Class Actions

Class actions were developed as a form of lawsuit in which a group of people claiming similar injuries or damages could sue the same company or organization together. Class actions were originally designed to benefit legitimately aggrieved individuals by allowing them to more easily join together and seek efficient legal relief. Nowadays, however, many class actions are not being prosecuted to seek justice, but rather to essentially shakedown a defendant - hurting businesses and damaging the American economy. read more...

Originally a vehicle for civil rights litigation, class actions quickly spread to such areas as product liability, consumer fraud, and employment discrimination cases. The sheer size of some classes is enormous – thousands, tens of thousands and, in some cases, millions of individual claimants have been brought together in single class actions.

The large size of some classes, and the resulting large potential payouts, make these cases very risky for businesses. As a result, most business defendants seek to settle class actions before risking a trial – even if they have not done anything wrong. Unfortunately, plaintiffs’ lawyers have exploited businesses’ understandable caution to file many questionable or meritless class actions – all with the goal of scoring a jackpot settlement.

These large settlements provide highly lucrative fee awards to plaintiffs' lawyers. Meanwhile their purported "clients," the class members, must fill out paperwork to obtain small, often token, compensation. Moreover, because participation in these settlements is often quite meager, much of the fund remains unclaimed. This can results in what is called a cy pres ("near as possible") distribution – in which the money meant to compensate class members goes instead to third-party charities that have little or no connection to the interest of the injured class. Plaintiffs’ lawyers like cy pres settlements because they can inflate their fees, which are almost always tied to the size of the entire class award (including the cy pres distribution). But the end result is that the supposed beneficiaries of class actions rarely obtain meaningful benefits.

The Class Action Fairness Act of 2005 (CAFA) curbed many abuses by moving most large, interstate class actions to federal courts, where scrutiny of class actions is generally more rigorous and impartial than in state courts. In the 2013 case of Standard Fire Insurance Co. v. Knowles, the U.S. Supreme Court blocked attempts by plaintiffs’ lawyers to circumvent CAFA and keep some cases in state courts. The Supreme Court confirmed the broad reach of CAFA the following year in Dart Cherokee Basin Operating Co. v. Owens. In addition, the Court has issued a number of recent rulings tightening class certification standards, including Dukes v. Wal-Mart and Comcast Corp. v. Behrend.

While CAFA has significantly improved the civil justice landscape in the United States, some problems remain. For example, CAFA did not address the problem of frivolous small-dollar class actions at the state level, which cry out for reform by state legislators. In addition, notwithstanding Supreme Court rulings tightening the requirements for class certification, certain courts of appeals have resisted those dictates. Most notably, the Courts of Appeals for the Sixth, Seventh, and Ninth Circuits have been less rigorous than other circuits in certifying class actions often going out of their way to try to limit the reach of the Supreme Court’s pronouncements. Specifically, a growing chorus of federal courts is certifying classes consisting of plaintiffs who have not been injured in the same way as the purported class representative. This is why ILR supports enactment of the Fairness in Class Action Litigation Act (“FICALA”), which would limit class certification to cases in which the named plaintiff and absent class members suffered the same type of injury.

Some of the other challenges include:

  • Interlocutory appellate review of class certification decisions is discretionary, and only about one quarter of class certification rulings receive immediate appellate review, resulting in coercive settlements that would be avoided by appeals as or right.
  • A handful of federal courts have resisted Congress’s intent to expand federal jurisdiction over interstate class actions by imposing overly restrictive standards for removing class actions to federal court.
  • Federal courts have split on the extent to which statutes of limitation can be tolled for future classes after an initial class action’s certification is denied.
  • A growing number of courts are improperly invoking Federal Rule of Civil Procedure 23(c)(4) to endorse issues classes even though common issues do not predominate as to the case as a whole. These courts have certified the question of liability – for example, whether the product in question was defective – and left individualized damages questions for another day. That was the case in recent decisions issued by the Sixth and Seventh Circuits with respect to moldy washing machines. Issues classes misapply Supreme Court precedent on predominance and endorse the use of an unfair and inefficient procedure that hurts plaintiffs and defendants alike.


