In law, a class action or a representative action is a form of lawsuit where a large group of people collectively bring a claim to court. This form of collective lawsuit originated in the United States and is still predominantly a U.S. phenomenon, at least the U.S. variant of it. However, in several European countries with civil law (as opposed to the English common law principle, which is used by US courts), changes have in recent years been made that allow consumer organizations to bring claims on behalf of large groups of consumers.
US federal class actions
In the United States federal courts, class actions are governed by Federal Rules of Civil Procedure Rule 23 and 28 U.S.C.A. § 1332 (d).
Class action lawsuits 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 either 1. any member of a class of plaintiffs is a citizen of a State different from any defendant; 2. 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 3. 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 have significant differences. 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 action lawsuits 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 action cases 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 action lawsuits 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 uniform manner. After the complaint is filed, the plaintiff must file a motion to have the class certified. In some cases class certification may require additional discovery in order to determine 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 generally been accepted by most states (through adoption of state civil procedure rules paralleling the federal rules), the class action must have certain definite characteristics: (1) the class must be so large as to make individual suits impractical, (2) there must be legal or factual claims in common (3) the claims or defenses must be typical of the plaintiffs or defendants, and (4) the representative parties must adequately protect the interests of the class. In many cases, the party seeking certification must also show (5) that common issues between the class and the defendants will predominate the proceedings, as opposed to individual fact-specific conflicts between class members and the defendants and (6) that the class action, instead of individual litigation, is a superior vehicle for resolution of the disputes at hand.
State class actions
Since 1938, many states have adopted rules similar to the Fed. R. Civ. P. However, some states like California have homegrown civil procedure codes which less closely mirror the federal rules. As a result, there are entire treatises dedicated to the topic. 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
As Justice Kathryn Werdegar of the Supreme Court of California noted in a 2009 concurring opinion, class actions evolved in the U.S. state courts out of the equitable doctrine of virtual representation, under which "a person who was not a party to an action was deemed to have been virtually represented, and thus bound by the judgment, if his or her interests had received adequate representation by a party." This doctrine was originally developed to enable courts of equity to make a final resolution of all property interests in a deceased person's estate, including contingent interests, even where the court did not have or could not obtain jurisdiction over all the potential holders of the contingent interests.
Federal class actions evolved separately in the federal courts out of gradual revisions of the federal equity rules. The oldest predecessor 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. Within 10 years, the Supreme Court interpreted the rule in such a way so that it could apply to absent parties under certain circumstances. 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 and made the opt-out class action the standard option. This is the most unique and well-known feature of contemporary U.S. class actions, where they generally bind all absent members of the class unless those persons appear before the court and expressly indicate their desire to not be bound by its outcome. Most class actions prior to that point were opt-in class actions, and opt-out was the exception, not the rule.
Advantages and criticisms of class actions
Advantages of class actions
Class action lawsuits may offer a number of advantages because they aggregate a large number of individualized claims into one representational lawsuit.
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 co
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