By Trevor Byrne1
A class action lawsuit is a case brought by one or more individuals on behalf of a larger group of people who have suffered similar injuries caused by the same unlawful conduct. The resolution of the case—either by trial or by settlement—applies to each member of the class. Class actions can be an efficient and effective way to resolve claims of unlawful conduct that harmed a large group of people. Due to the difficulty of filing a lawsuit as an individual, as a practical matter class actions are sometimes the only accountability mechanism for responding to illegal policies or practices.
What are the benefits of a class action?
For plaintiffs, class actions are more practical and efficient than individual lawsuits. When multiple people are harmed by the same conduct, a class action lawsuit allows them to share resources and be represented by the same legal team. Each class member benefits from a joint effort to gather evidence, conduct legal research, and communicate with the defendant.
Class actions can also be more efficient for defendants. Rather than having to defend several lawsuits with similar claims across multiple courts, defendants can litigate similar legal and factual issues in one proceeding. By consolidating several claims into one lawsuit before one judge, class action lawsuits conserve the resources of the judicial system as well.
Class actions are crucial in cases where injured people may not be aware that they are the victims of unlawful activity. For example, if a bank improperly charges hundreds of its customers with overdraft fees, many people may not notice the extra charge. A class action would permit a representative—in this case one or more people harmed by the fees—to bring a lawsuit on behalf of everyone harmed by the bank’s conduct, even those who don’t show up in court themselves.
Because litigation is expensive, class action lawsuits provide a pathway to justice for employees, consumers, and others harmed by unlawful conduct. In many situations, the damages owed to potential class members are often too low to feasibly file an individual lawsuit. For example, if a worker is owed $500 in unpaid overtime wages, the litigation required to recuperate those damages would cost well over the amount that the worker could win in court. But if other employees have been similarly underpaid by the same unlawful policy, they can pool together their claims. If 1,000 employees have each been underpaid by $500, a representative employee can bring a single class action lawsuit to recover the $500,000 that is owed to the entire class. By pooling their claims and increasing the total potential recovery, workers and their attorneys can more likely afford to litigate a case.
Pooling together claims in this manner is also more likely to address the systemic injustices often facing victims of unlawful conduct. Class action lawsuits can directly or indirectly prompt changes to the policies of companies and government agencies. If an employee brings an individual lawsuit against a large employer, the defendant can likely pay out a settlement or jury award from its abundant cash reserves without feeling much pressure to change its ways. But if a class of plaintiffs joins together to bring a multi-million-dollar lawsuit, the employer faces more financial pressure to adopt system-wide changes to address its misconduct. In some class-action lawsuits, the plaintiffs, through settlement or court decree, obtain enforceable injunctions to ameliorate the unlawful conditions or civil rights violations that prompted legal action.
What are the steps of a class action lawsuit?
The first step in any lawsuit is to file a “complaint,” a document filed in court that describes the allegations of unlawful conduct and the relief being sought. In a class action complaint, the filing attorney must describe a proposed “class” of individuals who faced similar injuries from the defendant’s conduct. The attorney must also identify at least one individual to serve as a class representative.
Once the complaint is filed, the class representative must request the court to “certify,” or approve, the proposed class. To grant class certification, the court must ensure that the proposed class meets certain federal or state requirements for a class action lawsuit. For example, in both federal and California cases, the court must ensure that common legal and factual issues affect each member of the class.
Typically, after a class is certified, notice of the class action lawsuit will be provided to each member of the class. Membership in the class is generally automatic, but in some cases, members are given the opportunity to opt out of being in the class. Once the class members are determined, most class members are considered “absent class members” because they do not have an active role in the litigation.
Before trial, many class action lawsuits will settle. In fact, the litigants may agree on a class action settlement at any time, before or after class certification. Before a class action settlement becomes legally binding, it must be approved by the court. The judge will analyze the terms of the settlement to ensure that it provides fair and adequate compensation to the class. The settlement may also involve some prospective obligations for the defendant to change certain policies or practices. The court’s role is to scrutinize the settlement terms and how the settlement came about in order to protect the rights of the absent class members. If no settlement is reached, the outcome of the case will be decided by a judge or jury.
