Class action

• 1. A Lawsuit for Everyone

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  In 2005, a class action initiated by Nora Bernard united an estimated 79,000 survivors of Canada's residential school system in a single lawsuit. The settlement reached upwards of $5 billion. One person's determination had activated a legal mechanism capable of speaking for tens of thousands at once.

  A class action allows a person or small group to sue on behalf of a much larger group of similarly situated parties. The absent members may not even know a lawsuit exists in their name. This differs from a traditional lawsuit, where all plaintiffs must appear in court.

  How did such a mechanism come to exist? Why are powerful institutions so determined to shut it down? And how did a legal form with deep roots in English history come to be predominantly an American institution?

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• 2. From Guilds to Chancery

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  What modern observers call "group litigation" was common in medieval England from about 1200 onward. These lawsuits involved groups based on existing societal structures: villages, towns, parishes, and guilds. Courts of that era never questioned whether a few representatives could pursue or defend claims on behalf of an entire group.

  Legal scholar Stephen C. Yeazell has theorized an explanation. The transportation, communications, and administrative apparatus of medieval England was so poor that the Crown simply could not govern through individual relationships. It was far more practical to impose obligations on entire groups, enforced through the sporadic use of force.

  From 1400 to 1700, group litigation shifted from the norm to the exception. The rise of the corporate form made wealthy supporters suspicious of all unincorporated legal entities. Turmoil from the Wars of the Roses paralyzed the common law courts, and the Court of Chancery emerged with exclusive jurisdiction over group litigation.

  After 1700, Chancery jurisprudence on the subject grew increasingly incoherent. Yeazell pointed to trends toward fragmentation and individualism in English society, which ultimately drove the Reform Act 1832. By 1850, Parliament had enacted several case-by-case statutes addressing issues for specific types of organizations, and group litigation entered a steep decline. The Judicature Acts of 1874 and 1875 further weakened equity pleading generally, and group litigation was effectively dead in the United Kingdom, never to recover.

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• 3. The American Form

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  Class actions survived in the United States thanks largely to Supreme Court Associate Justice Joseph Story. Story imported the concept through his equity treatises and his 1820 opinion in West v. Randall. Strikingly, he did not endorse class actions. He "could not conceive of a modern function or a coherent theory for representative litigation."

  Like most Americans of his era, Story took individualism for granted. That assumption explains why he could not comprehend a court binding an absent person to litigation on that person's behalf. Harvard Law School dean Christopher Columbus Langdell apparently shared the same difficulty.

  The oldest predecessor to the American class-action rule was Equity Rule 48, promulgated in 1842. It allowed representative suits where parties were too numerous to bring individually before a court. But it could not bind absent parties. Within ten years, the Supreme Court had stretched its meaning to apply to absent parties under certain circumstances.

  In 1912, Equity Rule 48 was replaced by Equity Rule 38 in a major restructuring. When federal courts merged their legal and equitable systems in 1938, Equity Rule 38 became Rule 23 of the Federal Rules of Civil Procedure.

  A major revision of Rule 23 in 1966 radically transformed the landscape. It made the opt-out class action the standard option, creating what lawyers now recognize as the modern class action. The Advisory Committee that drafted this revision was shaped by two developments. First was a 1941 suggestion from Harry Kalven Jr. and Maurice Rosenfield that shareholder class actions could supplement government regulation of markets. The second was the rise of civil rights, environmentalism, and consumerism in the following decades.

  A 1978 environmental law treatise reprinted the entire text of Rule 23 and mentioned "class actions" 14 times in its index.

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• 4. The Case for Class Actions

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  Jenkins v. Raymark Indus. Inc. in 1986 illustrated the first advantage class actions offer: efficiency. Aggregating claims that share common questions of law and fact can avoid repeating the same witnesses, exhibits, and issues across multiple separate trials. The Fifth Circuit Court of Appeals certified that asbestos class action specifically because of those efficiency gains.

  Amchem Prods., Inc. v. Windsor in 1997 identified a second advantage. Class actions aggregate what the court described as "relatively paltry potential recoveries into something worth someone's (usually an attorney's) labor." Thousands of shareholders with individually small losses can pursue a claim that no single investor could afford to bring alone. Without class treatment, a defendant who causes widespread but individually minor harm can simply count on no one suing.

  Landeros v. Flood, decided by the California Supreme Court in 1976, showed that class treatment can change behavior, not just compensate victims. That case targeted doctors who failed to report suspected child abuse, applying civil liability to press them toward compliance with existing law.

