Rob Stern Discusses Proposed Federal Legislation to Control Number of Class-Action Lawsuits

The Wall Street Journal | February.24.2017

Rob Stern, a litigation partner in Orrick’s Washington, D.C. office, recently spoke with The Wall Street Journal [subscription required] about a proposed bill in the U.S. House of Representatives that could make prosecution of class-action lawsuits more difficult. Among other things, the bill seeks to limit certification of class-actions to those instances where class members all suffered the same type and scope of injury, to prevent plaintiffs from using the same attorneys when filing lawsuits, and to require the disclosure of third party funders to class-actions.

According to Rob, the prospects for passing the bill are better than in previous attempts because Republicans control both Houses of Congress and the White House: “Most companies will view this as a very good thing. The typical issuer, publicly traded manufacturers of consumer goods or financial services companies, will welcome this. It will make it harder to bring class actions against them, there’s no two ways about that”. On the other side, he acknowledged that “The institutional investors, the pension funds, hedge funds, the people who tend to be plaintiffs, won’t like it. The plaintiffs’ bar won’t like it.”

Rob also noted that a small industry had grown around the funding of class-action lawsuits, creating special interest in the provision that would require third-party funders to be disclosed to the court. If disclosures began to reveal that a majority of class-actions are funded by a few people or groups, he said “it would be interesting to see how it might play out in terms of additional legislation to curtail or impose restrictions on funding”.