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Class Actions 101: What Are These Lawsuits All About, Anyway?

By Julie Cantor

Apple. Gap. Starbucks. They’re high profile brands with memorable logos, loyal followings, and a permanent place on holiday gift lists. And, like countless other companies, all have found themselves on the defensive end of class action lawsuits.

Class actions make headlines on a near-daily basis. They’re filed, rejected, and settled. Occasionally they’re tried. And while many new attorneys remember the keys to class actions from law school course work or bar exam preparation, it never hurts to have a refresher.

Which Rule?
Which one of the Federal Rules of Civil Procedure addresses class action lawsuits? Rule 23. (Yes, we’re starting slowly.) Think Michael Jordan. Or LeBron James. Note that most states have included a similar rule in their procedural codes.[1]

Like many great legal doctrines, class actions originated in England’s courts of chancery. [2] The courts’ strict joinder rules—everyone with an interest in the suit had to be a part of it—presented serious problems. It’s hard enough to coordinate people and lawsuits these days with email. Things were infinitely more difficult during the days of quill pens. So eventually the courts decided that their joinder requirement was impractical and unjust. They created a new brand of suit, dubbed “Bills of Peace,” where one representative sued, and the outcome bound those who were similarly situated. [3] Class actions were born.

According to the U.S. Supreme Court, the “principal purpose” of class actions is “the efficiency and economy of litigation.” [4]The Court has also noted other justifications for class actions, including:

  • the protection of the defendant from inconsistent obligations;
  • the protection of the interests of absentees;
  • the provision of a convenient and economical means of disposing of similar lawsuits; and
  • the facilitation of the spreading of litigation costs among numerous litigants with similar claims.[5]

In other words, people whose claims might be too insignificant to litigate alone can band together. The class action device can eliminate redundancy in the judicial system, streamline litigation, and in some cases, create significant institutional change.

What are the four prerequisites of Federal Rule of Civil Procedure 23(a)? Here is the text of the rule:

One or more members of a class may sue or be sued as representative parties on behalf of all members only if: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.

Parallel state rules typically track the federal rule, but be sure to confirm the same. Also, be aware of the impact of the Class Action Fairness Act [PDF], and factor in the likelihood of removal of a state class action suit to federal court under the same.

Well, that all sounds very legalistic. Turning to Rule 23(a)(1), how numerous is numerous? What does “impracticable” actually mean? Is there a magic number? Courts have certified classes with as few as 13 defendants or 14 plaintiffs, and they have denied classes with several hundred claimants. [6] So there is no magic number, and no clear formula. It’s a judgment call—“a court must make a practical judgment based on the facts of the case.” [7]

Newberg has gleaned general principles from the case law: “(1) impracticability short of impossibility is sufficient; (2) evidence of exact class size is not required; (3) when the class is large, numbers alone should be dispositive; (4) when the class is small, factors other than number will be significant; and (5) a common sense approach is contemplated by Rule 23.” [8] The Court of Appeals for the Second Circuit has offered a similar synopsis. In Robidoux v. Celani, [9] the court explained that

practicability depends on all the circumstances surrounding a case, not on mere numbers. Relevant considerations include judicial economy arising from the avoidance of a multiplicity of actions, geographic dispersions of class members, financial resources of class members, the ability of claimants to institute individual suits, and requests for prospective injunctive relief that would involve future class members [10]

Of course, different courts may have their own ideas about how many people are enough. The Second Circuit, for example, “has held that a prospective class of 40 or more raises a presumption of numerosity.” [11] As with all things legal, thoroughly research the law in your particular jurisdiction.

Must all questions of law or fact in a particular case be common to the class? In short, no. [12] In fact, “a single issue common to all members of the class” is enough. [13] But watch out if you’re the plaintiff trying to proceed under subsection (b)(3) of Rule 23 (more on this to later).

Typicality? Fair and adequate representation?
While subsections (1) and (2) of Rule 23(a) deal with class characteristics, subsections (3) and (4) address the class representative’s adequacy. To check off the typicality box, there must be “a relationship between the plaintiff’s claims and the claims alleged on behalf of the class.” [14] And “adequacy” dictates that a potential class representative must have more than overlapping legal interests; he or she must be free from conflicts of interest with the class vis-à-vis the common questions. Basically, the rules ensure the alignment of critical interests. [15]

Is the rest of Rule 23 superfluous?
No, it matters. To be certified, a class needs to satisfy one of the part (b) categories. Subsection (b)(1) focuses on the potential for inconsistency if the claims were decided separately. In other words, individual lawsuits, as opposed to a single class action, would establish incompatible standards of conduct for the defendant or impair one claimant’s rights, as a practical matter, with respect to the rights of another claimant. Subsection (b)(2) allows a class action for injunctive relief if the party to be enjoined has acted the same with respect to all class members. And subsection (b)(3) ups the ante on the commonality requirement of subsection (a). No longer is a single common issue sufficient; common questions must predominate over individual questions. So if each class member’s claim would require the court to determine issues on an individualized basis—reliance in a fraud case, for example—you can probably forget about class certification under subsection (b)(3).

Who bears the burden of proof at the class certification stage?
Plaintiffs. [16]

Whew. That’s enough review for now. But next time you’re listening to your iPod, shopping for the perfect sweater, or sipping a latte, think about class actions. And some holiday season, if you need a break from the madness, curl up by the fire with Newberg’s 11-volume treatise. It’s a great read, and it goes well with some tunes, your new cardigan, and a coffee. In no time, you’ll be a class-action expert, ready to jump into the burgeoning fray.

Keywords: Class actions, Federal Rules of Civil Procedure, Class Action Fairness Act, Rule 23(a)

Julie Cantor is an associate with Munger, Tolles & Olson LLP in Los Angeles, California.

This article appears in the forthcoming winter 2009 issue of CADS Report, from the Class Actions and Derivative Suits Committee.


End Notes

  1. Alba Conte and Herbert Newberg, § 1:2 Newberg on Class Actions (4th ed. 2002).
  2. Id. § 1:6.
  3. Id. § 1:9.
  4. Id.§ 1:6 n.2 (citing Gen. Tel. Co. v. Falcon, 457 U.S. 147, 159 (1982) (quoting Am. Pipe & Constr. Co. v. Utah, 414 U.S. 538, 553 (1974)).
  5. Id.§ 1:6 n.6 (citing U.S. Parole Comm’n v. Geraghty, 445 U.S. 338, 402–03 (1980)).
  6. Id.§ 3:3 nn. 13, 14 & 16.
  7. Id. § 3:3
  8. Id.
  9. Robidoux v. Celani, 987 F.2d 931, 936 (2d Cir. 1993).
  10. Id.
  11. In re Zyprexa Prod. Liab. Litig._ F.R.D. _, 2008 WL 4097408, at *144 (E.D.N.Y. Sep. 5, 2008) (citing Consol. Rail Corp. v. Hyde Park, 47 F.3d 473, 483 (2d Cir. 1995)).
  12. See Newberg § 3:10.
  13. Id.
  14. Id.§ 3:13.
  15. See, e.g., Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 625 (1997) (“The adequacy inquiry under Rule 23(a)(4) serves to uncover conflicts of interest between named parties and the class they seek to represent.”).
  16. See id. at 614 (“In addition to satisfying Rule 23(a)’s prerequisites, parties seeking class certification must show that the action is maintainable under Rule 23(b)(1), (2), or (3).”) (emphasis added).


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