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In law, a class action or a representative action is a procedural device used in litigation to determine the rights of and remedies, if any, for large numbers of people whose cases involve common questions of law and/or fact.

Class actions in individual jurisdictions Austria The Austrian Code of Civil Procedure (Zivilprozessordnung – ZPO) does not provide for a special proceeding for complex class action litigation. However, Austrian consumer organizations (Verein für Konsumenteninformation/VKI and the Federal Chamber of Labour/Bundesarbeitskammer) have, in recent years, brought claims on behalf of hundreds or even thousands of consumers. This technique, soon labelled as “class action Austrian style”, allows for a significant reduction of overall costs. The Austrian Supreme Court, in a recent judgment, has confirmed the legal admissibility of these lawsuits under the condition that all claims are essentially based on the same grounds.

The Austrian Parliament has unanimously requested the Austrian Federal Minister for Justice to examine the possibility of new legislation providing for a cost-effective and appropriate way to deal with mass claims. Together with the Austrian Ministry for Social Security, Generations and Consumer Protection, the Justice Ministry opened the discussion with a conference held in Vienna in June, 2005. With the aid of a group of experts from many fields, the Justice Ministry began drafting the new law in September, 2005. With the individual positions varying greatly, the process is still pending. (.pdf file)

France Under French law, an association can represent the collective interests of consumers; however, each claimant must be individually named in the lawsuit. On January 4, 2005, President Chirac urged changes that would provide greater consumer protection. A draft bill was proposed in April 2006. Under the proposals the court will be able to decide whether to allow an action brought by an association on behalf of consumers (which must comprise at least two individuals) for goods purchased under a standard contract. After such an action is brought, the association would be entitled to identify additional consumers for a one-month period. The court would determine the damages that must be awarded to the consumers who have opted-in to the proceedings, with damages limited to 2000 Euros; contingent fees for attorneys would be barred. The president of the French Supreme Court recently declared that "class actions are inescapable." Nevertheless, the bill was withdrawn in January 2007 at the request of Minister of Health Xavier Bertrand.

Germany On November 1, 2005, Germany enacted the “Act on Model Case Proceedings in Disputes under Capital Markets Law (Capital Markets Model Case Act)” allowing sample proceedings to be brought before the courts in litigation arising from mass capital markets transactions. It does not apply to any other civil law proceeding. It is not like class actions in the United States -- it only applies to parties who have already filed suit and does not allow a claim to be brought in the name of an unknown group of claimants. The effects of the new law will be monitored over the next five years. It contains a ‘sunset clause’, and it will automatically cease to have effect on November 1, 2010, unless the legislature decides to prolong the law, or extend it to other mass civil case proceedings. “Capital Markets Model Case Act” Der Bund Retrieved July 16, 2006

Italy Italy has no class action legislation. However, consumer associations can file claims on behalf of groups of consumers to obtain judicial orders against corporations that cause injury or damage to consumers. These types of claims are increasing and Italian courts have recently allowed them against banks that continue to apply compound interest on retail clients’ current account overdrafts. The introduction of class actions is on the new government’s agenda. In 2004, the Italian parliament considered the introduction of a type of class action lawsuit, specifically in the area of consumers’ law. To date, no such law has been enacted, however scholars demonstrated that class actions (azioni rappresentative) do not contrast with Italian principles of civil procedure P., L’importabilità delle class actions in Italia, in Contratto e Impresa 1/2004 FAVA P., Class actions all’italiana:“Paese che vai, usanza che trovi” (l’esperienza dei principali ordinamenti giuridici stranieri e le proposte A.A.C.C. n. 3838 e n. 3839), in Corr. Giur. 3/2004; FAVA P., Class actions tra efficientismo processuale, aumento di competitività e risparmio di spesa: l’esame di un contenzioso seriale concreto (le S.U. sul rapporto tra indennità di amministrazione e tredicesima), in Corr. Giur. 2006, 535; FAVA P., Indennità di amministrazione e tredicesima: il “no secco” delle Sezioni Unite. Un caso pratico per valutare le potenzialità delle azioni rappresentative (class actions) nel contenzioso seriale italiano, Rass. Avv. Stato 2005.

The Netherlands Dutch law allows collective actions brought by associations on behalf of injured parties seeking a judicialdeclaration that the company is liable for the damage it has caused.

Spain Spanish law allows nominated consumer associations to take action to protect the interests of consumers. A number of groups already have the power to bring collective or class actions: certain consumer associations, bodies legally constituted to defend the ‘collective interest’ and groups of injured parties.

