Class Action Litigation
By Aaron Larson
March, 2005
Contents
There has been a lot of media attention lately on the subject of "class action lawsuits", and "class action reform". Unfortunately little of that coverage provides a good background as to the nature of class action litigation, why it exists, and the important role it can play in our legal system.
The principal benefit of a class action lawsuit is that it enables a court to aggregate the small claims of large numbers of plaintiffs into a single lawsuit, such that claims which might be too costly to otherwise litigate can be redressed. For example, imagine a corporation that defrauds one million of its customers of one dollar. The corporation profits through its misconduct in the amount of $1,000,000.00, but its customers have no meaningful remedy to recover their money. It would be too costly in terms of both time and money to litigate the claims individually. The class action permits the claims to be brought in a single lawsuit, with the goal of avoiding the waste, duplication of effort, and financial cost of individual actions.
What Is a Class Action
A class action lawsuit occurs when a group of similarly situated people have suffered injury arising from a common set of laws, facts and circumstances. One or more people within that group will be identified as plaintiffs representing the class, and at in the early stages of litigation the trial court will be asked to "certify" the class. (Typically, the lawyers for the plaintiff will file and serve a complaint and petition to proceed as a class action, and the defense will reply to those pleadings. Following a period of discovery, the trial court will be asked to rule on the issue of certification, with the defense arguing that the lawsuit should not proceed as a class action, and perhaps also asking that the trial court narrow the legal issues for a class action, narrow the class, or dismiss the lawsuit.) The plaintiff who is named as representing the class is referenced as the "lead plaintiff".
In the certification, based upon the governing law and court rules, the trial court evaluates the case to determine whether the legal and factual claims made by the named plaintiffs justify their being recognized as a class. If the judge finds that the proposed class involves too many divergent legal claims, or that the injuries suffered by the proposed class are too divergent, the judge may deny certification or grant a narrower certification than was requested. On rare occasions, a class action suit might involve a plaintiff who seeks to have a group of defendants certified as a class.
Class action litigation tends to be procedurally complex, and there can be significant cost in notifying a large or national class of the pendency of the class action litigation. As a result, there are relatively few firms which specialize in class action work.
The Class Action Judgment
The judgment in a class action is binding upon both the named plaintiffs, and upon the members of the class they represent. The lawyers in a class action are typically paid out of the recovery. As with most civil litigation, assuming that the class is certified, class action lawsuits typically settle. In the event of settlement, the judge presiding over the class action lawsuit must approve the amount of compensation to be awarded to class members, and the attorney fee to be paid to the attorneys for the class.
Sometimes a class action won't seek money damages, but will instead seek injunctive relief. For example, a civil rights lawsuit could be brought as a class action, demanding that the government cease certain conduct which the class contends is discriminatory or otherwise unlawful. A class action might also seek a declaratory judgment, meaning that the class asks the court to make a ruling on a point of law in favor of the plaintiff class which will be binding upon the defendants, but without ordering any further remedy or relief. It is possible for a class action to demand more than one remedy, for example seeking both money damages and injunctive relief.
Members of a class action are typically given the opportunity to file objections to a proposed settlement with the trial court presiding over the class action lawsuit. Practically speaking, few class members file objections and they rarely affect the terms of the settlement.
Opting Out of a Class Action
In a typical class action, you are not invited to join the class action lawsuit. Instead you are made part of the class by the trial court, and then are provided with a notice of the lawsuit and given the opportunity to "opt out". Should you choose not to opt out, the judgment will ordinarily be binding upon you. Notice is often provided in the form of a mass mailing, detailing the class action and the steps a class member must take to opt out of the action. Many people discard these notices without reading them, or mistake them for junk mail.
In some class action lawsuits involving more significant injuries, law firms will advertise to try to encourage class members to contact them to have their situations reviewed for possible individual actions. As a class action, as much as possible, will treat class members equally, it may be possible for a plaintiff who has suffered injuries more severe than a typical class member to obtain a larger verdict or settlement by bringing his or her own separate lawsuit. (Some class action verdicts or settlements provide a formula for the distribution of funds, such that more severely injured members of the class receive larger awards, but even under such circumstances it remains possible that a severely injured person would do better through an individual lawsuit.)
It is generally a good idea to consult with a personal injury lawyer about your situation before deciding to opt out of a class action lawsuit.