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The Basics of a Federal Class Action
By Herbert T. Schwartz, Attorney at Law
This article is to summarize the organizational criteria of Federal Rules of Civil Procedure Rule 23 to assist the reader in understanding class actions as a procedural device. With the exception of Mississippi in which state court class actions are prohibited by statute, virtually all state class action rules are analogous to the federal rule and, with minor exceptions, followed closely by state court judges.
The subject differs in a significant way from the usual law summary topic because, while there are many reported decisions, there really are no cases the advocate can point to as leading. An excellent guide for the lawyer choosing to become involved in class cases is the Federal Judicial Center’s publication: ''The Manual for Complex Litigation'' currently in its fourth edition and the notes of the Advisory Committee on Civil Rules. The undertaking and prosecution of a class case is neither formless nor without precedential authority. The class action advocate is virtually deluged with cases from every level of the judiciary containing support for any position one chooses to argue. The practice becomes more art than science and is limited only by the skill and innovation of counsel. To say that class action practice presents a formidable challenge to lawyers is a significant understatement.
The theory, policies, results and historical benefit of class actions as well as the value of aggregate litigation has been largely lost on the public. Class actions have become a convenient target for special interests in industry and commerce and their well-paid lobbyists as well as elected officials. The recurring political furor is rife with misunderstanding, purposeful misrepresentations, hyperbole, and lurid examples that create fertile ground for often misdirected contentiousness as to whether the class action is a superior procedural device for resolution of aggregate and representative litigation.
Long before the emergence of the nation-state in 1648 and the expression of the public will through representative government, the earliest King’s Courts papers suggest a history of representative litigation for others having a common grievance. During the reign of Henry III of England (1216-1272), a letter from the King speaks of ''pleas and controversies prosecuted by three or four representatives of villages and communities.''
Our own Supreme Court in 1853, announced the proposition that ''the (class action) decree binds all of them the same as if all were before the court.'' Federal Rule of Equity 48 in effect between 1842 and 1912, also recognized what we have come to know today as a class action. The present Rule 23 has evolved through differing incarnations since 1937, seeking to codify the Supreme Court's recognition of the class action device:
If the federal courts are to have the jurisdiction in class suits to which they are obviously entitled, the decree when rendered must bind all of the class properly represented. The parties and the subject-matter are within the court’s jurisdiction. It is impossible to name all of the class as parties, where, as here, its membership is too numerous to bring into court. The subject-matter included the control and disposition of the funds of a beneficial organization and was properly cognizable in a court of equity. The parties bringing the suit truly represented the interested class. If the decree is to be effective and conflicting judgments are to be avoided all of the class must be concluded by the decree.
The existence of class action litigation in today’s society plays a substantial role in bringing about more efficient enforcement of consumer protection laws. Either we are committed to make reasonable and efficient efforts to provide a forum for the adjudication of disputes affecting many persons in a similar manner; or we are not. It would be a tragic irony if the American populace observe courts ready to imprison a person who steals $500 worth of goods from a store or interstate commerce while, at once, unwilling to grant a civil remedy against a commercial or industrial entity which has benefited, perhaps to the extent of several million dollars, from wrongful conduct aimed at the consuming public.
Our modern society affords the possibility of wrongful corporate behavior causing widespread adverse consequence to many people. Some procedural means must exist to remedy and deter that conduct while vindicating the collective rights of wrongful conduct.
The class action provides the procedural mechanism.
As early as 1842 the U.S. Supreme Court recognized the class action as a beneficial procedural mechanism that serves a public purpose. It said:
''Where the parties on either side are very numerous, and cannot, without manifest inconvenience and oppressive delays in the suit, be all brought before it, the Court in its discretion may dispense with making all of them parties, and may proceed in the suit, having sufficient parties to represent all the adverse interests of the Plaintiffs.''
The class action procedural device can be a powerful and pervasive instrument of social change, consumer protection, civil rights, constitutional enforcement or environmental conduct. Critics typically come from the ranks of banking, insurance, governmental agencies, industrial and commercial entities and sellers of goods and services to the consuming public. An often heard claim of critics is that class action litigation was invented and driven by lawyers. Along freeways in major metropolitan areas it is not unusual to see a billboard paid for by a committee of critics that seek to convince the public that class actions result in only pennies for class members yet millions for lawyers. Of course, the sponsors of such advertising probably have their own self-interest reasons for such large expenditures for radio, television, newspaper or billboards to alert the public these sponsors’ special interest in the guise of public spiritedness. Almost without fail, these commercial giants are frequent targets of class action lawsuits for wrongful conduct aimed at the consuming public. And, rather than change their wrongful, yet profitable, courses of business conduct, they have chosen to deflect the attention from themselves to the body of professionals who have frequently frustrated their methods.