Recent changes to Spanish civil procedure rules include the introduction of a quasi-class action right for certain consumer associations to claim damages on behalf of unidentified classes of consumers. The rules require consumer associations torepresent an adequate number of affected parties who have suffered the same harm. Also any judgment made by the Spanish court will list the individual beneficiaries or, if that is not possible, conditions that need to be fulfilled for a party to benefit from a judgment.

Switzerland Swiss law does not provide for any form of class action. When the Swiss Federal Council proposed a new Swiss Code of Civil Procedure in 2006, replacing the cantonal codes of civil procedure, it rejected the introduction of class actions, arguing that:

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 United States district court if the claim arises under federal law, or if all named representative members of the potential plaintiff class are from a different state than the defendant. 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 (private 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 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, 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 removal jurisdiction the case to federal court. The Class Action Fairness Act of 2005 increases defendants' ability to remove state cases to federal court. It should be noted, however, that the Class Action Fairness Act contains carve-outs for, inter alia, shareholder class action lawsuits covered by the PSLRA 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). William B. Rubenstein, "Understanding the Class Action Fairness Act of 2005" (briefing paper)

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 (law) 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 FRCP. 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.

Pros and cons 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, wikt:exhibit and issues from trial (law) 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, 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 (law) 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 Bond (finance) to common stock. Refusing to litigate the case in one trial (law) 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: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.

Criticisms of class actions There are several criticisms of class action lawsuits. The preamble to the Class Action Fairness Act stated that some abusive class actions harmed class members with legitimate claims and defendants that have acted responsibly; adversely affected interstate commerce; and undermined public respect for the country's judicial system.

Class members often receive little or no benefit from class actions. Examples cited for this include large fees for the attorneys, while leaving class members with coupons or other awards of little or no value; unjustified awards are made to certain plaintiffs at the expense of other class members; and confusing notices are published that prevent class members from being able to fully understand and effectively exercise their rights.

For example, in the United States, class lawsuits sometimes bind all class members with a low settlement (law). These "coupon settlements" (which usually allow the plaintiffs to receive minimal benefit such as a small check or a coupon for future services or products with the defendant company) are a way for a defendant to forestall major liability by precluding a large number of people from litigating their claims separately, to recover reasonable compensation for the damages. However, existing law requires judicial approval of all class action settlements, and in most cases class members are given a chance to opt out of class settlement, though class members, despite opt-out notices, may be unaware of their right to opt-out because they did not receive the notice, did not read it, or did not understand it.

The Class Action Fairness Act of 2005 addresses these concerns. Coupon Settlements may be scrutinized by an indepentent expert before judicial approval, in order to assure that the settlement will be of value to the class members. 28 U.S.C.A. 1712(d). Further, if the action provides for settlement in coupons, the attorney must take a corresponding part of his fee in coupons. 28 U.S.C.A. 1712(a).

Defendant class action Although normally plaintiffs are the class, defendant class actions are also possible. For example, in 2005, the Archidiocese of Portland, Oregon was sued as part of the Catholic priest sex-abuse scandal. All parishioners of the Archdiocese's churches were cited as a defendant class. This was done to include their assets (local churches) in any settlement. Where both the plaintiffs and the defendants have been organized into court-approved classes, the action is called a bilateral class action.

Class actions vs. mass actions In a class action, the plaintiff seeks court approval to litigate on behalf of a group of similarly-situated persons. Not every plaintiff looks for, or could obtain, such approval. As a procedural alternative, plaintiff's counsel may attempt to sign up every similarly-situated person that counsel can find as a client. Plaintiff's counsel can then join the claims of all of these persons in one complaint, a so-called "mass action," hoping to have the same efficiencies and economic leverage as if a class had been certified.

Because mass actions operate outside the detailed procedures laid out for class actions, they can pose special difficulties for both plaintiffs, defendants, and the court. For example, settlement of class actions follows a predictable path of negotiation with class counsel and representatives, court scrutiny, and notice. There may not be a way to uniformly settle all of the many claims brought via a mass action. Some states permit plaintiff's counsel to settle for all the mass action plaintiffs according to a majority vote, for example. Other states, such as New Jersey, require each plaintiff to approve the settlement of that plaintiff's own individual claims.

See also

External links U.S. law

Criticism of U.S. class action law

Defense of U.S. class action law

Proposals to expand European class action law

Notes



In law, a class action or a representative action is a procedural device used in litigation to determine the rights of and remedies, if any, for large numbers of people whose cases involve common questions of law and/or fact.

