The growing class action abuse phenomenon has had a number of serious, adverse consequences. The most troubling of these are: increased forum shopping; manipulation of procedural rules to avoid federal diversity jurisdiction; displacement of the laws of some states by local judges in other states; the resolution of class action cases by ill-equipped state courts; ''strike'' suits intended to coerce quick settlements from defendants; collusive settlements, where plaintiffs' lawyers receive large fees while accepting settlements of little or no value to class members; and grossly inflated ''bounties'' being paid to lead plaintiffs. I'll address some of these problems that we have seen at Intel.

Forum Shopping

    Lax enforcement of certification rules in a few jurisdictions allows plaintiffs bringing national class actions to shop around for the most favorable forum, even when that jurisdiction has little connection to the underlying dispute. As a result, a few states—and a few local jurisdictions within those states—receive a disproportionate share of class action filings. Furthermore, if one of these states happens to crack down on class action abuses, the lawyers simply shift their business to other jurisdictions.

    Intel has had first-hand experience with this phenomenon. In one instance, thirteen class actions were filed in a three-week period in state courts in Chicago, Detroit, Denver, Camden, and San Jose, as well as in the federal district courts in Colorado and California. All of these complaints alleged the same facts, asserted essentially the same claims, and purported to be class actions on behalf of the same nationwide class of consumers. In another instance, five class actions were filed against Intel in a nine-day period in the state courts in San Jose, Chicago, and Camden. Both of these situations are discussed in a little more detail later in my testimony.

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    In both of these litigation ''clusters,'' the plaintiffs simultaneously pursued motions in several state courts, all of them seeking to certify a nationwide class. The cases were settled before any of the courts certified a class. Had this not been done, the decision as to where the class action would have been prosecuted and tried would have been decided on the basis of this unseemly race to the courthouse, and not based on traditional notions of judicial administration such as the convenience of the parties, the ability to compel testimony of witnesses, and the location of documentary and physical evidence.

Manipulation of the Rules to Avoid Federal Diversity Jurisdiction

    Lawyers are often able to keep national class actions in federal court by manipulating the rules that govern federal jurisdiction. Under current law, a case may be removed from state to federal court if all of the plaintiff class representatives are citizens of a different state than all of the defendants, and if each plaintiff is seeking more than $75,000 in damages. To prevent removal, the class counsel may include a named plaintiff that has the same citizenship as one of the defendants, or may name a local ''straw defendant'' that has the same citizenship as one of the plaintiffs, or may ''shave'' claims by forgoing damages for class members in excess of $74,999.(see footnote 5) These tactics may cause considerable expense and inconvenience for local defendants, and may severely disadvantage the class members whose lawyers have surrendered valuable claims.

Displacement of State Law

    State courts hearing national class actions sometimes apply the law of the forum state to govern the claims of all class members, even when many members of the class live in states whose laws differ dramatically. A local court entertaining a national class action against an auto insurer, for example, recently held that the defendant insurance company acted illegally in using ''non-OEM'' parts (i.e., parts not produced by the original equipment manufacturer) in preparing estimates for repairs—even though most states permit (and some states require) use of non-OEM parts in an effort to benefit consumers by keeping down repair costs.(see footnote 6) In cases like this, local courts effectively override the considered policy choices of other states.

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    Moreover, idiosyncratic local rules also sometimes allow plaintiffs' counsel to manipulate the system to the disadvantage of the out-of-state defendant. We experienced that problem in a case in the Midwest, where plaintiffs' counsel repeatedly (but unsuccessfully) sought class certification and restraining orders of various kinds, each time petitioning the court on an ''emergency'' basis. Intel received less than 48 hours' notice of each new hearing, forcing us to run halfway across the country to meet each ''emergency.'' I am aware of numerous other stories of abuse of state procedural rules, such as the so-called ''drive-by-certifications,'' where class actions are certified before the defendant has a chance to respond. This is particularly pernicious because, as I discuss later, the decision to certify a class action is often decisive.

Ill-Equipped State Courts

    In addition, many state courts have neither sufficient experience nor resources to handle complex class actions. They also lack any mechanism to consolidate related class suits that are brought in other jurisdictions, meaning that defendants often are required to defend against multiple class actions filed in state courts across the country. Intel has experienced this problem first-hand; as I mentioned earlier, more than once we have been forced at substantial expense to defend identical suits in jurisdictions from coast to coast. Federal courts, in contrast, have the expertise and resources necessary to deal adequately with multi-party litigation, and existing procedures allow related class actions to be consolidated into a single proceeding for pretrial purposes. At the same time, there is little doubt that local courts sometimes give favorable treatment to local plaintiffs, at the expense of out-of-state class action defendants; indeed, the Framers of the Constitution provided for diversity jurisdiction in the federal courts to guard against precisely that danger of bias against out-of-state parties.

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