Class action
Encyclopedia
In law
, a class action, a class suit, or a representative action is a form of lawsuit
in which a large group of people collectively bring a claim to court and/or in which a class of defendants is being sued. Class actions are commonly referred to as "class action suits," however this phrase is redundant as the historical distinction between "actions" at law and "suits" in equity is no longer recognized. This form of collective lawsuit originated in the United States and is still predominantly a U.S. phenomenon. However, in several European countries with civil law
, as opposed to the Anglo-American common law
system, changes have been made in recent years that allow consumer organizations to bring claims on behalf of large groups of consumers.
Rule 23] and 28 U.S.C.A. § 1332 (d).
Class actions may be brought in federal court
if the claim arises under federal law, or if the claim falls under 28 USCA § 1332 (d). Under § 1332 (d) (2) the federal district courts have original jurisdiction over any civil action where the amount in controversy exceeds $5,000,000 and any of
Nationwide plaintiff classes are possible, but such suits must have a commonality of issues across state lines. This may be difficult if the civil law in the various states lack significant commonalities. Large class actions brought in federal court frequently are consolidated for pre-trial purposes through the device of multidistrict litigation
(MDL). It is also possible to bring class actions under state law, and in some cases the court may extend its jurisdiction to all the members of the class, including out of state (or even internationally) as the key element is the jurisdiction that the court has over the defendant.
Typically, federal courts are thought to be more favorable for defendants, and state courts more favorable for plaintiffs. Many class actions are filed initially in state court. The defendant will frequently try to remove
the case to federal court. The Class Action Fairness Act of 2005
increases defendants' ability to remove state cases to federal court by giving federal courts original jurisdiction for all class actions with damages exceeding $5,000,000, exclusive of interest and costs. It should be noted, however, that the Class Action Fairness Act contains carve-outs for, 'inter alia', shareholder class actions covered by the Private Securities Litigation Reform Act
of 1995 and those concerning internal corporate governance issues (the latter typically being brought as shareholder derivative actions in the state courts of Delaware, the state of incorporation of most large corporations).
The procedure for filing a class action is to file suit with one or several named plaintiffs on behalf of a proposed class. The proposed class must consist of a group of individuals or business entities that have suffered a common injury or injuries. Typically these cases result from an action on the part of a business or a particular product defect or policy that applied to all proposed class members in a typical manner. After the complaint is filed, the plaintiff must file a motion to have the class certified. In some cases class certification may require discovery
in order to determine its size and if the proposed class meets the standard for class certification.
Upon the motion to certify the class, the defendants may object to whether the issues are appropriately handled as a class action, to whether the named plaintiffs are sufficiently representative of the class, and to their relationship with the law firm or firms handling the case. 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.
Due process
requires in most cases that notice describing the class action be sent, published, or broadcast to class members. 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, informing them of the details of the proposed settlement.
In federal civil procedure
law, which has also been accepted by approximately 35 states (through adoption of state civil procedure rules similar to the federal rules), the class action must have certain definite characteristics (often referred to by the acronym CANT):
have civil procedure systems which deviate significantly from the federal rules; the California Codes
provide for four separate types of class actions. As a result, there are two separate treatises devoted solely to the complex topic of California class actions. Some states, such as Virginia, do not provide for any class actions, while others, such as New York, limit the types of claims that may be brought as class actions.
As UCLA law professor Stephen Yeazell has pointed out, the most likely reason is that the abysmally poor transportation, communications, and administrative apparatus of medieval times made it impossible for the English sovereign to directly manage the entire country in terms of individuals; it was easier to structure society by imposing obligations upon groups which were enforced by the sporadic use of force. In turn, lawyers and judges who operated the king's system of justice in a society strictly organized into groups would not question the right of a group to sue or be sued because to do so would bring into question the entire group-oriented society in which they operated.
From 1400 to 1700, group litigation gradually switched from being the norm in England to the exception. The development of the concept of the corporation
led to the wealthy supporters of the corporate form becoming suspicious of all unincorporated legal entities, which in turn led to the modern concept of the unincorporated or voluntary association
. The tumultuous history of the Wars of the Roses
and then the Star Chamber
resulted in periods during which the common law courts were frequently paralyzed, and out of the confusion the Court of Chancery
emerged with exclusive jurisdiction over group litigation.