  Ortiz v. Fibreboard Corp., decided in 1999, addressed a different concern: cases where a defendant's assets are finite. Without class treatment, early-filing plaintiffs could drain those assets before others are compensated. A court can equitably divide what remains if the class prevails.

  Van Gemert v. Boeing Co., decided in the Southern District of New York in 1966, illustrated a final advantage. Separate trials might reach conflicting conclusions about whether bond-holders could convert their bonds to common stock. That would leave a single defendant trying to comply with incompatible court orders at the same time.

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• 5. The Counterattack

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  Law professor Milton Handler published a law review article in 1971 calling the class action a form of "legalized blackmail." His extortion thesis attracted support from prominent judges including Henry Friendly and Richard Posner. A significant minority of Supreme Court justices has also embraced it. Empirical studies have generally found the thesis "overstated," but it has never lost its grip on the debate.

  The preamble to the Class Action Fairness Act of 2005 found that some abusive class actions had harmed class members with legitimate claims. They had also adversely affected interstate commerce and undermined public respect for the courts. Among the specific abuses cited were "coupon settlements," which allow defendants to forestall major liability by offering coupons for future products or services. The 2005 Act addressed this by tying attorney fees to the value of coupons actually redeemed, not merely offered.

  In the 1990s, the Supreme Court issued several decisions strengthening what it called the "federal policy favoring arbitration." Lawyers responded by inserting "collective action waivers" into consumer contracts, prohibiting signers from bringing class actions. In 2011, the Supreme Court ruled 5-4 in AT&T Mobility v. Concepcion that the Federal Arbitration Act of 1925 preempted certain state laws. Those laws had protected the right to file class-action lawsuits.

  Two further 5-4 decisions restricted class certification. In Wal-Mart v. Dukes in 2011, and again in Comcast Corp. v. Behrend in 2013, the Court ruled against certifying large classes. Both cases turned on differences in individual members' circumstances.

  Epic Systems Corp. v. Lewis in 2018 went further, enabling class action waivers as a condition of employment and consumer purchases. Some commentators called the ruling a "death knell" to many employment and consumer class actions. Supporters argued the holding was consistent with freedom of contract principles; they had long contended that class actions promoted unnecessary litigation over small claims.

  In 2017, the Supreme Court ruled in Bristol-Myers Squibb Co. v. Superior Court on a mass action brought against the pharmaceutical company. Over 500 plaintiffs from other states had tried to consolidate their claims in California. That ruling may make nationwide class and mass actions impossible to file in any state other than the defendant's home state.

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• 6. Country by Country

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  Australia formalized class actions in 1992, when federal Parliament amended the Federal Court of Australia Act to introduce "representative proceedings." Chile approved class actions in 2004. Since 2005, more than 100 cases have been filed there, most of them by Servicio Nacional del Consumidor, Chile's consumer protection agency.

  Quebec was the first Canadian province to enact class proceedings legislation, in 1978. Ontario followed with the Class Proceedings Act, 1992. By 2008, nine of ten Canadian provinces had enacted comprehensive class actions legislation.

  The "Fair Play on Fees" proceedings in New Zealand became the largest class action in that country's history. They targeted penalty fees charged by banks. Litigation Lending Services, a company specializing in funding litigation across Australia and New Zealand, covered the costs.

  France passed the loi Hamon on the 1st of March 2014, limiting class actions to consumer and competition disputes. Italy had introduced class action legislation effective the 1st of July 2009. A reform under Law n. 31/2019 was set for April 2020 but delayed twice, finally taking effect in May 2021.

  Germany introduced a Model Declaratory Action effective the 1st of November 2018. Registered consumer protection associations representing at least ten individuals can file for a judicial finding on whether the legal requirements for certain claims are met. Each individual must then pursue their own claims separately.

  Argentina recognized class actions in 2009, in a Supreme Court case known as "Halabi." England and Wales reintroduced group litigation orders under Civil Procedure Rules that came into force in 1999. HM Courts and Tribunals Service maintains a public list of these orders; 124 have been granted.

  Russia has permitted collective litigation since 2002, applying the same basic criteria as the United States: numerosity, commonality, and typicality. In the Vioxx litigation, two Canadian provincial courts certified overlapping class actions. Canadian residents became class members in two class actions, in two provinces, simultaneously. Both went to appeal.

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