Eduardo Vidal | Sunny South Florida | June 2020
Class action litigation has become an integral component of the litigation arsenal in the United States, at its best providing an alternative to government regulation, by providing a class of aggrieved parties, who are all similarly situated, with a direct court remedy against an offending defendant. This alternative, however, requires entrepreneurial action by a plaintiffs’ attorney to find and assemble the members of the class in order to bring the litigation, and then keep them informed of court proceedings.
A class action lawsuit, also known as a mass tort litigation or a derivative action, is a type of lawsuit where the plaintiff is a group of people, who have suffered a similar damage. The class action originated in the United States, and that is where it is most prevalent, usually where at least 40 people have been injured by the same defendant in the same way. Instead of each injured person bringing his own lawsuit, the class action allows all the claims of all class members to be resolved in a single lawsuit.
The legal foundations of class action litigation in contemporary practice go back to a seminal law review article by Harry Kalven and Maurice Rosenfield, “The Contemporary Function of the Class Suit,” in The University of Chicago Law Review (1941), suggesting that class action litigation by individual shareholders, acting on behalf of all similarly-situated shareholders, could effectively supplement, or provide a sufficient alternative, to direct government regulation of the securities markets and other similar markets. The class action also avoids the violation of the Constitutional principle of separation-of-powers and checks-and-balances, by government regulators, like the U.S. Securities and Exchange Commission, when they combine: (1) legislation through regulation and rule-making; (2) executive functions of investigation and prosecution; and (3) judicial power by holding hearings before administrative law judges, who are employees of the agency appearing before them.
This article started the bar, judiciary and legislatures thinking about the possibilities, culminating in 1966 with Rule 23 of the Federal Rules of Civil Procedure, which provides the framework for contemporary class action litigation. As a result, class action litigation has grown, especially in the areas not only of securities litigation and shareholders’ derivative lawsuits, but also of consumer products, environmental claims and employment practices, among others.
The United States Supreme Court has tended to give a narrow reading to the scope of class action litigation, holding twice in the last decade against certification of class actions due to differences in the circumstances of individual members of each class, so that they were not similarly situated, first in Wal-Mart v. Dukes (2011) and later in Comcast v. Behrend (2013). The U.S. Supreme Court has also allowed the use of “class action waivers” for consumer, employment and other similar contracts in Epic Systems v. Lewis (2018).
To start a class action lawsuit, an attorney who takes notice of a situation that lends itself to a class action must first assemble the initial members of the class, in order to persuade a court to certify the class for litigation. Then every person who would be affected by the court’s decision in the class action is entitled to notice that the action has started. Although it is usually not possible to give every such individual personal notice, all persons who might be affected are entitled to the best notice possible. The court will order that the class representative, through his attorneys, make reasonable attempts to notify any unknown class members. The court will tailor the type of notice required to the particular facts of the case.
Those persons who are notified then have the opportunity to join in the action – – called “opting in” – – or to decide not to participate as a member of the class – – that is, to “opt out.” In some cases, parties not have the opportunity to opt out. That is, if the action has been filed over particular injuries caused by a particular defendant, all persons who are similarly situated are automatically in the class and must live with the outcome.
Class action cases involve extensive research to reach the members of the class, even more than in the typical individual lawsuit. The plaintiffs’ attorney must work to gather evidence to prove that the defendant’s product or conduct harmed the entire class.
One of the most difficult tasks of a class action attorney’s practice is assembling the members of the class for litigation, and then keeping them informed of the court proceedings. The process of class-building requires the attorney to reach out to the potential members who may have been injured in a similar way or by a common event, finding them wherever they may be present, and keeping them informed thereafter. The Internet, of course, facilitates this process, and now there are online services that do this.
Class action litigation, including for mass torts and shareholders’ derivative lawsuits, is an integral component of the litigation arsenal in the United States, but targeting, identifying and assembling the members of a class has been one of its most difficult tasks.