Jack Dolan, a representative of the Washington-based American Council of Life Insurers, called the Judiciary Committee's action an important step towards addressing the national problem of runaway class action lawsuits.

"The legislation would bring order and fairness to a system that is running amok," Mr. Dolan said.

Melissa Shelk, vice president of federal affairs for the Washington-based American Insurance Association, said that multistate class action lawsuits belong in federal courts.

Moreover, she said, the system will be better for consumers since it includes numerous protections such as judicial scrutiny of so-called "coupon" settlements. Coupon settlements are those in which the consumer-plaintiffs in a class action suit receive a coupon to purchase a product from the defendant at a minimal discount, while the plaintiff lawyers receive a substantial fee.

Monte Ward, vice president of federal affairs for the Indianapolis-based National Association of Mutual Insurance Companies, said that due to the increase in class action lawsuits, NAMIC members have been forced to use more of their valuable resources to conduct business.

Under H.R. 2341, federal district courts will have jurisdiction in any class action in which the amount in controversy exceeds $2 million and in which any member of the plantiffs' class is a citizen of a state different from any defendant.

In addition, the legislation establishes a "class action bill of rights," which includes judicial review of noncash settlements, protection against loss by class members because of payments to the class counsel and standardized settlement notification information.

Similar legislation is pending in the Senate.