In law, a class action is an equitable procedural device used in litigation for determining the rights of and remedies, if any, for large numbers of people whose cases involve common questions of law and fact.
Class actions in the United States
Federal class actions
In the United States federal courts, class actions are governed by Rule 23 of the Federal Rules of Civil Procedure.
Class action lawsuits may be brought in Federal court if the case involves issues that affect potential class members in different states and has a nexus with federal law. However, such class action suits must have a certain equality of issues across state lines. This may be difficult as the civil law in the various states has significant differences and thus each state's set of claims may have to be handled separately or through the device of multi-district litigation (MDL). It is also possible to bring class action lawsuits under state law, and in some cases the court may extend its jurisdiction to all the members of the class both within the state and without (even internationally) as the key element is the jurisdiction that the court has over the defendant.
The procedure for filing a class action is to file suit with one or several named plaintiffs on behalf of a putative class. The putative class must consist of a group of individuals or business entities that have suffered a common wrong. Usually, these kinds of cases are connected to some standard action on the part of a business, or some particular product defect or policy that was applied to all potential class members in a uniform matter. After the summons and complaint is filed, the plaintiff usually has to bring a motion (sometimes at the same time as filing the summons and complaint) to have the class certified. In some jurisdictions class certification may require additional discovery in order to determine if the proposed class has any cohesiveness.
Upon the motion to certify the class, the defendants may attack the named plaintiffs, their relationship with the law firm or firms handling the case, and their ability to finance the litigation. The court will also examine the ability of the firm to prosecute the claim for the plaintiffs, and their resources for dealing with class actions; the court may require complex notices to be sent, published, or broadcast to the public, in any place where the class members can be found.
As part of this notice procedure, there may have to be several notices, first a notice giving class members the opportunity to opt out of the class, i.e. if individuals wish to proceed with their own litigation they are entitled to do so, only to the extent that they give timely notice to the class counsel or the court that they are opting out. Second, if there is a settlement proposal, the court will usually direct the class counsel to send a settlement notice to all the members of the certified class and all the members of any subclasses (that might have slightly different but uniform claims), informing them of the settlement offer being made by the defendants, and the fact that the named plaintiffs have agreed to accept the settlement. Usually, the court will also state the legal fees being paid to the class counsel as part of the settlement, which may be considerable shich makes class actions appealing to many plaintiff law firms.
In federal civil procedure law, which has generally been accepted by most states (through adoption of rules paralleling the FRCP), the class action must have certain definite characteristics, (1) the class must be so large as to make individual suits impractical, (2) their must be legal or factual claims in common (3) the claims or defences must be typical of the plaintiffs or defendants (4) the representative parties must adequately protect the interests of the class.
State class actions
Since 1938, many states have adopted rules similar to the FRCP. However, some states like California have homegrown civil procedure codes which they have been reluctant to abandon. The law of class actions in California developed in a rather chaotic fashion, and has never been cleaned up (in the way that the FRCP cleaned up the thicket of federal procedural law); as a result, there are entire treatises dedicated to the topic.
Criticisms of Class Actions
There have been many criticisms of class actions. Some say that many class actions are brought by lawyers too willing to settle for coupon settlements for their clients when they can get very substantial legal fees for their efforts. These coupon settlements (which usually allow the plaintiffs to receive some kind of minimal benefit such as a small check or a coupon off future services or products with the defendant company) are also a way that the defendants forstall major liability; if a large number of people do not litigate their claims separately, then the business is not adversely affected.
Some conservative critics also attack the institution of the class action as being a form of taxation upon large business corporations that prevents them from aggressively pursuing innovation. For example, although primitive self-driving cars have already been developed, no rational automobile manufacturer will sell such cars in the open market until their artificial intelligence is perfect; they are terrified of being hit with class actions from vehicle owners and pedestrians who are injured as a result of the slightest bug in the car's software.
This kind of argument is generally seen among those involved in tort reform.
Advantages of Class Actions
Depending on the case, a class action may offer a number of advantages. Each of these advantages essentially stems from the fact that a class action aggregates a large number of individualized claims into one representational lawsuit. Although aggregation creates the potential for harm, it also creates potential benefits.
First, aggregation may increase the efficiency of the legal process. In cases with common questions of law and fact, aggregation of claims into a class action may avoid the necessity of repeating "days of the same witnesses, exhibits and issues from trial to trial." Jenkins v. Raymark Indus., Inc. , 782 F.2d 468, 473 (5th Cir. 1986) (granting certification of a class action involving asbestos).
Second, a class action overcomes "the problem that small recoveries do not provide the incentive for any individual to bring a solo action prosecuting his or her rights." Amchem Prods., Inc. v. Windsor , 521 U.S. 591, 617 (1997) (quoting Mace v. Van Ru Credit Corp. , 109 F.3d 388, 344 (7th Cir. 1997)). "A class action solves this problem by aggregating the relatively paltry potential recoveries into something worth someone's (usually an attorney's) labor." Amchem Prods., Inc. , 521 U.S. at 617 (quoting Mace , 109 F.3d at 344). In other words, a class action ensures that a defendant who engages in widespread harm -- but does so minimally against each individual plaintiff -- must compensate those individuals for their injuries.
Third, in "limited fund" cases, a class action ensures that all plaintiffs receive relief and that early-filing plaintiffs do not raid the fund ( i.e. , the defendant) of all its assets before other plaintiffs may be compensated. See Ortiz v. Fibreboard Corp. , 527 U.S. 815 (1999). A class action in such a situation centralizes all claims into one venue where a court can equitably divide the assets amongst all the plaintiffs if they win the case.
Finally, a class action avoids the situation where different court rulings could create "incompatible standards" of conduct for the defendant to follow. For example, a court might certify a case for class treatment where a number of individual bond-holders sue to determine whether they may convert their bonds to common stock . Refusing to litigate the case in one trial could result in different outcomes and inconsistent standards of conduct for the defendant corporation. Thus, courts will generally allow a class action in such a situation. See, e.g., Van Gemert v. Boeing Co. , 259 F. Supp. 125 (S.D.N.Y. 1966).
Whether a class action is superior to individual litigation depends on the case. The Advisory Committee Note to Rule 23, for example, states that mass torts are ordinarily "not appropriate" for class treatment. Class treatment generally does little to improve the efficiency of a mass tort because the claims almost always involve individualized issues of law and fact that will have to be re-tried on an individual basis. See Castano v. Am. Tobacco Co. , 84 F.3d 734 (5th Cir. 1996) (rejecting nationwide class action against tobacco companies). Mass torts also involve high individual damage awards; thus, the absence of class treatment will not impede the ability of individual claimants to seek justice. See id. Other cases, however, may be more conducive to class treatment.
Many jurisdictions (for example: Germany, Austria) do not provide Class Action lawsuits.
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