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 defendants 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 defendanthurting 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 enormousthousands, 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 trialeven if they have not done anything wrong. Unfortunately, plaintiffs’ lawyers have exploited businesses’ understandable caution by filing many questionable or meritless class actionsall with the goal of scoring a jackpot settlement.

These large settlements provide highly lucrative contingency 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 compensation remains unclaimed. This can results in what is called a cy pres ("near as possible") distribution—in which 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 number of federal courts are certifying classes consisting of plaintiffs who have not been injured in the same way as the purported class representative, and even some who have not been injured at all. The cases have become known as “no injury” class actions.

Article III of the Constitution requires that a suing party must have actually suffered some injury or threat of injury that can be traced to the actions of the defendant at issue in the case, in order to have “standing.” But presently, a person who has a problem with a product or service is often allowed to sue on behalf of all the other people who bought the product or paid for the service, even when these others have not been injured in any way and might be perfectly happy with what they paid for. This clear violation of constitutional standing requirements is used as a tactic to enlarge putative classes in the beginning stages of a class action suit, which often pressures settlements and unjustly inflates plaintiffs’ attorneys’ contingency fees. In May 2016, the Supreme Court in Spokeo Inc. v. Robins somewhat addressed this issue, ruling that the Ninth Circuit Court “used the wrong legal analysis when it allowed” a class action against search engine Spokeo to move forward. The plaintiff in Spokeo had argued that the search engine violated the Fair Credit Reporting Act when it inaccurately published that he was a wealthy married man with children.

This is why ILR supports enactment of the Fairness in Class Action Litigation Act of 2017 (FICALA).  FICALA will make a number of significant changes to the class action litigation system:

  • Addition of an ascertainability standard, which would require that the members of a class be readily identifiable as a prerequisite to class certification. This fix would also require lawyers to demonstrate that they can actually deliver actual relief to class members.
  • Mandated disclosure of third party litigation funding arrangements in all class actions, which would provide much needed transparency to what are currently secret agreements where “investors” pay plaintiffs’ counsel money up front in exchange for a right to receive a portion of whatever award class members might receive.
  • Elimination of “no injury” class actions by requiring that plaintiffs’ lawyers demonstrate that each class member has suffered an injury of the same type and scope as the class representative who brought the lawsuit.
  • Reigning in of issues classes, in which courts certify only a particular issue (just a sliver of the case) for class treatment (a clear end run around Supreme Court mandated fairness requirements), by making clear that federal courts should not certify a proposed issues class unless the entire claim for relief qualifies for class treatment.
  • Establishing a rule in all class actions that discovery may not proceed until threshold motions challenging the validity of the claims are resolved—just as Congress has already mandated in securities class actions. This measure would help curb aggressive and abusive discovery methods used to coerce settlements.
  • Requiring federal courts to hear appeals from class certification rulings.
  • Mandating disclosure of the circumstances under which each named plaintiff became involved in a class action, in order to root out any potential conflicts of interest between class counsel and class members.  Further, persons having familial or employment relationships with counsel would be prohibited from acting as class representatives.


In short, CAFA played a vital role in curtailing class action abuses. However, problems still remain that merit further reforms such as those envisioned by FICALA. Reforms like FICALA would help further restore balance to the current class action landscape.

FICALA would also address mass tort multidistrict litigation (MDL) proceedings by addressing many of the significant abuses that turn MDLs into a mechanism of extracting strong-armed settlements from defendants, who are many times effectively deprived of their day in court.

Research

Engineered Liability: The Plaintiffs' Bar's Campaign to Expand Data Privacy and Security Litigation

April 19, 2017 | As data breaches are becoming more commonplace, the plaintiffs' bar is engineer a staggering expansion of liability in the areas of privacy and data security. Class action lawyers are pursuing data privacy cases and amassing fortunes even where no one has been harmed. This paper examines the data privacy and security legal landscape, plaintiffs' bar tactics, major cases and settlements, and a suggested framework for reform.