Chancery cases on group litigation after 1700 were a totally incoherent mess, which Yeazell has explained by pointing to the trends towards fragmentation and individualism in English society during that period; the resulting societal pressures ultimately led to the Reform Act 1832
. The problem which confounded Chancery was the shift from representation based on the consent of a group to representation based on a common interest, such as holding shares of a corporation. Group litigation has struggled with the tension between consent and interest ever since.
By 1850, Parliament had enacted several statutes on a case-by-case basis to deal with issues regularly faced by certain types of organizations, like joint-stock companies, and with the impetus for most types of group litigation removed, it went into a steep decline in English jurisprudence from which it never recovered. It was further weakened by the fact that equity pleading in general was falling into disfavor, which culminated in the Judicature Acts
of 1874 and 1875. Group litigation was essentially dead in England after 1850.
Group litigation survived in the United States only thanks to the influence of Supreme Court Associate Justice Joseph Story
, who imported it in a rather mangled form into U.S. law
through summary discussions in his two equity treatises as well as his famous opinion in West v. Randall
(1820). Although Story was highly intelligent and familiar with all the relevant English precedents, he merely summarized them in a confused fashion because he "could not conceive of a modern function or a coherent theory for representative litigation: why?" Like most Americans then and since, Story took individualism for granted; on that basis, he simply could not comprehend a rule that allowed a court to bind someone who had never been a party to litigation purportedly conducted on his behalf.
The oldest predecessor to the class action rule was Equity Rule 48, promulgated in 1833, which allowed for representative suits in situations where there were too many individual parties (which now forms the first requirement for class action litigation, numerosity). However, this rule did not allow such suits to bind similarly situated absent parties, which rendered the rule almost entirely useless and was a direct reflection of Story's inability to understand the old English Chancery precedents. Story's confusion was apparently typical of 19th century American lawyers, as even the legendary Christopher Columbus Langdell
also could not understand the old cases.
Within ten years, the Supreme Court interpreted Rule 48 in such a way so that it could apply to absent parties under certain circumstances, but only by ignoring the plain meaning of the rule. In the early 20th century, Equity Rule 48 was replaced with Equity Rule 38 as part of a major restructuring of the Equity Rules, and when federal courts merged their legal and equitable procedural systems in 1938, Equity Rule 38 became Rule 23 of the Federal Rules of Civil Procedure.
A major revision of the FRCP in 1966 radically transformed Rule 23, made the opt-out class action the standard option, and gave birth to the modern class action. Entire treatises have been written since to summarize the huge mass of law that sprang up from the 1966 revision of Rule 23. Just as medieval group litigation bound all members of the group regardless of whether they all actually appeared in court, the modern class action binds all members of the class, with the exception of those who appear and object.
The Advisory Committee that drafted the new Rule 23 in the mid-1960s was influenced by two major developments. First was the suggestion of Harry Kalven, Jr. and Maurice Rosenfeld in 1941 that class action litigation by individual shareholders on behalf of all shareholders of a company could effectively supplement direct government regulation of securities markets and other similar markets. The second development was the rise of the African-American civil rights movement, environmentalism
, and consumerism
. As expected, the groups behind these movements, as well as many others in the 1960s, 1970s, and 1980s all turned to class actions as a means for achieving their goals. For example, a 1978 environmental law treatise reprinted the entire text of Rule 23 and mentioned "class actions" 14 times in its index.
Of course, businesses targeted by class actions for inflicting massive aggregate harm have sought ways to avoid class actions altogether. In the 1990s, the U.S. Supreme Court issued a number of decisions which strengthened the "federal policy favoring arbitration
". In response, lawyers have added provisions to consumer contracts of adhesion
called "collective action waivers". In 1999 the National Arbitration Forum
began advocating that such contracts should be drafted so as to force consumers to waive the right to a class action completely, and such provisions have become very popular among businesses. As of November 2007, the legal validity of contracts of adhesion with class action waivers is unclear, and courts have rendered mixed and sometimes contradictory opinions.
.
First, aggregation can increase the efficiency of the legal process, and lower the costs of litigation. 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 may overcome "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. For example, thousands of shareholders of a public company may have losses too small to justify separate lawsuits, but a class action can be brought efficiently on behalf of all shareholders. Perhaps even more important than compensation is that class treatment of claims may be the only way to impose the costs of wrongdoing on the wrongdoer, thus deterring future wrongdoing.
