Class actions arise when a company’s actions harm a large group of people. Lawsuits of this type have been brought against consumer product manufacturers, business and financial services practices, individual employers, pharmaceutical companies, tobacco companies, insurance companies, technology corporations and more. Even shareholders of companies use class actions to hold executives accountable for poor management or misleading investment information.
Class action lawsuits are an important and valuable part of the legal system. They provide for the fair and efficient resolution of legitimate claims of numerous parties, as claims can be aggregated into a single action against a defendant that has allegedly caused harm. This group of individuals, or, in some cases, companies, must first be granted “class status” before proceedings can begin.
Federal law, which has generally been accepted by most states, indicates that for this status to be granted the class action must have certain definite characteristics:
• The class must be so large as to make individual suits impractical
• There must be legal or factual claims in common
• The claims or defenses must be typical of the plaintiffs or defendants
• The representative parties must adequately protect the interests of the class
Additionally, a judge can grant class action status if the class includes additional plaintiffs harmed in the same way by the same defendant or if there is sufficient evidence of a “class” in a pending suit.
Generally, class action lawsuits may be brought in federal court if the case involves issues that affect potential class members in different states or has a nexus with federal law. However, such class action suits must have a commonality of issues across state lines. This can be difficult, as civil law in different states has significant variations. Therefore, each state’s set of claims may have to be handled separately or through the device of multi-district litigation. It is possible to bring class action lawsuits under state law, and in some cases the court may extend its jurisdiction to all the members of the class both within the state and without as the key element is the jurisdiction that the court has over the defendant.
Last year the Class Action Fairness Act of 2005 became law. One of the main purposes of the Act was to assure fair and prompt recoveries of legitimate claims. The Act also expanded diversity jurisdiction to grant federal courts original jurisdiction over certain mass actions and class actions when the class of plaintiffs consists of at least 100 members, the value of the claims of all plaintiffs combined exceeds $5 million and at least one of the plaintiffs is a resident of a different state from that of any defendant.
The expansion also included provisions to allow for multi-state claims in federal court unless two-thirds or more of the members of the proposed plaintiff class, who are the primary defendants, are residents of the state in which the action was originally filed.
In addition existing state class action suits may now be moved to a federal court if the plaintiffs request the state court to decide new class actions across state lines.
Class Action Procedures
Generally, the procedures for filing a class action include having a class action law firm representative file a lawsuit for one or several named plaintiffs on behalf of a specific punitve class. Then a summons and complaint is filed and the plaintiff(s) usually have to bring a motion to a judge to have the class certified. In some jurisdictions, this class certification process may include additional information be provided in order to determine if the proposed class is sufficiently cohesive.
Upon the motion to certify the class, the defendants have the opportunity to object to the action. Often these objections include whether the issues would be appropriately handled as class litigation, whether the named plaintiffs are sufficiently representative of the class, and issues about the relationship the plaintiffs have with the law firm or firms handling the case.
The courts also examine the ability of the law firm to prosecute the claim for the plaintiffs including their resources for dealing with class actions. The court may also request that the law firm post in print, send through the mail and/or broadcast public notices about the class action. The notice procedure is often required to give class members an opportunity to opt out or for any not yet identified members to be included. Identified members that elect to “opt out” have the legal right to file a separate lawsuit.
In an action certified as a class action, the court may award reasonable attorney fees and nontaxable costs authorized by law or by agreement of the parties as follows:
Motion for Award of Attorney Fees
A claim for an award of attorney fees and nontaxable costs must be made and notice of the motion must be served on all parties, and directed to class members, in a reasonable manner. A class member, or a party from whom payment is sought, may object to the motion. The court will provide final the final resolution of fees on a case by case basis.