CLASS ACTION
A lawsuit that allows a large number of people with a common interest in a matter to sue or be sued as a group.
The class action suit began in the EQUITY
courts of seventeenth-century England as a bill
of peace. English courts would allow a bill of
peace to be heard if the number of litigants was
so large that joining their claims in a lawsuit was
not possible or practical; the members of the
group possessed a joint interest in the question
to be adjudicated; and the parties named in the
suit could adequately represent the interests of
persons who were absent from the action but
whose rights would be affected by the outcome.
If a court allowed a bill of peace to proceed, the
judgment that resulted would bind all members
of the group.
Justice JOSEPH STORY, who served on the
U.S. Supreme Court from 1811 to 1845, advo-
cated the development of the bill of peace in the
United States.He wrote that in equity courts, “all
persons materially interested, either as plaintiffs
or defendants in the subject matter of a bill
ought to be made parties to the suit, however
numerous they may be,†so that the court could
“make a complete decree between the parties
[and] prevent future litigation by taking away
the necessity of a multiplicity of suits†(West v.
Randall, 29 F. Cas. 718, 2 [C.C.R.I. Mason] 181
[1820] [No. 17, 424]). The bill of peace, and later
the class action, provided a convenient and effi-
cient vehicle for resolving legal disputes affect-
ing a number of parties with similar claims.
Common issues that could have similar out-
comes did not have to be tried piecemeal in sep-
arate actions, thus saving the courts and the
litigants time and money.
Initially, a class action could be brought only
in equity cases, disputes in which the parties did
not necessarily seek monetary damages but
instead might desire some other type of relief.
The adoption of Rule 23 of the Federal Rules of
Civil Procedure in 1938 broadened the scope of
the class action suit, providing that cases in law
seeking money damages as well as cases in
equity could be brought as class actions. In 1966,
the scope of the class action was again clarified
and expanded when Rule 23 was amended to
provide that unnamed parties to a class action
were bound by the final judgment in the action
so long as their interests were adequately repre-
sented.
Rule 23 of the Federal Rules of Civil Proce-
dure defines three kinds of class actions. The
first type may be brought where separate law-
suits might adversely affect other members of
the class or the defendant in either of two
ways – if the piecemeal litigation resulting from
separate suits might impose inconsistent stan-
dards of conduct on the defendant, or if multi-
ple suits might “impair or impede – the class
members from protecting their various inter-
ests. In the second type of class action, a class
seeks an INJUNCTION or some type of relief
compelling the defendant either to cease a cer-
tain activity or to perform some other type of
action. In the third category of class action law-
suit, there are QUESTIONS OF LAW or fact com-
mon to the entire class that predominate over
questions peculiar to each individual plaintiff,
and a class action suit is a more efficient means
to resolve the controversy. Under the third type
of class action, individual members of the class may “opt out” of the litigation if they do not want to be bound by the results of the suit.
Courts have held that DUE PROCESS requires
that absent class members be given adequate
notice, adequate representation, and adequate
opportunity to opt out, before they can be
bound by a final judgment in the suit (Phillips
Petroleum Co. v. Shutts, 472 U.S. 797, 105 S. Ct.
2965, 86 L. Ed. 2d 628 [1985]).
Class action suits have led to social reform in
the United States. They have helped to remedy
discrimination based on race and gender; been
used to address inequities in education, housing,
and VOTING RIGHTS laws; and helped to ensure
due process. For example, BROWN V. BOARD OF
EDUCATION, 347 U.S. 483, 74 S. Ct. 686, 98 L. Ed.
873 (1954), the Supreme Court decision striking
down segregated schools, was brought as a class
action lawsuit. The landmark decision Goldberg
v. Kelly, 397 U.S. 254, 90 S. Ct. 1011, 25 L. Ed. 2d
287 (1970), in which the SUPREME COURT OF
THE UNITED STATES held that recipients of public
assistance must be given notice and the
opportunity for a hearing prior to termination
of benefits, was also litigated as a class action
suit.
In addition, the class action suit has been
used in several widely publicized mass TORT
cases. In these actions, many plaintiffs, often
hundreds or even thousands, have alleged
injuries suffered as the result of the actions of a
single defendant, usually the manufacturer of
some product believed to have caused damage.
In the mid-1970s, thousands of women brought
suit against the manufacturer of the Dalkon
Shield, an intrauterine contraceptive device
linked to numerous health problems, including
sterility. A class action suit was also employed
in lawsuits against the manufacturer of the herbicide Agent Orange, a highly toxic defoliant
that was used during the VIETNAM WAR and has
been linked to cancer and birth defects in Vietnam
era veterans and their families. In mid-
1995, two major class action suits on behalf of
millions of smokers were instituted against several
tobacco companies. The plaintiffs hoped to
prove that they had become addicted to nicotine
and suffered illnesses as a result, and that
the defendant tobacco companies concealed
their knowledge of the addictive nature of nicotine
and the harmful effects of smoking.