Third, class action cases may be brought to purposely change behavior of a class of which the defendant is a member. Landeros v. Flood
was a landmark case used to purposely change the behavior of doctors, and encourage them to report suspected child abuse. Otherwise, they would face the threat of civil action for damages in tort
proximately flowing from the failure to report the suspected injuries. Previously, many physicians had remained reluctant to report cases of apparent child abuse, despite existing law that required it.
Fourth, in "limited fund" cases, a class action ensures that all plaintiff
s receive relief and that early-filing plaintiffs do not raid the fund (i.e., the defendant
) of all its asset
s 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. See Fed. R. Civ. P. 23(b)(1)(A). 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, and is determined by the judge's ruling on a motion for class certification. The Advisory Committee Note to Rule 23, for example, states that mass torts are ordinarily "not appropriate" for class treatment. Class treatment may not improve the efficiency of a mass tort because the claims frequently 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.
The preamble to the Class Action Fairness Act of 2005
, passed by the United States Congress, found:
Law
Law is a system of rules and guidelines which are enforced through social institutions to govern behavior, wherever possible. It shapes politics, economics and society in numerous ways and serves as a social mediator of relations between people. Contract law regulates everything from buying a bus...
, a class action, a class suit, or a representative action is a form of lawsuit
Lawsuit
A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
in which a large group of people collectively bring a claim to court and/or in which a class of defendants is being sued. Class actions are commonly referred to as "class action suits," however this phrase is redundant as the historical distinction between "actions" at law and "suits" in equity is no longer recognized. This form of collective lawsuit originated in the United States and is still predominantly a U.S. phenomenon. However, in several European countries with civil law
Civil law (legal system)
Civil law is a legal system inspired by Roman law and whose primary feature is that laws are codified into collections, as compared to common law systems that gives great precedential weight to common law on the principle that it is unfair to treat similar facts differently on different...
, as opposed to the Anglo-American common law
Common law
Common law is law developed by judges through decisions of courts and similar tribunals rather than through legislative statutes or executive branch action...
system, changes have been made in recent years that allow consumer organizations to bring claims on behalf of large groups of consumers.
U.S. federal class actions
In the United States federal courts, class actions are governed by Federal Rules of Civil ProcedureFederal Rules of Civil Procedure
The Federal Rules of Civil Procedure govern civil procedure in United States district courts. The FRCP are promulgated by the United States Supreme Court pursuant to the Rules Enabling Act, and then the United States Congress has 7 months to veto the rules promulgated or they become part of the...
Rule 23] and 28 U.S.C.A. § 1332 (d).
Class actions may be brought in federal court
United States district court
The United States district courts are the general trial courts of the United States federal court system. Both civil and criminal cases are filed in the district court, which is a court of law, equity, and admiralty. There is a United States bankruptcy court associated with each United States...
if the claim arises under federal law, or if the claim falls under 28 USCA § 1332 (d). Under § 1332 (d) (2) the federal district courts have original jurisdiction over any civil action where the amount in controversy exceeds $5,000,000 and any of
- any member of a class of plaintiffs is a citizen of a State different from any defendant;
- any member of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or
- any member of a class of plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject of a foreign state.
Nationwide plaintiff classes are possible, but such suits must have a commonality of issues across state lines. This may be difficult if the civil law in the various states lack significant commonalities. Large class actions brought in federal court frequently are consolidated for pre-trial purposes through the device of multidistrict litigation
Multidistrict litigation
In the United States, multidistrict litigation refers to a special federal legal procedure designed to speed the process of handling complex cases such as air disaster litigation or complex product liability suits....
(MDL). It is also possible to bring class actions under state law, and in some cases the court may extend its jurisdiction to all the members of the class, including out of state (or even internationally) as the key element is the jurisdiction that the court has over the defendant.
