Sen. Grassley said the legislation is necessary to help people understand their rights in class action lawsuits and to protect them from unfair settlements.

"The class action system is full of problems," Sen. Grassley said. "We need to protect the rights of consumers and not allow attorneys to gain huge fees when their clients are left with little."

"Right now," Sen. Kohl added, "people across the country can be dragged into class action lawsuits unaware of their rights and unarmed on the legal battlefield."

The legislation would allow class actions, which normally are heard in state courts, to be heard in federal courts if total damages exceed $2 million and the parties include citizens from multiple states.

Advocates of class action legal reform contend that some state courts are biased against defendants and federal court jurisdiction is necessary to ensure fairness.

In addition, the legislation calls for judicial scrutiny of settlements to assure fairness to plaintiffs, and "plain English" notification to plaintiffs of the fact the class action has been filed and of any proposed settlements.

Carl Parks, senior vice president of government relations with the Des Plaines, Ill.-based National Association of Independent Insurers, praised the legislation, saying it will restore basic principles of fairness in national class action lawsuits.