Class Action

When properly used, class action lawsuits can be a valuable part of the legal system. Class action lawsuits were originally designed to benefit consumers by allowing them to more easily join together and seek efficient legal relief as a group or “class” of individuals who have all been affected by a single event or circumstance. In recent years, however, the class action system has become severely abused.

Trial lawyers have used the class action legal mechanism to joining together large and diverse groups of claimants as a means of extracting huge settlements or court awards from defendants. Through the practice of “forum shopping,” plaintiff lawyers could file their suits in local plaintiff-friendly courtrooms that had little regard for defendants’ right to due process.

And, while businesses often are the losers in state class actions, many plaintiffs do not end up as the winners. A number of high-profile cases resulted in class members "winning" coupons worth a few dollars while their lawyers have won millions (See Class Action Calamities). A RAND Institute for Civil Justice study of state class action settlements found that attorneys' fees and administrative costs account for nearly half of settlements or awards.

Congress Acts to Stem Class Action Abuses

To help correct these abuses of the class action system, Congress passed the Class Action Fairness Act of 2005, signed into law by President Bush on February 18, 2005 (Read the ILR press release). This bill is designed to help curb forum shopping by moving many large class actions out of state courts and into the federal court system (See the legislation). It is also helping to ensure that settlements are in the best interest of the class members – as opposed to the best interest of their attorneys.

The Class Action Fairness Act is a landmark win in the fight for legal reform. However, we are continuing to monitor the class action system to ensure that this new law is being applied and to detect and address any new abuses of the system.