Typically, federal courts are thought to be more favorable for defendants, and state courts more favorable for plaintiffs. Many class actions are filed initially in state court. The defendant will frequently try to remove
Removal jurisdiction
In the United States, removal jurisdiction refers to the right of a defendant to move a lawsuit filed in state court to the federal district court for the federal judicial district in which the state court sits. This is a general exception to the usual American rule giving the plaintiff the right...
the case to federal court. The Class Action Fairness Act of 2005
Class Action Fairness Act of 2005
The U.S. Class Action Fairness Act of 2005, 28 U.S.C. Sections 1332, 1453, and 1711–1715, expanded federal jurisdiction over many large class-action lawsuits and mass actions taken in the United States....
increases defendants' ability to remove state cases to federal court by giving federal courts original jurisdiction for all class actions with damages exceeding $5,000,000, exclusive of interest and costs. It should be noted, however, that the Class Action Fairness Act contains carve-outs for, 'inter alia', shareholder class actions covered by the Private Securities Litigation Reform Act
Private Securities Litigation Reform Act
The United States Private Securities Litigation Reform Act of 1995, Pub. L. 104-67, 109 Stat. 737 implemented several substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation, and...
of 1995 and those concerning internal corporate governance issues (the latter typically being brought as shareholder derivative actions in the state courts of Delaware, the state of incorporation of most large corporations).
The procedure for filing a class action is to file suit with one or several named plaintiffs on behalf of a proposed class. The proposed class must consist of a group of individuals or business entities that have suffered a common injury or injuries. Typically these cases result from an action on the part of a business or a particular product defect or policy that applied to all proposed class members in a typical manner. After the complaint is filed, the plaintiff must file a motion to have the class certified. In some cases class certification may require discovery
Discovery (law)
In U.S.law, discovery is the pre-trial phase in a lawsuit in which each party, through the law of civil procedure, can obtain evidence from the opposing party by means of discovery devices including requests for answers to interrogatories, requests for production of documents, requests for...
in order to determine its size and if the proposed class meets the standard for class certification.
Upon the motion to certify the class, the defendants may object to whether the issues are appropriately handled as a class action, to whether the named plaintiffs are sufficiently representative of the class, and to their relationship with the law firm or firms handling the case. 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.
Due process
Due process
Due process is the legal code that the state must venerate all of the legal rights that are owed to a person under the principle. Due process balances the power of the state law of the land and thus protects individual persons from it...
requires in most cases that notice describing the class action be sent, published, or broadcast to class members. 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, informing them of the details of the proposed settlement.
In federal civil procedure
Civil procedure
Civil procedure is the body of law that sets out the rules and standards that courts follow when adjudicating civil lawsuits...
law, which has also been accepted by approximately 35 states (through adoption of state civil procedure rules similar to the federal rules), the class action must have certain definite characteristics (often referred to by the acronym CANT):
- Commonality -- there must be one or more legal or factual claims common to the entire class (in some cases, it must be shown that the common issues will predominate the proceedings over individual issues, such as the amount of damages due to a particular class member),
- Adequacy -- the representative parties must adequately protect the interests of the class,
- Numerosity -- the class must be so large as to make individual suits impractical (in other words, that the class action is a superior vehicle for resolution than numerous individual suits), and
- Typicality -- the claims or defenses must be typical of the plaintiffs or defendants.
State class actions
Since 1938, many states have adopted rules similar to the FRCP. However, some states like CaliforniaCalifornia
California is a state located on the West Coast of the United States. It is by far the most populous U.S. state, and the third-largest by land area...
have civil procedure systems which deviate significantly from the federal rules; the California Codes
California Codes
The California Codes are 29 legal codes enacted by the California State Legislature, which together form the general statutory law of the state of California. Due to tradition and inertia, they have never been consolidated into a single unified code, unlike the United States Code or codifications...
provide for four separate types of class actions. As a result, there are two separate treatises devoted solely to the complex topic of California class actions. Some states, such as Virginia, do not provide for any class actions, while others, such as New York, limit the types of claims that may be brought as class actions.
History
The ancestor of the class action was what modern observers call "group litigation," which appears to have been quite common in medieval England from about 1200 onward. These lawsuits involved groups of people either suing or being sued in actions at common law. These groups were usually based on existing societal structures like villages, towns, parishes, and guilds. What is striking about these early cases is that unlike modern courts, the medieval English courts never questioned the right of the actual plaintiffs to sue on behalf of a group or a few representatives to defend an entire group.As UCLA law professor Stephen Yeazell has pointed out, the most likely reason is that the abysmally poor transportation, communications, and administrative apparatus of medieval times made it impossible for the English sovereign to directly manage the entire country in terms of individuals; it was easier to structure society by imposing obligations upon groups which were enforced by the sporadic use of force. In turn, lawyers and judges who operated the king's system of justice in a society strictly organized into groups would not question the right of a group to sue or be sued because to do so would bring into question the entire group-oriented society in which they operated.
