I would guess that most of you reading this believe that you have never been involved in a lawsuit. I would also guess that many of you would likely be wrong because you may well have been a plaintiff in a “class action.”
A class action is a lawsuit brought by one or more people on behalf of a larger number of people who share the same complaint. Under modern rules, the people not actually named in the lawsuit do not have to give permission to be part of the suit, but they must be notified of the suit and be given the opportunity to “opt out.” If they do so, they can bring an individual lawsuit on their own, but they do not get the benefit of any settlement or judgment obtained by the class action plaintiffs.
For the history of class actions, we can thank attorney Chuck Douglas, who in his long career has been a Supreme Court Justice, a United States Congressman, and always, a passionate and erudite defender of the rights of consumers, employees, and taxpayers. In Royer v. State Department of Employment Security (1978), he wrote a separate opinion explaining why the claims of people whose unemployment benefits had been stopped without a hearing should have been allowed to go forward as a class action.
He wrote, “In the United States … a court of equity permits a portion of the parties in interest to represent the entire body, and the decree binds all of them the same as if all were before the court.”
NEW BOSTON LEGAL In 1982, the Supreme Court adopted Justice Douglas’ reasoning and allowed state retirement system members to bring a class action on behalf of all the members. Since then, the state courts adopted rules, essentially the same as the rules in federal courts, laying out the requirements for bringing a class action lawsuit. The essential requirements are:
- The class is so numerous that joinder of all members… is impracticable;
- There are questions of law or fact common to the class;
- The representative parties will fairly and adequately protect the interests of the class;
- A class action is superior to other available methods for the fair and efficient adjudication of the controversy; and
- The attorney representative … will adequately represent the interests of the class.
Once the court decides that a case can be brought as a class action, and approves the attorney representing the class, it orders the lawyers to notify all the potential class members. One important requirement is that any settlement be approved by the court, which also must approve the amount allocated for attorneys’ fees: A class action settlement must be “fair, reasonable, and adequate.”
Since these rules were put into place, class actions have become a common way of addressing illegal and unfair corporate actions that impose small costs on individuals but add up to large rewards for the companies involved. Class actions have also been used to pursue larger claims, such as those against asbestos, tobacco, and drug manufacturers. But because the circumstances of the individuals making those claims are so different, it is often difficult to meet the requirements of class certification. An alternative solution has become multidistrict litigation in federal court. When it becomes apparent that there will be many claims based on the same conduct, for example, a defectively manufactured product, a procedure is implemented to assign all cases based on that conduct to one court, to be managed by a single judge. Unlike class actions, each case is individual, but orders concerning discovery and pretrial preparation apply to all the cases, and no cases can go to trial until the managing judge allows it.
Class action lawsuits are not popular with the business world. In 2005, Congress was persuaded to pass the “Class Action Fairness Act” (a name which some might argue is misleading). The act forces some class actions to be brought in federal court instead of state court, where the procedures and judges are generally thought to be less favorable to plaintiffs and requires judges to carefully review settlements and attorneys’ fee awards. This targets what many believe to be the most distasteful aspect of class action suits, that in typical settlements, the lawyers are paid far more than the individual class members, raising a concern that there is an incentive for them to bring lawsuits that do not truly benefit consumers. Yet, these settlements are also a powerful incentive for corporations to avoid treating consumers unfairly.
Another way businesses try to avoid class actions is through mandatory arbitration. This is achieved through agreements that require consumers, employees, and patients to agree that any legal disputes must be resolved through arbitration, not in court, and that a class action will not be allowed. These are viewed by many as particularly unfair, because they require those involved to give away rights before they even know they have them.
Regardless of your political beliefs, I hope you agree that class actions remain a way for the Davids of the world to effectively confront the Goliaths.
