Class action
In medieval England, around the year 1200, groups of people sued or were sued together in actions at common law. These lawsuits relied on existing societal structures like villages, towns, parishes, and guilds to define who belonged to a group. Stephen C. Yeazell theorized that poor transportation and communication made it impossible for the English sovereign to manage the country by dealing with individuals one by one. The Crown found it easier to impose obligations on entire groups and enforce them through sporadic force. Lawyers and judges did not question the right of a group to sue because doing so would challenge the entire group-oriented society they lived in. From 1400 to 1700, this practice gradually shifted from being the norm to becoming an exception. The development of the corporation concept led wealthy supporters to become suspicious of unincorporated legal entities. This suspicion eventually created the modern idea of voluntary associations. The Wars of the Roses and the Star Chamber caused periods where common law courts became paralyzed. Out of this confusion emerged the Court of Chancery with exclusive jurisdiction over group litigation. By 1850, Parliament had enacted statutes case-by-case to handle issues faced by organizations like joint-stock companies. With the impetus removed, group litigation went into steep decline in English jurisprudence. It never recovered after 1850 due to equity pleading falling out of favor. The Judicature Acts of 1874 and 1875 cemented this decline. Group litigation was essentially dead in the United Kingdom after 1850.
Class actions survived in the United States thanks to Supreme Court Associate Justice Joseph Story. He imported the concept through summary discussions in his two equity treatises and his opinion in West v. Randall in 1820. Story did not necessarily endorse class actions because he could not conceive of a modern function for representative litigation. Like most Americans of his time, Story took individualism for granted. He could not understand a rule allowing a court to bind an absent person to litigation conducted on their behalf. The oldest predecessor to the class-action rule appeared in Federal Equity Rules as Equity Rule 48 in 1842. This rule allowed courts to dispense with making all numerous parties present if it caused manifest inconvenience or oppressive delays. However, the decree would be without prejudice to the rights of absent parties. Within ten years, the Supreme Court interpreted Rule 48 to apply to absent parties under certain circumstances by ignoring its plain meaning. In 1912, Equity Rule 48 was replaced with Equity Rule 38 during a major restructuring. When federal courts merged 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 American law. It made opt-out class actions the standard option and gave birth to the modern class action. Arthur Taylor von Mehren characterized this development as the most extreme form of collective civil litigation in the modern world. The Advisory Committee drafting the new Rule 23 was influenced by Harry Kalven Jr. and Maurice Rosenfield's 1941 suggestion about shareholder litigation. They argued such suits could supplement direct government regulation of securities markets. The rise of the civil rights movement, environmentalism, and consumerism also drove changes. Groups from the 1960s through the 1980s turned to class actions to achieve their goals.
Proponents argue class actions offer efficiency gains by aggregating many individualized claims into one representational lawsuit. Aggregation avoids repeating days of witness testimony, exhibits, and issues from trial to trial. In cases involving asbestos like Jenkins v. Raymark Indus. Inc., certification prevented redundant proceedings. Small recoveries often fail to provide incentives for individuals to bring solo actions prosecuting their rights. A class action solves this problem by aggregating paltry potential recoveries into something worth an attorney's labor. This ensures defendants who engage in widespread harm must compensate those injured even if damages are minimal per person. Thousands of shareholders may have losses too small to justify separate lawsuits yet a class action brings them together efficiently. Perhaps more important than compensation is that class treatment imposes costs of wrongdoing on wrongdoers thus deterring future misconduct. Landeros v. Flood decided in 1976 aimed at changing doctor behavior regarding child abuse reporting threats. Physicians previously remained reluctant to report suspected injuries despite existing laws requiring it. Class actions ensure all plaintiffs receive relief in limited fund cases preventing early filers from raiding assets before others get compensated. Ortiz v. Fibreboard Corp. established rules ensuring equitable division of assets among winning plaintiffs. Different court rulings could create incompatible standards of conduct for defendants if not litigated collectively. Refusing class treatment might result in inconsistent outcomes for bond-holders suing to convert bonds to common stock. Courts generally allow class actions where individual trials would produce conflicting standards. The preamble to the Class Action Fairness Act of 2005 found these suits permit fair and efficient resolution of legitimate claims aggregated against harmful defendants.