From 1400 to 1700, group litigation gradually switched from being the norm in England to the exception. The development of the concept of the corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
led to the wealthy supporters of the corporate form becoming suspicious of all unincorporated legal entities, which in turn led to the modern concept of the unincorporated or voluntary association
Voluntary association
A voluntary association or union is a group of individuals who enter into an agreement as volunteers to form a body to accomplish a purpose.Strictly speaking, in many jurisdictions no formalities are necessary to start an association...
. The tumultuous history of the Wars of the Roses
Wars of the Roses
The Wars of the Roses were a series of dynastic civil wars for the throne of England fought between supporters of two rival branches of the royal House of Plantagenet: the houses of Lancaster and York...
and then the Star Chamber
Star Chamber
The Star Chamber was an English court of law that sat at the royal Palace of Westminster until 1641. It was made up of Privy Counsellors, as well as common-law judges and supplemented the activities of the common-law and equity courts in both civil and criminal matters...
resulted in periods during which the common law courts were frequently paralyzed, and out of the confusion the Court of Chancery
Court of Chancery
The Court of Chancery was a court of equity in England and Wales that followed a set of loose rules to avoid the slow pace of change and possible harshness of the common law. The Chancery had jurisdiction over all matters of equity, including trusts, land law, the administration of the estates of...
emerged with exclusive jurisdiction over group litigation.
Chancery cases on group litigation after 1700 were a totally incoherent mess, which Yeazell has explained by pointing to the trends towards fragmentation and individualism in English society during that period; the resulting societal pressures ultimately led to the Reform Act 1832
Reform Act 1832
The Representation of the People Act 1832 was an Act of Parliament that introduced wide-ranging changes to the electoral system of England and Wales...
. The problem which confounded Chancery was the shift from representation based on the consent of a group to representation based on a common interest, such as holding shares of a corporation. Group litigation has struggled with the tension between consent and interest ever since.
By 1850, Parliament had enacted several statutes on a case-by-case basis to deal with issues regularly faced by certain types of organizations, like joint-stock companies, and with the impetus for most types of group litigation removed, it went into a steep decline in English jurisprudence from which it never recovered. It was further weakened by the fact that equity pleading in general was falling into disfavor, which culminated in the Judicature Acts
Judicature Acts
The Judicature Acts are a series of Acts of Parliament, beginning in the 1870s, which aimed to fuse the hitherto split system of courts in England and Wales. The first two Acts were the Supreme Court of Judicature Act 1873 and the Supreme Court of Judicature Act 1875 The Judicature Acts are a...
of 1874 and 1875. Group litigation was essentially dead in England after 1850.
Group litigation survived in the United States only thanks to the influence of Supreme Court Associate Justice Joseph Story
Joseph Story
Joseph Story was an American lawyer and jurist who served on the Supreme Court of the United States from 1811 to 1845. He is most remembered today for his opinions in Martin v. Hunter's Lessee and The Amistad, along with his magisterial Commentaries on the Constitution of the United States, first...
, who imported it in a rather mangled form into U.S. law
Law of the United States
The law of the United States consists of many levels of codified and uncodified forms of law, of which the most important is the United States Constitution, the foundation of the federal government of the United States...
through summary discussions in his two equity treatises as well as his famous opinion in West v. Randall
West v. Randall
West v. Randall West v. Randall West v. Randall (29 F. Cas. 718 (R.I. 1820) is one of the earliest class action lawsuit related cases in early United States federal case law. The decision was written by Justice Joseph Story while serving on the United States Court of Appeals for the First...
(1820). Although Story was highly intelligent and familiar with all the relevant English precedents, he merely summarized them in a confused fashion because he "could not conceive of a modern function or a coherent theory for representative litigation: why?" Like most Americans then and since, Story took individualism for granted; on that basis, he simply could not comprehend a rule that allowed a court to bind someone who had never been a party to litigation purportedly conducted on his behalf.