In short, CAFA played a vital role in curtailing class-action abuses. However, problems still remain that merit further reforms at both the federal and state levels. Reforms like FICALA would help further restore balance to the current class action landscape. 

Research

The Food Court: Trends in Food and Beverage Class Action Litigation

February 24, 2017 | This paper examines the emerging litigation trends in the food and beverage industry and makes concrete recommendations for reforms, outlining the role that the courts, legislatures, and regulatory agencies all have in restoring common sense to food class action litigation.

The ILR Research Review - Winter 2016

December 28, 2016 | This edition of the ILR Research Review offers valuable insights from ILR's latest research on the increasing use of contingency fee counsel by local governments, asbestos "double dipping," trends in trial lawyer drug and device advertising, and the public's views on data privacy liability and legal reform issues.

All Results for Class Actions

Class Action Reform Bill Would Spotlight "Cottage Industry" of Third-Party Litigation Funders

February 24, 2017 | News and Blog

In a story examining the Fairness in Class Action Litigation Act, the Wall Street Journal's Ben Depietro looks specifically at measures in the legislation that would "require disclosure of third parties funding class actions," and notes the U.S. Chamber's support for the bill. Read More »

In the News Today - February 24, 2017

February 24, 2017 | News and Blog

The American Law Institute is "cooking up new common law rules covering consumer contracts that would give courts an unprecedented range of reasons to invalidate or rewrite contract terms." Read More »

The Food Court: Trends in Food and Beverage Class Action Litigation

Author: Cary Silverman and James Muehlberger, Shook, Hardy & Bacon L.L.P. | February 24, 2017 | Research

This paper examines the emerging litigation trends in the food and beverage industry and makes concrete recommendations for reforms, outlining the role that the courts, legislatures, and regulatory agencies all have in restoring common sense to food class action litigation. Read More »

WSJ Highlights ILR's Support for Fairness in Class Action Litigation Act

February 23, 2017 | News and Blog

A Wall Street Journal article regarding the Fairness in Class Action Litigation Act notes ILR's support for the legislation. Read More »

In the News Today - February 23, 2017

February 23, 2017 | News and Blog

Yesterday's edition of NBC's "Today" show featured a segment about so-called "slack fill" class action lawsuits, to which ILR responded with a media statement pointing to the release of a new report highlighting the growth in food and beverage lawsuits in America. Read More »

In the News Today - February 21, 2017

February 21, 2017 | News and Blog

The Florida Supreme Court's penchant for overturning the legislature's legal reforms was cited as a big reason for Florida's paltry 44th lawsuit climate in 2015. Well, the court has done it again - opting (in a 4-2 ruling) to overturn the Florida legislature's 2013 law that adopted the strict "Daubert" expert evidence standards in the state's courts. Read More »

In the News Today - February 17, 2017

February 17, 2017 | News and Blog

Lawyers, not consumers, are the main beneficiaries of class actions today. Take, for example, a class action lawsuit against a beverage company for allegedly implying that a product called "vitaminwater" was healthy. Read More »

House Bill Would Make Life Much, Much Harder for Class-Action Lawyers

February 16, 2017 | News and Blog

Dan Fisher, senior editor at Forbes, writes on the Fairness in Class Action Litigation Act of 2017 (FICALA) which passed the House Judiciary Committee last night. The bill will eliminate "most of the tactics plaintiff lawyers use to extract large fees for themselves while delivering little or nothing to their clients." Read More »

Make Class Action Lawsuits Benefit People, Not Lawyers

February 16, 2017 | News and Blog

Lawyers, not consumers, are today the main beneficiaries of class actions – a lawsuit structure that was intended to make it easier for injured consumers sharing smaller claims to seek recourse as a group. Read More »

After 12 Years of "Chasing" Former AIG CEO, NY AG Settles Case for "Legal Equivalent of a Lousy T-shirt"

February 13, 2017 | News and Blog

In 2005, former state AG Eliot Spitzer started the civil fraud case against former AIG CEO Hank Greenberg as part of "his revenge campaign against Mr. Greenberg for daring to criticize his prosecutions against business," writes the Wall Street Journal. After 12 years of legal battles, Greenberg finally reached a $9 million settlement with current NY AG Eric Schneiderman. Read More »

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