Class actions in individual jurisdictions Austria The Austrian Code of Civil Procedure (Zivilprozessordnung – ZPO) does not provide for a special proceeding for complex class action litigation. However, Austrian consumer organizations (Verein für Konsumenteninformation/VKI and the Federal Chamber of Labour/Bundesarbeitskammer) have, in recent years, brought claims on behalf of hundreds or even thousands of consumers. This technique, soon labelled as “class action Austrian style”, allows for a significant reduction of overall costs. The Austrian Supreme Court, in a recent judgment, has confirmed the legal admissibility of these lawsuits under the condition that all claims are essentially based on the same grounds.

The Austrian Parliament has unanimously requested the Austrian Federal Minister for Justice to examine the possibility of new legislation providing for a cost-effective and appropriate way to deal with mass claims. Together with the Austrian Ministry for Social Security, Generations and Consumer Protection, the Justice Ministry opened the discussion with a conference held in Vienna in June, 2005. With the aid of a group of experts from many fields, the Justice Ministry began drafting the new law in September, 2005. With the individual positions varying greatly, the process is still pending. (.pdf file)

France Under French law, an association can represent the collective interests of consumers; however, each claimant must be individually named in the lawsuit. On January 4, 2005, President Chirac urged changes that would provide greater consumer protection. A draft bill was proposed in April 2006. Under the proposals the court will be able to decide whether to allow an action brought by an association on behalf of consumers (which must comprise at least two individuals) for goods purchased under a standard contract. After such an action is brought, the association would be entitled to identify additional consumers for a one-month period. The court would determine the damages that must be awarded to the consumers who have opted-in to the proceedings, with damages limited to 2000 Euros; contingent fees for attorneys would be barred. The president of the French Supreme Court recently declared that "class actions are inescapable." Nevertheless, the bill was withdrawn in January 2007 at the request of Minister of Health Xavier Bertrand.

Germany On November 1, 2005, Germany enacted the “Act on Model Case Proceedings in Disputes under Capital Markets Law (Capital Markets Model Case Act)” allowing sample proceedings to be brought before the courts in litigation arising from mass capital markets transactions. It does not apply to any other civil law proceeding. It is not like class actions in the United States -- it only applies to parties who have already filed suit and does not allow a claim to be brought in the name of an unknown group of claimants. The effects of the new law will be monitored over the next five years. It contains a ‘sunset clause’, and it will automatically cease to have effect on November 1, 2010, unless the legislature decides to prolong the law, or extend it to other mass civil case proceedings. “Capital Markets Model Case Act” Der Bund Retrieved July 16, 2006

Italy Italy has no class action legislation. However, consumer associations can file claims on behalf of groups of consumers to obtain judicial orders against corporations that cause injury or damage to consumers. These types of claims are increasing and Italian courts have recently allowed them against banks that continue to apply compound interest on retail clients’ current account overdrafts. The introduction of class actions is on the new government’s agenda. In 2004, the Italian parliament considered the introduction of a type of class action lawsuit, specifically in the area of consumers’ law. To date, no such law has been enacted, however scholars demonstrated that class actions (azioni rappresentative) do not contrast with Italian principles of civil procedure P., L’importabilità delle class actions in Italia, in Contratto e Impresa 1/2004 FAVA P., Class actions all’italiana:“Paese che vai, usanza che trovi” (l’esperienza dei principali ordinamenti giuridici stranieri e le proposte A.A.C.C. n. 3838 e n. 3839), in Corr. Giur. 3/2004; FAVA P., Class actions tra efficientismo processuale, aumento di competitività e risparmio di spesa: l’esame di un contenzioso seriale concreto (le S.U. sul rapporto tra indennità di amministrazione e tredicesima), in Corr. Giur. 2006, 535; FAVA P., Indennità di amministrazione e tredicesima: il “no secco” delle Sezioni Unite. Un caso pratico per valutare le potenzialità delle azioni rappresentative (class actions) nel contenzioso seriale italiano, Rass. Avv. Stato 2005.

The Netherlands Dutch law allows collective actions brought by associations on behalf of injured parties seeking a judicialdeclaration that the company is liable for the damage it has caused.

Spain Spanish law allows nominated consumer associations to take action to protect the interests of consumers. A number of groups already have the power to bring collective or class actions: certain consumer associations, bodies legally constituted to defend the ‘collective interest’ and groups of injured parties.