Once a verdict or settlement has been reached, members of the class will be notified. If there is a settlement, class members typically will be given an opportunity to opt out of the agreement. Class members are those who did not opt out, and who will receive benefits from the class action outcome. Typically, the lawyers representing the plaintiffs get a share of the settlement, the class representatives receive an award, and payments are distributed to class members.
What are some challenges to class action lawsuits?
While class action lawsuits have historically been an effective means of bringing together victims of unlawful conduct and holding powerful defendants accountable, recent legal trends have made pursuing class action litigation increasingly difficult.
One phenomenon preventing class actions in many instances is the rise of mandatory arbitration. Arbitration, which we’ve written about previously, is a process in which parties resolve their legal disputes out of court by presenting their case to a neutral third-party decision-maker called an “arbitrator.” As plaintiffs’ advocates have pointed out, it has become increasingly common for corporations to force employees and consumers into contracts that require them to arbitrate any legal claims.2 For example, hiring contracts between employers and new employees often require the employees to arbitrate any legal disputes that may arise. If an employee tries to file a lawsuit in court, the judge will likely refuse to hear the case due to the arbitration agreement. These arbitration agreements often prohibit individuals from pursuing class actions.
The Supreme Court has repeatedly upheld corporations’ ability to force employers and consumers into mandatory arbitration agreements that include class action waivers. In the landmark case AT&T Mobility LLC v. Concepcion (2011)3, a group of consumers attempted to bring a class action lawsuit against AT&T for overcharging them. The California court allowed the class action lawsuit to proceed, holding that AT&T’s arbitration agreement, which disallowed class-wide proceedings, could not be enforced. The Supreme Court overruled the California court’s decision and upheld the arbitration agreement, holding that federal law favoring arbitration overrides any state law that attempts to shield consumers from class action waivers. In American Express Co. v. Italian Colors Restaurant (2013), the Supreme Court upheld an arbitration agreement with a class action waiver again, even though the high cost of individual arbitration effectively made it impossible for the plaintiffs to vindicate their legal rights without a class action.4
Another barrier to class action lawsuits is the requirement of “commonality.” Under the commonality standard, a court certifying a class must determine that the class members have similar legal claims that can be resolved in a single lawsuit. Due to recent Supreme Court precedent, the requirement of commonality can be a significant hurdle to class action lawsuits, especially for employees trying to sue a large corporation for discriminatory practices. For instance, in the landmark case Wal-Mart v. Dukes (2011), a nationwide class of female Wal-Mart employees sued the company for widespread pay disparities based on gender. To support their claims, the employees provided statistics revealing widespread gender discrimination. Despite this evidence, the Supreme Court determined that the class lacked commonality. The Court reasoned that gender discrimination was occurring not as a result of a company-wide policy that affected all women the same, but rather as the result of individual supervisors’ discretion. Following the Dukes holding, large-scale discrimination class actions against corporations have been difficult to certify when company decision-making is highly decentralized.
Is a class action right for me?
Despite the setbacks caused by the rise of arbitration agreements and many courts’ defense of them, class actions remain an important means of holding corporations accountable for causing widespread harm. If you have been harmed by a corporate policy or practice that similarly affects other people, a class action may be possible. Call us at 888-686-1918 to speak with one of our experienced class action attorneys today.
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1 Trevor Bryne is a third year law student at Stanford Law School as of Spring 2023. Trevor recently completed a stint as a Law Clerk at Valerian Law.
2 Katherine V.W. Stone & Alexander J.S. Colvin, The Arbitration Epidemic, Econ. Pol’y Inst. (Dec. 7, 2015), https://www.epi.org/publication/the-arbitration-epidemic/#epi-toc-10.
3 563 U.S. 333 (2011).
4 570 U.S. 228 (2013).
5 564 U.S. 338 (2011)