Some large companies, anticipating liability
for potentially huge damages as a result of class
action suits, file for BANKRUPTCY in order to
protect their assets. The pharmaceutical company
A. H. Robins, the manufacturer of the
Dalkon Shield, filed for bankruptcy in 1985
when it was faced with the prospect of paying
millions of dollars as a result of class action suits
filed against it. In 1995, Dow Corning Corporation,
the subject of hundreds of claims resulting
from allegedly defective silicone gel breast
implants, filed for Chapter 11 bankruptcy protection.
Other companies, fearing the financial
consequences of possible class action suits arising
from certain types of products, have ceased
research and development in certain areas altogether.
The Upjohn Company, for instance,
ceased contraceptive research in 1986.
The Supreme Court addressed concerns
about the use of Rule 23 in mass tort actions in
Amchem Products, Inc. v. Windsor, 521 U.S. 591,
117 S.Ct. 2231, 138 L.Ed.2d 689 (1997). This
case involved persons who had been exposed to
asbestos and who either had diseases attributed
to this exposure or who had the potential of
developing these diseases. The federal courts became worried that they would be inundated by thousands of individual cases. Therefore, in
1991 all asbestos cases that had been filed but
not tried were consolidated and transferred to a
single judge in Pennsylvania.
During settlement discussions the defendants
refused to negotiate unless the final agreement
bound victims who would file claims in
the future. The plaintiffs eventually agreed and
the parties came to a settlement. They then went
into court and obtained a certification of class
action.However, objections were raised by many
class members and the Supreme Court was
required to make a final determination.
The Supreme Court ruled the class action
was improper. The Court was troubled by attorneys
of current victims, who stood to receive
payment from the defendants, binding future
victims to a settlement that greatly restricted
their ability to receive compensation. Rule 23
requires class representatives to protect the
interests of all class members, yet it seemed
unlikely that future victims were fully protected.
Another concern was that the proposed class did
not have sufficient unity so that the future
claimants could “fairly be bound by class representatives’
decisions.”The current plaintiffs,who
had asbestos injuries and wanted immediate
compensation, had agreed to terms that future
claimants might find unacceptable. These
included the lack of inflation adjustment, the
limitation on the number of payable claims each
year, and the prohibitions against asking for
damages based on emotional distress and loss of
consortium.
The Court found that the proposed class was
not “sufficiently cohesive.” Although all members
of the class shared experience of asbestos
exposure, this did not meet the predominance
requirement under Rule 23 (b)(3). In fact, there
were many individual issues and many categories
of persons who were exposed and injured
or exposed but not yet injured. The supposed
class was too “sprawling” to meet the Rule 23
requirement.
In 2002, the Supreme Court reviewed the
rights of persons who seek to intervene in a class
action settlement for the purpose of objecting to
the settlement. In Devlin v. Scardelletti, 536 U.S.
1, 122 S.Ct. 2005, 153 L.Ed.2d 27 (2002), the
Court held that persons affected by a settlement
may appeal even if they are not a class representative
or a court-approved intervener. The decision
is likely to increase such appeals.
FURTHER READINGS
Hensler, Deborah, Nicholas M. Pace, Bonita Dombey-
Moore, Beth Giddens, et al. 2000. Class Action Dilemmas:
Pursuing Public Goals for Private Gain. Santa
Monica, Calif.: Rand.
Olson,Walter K. 2003. The Rule of Lawyers: How the New Litigation
Elite Threatens America’s Rule of Law. New York:
St.Martin’s Press.
Viscusi, Kip W., ed. 2002. Regulation Through Litigation.
Washington, D.C.: Brookings Institution.
CROSS-REFERENCES
Civil Procedure; Product Liability.
Should Class Actions Be Restricted?
Class action lawsuits have become a
controversial topic in the 1990s.
Once seen as a way of empowering individuals
with small claims to have their
day in court, class actions are viewed by
many lawyers, legislators, and government
officials as a vehicle for plaintiffs’
lawyers to make millions of dollars on
issues of dubious merit. Other critics
charge that class actions have been used
by defendants in mass TORT cases, such
as asbestos litigation, to frustrate
the large and legitimate
claims of individual victims.
Defenders of class actions
argue that this type of lawsuit
has a legitimate social purpose.
A lawyer who prosecutes a class
action can be viewed as a “private
attorney general” who aggressively
enforces various regulatory laws or who
alerts the public to FRAUD, health, and
safety problems. In a time when government
is seeking to reduce government
regulation, class action lawsuits provide
an opportunity for the private sector to
take up the oversight function.