Recent changes to Spanish civil procedure rules include the introduction of a quasi-class action right for certain consumer associations to claim damages on behalf of unidentified classes of consumers. The rules require consumer associations torepresent an adequate number of affected parties who have suffered the same harm. Also any judgment made by the Spanish court will list the individual beneficiaries or, if that is not possible, conditions that need to be fulfilled for a party to benefit from a judgment.

Switzerland Swiss law does not provide for any form of class action. When the Swiss Federal Council proposed a new Swiss Code of Civil Procedure in 2006, replacing the cantonal codes of civil procedure, it rejected the introduction of class actions, arguing that:

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 United States district court if the claim arises under federal law, or if all named representative members of the potential plaintiff class are from a different state than the defendant. 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 (private 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 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, 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 removal jurisdiction the case to federal court. The Class Action Fairness Act of 2005 increases defendants' ability to remove state cases to federal court. It should be noted, however, that the Class Action Fairness Act contains carve-outs for, inter alia, shareholder class action lawsuits covered by the PSLRA 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). William B. Rubenstein, "Understanding the Class Action Fairness Act of 2005" (briefing paper)

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 (law) 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 FRCP. 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.

Pros and cons 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, wikt:exhibit and issues from trial (law) 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, 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 (law) 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 Bond (finance) to common stock. Refusing to litigate the case in one trial (law) 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: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.

Criticisms of class actions There are several criticisms of class action lawsuits. The preamble to the Class Action Fairness Act stated that some abusive class actions harmed class members with legitimate claims and defendants that have acted responsibly; adversely affected interstate commerce; and undermined public respect for the country's judicial system.

Class members often receive little or no benefit from class actions. Examples cited for this include large fees for the attorneys, while leaving class members with coupons or other awards of little or no value; unjustified awards are made to certain plaintiffs at the expense of other class members; and confusing notices are published that prevent class members from being able to fully understand and effectively exercise their rights.

For example, in the United States, class lawsuits sometimes bind all class members with a low settlement (law). These "coupon settlements" (which usually allow the plaintiffs to receive minimal benefit such as a small check or a coupon for future services or products with the defendant company) are a way for a defendant to forestall major liability by precluding a large number of people from litigating their claims separately, to recover reasonable compensation for the damages. However, existing law requires judicial approval of all class action settlements, and in most cases class members are given a chance to opt out of class settlement, though class members, despite opt-out notices, may be unaware of their right to opt-out because they did not receive the notice, did not read it, or did not understand it.

The Class Action Fairness Act of 2005 addresses these concerns. Coupon Settlements may be scrutinized by an indepentent expert before judicial approval, in order to assure that the settlement will be of value to the class members. 28 U.S.C.A. 1712(d). Further, if the action provides for settlement in coupons, the attorney must take a corresponding part of his fee in coupons. 28 U.S.C.A. 1712(a).

Defendant class action Although normally plaintiffs are the class, defendant class actions are also possible. For example, in 2005, the Archidiocese of Portland, Oregon was sued as part of the Catholic priest sex-abuse scandal. All parishioners of the Archdiocese's churches were cited as a defendant class. This was done to include their assets (local churches) in any settlement. Where both the plaintiffs and the defendants have been organized into court-approved classes, the action is called a bilateral class action.

Class actions vs. mass actions In a class action, the plaintiff seeks court approval to litigate on behalf of a group of similarly-situated persons. Not every plaintiff looks for, or could obtain, such approval. As a procedural alternative, plaintiff's counsel may attempt to sign up every similarly-situated person that counsel can find as a client. Plaintiff's counsel can then join the claims of all of these persons in one complaint, a so-called "mass action," hoping to have the same efficiencies and economic leverage as if a class had been certified.

Because mass actions operate outside the detailed procedures laid out for class actions, they can pose special difficulties for both plaintiffs, defendants, and the court. For example, settlement of class actions follows a predictable path of negotiation with class counsel and representatives, court scrutiny, and notice. There may not be a way to uniformly settle all of the many claims brought via a mass action. Some states permit plaintiff's counsel to settle for all the mass action plaintiffs according to a majority vote, for example. Other states, such as New Jersey, require each plaintiff to approve the settlement of that plaintiff's own individual claims.

See also

External links U.S. law

Criticism of U.S. class action law

Defense of U.S. class action law

Proposals to expand European class action law

Notes



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Class Action Lawsuit

Class Action Lawsuit

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