If one were to compose a list of important subjects of every day American life that would not have changed for the benefit of society except for the existence of the class action procedural rule and lawyers representing classes, it would look like this:
- Intrauterine Contraception Devices
- Tobacco
- Breast Implants
- Agent Orange Injuries to Vietnam Veterans
- Gulf War Syndrome Treatment for Veterans
- Asbestos
- Injurious Medication
- Carcinogenic Chemicals
- Stock Frauds
- Retirement Plan Fraud
- Deleterious Foods
- Unsafe Tires and Other Auto Parts
- HMOs Defrauding Physicians
- Unsafe Automobiles
- Unlawful Taxation
- Price Fixing – Antitrust Violations
- Patent Pools Resulting in Higher Prices
- Fraudulently Induced Shortages – Higher Prices
- Insurance Company Claims Payment Fraud
- Deceptive Advertising
- Bait-and-Switch Sales Tactics
- Fraudulent Bank Charges – Real Property Closings and Accounts
And many more.
The class action has been described as a mass production remedy for a mass production wrong. They serve as representative suits for addressing claims or defenses of a group of persons similarly situated. A class action may be seen as a tool by which numerous members of a group may have their claims or rights addressed in a single, binding judicial proceeding. Courts have emphasized the flexibility of the class action as a tool for merging substantive relief and a procedural mechanism to reach a just decision. The goal of the class action mechanism is to allow for many, often thousands, individuals with small claims that are similar in nature, to aggregate their claims in a single action. This goal has been recognized by the courts as a just and an efficient means for the judiciary to resolve cases and for many persons having similar claims to have their day in court.
The class action procedural device can be traced back to the English Common Law courts of the 16th Century. Today they permit a person, the class representative, sharing typical claims to sue – or defend – for many similarly situated persons when it would be impracticable to join all others and bring them before the court. A class action provides a means by which a large group of persons who share a common grievance may bring their claims before a court without the usual requirement of joining every person within a discrete group possessed of a similar claim of being harmed by the same potential defendant. In a class case, a single member or a small number of the class members will be named as the representative(s) of the absent class members and will act in the best interests of the class as whole.
In our complex modern economic system where a single harmful act may result in damages to a great many people there is a distinct need for the representative action as a device for vindicating claims, which, taken individually, are too small to justify legal action but which are of significant size if taken as a group. The courts have recognized that there must be a practical method for combining these small claims. The class action provides that method.
Adjudicating the claims of the many similar claims in a single proceeding and thereby conserving scarce court time and resources is one of several policy reasons in support of class actions. The judicial economy of a single action to resolve a widespread wrong imposed on many persons promotes the efficient use of the court’s time and prevents the repetitive presentation of the same evidence in each individual case or the potential of clogging our courts with a large number of cases sharing the same facts, evidence and sharing the same legal basis for relief. It also prevents the possibility of conflicting court decisions that might create differing standards of conduct for both the class members and the defendant(s).
The class action serves as a powerful deterrent to large commercial business entities in the consumer marketplace. When commercial or industrial practices inflict a small, but nonetheless wrongful, monetary injury to a large group of persons, any single individual’s claim may be too small to warrant seeking relief in the courts. Injuring a single individual in the amount of $100 is probably not going to result in legal action to recover the lost $100. It is uneconomical to bring an action to recover a single minimal sum and it is unlikely the injured party could find a lawyer to take the case. But, discovering that the same business source caused a similar $100 injury to 50,000 other similarly situated persons creates a different scenario. The economic feasibility of legal action that once was negative now becomes positive. The individual small injury becomes, in the aggregate, significant when the similarly injured group combine their claims into a single action. The business interest and its wrongful conduct causing the financial injury would certainly prefer to not be confronted with the economic prospect of the combined claims of many in a single lawsuit. That prospect and the likelihood of being required to repay the entire wrongfully exacted amount in one legal action is, without doubt, a deterrent to the continuation of that business course of conduct. By use of the class action procedural device and the potential of having a court order that these same 50,000 monetarily injured persons each be refunded the $100 wrongfully taken from them poses a much more meaningful and serious economic incentive to refrain from such conduct in the future. Such commercial business entities come to know that aware consumers and competent class action lawyers serve as a disciplinary force that will catch the wrongful conduct and hale the business into court for remediation of the wrong. The public awareness of a company’s engagement in conduct that is contrary to the good faith placed in the business by their consumers creates what will become a widely known negative consumer distrust that cannot but have adverse economic consequences to the offending defendant.
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