Defenders note that the class action
format has most often been used to
aggregate small claims that were not
worth litigating separately. A class action
is an effective means for holding defendants
accountable for widespread harm
that would otherwise go unchecked.
There is public value in allowing this type
of class action to go forward, even if the
amount payable to each member of the
class is small. The deterrent effect of a
class action can be substantial, forcing
the defendant to change its product or
procedures.
Supporters of class actions
contend that trivial cases are
rare and that neither high settlement
rates nor small individual
recoveries demonstrate
frivolous litigation. Moreover,
criticism of multimillion-dollar
attorney fees ignores the risk that class
action attorneys take in starting such lawsuits.
Not every class action will be successful
and the costs of litigation can be
substantial.Without a financial incentive,
attorneys will not take on and plaintiffs
will not find redress for certain types of
injury. Defenders also point out that personal
injury attorneys receive large portions
of the awarded damages through
CONTINGENT FEE agreements. Class
action attorneys should not be treated
differently.
Defenders of large claim class actions
believe that mass tort cases benefit from
using a class action structure. When victims
of mass torts seek substantial compensation
for injuries caused by a
defective product, such as asbestos, breast
implants, and BIRTH CONTROL devices,
it makes sense to aggregate the claims. It
is more economical for attorneys and the
courts to manage hundreds or even thousands
of similar claims as a group rather
than on a case-by-case basis. The courts
would be tied up for years if each case
had to be handled individually, and the
duplication of evidence and expert witnesses
would generate needless expense.
A class action, on the other hand, can
resolve the central issues and develop
rational compensation schedules for the
victims. Settlement also becomes a more
attractive option for defendants when the
victims are members of a class.
Critics of class actions remain
unconvinced about the social and legal
value of group lawsuits. In small claims
class actions, critics question the value of supporting litigation in which individual
class members have very small stakes. For
example, does it make sense to permit a
lawyer to initiate a class action where a
utility company overcharged two million
customers two cents per month? Such filings
demonstrate to the critics the
lawyer-driven nature of most small
claims class actions. The individual
claimants, because they have so little at
stake, do not exercise any control over the
litigation or elect to opt out of the class
and pursue individual claims. With the
plaintiffs’ lawyer in total control, the
dynamics of the lawsuit change. The
lawyer has the largest economic stake in
the outcome, leading to settlements that
guarantee high attorney fees and minimal
payouts to the class members.
Critics also dispute the value of the
private attorney general role. Most class
action attorneys, they contend, are seeking
lucrative financial awards rather than
social justice.Moreover, class actions may
interfere with the regulatory and oversight
functions of the appropriate government
agency. The agency may conclude
that the injuries attributed to the defendant
are insignificant and do not warrant
prosecution. A class action substitutes the
judgment of the private attorney for that
of the public’s elected officials.
As to the deterrence value of class
actions, the critics maintain that state
and federal law enforcement organizations
have the ability to investigate and
punish cases involving widespread smallscale
fraud and offer an alternative means
of addressing wrongful conduct. Private
enforcement through a class action
reduces the accountability of the law
enforcement effort and delegates to the
plaintiffs’ attorney control over enforcement
priorities.
As to large claim class actions, critics
believe that the victims may not be fairly
served. They contend that large claim
cases raise concerns about the capacity of
the class action format to provide individualized
justice, the ability of class
attorneys to effectively represent the various
needs of class members, and the
impact on future class members who do
not, at the time of litigation, have a ripe
claim (their injury is not yet apparent).
Critics argue that in these large claim
cases, defendants have sought class action
status as a way of limiting liability. In
some cases, the parties propose a settlement
before a complaint has ever been
filed, suggesting the possibility of collusion
between the attorneys for the two
sides. Finally, defendants in mass tort
class actions have an incentive to search
for and negotiate with the plaintiffs’
attorney for the lowest settlement
amount.
Critics of class actions propose that
legislation and court rules be changed to
give more power to the courts to examine
class action applications. Courts should
carefully review the applications and
deny class status to small claims cases
with little social value in the adjudicating
the claims. Another alternative is to
sharply reduce attorney fees, which
would reduce the incentive for frivolous
actions.
FURTHER READINGS
Conte, Alba, and Herbert B. Newberg. 2002.
Newberg on Class Actions. 4th ed. St. Paul,
Minn.: Thomson/West.
Coyle, Marcia. 2003. “Bill Targets Class Action
Lawyer Fees: Sparked by Ire Over Tobacco
Money. The National Law Journal 25
(May 19): 1.
Feldman, Joel S., and Keith M. Fleischman.
2002. Non-Federal Question Class Actions
2002: Prosecution & Defense Strategies.
New York: Practicing Law Institute.
Schwartz, Robert Alexander. 2003. “Can Arbitration
Do More for Consumers? The
TILA Class Action Reconsidered.” New
York University Law Review 78 (May):
809–44.
