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

The ILR Research Review - Spring 2017

May 08, 2017 | This edition of the ILR Research Review offers valuable insights from ILR's recent research on the latest trends in litigation and the tactics and strategies entrepreneurial plaintiffs' firms are using to expand their business models and bring more lawsuits in local, state, federal, and international courts.

Watching it Work: The Impact of Ohio's Asbestos Trust Transparency Law on Tort Litigation in the State

May 04, 2017 | This report analyzes the impact that Ohio's 2013 asbestos trust transparency law has had on asbestos tort litigation in the state and concludes that trust transparency reforms appear to have accomplished the goal of ensuring transparency and fairness without causing delays in case resolution.

All Results for Class Actions

7th Circ. Halves Attys' Fees In Sears Washer Class Action

August 15, 2017 | News and Blog

The Seventh Circuit drastically cut the award to six law firms that worked on a class action against Sears and Whirlpool over malfunctioning washing machines, according to Law360. The judge said the fees needed to be closer to the amount awarded to the class. Read More »

In the News Today - August 10, 2017

August 10, 2017 | News and Blog

U.S. law firm Quinn Emmanuel wanted to sue MasterCard for 14 billion British pounds on behalf of roughly 70 percent of the U.K. population, which was supposedly overcharged over a 16-year period due to MasterCard's interchange-fee policy. A U.K. court did the logical thing and rejected the case. Read More »

In the News Today - July 21, 2017

July 21, 2017 | News and Blog

The U.S. Supreme Court has set Oct. 2 as the date for oral arguments in a closely watched battle over the legality of arbitration agreements requiring workers to waive their rights to file class or collective actions against their employers, according to a notice filed Wednesday Read More »

"Broadening Effort" by the Trump Administration to Rein in Class Actions

July 07, 2017 | News and Blog

The Trump administration and the U.S. Justice Department have made several steps toward reining in class action legislation and that work may have an impact "beyond a trio of challenges the U.S. Supreme Court is set to hear this fall," writes Law.com. Read More »

In the News Today - June 28, 2017

June 28, 2017 | News and Blog

MyPillow, a company that offers a pillow it says will stay fluffy and cool through the night, is defending itself against claims that its special offers violate the consumer protection laws of several states. Plaintiffs' lawyers have filed at least six class actions from October to April against the company. Read More »

In the News Today - June 15, 2017

June 15, 2017 | News and Blog

Bringing TPLF ‘Out of the Shadows': ILR wants to "bring third-party litigation funding arrangements out of the shadows," writes attorney Kendall W. Harrison. Read More »

In the News Today - May 22, 2017

May 22, 2017 | News and Blog

On Wednesday of this week, 11 D.C. Circuit Court judges will hear arguments over the constitutionality of the Consumer Financial Protection Bureau (CFPB). At the "heart of the legal dispute" is whether President Trump can fire CFPB Director, Richard Cordray, as PHH Corp, a mortgage lender, is currently challenging the constitutionality of the CFPB's structure. Read More »

Class Action Ascertainability Case May Head to Supreme Court

May 09, 2017 | News and Blog

Ascertainability has been a particularly hot controversy since 2015, when the 7th Circuit roundly rejected the 3rd Circuit's conclusion that classes cannot be certified unless plaintiffs offer a "reliable and administratively feasible" way to determine who's in the class, writes Reuters. Read More »

The ILR Research Review - Spring 2017

May 08, 2017 | Research

This edition of the ILR Research Review offers valuable insights from ILR's recent research on the latest trends in litigation and the tactics and strategies entrepreneurial plaintiffs' firms are using to expand their business models and bring more lawsuits in local, state, federal, and international courts. Read More »

Watching it Work: The Impact of Ohio's Asbestos Trust Transparency Law on Tort Litigation in the State

Author: Maryellen K. Corbett and Matthew M. Mendoza, Calfee, Halter & Griswold LLP | May 04, 2017 | Research

This report analyzes the impact that Ohio's 2013 asbestos trust transparency law has had on asbestos tort litigation in the state and concludes that trust transparency reforms appear to have accomplished the goal of ensuring transparency and fairness without causing delays in case resolution. Read More »

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