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class action

At equity, a "bill of peace" was available that allowed the representative of a group to secure binding judgment for that group if (1) the number of persons involved was too large for joinder, (2) the members of the group possessed a joint interest in the question adjucated, and (3) the named parties adequately represented the interests of those who were not present. Modern class actions, which now allow class actions at law, are governed by Fed. R. Civ. P. 23 and accompanying case law. Class actions afford a scattered group of individual plaintiffs to jointly proceed against a defendant, so that the judgment reached in a class action will preclude class members' later individual suits.

(Note: all citations in bold come from Fed. R. Civ. P. 23)

Permissibility of a class action

(a) Prerequisites to a Class Action.
One or more members of a class may sue or be sued as representative parties on behalf of all only if...
Usually, "numerosity" is sufficient by itself to satisfy this section; however, with a smaller class, the requirements of this section may depend on the relative size of the plaintiff's claims (smaller claims favoring class action, given the decreased likelihood of individual suit) and the geographic location of the parties.
Courts give this section a "permissive application," and even one significant common question is sometimes sufficient. 7A Wright Miller and Kane Fed. Practice and Procedure Civil 3d 1763 (2005). The critical standard is whether "differences in the factual background of each claim will affect the outcome of the larger issue." [Califano v Yamasaki]. Note that some individualized injures may defeat a finding of commonality. See, e.g., [Donaldson v Microsoft Corp] (denying certification in employment discrimination suit where plaintiff alleged individualized discrimination)
This section may be redundant given Fed. R. Civ. P. 23(a)(3) (above). Typicality is usually found "when each class member's claim arises from the same course of events, and each class member makes similar legal arguments to provide the defendant's liability." [Marisol v Giuliani].
Rule 23(a)(4) invokes due process concerns under Amendment V and Amendment XIV, but the law on the significance of the adequacy requirement is "remarkably unsettled." The adequacy requirement "serves to uncover conflicts of interest between named parties and the class they seek to represent." [Amchem Products Inc v Windsor] . Notice also that a class member bound by a previous judgment can collaterally attack the adequacy of representation. [Hansberry v Lee]

Types of class actions

Note that a plaintiff must attempt to get a class certified in one of the three following categories; the plaintiff may thus have a strategic incentive to avoid 23(b)(3) suits, which have higher requirements for notice and opt-out capabilites.

(b) Class Actions Maintainable.
An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:
This section is the most commonly used class action provision, often in civil rights, employment discrimination, consumer, and environmental suits. Its primary purpose is to change the defendant's behavior prospectiveyl and not to provide individual compensation for individual injuries suffered. Note tthat the defendant's conduct need only be "generally applicable" to the class; there is no requirement that the conduct be damaging or offensive to every class member.

On the theory that an injunctive class is cohesive, notice is not deemed essential. [Wetzel v Liberty Mutual Insurance Co].
This section is typically used to adjucate damage actions on behalf of a large class, such as actions arising out of mass torts. Rule 23(b)(3) classes are more appropriate where the class' interests are more similar or unified.

Matters such as the contentiousness of the class, the number of class members participating or intervening, or the onerousness of the Fed. R. Civ. P. 23(c)(2) notice requirement are to be considered in determining whether the suit is "manageable" under Fed. R. Civ. P. 23(c)(3)(D). The requirement of "predomination" is unclear, and may mean either a mechanical counting of whether a majority of issues are common, or whether the most important issues in the suit are common.

Note that in class actions under Fed. R. Civ. P. 23(b)(3), each plaintiff must satisfy jurisdictional amount-in-controversy requirements. [Zahn v Harris]. Also notice that the due process concerns of Phillips Petroleum Co v Shutts apply most clearly to actions under Fed. R. Civ. P. 23(b)(3)

Defining a class


(c) Determining by Order Whether to Certify a Class Action; Appointing Class Counsel; Notice and Membership in Class; Judgment; Multiple Classes and Subclasses.
(1)...
(B) An order certifying a class action must define the class and the class claims, issues, or defenses, and must appoint class counsel under Rule 23(g).
(C) An order under Rule 23(c)(1) may be altered or amended before final judgment.

"A proposed class definition must be precise, objective, and presently ascertainable," and "must not depend on subjective criteria or the merits of the case or require extensive factual inquiry to determine who is a class member." [In re Copper Antitrust Litigation]; see, e.g., [Rink v Cheminova, Inc] (rejecting definition of class as "all persons living or employed in certain FL counties during a certain date who were exposed to malathion-based insecticide" as lacking "sufficient precision or specificity")

Note that certification also effectively determines the substantive issues that will be considered under Fed. R. Civ. P. 23(c)(1)(B) (above).

The possibility and likely form of settlement is relevant to a district court's determination to certify or not to certify a particular class. [Amchem Products Inc v Windsor]. District courts should apply the considerations of Rule 23(a) and 23(b) -- including the possibility of inadequate representation by class representatives during settlement, the disparity of the different class members' financial interests during settlement, and whether the different class members' legal claims under settlement are sufficiently common (that is, there is a "predominating" question under 23(b)(3)) -- when deciding whether to certify a class for the purposes of settlement rather than trial. [Amchem Products Inc v Windsor]. Note that Amchem specifically does NOT require (or allow) a mere review of whether the settlement reached was "fair."

Note that the court's power under 23(c)(1)(C) to amend certification before final judgment is "critical, because the scope and contour of a class may change radically as discovery progresses and more information is gathered about the nature of the putative class members' claims." [Prado-Steiman v Bush].

Note also that both plaintiffs and defendants may be certified as a class. [Hansberry v Lee].

Class actions and due process rights


(2)...
(B) For any class certified under Rule 23(b)(3), the court must direct to class members the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort...