The oldest predecessor to the class action rule was Equity Rule 48, promulgated in 1833, which allowed for representative suits in situations where there were too many individual parties (which now forms the first requirement for class action litigation, numerosity). However, this rule did not allow such suits to bind similarly situated absent parties, which rendered the rule almost entirely useless and was a direct reflection of Story's inability to understand the old English Chancery precedents. Story's confusion was apparently typical of 19th century American lawyers, as even the legendary Christopher Columbus Langdell
Christopher Columbus Langdell
Christopher Columbus Langdell , American jurist, was born in the town of New Boston, New Hampshire, of English and Scots-Irish ancestry....
also could not understand the old cases.
Within ten years, the Supreme Court interpreted Rule 48 in such a way so that it could apply to absent parties under certain circumstances, but only by ignoring the plain meaning of the rule. In the early 20th century, Equity Rule 48 was replaced with Equity Rule 38 as part of a major restructuring of the Equity Rules, and when federal courts merged their legal and equitable procedural systems in 1938, Equity Rule 38 became Rule 23 of the Federal Rules of Civil Procedure.
A major revision of the FRCP in 1966 radically transformed Rule 23, made the opt-out class action the standard option, and gave birth to the modern class action. Entire treatises have been written since to summarize the huge mass of law that sprang up from the 1966 revision of Rule 23. Just as medieval group litigation bound all members of the group regardless of whether they all actually appeared in court, the modern class action binds all members of the class, with the exception of those who appear and object.
The Advisory Committee that drafted the new Rule 23 in the mid-1960s was influenced by two major developments. First was the suggestion of Harry Kalven, Jr. and Maurice Rosenfeld in 1941 that class action litigation by individual shareholders on behalf of all shareholders of a company could effectively supplement direct government regulation of securities markets and other similar markets. The second development was the rise of the African-American civil rights movement, environmentalism
Environmentalism
Environmentalism is a broad philosophy, ideology and social movement regarding concerns for environmental conservation and improvement of the health of the environment, particularly as the measure for this health seeks to incorporate the concerns of non-human elements...
, and consumerism
Consumerism
Consumerism is a social and economic order that is based on the systematic creation and fostering of a desire to purchase goods and services in ever greater amounts. The term is often associated with criticisms of consumption starting with Thorstein Veblen...
. As expected, the groups behind these movements, as well as many others in the 1960s, 1970s, and 1980s all turned to class actions as a means for achieving their goals. For example, a 1978 environmental law treatise reprinted the entire text of Rule 23 and mentioned "class actions" 14 times in its index.
Of course, businesses targeted by class actions for inflicting massive aggregate harm have sought ways to avoid class actions altogether. In the 1990s, the U.S. Supreme Court issued a number of decisions which strengthened the "federal policy favoring arbitration
Arbitration
Arbitration, a form of alternative dispute resolution , is a legal technique for the resolution of disputes outside the courts, where the parties to a dispute refer it to one or more persons , by whose decision they agree to be bound...
". In response, lawyers have added provisions to consumer contracts of adhesion
Standard form contract
A standard form contract is a contract between two parties where the terms and conditions of the contract are set by one of the parties, and the other party is placed in a "take it or leave it" position with little or no ability to negotiate terms more favorable to it.Examples of standard form...
called "collective action waivers". In 1999 the National Arbitration Forum
National Arbitration Forum
The National Arbitration Forum , founded in 1986, provides arbitration and mediation services to businesses, based at its Minneapolis, Minnesota headquarters and offices in New Jersey. The company is one of the United States's largest and most controversial dispute resolution companies...
began advocating that such contracts should be drafted so as to force consumers to waive the right to a class action completely, and such provisions have become very popular among businesses. As of November 2007, the legal validity of contracts of adhesion with class action waivers is unclear, and courts have rendered mixed and sometimes contradictory opinions.
Advantages
Class actions may offer a number of advantages because they aggregate a large number of individualized claims into one representational lawsuitLawsuit
A lawsuit or "suit in law" is a civil action brought in a court of law in which a plaintiff, a party who claims to have incurred loss as a result of a defendant's actions, demands a legal or equitable remedy. The defendant is required to respond to the plaintiff's complaint...
.
First, aggregation can increase the efficiency of the legal process, and lower the costs of litigation. 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
Trial (law)
In law, a trial is when parties to a dispute come together to present information in a tribunal, a formal setting with the authority to adjudicate claims or disputes. One form of tribunal is a court...
to trial." Jenkins v. Raymark Indus. Inc., 782 F.2d 468, 473 (5th Cir. 1986) (granting certification of a class action involving asbestos
Asbestos
Asbestos is a set of six naturally occurring silicate minerals used commercially for their desirable physical properties. They all have in common their eponymous, asbestiform habit: long, thin fibrous crystals...
