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What Are Class-Action Lawsuits?

What Are Class-Action Lawsuits?
How Do Class Actions Advance Access to Justice?

What is a class action?

A class action lawsuit is a case brought by one or more individuals on behalf of a larger group of people who have the same claim. If the court agrees to allow the case to proceed as a class action, the outcome of the case applies to all the class members. Class actions are therefore an efficient way to resolve claims of wrongful conduct that harmed a large number of people—such as claims alleging discrimination or deceptive marketing, for example. In some cases, a class action is the only feasible way to pursue the claim, because the amount of each person’s damages is too low to make the cost of litigating worthwhile.

What happens in a class action?

A class action starts with the filing of a complaint—the document that the plaintiff files in court to start a civil case. The case name in a class action is not simply “Jane Smith, plaintiff, v. Jones Co., defendant,” but “Jane Smith, on behalf of herself and all others similarly situated, plaintiff, v. Jones Co., defendant.”

In the complaint, the plaintiff makes allegations about the claimed wrongdoing and how it entitles her to a remedy from the court, just as a complaint in an individual action does. In addition, the complaint in a class action typically includes allegations about how the claimed wrongdoing affected other individuals and how the case meets the requirements of the court rules (described below) that determine when a case can be brought as a class action.

A case cannot proceed as a class action until the court “certifies” the class. That process requires the plaintiff—let’s stick with Smith—to file a motion for class certification. In that motion, Smith must show that the case meets the requirements set forth in Federal Rule of Civil Procedure 23. (Rules governing class actions in individual states vary, although many mimic Rule 23.)

The motion for class certification should first state a definition of the class: for example, “all women who worked as employees of Jones Company from 2018–2020,” or “all purchasers of widgets from Jones.” Then, under Rule 23, Smith must show that:

  1. the number of individuals in the class that she defined is numerous and, in fact, so numerous that including everyone as plaintiffs would not be practicable;
  2. the class members’ claims share common questions of law or fact;
  3. the claims of Smith are typical of the claims of the class as a whole; and
  4. Smith will adequately protect the interests of the entire class.

For class actions in which the plaintiffs seek to recover money (“damages”), the motion must also show that the common issues in the case (#2 above) predominate over any individual issues, that moving forward as a class action is preferable to litigating individually, and that litigating the dispute as a class will be manageable.

If the court grants the motion for class certification, the plaintiff then gives notice to the class members. The notice informs people that the case has been certified as a class action, states the class definition, and describes basic information about the nature of the case. For cases seeking damages, the notice also explains to class members how to exclude themselves form the class, if they prefer not to be included for any reason (for example, if they prefer to litigate on their own). Notice may be given in different ways, based on what is practical and best suited to be effective. Where the individual class members can be identified, notice will typically be given by mail and/or email. Notice is sometimes also published in newspapers or magazines (for example, in a computer magazine if the claim relates to a computer defect), posted in stores (for example, at a pharmacy chain that sold the product that the plaintiff claims is defective), or posted on websites that class members are likely to visit.

The case then proceeds like any civil case, with the parties seeking information from one another, making motions, and resolving the case either through motions or at trial. The outcome of the case binds all class members (other than those who excluded themselves after they received notice). That is, if the plaintiff loses, the loss applies to all class members and they generally will not be able to bring their own lawsuits against the defendant based on the same claims. If the plaintiff wins and obtains an award of damages, all class members have won as well, and the damages will be distributed among the class members.

Like other types of cases, many class actions are resolved through settlement. Unlike most civil cases, however, a class-action cannot settle without court approval. After the plaintiff and the defendant reach a settlement, they must file a motion with the court seeking approval. The court will approve the proposed settlement only if—after providing notice to the class, a chance for class members to file objections explaining why they think the proposal is inadequate or unfair, and a chance for members to exclude themselves—the court concludes that the proposed settlement is fair, adequate, and reasonable. If the court does not give approval, the parties can either continue litigating, or they can try to negotiate a new settlement to address the court’s concerns (and then submit the new settlement for the court’s consideration).

Class actions are commonly used in cases alleging consumer protection (e.g., on behalf of customers of a bank that charged unauthorized fees), environmental protection (e.g., on behalf of people harmed by the BP oil spill in the Gulf of Mexico), and product liability (e.g., on behalf of customers who bought a product with an undisclosed hazard), as well as in cases alleging anti-competitive business practices, employment discrimination, and securities fraud.

Why are class actions valuable?

Class actions are an efficient way to resolve claims shared by many people, without dozens, hundreds, or thousands of individual cases. Class litigation is thus beneficial for courts, by reducing the number cases brought, and beneficial for defendants, who save money by consolidating legal expenses and lawyer and staff time into one case, rather than expending resources on essentially duplicative cases.

For plaintiffs, class actions often enable litigation that would be too expensive to litigate on an individual basis. For example, the cost of litigating would make it impractical to litigate a claim worth $50. Therefore, without a class action, a company whose wrongdoing cost 50,000 customers $50 each would rarely, if ever, be sued. As a result, the company would not be held accountable, would have little reason not to continue or repeat the wrongful conduct, and would be able to keep the profit from the wrongdoing. Class-action litigation, however, can provide a way for the customers to seek redress and to hold the company accountable, by making it worthwhile for the plaintiff to hire a lawyer. (The lawyer for a class will generally be paid either a percentage of the total damages awarded or based on a statute that allows a plaintiff who wins to have its attorney fees paid by the defendant.)

How do corporations try to undermine class actions?

Because the efficiencies of a class action enable people to bring lawsuits that would otherwise not be brought, advocates for business groups, such as the Federalist Society and the U.S. Chamber of Commerce, have attacked class actions and argued for procedures to make it harder to bring class-action lawsuits. They issue papers declaring that class actions don’t help class members, only lawyers, and highlighting unsuccessful cases. What they want to obscure, however, is that, without class actions, companies that cheat customers, sell defective products, or mistreat employees would often get away with it. That fact is why the business advocates try to undermine support for class actions in the press, in Congress, and in public opinion.

To avoid accountability, it is common today for companies to try to avoid them by including in employment agreements, financial services agreements (for example, baking and credit-card agreements), and other types of contracts (for example, cell-phone agreements and online terms) terms barring employees, customers, or others from litigating on a class-action basis any disputes that might arise. By barring class actions, the companies insulate themselves from liability when they sell defective products or engage in misrepresentations affecting large numbers of consumers.

Because class actions are a crucial tool for vindicating the rights of consumers and workers who cannot effectively bring suit on an individual basis, Public Citizen works to preserve the ability to maintain class actions and advocates to improve settlement terms when a proposed class-action settlement is not fair, reasonable, and adequate for the class.