Torts of the Future: Addressing the Liability and Regulatory Implications of Emerging Technologies

March 29, 2017 | Torts of the Future examines the emerging technology sectors of autonomous vehicles, commercial drones, private space exploration, the "sharing economy," and the Internet of Things, and assesses the existing regulatory and litigation environments and future liability trends for each. The paper also draws from experience in each area to present guiding principles for addressing the liability and regulatory implications of emerging technologies.

All Results for Class Actions

Chamber Praises House For Class Action Reform; Focus is Now on the Senate

March 12, 2002 | Press Release

WASHINGTON, D.C. - The United States Chamber of Commerce praised the U.S. House of Representatives today for passing the Class Action Fairness Act, by a vote of 233 to 190, and urged the Senate to follow suit. "For too long, America's legal system has made trial lawyers richer at the expense of innocent consumers, shareholders and businesses," said James M. Wootton, president of the Institute for Legal Reform, an affiliate of the U.S. Chamber. "Today lawmakers have sent a strong signal that the days of class action abuse are numbered." Read More »

Chamber Urges Class Action Reform

February 05, 2002 | Press Release

WASHINGTON, D.C., Feb. 6, 2002 -- The United Sates Chamber of Commerce today urged the House Judiciary Committee to pass the Class Action Fairness Act (H.R. 2341) to end abuses of our legal system."Abusive and frivolous lawsuits are stunting economic growth and job creation," said James M. Wootton, president of the Institute for Legal Reform, an affiliate of the U.S. Chamber. "The Class Action Fairness Act will restore balance and fairness to our civil justice system while enhancing and protecting the rights of consumers and businesses alike." Read More »

Chamber Applauds Senate Introduction Of Bill Curtailing Class Action Abuses

November 15, 2001 | Press Release

Washington, D.C., Nov. 16, 2001 - The U.S. Chamber of Commerce today applauded introduction of a Senate bill - S. 1712, "The Class Action Fairness Act of 2001" - that would allow complex national class actions to be tried in federal instead of state courts, where the rules are the same for all Americans. Read More »

Chamber Urges Congress to Pass Class Action Reform

June 26, 2001 | Press Release

Washington, D.C. - The United States Chamber of Commerce today applauded the introduction of legislation that would reform the nation's class action system to prevent abusive and frivolous lawsuits from overloading the legal system and to ensure that all parties are treated fairly. Read More »

Chamber Urges Review of Illinois Class Action Suit

January 23, 2000 | Press Release

WASHINGTON, D.C., Jan. 24, 2000 - The United States Chamber of Commerce warned that overly lenient state courts are becoming magnets for class action litigation, in an amicus brief filed today in the Supreme Court of Illinois on behalf of State Farm Mutual Automobile Insurance Company. State Farm was hit with a billion-dollar judgment after a state trial court certified a class action suit involving nearly five million plaintiffs in 48 states.< Read More »

Class Action Reform Vital to Business Says United States Chamber of Commerce

September 22, 1999 | Press Release

WASHINGTON, D.C., Sept. 23, 1999 - The Interstate Class Action Jurisdiction Act currently before Congress is essential to address the frivolous lawsuits currently undermining both small and large businesses, according to the United States Chamber of Commerce. "This bill will stop abusive cases that trample the rights of defendants and do little more than line the pockets of unscrupulous trial lawyers," said U.S. Chamber of Commerce Executive Vice President Bruce Josten. "HR 1875 is bi-partisan lawmaking at its best." Read More »

Chamber of Commerce Endorses House Action on Class Action Reform

September 22, 1999 | Press Release

WASHINGTON, D.C., Sept. 23, 1999 - The Interstate Class Action Jurisdiction Act (H.R. 1875) passed the House of Representatives 222 to 207 to the applause of small and large businesses across the country, according to the United States Chamber of Commerce. Read More »

In the News Today - May 15, 2014

December 31, 1969 | News and Blog

Kashi has agreed to pay $5 million to settle a lawsuit claiming its products contained unnaturally processed and synthetic ingredients. Read More »

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