).
Second, a class action may overcome "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
Defendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...
who engages in widespread harm but does so minimally against each individual plaintiff
Plaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...
must compensate those individuals for their injuries. For example, thousands of shareholders of a public company may have losses too small to justify separate lawsuits, but a class action can be brought efficiently on behalf of all shareholders. Perhaps even more important than compensation is that class treatment of claims may be the only way to impose the costs of wrongdoing on the wrongdoer, thus deterring future wrongdoing.
Third, class action cases may be brought to purposely change behavior of a class of which the defendant is a member. Landeros v. Flood
Landeros v. Flood
Gita Landeros, a minor, was seen in the emergency room by Dr. Flood for injuries inflicted by her mother and the mother's common law husband. Dr. Flood failed to diagnose "child abuse syndrome" and also did not report the injuries to proper civil authorities in violation of California law...
was a landmark case used to purposely change the behavior of doctors, and encourage them to report suspected child abuse. Otherwise, they would face the threat of civil action for damages in tort
Tort
A tort, in common law jurisdictions, is a wrong that involves a breach of a civil duty owed to someone else. It is differentiated from a crime, which involves a breach of a duty owed to society in general...
proximately flowing from the failure to report the suspected injuries. Previously, many physicians had remained reluctant to report cases of apparent child abuse, despite existing law that required it.
Fourth, in "limited fund" cases, a class action ensures that all plaintiff
Plaintiff
A plaintiff , also known as a claimant or complainant, is the term used in some jurisdictions for the party who initiates a lawsuit before a court...
s receive relief and that early-filing plaintiffs do not raid the fund (i.e., the defendant
Defendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...
) of all its asset
Asset
In financial accounting, assets are economic resources. Anything tangible or intangible that is capable of being owned or controlled to produce value and that is held to have positive economic value is considered an asset...
s 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
Venue (law)
Venue is the location where a case is heard. In the United States, the venue is either a county or a district or division . Venue deals with locality of a lawsuit--that is, in which locale a lawsuit may be filed or commenced...
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. See Fed. R. Civ. P. 23(b)(1)(A). 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
Bond (finance)
In finance, a bond is a debt security, in which the authorized issuer owes the holders a debt and, depending on the terms of the bond, is obliged to pay interest to use and/or to repay the principal at a later date, termed maturity...
to common stock
Common stock
Common stock is a form of corporate equity ownership, a type of security. It is called "common" to distinguish it from preferred stock. In the event of bankruptcy, common stock investors receive their funds after preferred stock holders, bondholders, creditors, etc...
. Refusing to litigate the case in one trial
Trial (law)
In law, a trial is when parties to a dispute come together to present information in a tribunal, a formal setting with the authority to adjudicate claims or disputes. One form of tribunal is a court...
could result in different outcomes and inconsistent standards of conduct for the defendant
Defendant
A defendant or defender is any party who is required to answer the complaint of a plaintiff or pursuer in a civil lawsuit before a court, or any party who has been formally charged or accused of violating a criminal statute...
corporation
Corporation
A corporation is created under the laws of a state as a separate legal entity that has privileges and liabilities that are distinct from those of its members. There are many different forms of corporations, most of which are used to conduct business. Early corporations were established by charter...
. 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, and is determined by the judge's ruling on a motion for class certification. The Advisory Committee Note to Rule 23, for example, states that mass torts are ordinarily "not appropriate" for class treatment. Class treatment may not improve the efficiency of a mass tort because the claims frequently 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.
The preamble to the Class Action Fairness Act of 2005
Class Action Fairness Act of 2005
The U.S. Class Action Fairness Act of 2005, 28 U.S.C. Sections 1332, 1453, and 1711–1715, expanded federal jurisdiction over many large class-action lawsuits and mass actions taken in the United States....
, passed by the United States Congress, found:
Class-action lawsuits are an important and valuable part of the legal system when they permit the fair and efficient resolution of legitimate claims of numerous parties by allowing the claims to be aggregated into a single action against a defendant that has allegedly caused harm.