So how can attorneys who we do not even know file a lawsuit on our behalf without our permission, and indeed, without even telling us, asserting claims with which we may disagree? Well, welcome to the world of class actions. By making this observation I am not saying that class actions are inherently a bad thing or that they ought to be abolished. To the contrary, the device definitely plays an important role in our legal system.

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    But the class action is a very powerful legal device. It hands attorneys the right to file lawsuits on behalf of people without their consent and without their control. It is a lawyer's dream: a lawsuit in which you really do not need a client in the traditional sense. So the class action device needs to be controlled very carefully by our courts because it creates a source of significant abuses.

    Unfortunately, those abuses are rampant in today's class action world. They are seriously injuring our economy. And worse yet, they are seriously injuring the consumers that class actions are supposed to benefit. As the Washington Post bluntly editorialized several months ago in urging the passage of this bill, ''No portion of the American civil justice system is more of a mess than the world of class actions. None is in more desperate need of policymakers' attention.''

    So in what respects is the class action world a mess? What are the abuses? Let me just mention three of many. First, State courts are using class actions to federalize State laws. County courts are presiding over class actions that have little or no connection to their own States, deciding claims of people who live in other jurisdictions, and in the process, interpreting the laws and setting the policies for other jurisdictions.

    The evidence on this point is not just anecdotal. I am the co-author of a study that is being published this week in the Harvard Journal of Law and Public Policy that analyzes hard data on this subject. For that study we pulled all of the class action files out of dockets in certain county courts in Illinois, Texas, and Florida. We found that very few of those class actions had any significant relationship to the counties in which they were filed. Most of the class actions were brought primarily on behalf of plaintiffs who did not live in those jurisdictions against defendants who did not reside there either.

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    And this phenomenon is worsening. The study found that the number of class actions filed in those county courts is growing by leaps and bounds, some up over 1,000 percent in the past 3 years alone.

    Second, State courts are being inundated with copycat class actions. When one class action is filed, often many more class actions, each asserting the same claims on behalf of the same purported classes of people, are being filed in State courts all over the country. This phenomenon does not occur in the Federal courts because when multiple class actions are filed in the Federal system there is a process by which they can be all drawn together before a single judge.

    This copycat class action phenomenon injures defendants because they end up defending exactly the same claims on behalf of the same people in 50 or 60 courts at the same time all over the country. And the phenomenon can injure class members as well because the lawyers who bring those cases can make money off of them only if they are the first to settle their claims, creating enormous incentives to sell out consumer interests.

    That brings us to the third major problem. In recent years, multiple hearings before this Committee and its Senate counterpart have uncovered many circumstances in which counsels walk off with enormous attorneys' fees but the class members receive next to nothing.

    As the Washington Post editorial that I mentioned earlier concluded, many of these problems would be eliminated if more interstate class actions could be heard in Federal court. That is not possible now because of a glitch in our Federal diversity jurisdiction statute. It allows Federal court simple slip-and-fall cases to be heard there, but cases that involve the most people, the most money, and the most interstate commerce implications cannot be heard there. That is the issue that this bill fundamentally is intended to address. I therefore urge this Committee to recommend its adoption.

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    Thank you.

    [The prepared statement of Mr. Beisner follows:]

PREPARED STATEMENT OF JOHN H. BEISNER, ESQ.

    Thank you for the opportunity to testify about the abuses of class actions that are presently occurring in our judicial system and about why enactment of H.R. 2341 would constitute an important step toward halting those abuses, which are challenging the basic legitimacy of the class action device.

    My testimony today is based primarily on my experiences as an ''in-the-trenches'' class action litigator. Over the past two decades, I have defended more than 400 class action lawsuits on a wide variety of subjects in federal and local courts in 37 states. In the course of that work, I have observed the soaring numbers of class actions in state courts and the increasing abuse of the class action device, particularly in certain state court settings. I have also personally witnessed the enormous economic waste that this inexplicable situation imposes on targeted companies, diverting attention and resources from job-creating innovation efforts and diluting the profits available for shareholders, including both pension funds and individual investors. Today, I would like to share with you some thoughts about what has led to this class action crisis—and why H.R. 2341 would be a positive, effective response to these problems.

I. THE STATE COURT CLASS ACTION CRISIS IS WORSENING.

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    My testimony today is not a new song; it is an old refrain. Over the last several years, most policymakers—and indeed most Americans—have read or heard about the explosion in state court class actions and have developed at least a passing familiarity with the abuses occurring in many of those cases.