action suit, plaintiffs with relatively small claims can nonetheless vigorously assert their rights.

Problems arise when plaintiff attorneys abuse the class action process. When the Federal Rules of Civil Procedure first addressed class action lawsuits, they required that all plaintiffs in a class action suit be specifically identified and demonstrate a willingness to participate in the litigation. In 1966 the Federal Rules were amended to allow attorneys, through the use of token plaintiffs, the ability to sue on behalf of limitless numbers of unknown persons. Furthermore, attorney’s fees are often recoverable in class action suits, providing a huge incentive for plaintiff’s attorneys to seek out potential defendants and launch a class action lawsuit.

The problem with class action lawsuits is twofold. First, the past several years have witnessed a dramatic increase in class action lawsuits, by some estimates a 1,000% increase over the past several years. Much of that growth has been in state courts, as federal courts have begun to restrict certain abuses. Second, plaintiff attorneys often walk away with huge fees, while the plaintiffs themselves receive nearly worthless settlements. For example, in one drug case the plaintiffs each received $19.60 as a settlement, less than the cost of one single purchase of medication. Meanwhile, plaintiffs’ lawyers received millions in fees. There have actually been cases where plaintiffs lost money, while their attorneys made millions.

Colorado Rule of Civil Procedure 23 governs class action lawsuits in Colorado. It is nearly identical to the Federal Rule of Civil Procedure 23. Because of this similarity, Colorado courts look to federal law when deciding class action issues. Consequently, Colorado faces fewer abuses than other states. Nonetheless, Colorado has seen an increase in class action lawsuits.

In 1998 Federal Rule 23 was updated to allow for interlocutory appeals of class certification. This process allows defendants to quickly appeal a class certification, rather than waiting until the very end of a class action trial. Class certification is a critical juncture in any class action lawsuit, and the opportunity to appeal certification can make the difference between ending the lawsuit and being forced into a huge settlement. Colorado has not yet updated Rule 23 to conform to federal law.

PROPOSED SOLUTION

Prior to 1998, Colorado’s Rule 23 was identical to Federal Rule 23. However, the Colorado Rule has not been updated. This initiative would simply update the Colorado rule, adding a section 23(f) to allow for interlocutory appeals of class certification. Specifically, 23(f) would read as follows:
Appeals. A court of appeals may in its discretion permit an appeal from an order of a district court granting or denying class action certification under this rule if application is made to it within ten days after entry of the order. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders.

Another change would be to limit the class of plaintiffs to Colorado residents only. Although this would not curb all abuses of class action lawsuits, it would ensure that Colorado courts are used only for claims affecting Colorado residents. At the same time, this reform would not limit plaintiffs from pursuing class actions that extend beyond Colorado, because they would still have the right to bring suit in Federal Court.

House Bill 1100
Update of Class Action Civil Rules
Rep. Jim Snook
Support HB 1100


HB 1100 updates Colorado Rule of Civil Procedure 23, which governs class actions, to reflect changes in the comparable Federal Rule of Civil Procedure 23. Colorado Rule 23 is identical to Federal Rule 23, except that Colorado has not added section (f), which allows for interlocutory appeals for class certification. This bill adds section (f) so that Colorado will also allow interlocutory appeals.

A class action is a procedural device that allows a number of individual claims -- and the rights of a large number of people – to be decided in one lawsuit. Certification of a class is a critical juncture in a class action lawsuit, especially in class actions involving large classes and/or large amounts of money. Certification greatly expands the number of plaintiffs and the dollar amounts at issue. It is not unusual for a class action to involve hundreds of thousands of plaintiffs and hundreds of millions of dollars. Prior to the change in the federal rule, plaintiffs and defendants could not appeal certification until the end of a trial. Denial meant that a plaintiff had to pursue expensive litigation for a small claim, or conversely that a Defendant was suddenly faced with multi-million dollar litigation. In either instance, certification of a class is a very high-stakes decision, and speedy appeal of the certification decision creates a low-cost way to resolve critical issues early in the litigation.

That change allows a permissive interlocutory appeal of class action certification. In other words, the Colorado Court of Appeals may choose to hear an appeal from a trial court decision certifying a class or denying class certification. However, the Court of Appeals would retain discretion whether or not to accept the appeal, the same as under the current federal rule.

HB 1100:

· Updates Colorado class action procedure to follow the federal procedure

· Allows a permissive interlocutory appeal of class action certification

· Creates a low-cost manner of resolving certification issues

· Does not change the standards for class action certification

Update the Colorado Rules for class action to reflect the federal rules. Vote ‘Yes’ for HB 1100