The first legislative victory of the 109th Congress — long-awaited reform of the nation's class action laws — was also a big win for the nation's home builders. President Bush signed the "Class Action Fairness Act of 2005" into law on Feb. 18, shortly after it cleared the House and Senate. NAHB designated this bill as a key congressional vote because of its significance to the housing industry.
The legislation will curb the number of frivolous lawsuits that unnecessarily drive up the cost of housing. The measure moves into federal court class action lawsuits when the total amount in dispute exceeds $5 million, and when any plaintiff and the defendant live in different states.
As an association which represents the entire spectrum of the housing industry, from both small and high production builders, as well as manufacturers of component products, NAHB believes these provisions will discourage "forum shopping," an abusive practice where attorneys seek out certain state courts that have a history of biased judgments against defendants in class action suits. This has reached a point where defendants will settle cases, even those without merit, rather than risk trial in state court.
The new law resolves this problem by shifting class action cases to federal courts, which tend to be more objective in their decisions than state courts. It also protects defendants from undue pressure to settle, and provides safeguards for plaintiffs by ensuring that they benefit from damage awards rather than lawyers.
NAHB will continue to support additional legislation to reform our tort system.