Critics argue class members often receive little or no benefit while attorneys collect large fees leaving claimants with coupons or worthless awards. Coupon settlements allow defendants to forestall major liability by precluding people from recovering reasonable compensation
separately. Existing law requires judicial approval but many class members remain unaware of their right to opt out because they did not receive notice or understand it. The Class Action Fairness Act of 2005 addresses concerns by allowing independent experts to scrutinize coupon settlements before approval. If an action provides settlement in coupons, attorney fee awards must be based on value redeemed by class members. A common critique describes class actions as judicially sanctioned extortion first articulated by Milton Handler in a 1971 law review article calling them legalized blackmail. This thesis has garnered support from significant minority Supreme Court justices including Henry Friendly and Richard Posner. Empirical studies have generally found the extortion thesis overstated despite its popularity among critics. Defendants can hold reverse auctions engaging in collusive settlement discussions to resolve exposure at most economic cost. Subclasses may have interests diverging greatly from the main class yet treated identically. Proposed settlements could offer former customers much greater benefits than other groups. Advertising or soliciting lead plaintiffs may also be unethical if the plaintiff is not genuinely aggrieved. In 2005, the Roman Catholic Archdiocese of Portland sued parishioners as defendant class to include church assets in any settlement regarding priest sex abuse scandals. Only a few hundred defendant class actions exist mostly in securities cases and constitutional challenges. Circuit courts remain split on whether injunctive relief applies against defendant classes.
In the 1990s, the US Supreme Court issued decisions strengthening federal policy favoring arbitration. Lawyers added collective action waivers to consumer contracts prohibiting signing parties from bringing class-action suits. AT&T Mobility v. Concepcion ruled in 2011 that
the Federal Arbitration Act of 1925 preempts state laws disallowing such waivers. The dissent pointed to saving clauses allowing states to determine contract revocation methods. Two major 21st-century cases restricted certification due to individual member differences. Wal-Mart Stores Inc. v. Dukes decided in 2011 and Comcast Corp. v. Behrend decided in 2013 both went 5-4 against certification. Companies insert phrases like may elect to resolve any claim by individual arbitration into employment contracts to prevent class actions. Epic Systems Corp. v. Lewis enabled use of these waivers as conditions of employment or consumer purchases in 2018. Some commentators called this ruling a death knell for many employment and consumer class actions while supporters argued it aligns with private contract principles. Bristol-Myers Squibb Co. v. Superior Court held in 2017 that over five hundred plaintiffs from other states could not bring consolidated mass actions against the pharmaceutical giant in California. This opinion arguably renders nationwide mass actions impossible except in defendant home states. In 2020, the 11th Circuit Court of Appeals ruled incentive awards impermissible. These modest payments to class representatives violate doctrine from two US Supreme Court cases from the 1800s. The ruling responded to objectors claiming Rule 23 required fee petitions before objection periods ended.
Continue Browsing
Common questions
When did class actions become dead in the United Kingdom?
Group litigation was essentially dead in the United Kingdom after 1850. The Judicature Acts of 1874 and 1875 cemented this decline following a steep drop in English jurisprudence.
Who imported the concept of class actions to the United States?
Class actions survived in the United States thanks to Supreme Court Associate Justice Joseph Story. He imported the concept through summary discussions in his two equity treatises and his opinion in West v. Randall in 1820.
What year did Equity Rule 48 become Rule 23 of the Federal Rules of Civil Procedure?
Equity Rule 38 became Rule 23 of the Federal Rules of Civil Procedure when federal courts merged legal and equitable systems in 1938. A major revision of Rule 23 in 1966 radically transformed American law by making opt-out class actions the standard option.
Which act addresses concerns about coupon settlements in class actions?
The Class Action Fairness Act of 2005 addresses concerns by allowing independent experts to scrutinize coupon settlements before approval. This legislation requires attorney fee awards based on value redeemed by class members if an action provides settlement in coupons.
When did AT&T Mobility v. Concepcion rule that arbitration waivers preempt state laws?
AT&T Mobility v. Concepcion ruled in 2011 that the Federal Arbitration Act of 1925 preempts state laws disallowing collective action waivers. Lawyers added these waivers to consumer contracts prohibiting signing parties from bringing class-action suits.