Generally, 23(b)(1) and 23(b)(2) classes require groups to participate, rather than to exit, in order to make the class more cohesive; in comparison, 23(b)(3) favors exit over voice because a cohesive class is less necessary.

Note that notice is not essential for classes under Fed. R. Civ. P. 23(b)(2) on the theory that an injunctive class is cohesive. [Wetzel v Liberty Mutual Insurance Co]. Notice is also discretionary for classes certified under Fed. R. Civ. P. 23(b)(1).

Absentee members of a class may be bound by a judgment affecting the class "where they are in fact adequately represented by parties who are present, or where they actually participate in the conduct of the litigation in which members of the class are present as parties, or where the interest of the members of the class, some of whom are present, is joint." [Hansberry v Lee] Note, however, that persons with different, especially opposite or adversarial, interests may not be bound to a class judgment under Amendment XIV. [Hansberry v Lee] (refusing to bind black family seeking to buy house in Woodlawn by class action brought by community members who signed a racially restrictive covenant).

Note that the adequacy of representation of a class may be collaterally attacked if (1) the trial court did not correctly determine that the representative would adequately represent the class (2) the class representative did not in fact adequately protect the interests of the class. [Gonzales v Cassidy]. Furthermore, an absent class member could collaterally attack the power of the court (through personal jurisdiction) to rule on the class dispute. Cf. [Phillips Petroleum v Shutts].

Serious principal-agent problems may arise through the adequacy of representation. See, e.g. [Amchem Products Inc v Windsor] (rejecting named plaintiff's certified class for purposes of settlement as inadequately representative). Notice, that for example, each class member's interest may be so small as to make monitoring class representatives' actions inefficient. Courts may also not be able to efficiently and equitably manage the creation and representation of class actions. At the same time, if attorneys get a large part of the judgment, the deterrence effect of tort suits may still be served. (Note, however, that attorneys may still collusively settle suits in order to save effort.)

(Note also that the defendant [Hansberry v Lee] successfully used a collateral attack against the adequacy of representation in a previous class action by the landowners signing the restrictive covenant). Note also that courts are split on whether members who opted out of a class judgment may use nonmutual offensive collateral estoppel in a later actoin.

(e) Settlement...
(4)
(A) Any class member may object to a proposed settlement, voluntary dismissal, or compromise that requires court approval under Rule 23(e)(1)(A).
(B) An objection made under Rule 23(e)(4)(A) may be withdrawn only with the court's approval.

(g) Class Counsel.
(1) Appointing Class Counsel.
(A) Unless a statute provides otherwise, a court that certifies a class must appoint class counsel.
(B) An attorney appointed to serve as class counsel must fairly and adequately represent the interests of the class.

(h) Attorney Fees Award.
In an action certified as a class action, the court may award reasonable attorney fees and nontaxable costs authorized by law or by agreement of the parties as follows:

A lawyer may not solicit victims of a disaster so as to gain appointment as class counsel. [Ohralik v Ohio State Bar Assn]. However, soliciting potential clients is not only permissible but constitutes protected political expression under Amendment I where the lawyer seeks to serve as counsel on a politically motivated suit. [In re Primus] (allowing NAACP lawyers to solicit clients for civil rights suits).

Note that in order to address principal-agent problems (discussed above), 23(h) allows courts to set "reasonable" attorney's fees, possibly as a check on unrepresentative or unscrupulous attorney behavior. At the same time, if attorneys get a large part of the judgment, the deterrence effect of tort suits may still be served. (Note, however, that attorneys may still collusively settle suits in order to save effort.)


Jurisdiction
(2) The district courts shall have original jurisdiction of any civil action in which the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs, and is a class action in which--
(A) any member of a class of plaintiffs is a citizen of a State different from any defendant;
(B) any member of a class of plaintiffs is a foreign state or a citizen or subject of a foreign state and any defendant is a citizen of a State; or
(C) any member of a class of plaintiffs is a citizen of a State and any defendant is a foreign state or a citizen or subject of a foreign state.
(3) A district court may, in the interests of justice and looking at the totality of the circumstances, decline to exercise jurisdiction under paragraph (2) over a class action in which greater than one-third but less than two-thirds of the members of all proposed plaintiff classes in the aggregate and the primary defendants are citizens of the State in which the action was originally filed based on consideration of--
(A) whether the claims asserted involve matters of national or interstate interest;
(B) whether the claims asserted will be governed by laws of the State in which the action was originally filed or by the laws of other States;
(C) whether the class action has been pleaded in a manner that seeks to avoid Federal jurisdiction;
(D) whether the action was brought in a forum with a distinct nexus with the class members, the alleged harm, or the defendants;
(E) whether the number of citizens of the State in which the action was originally filed in all proposed plaintiff classes in the aggregate is substantially larger than the number of citizens from any other State, and the citizenship of the other members of the proposed class is dispersed among a substantial number of States; and
(F) whether, during the 3-year period preceding the filing of that class action, 1 or more other class actions asserting the same or similar claims on behalf of the same or other persons have been filed.
(4) A district court shall decline to exercise jurisdiction under paragraph (2)--
(A)(i) over a class action in which--
(I) greater than two-thirds of the members of all proposed plaintiff classes in the aggregate are citizens of the State in which the action was originally filed;
(II) at least 1 defendant is a defendant--
(aa) from whom significant relief is sought by members of the plaintiff class;
(bb) whose alleged conduct forms a significant basis for the claims asserted by the proposed plaintiff class; and
(cc) who is a citizen of the State in which the action was originally filed; and
(III) principal injuries resulting from the alleged conduct or any related conduct of each defendant were incurred in the State in which the action was originally filed; and
(ii) during the 3-year period preceding the filing of that class action, no other class action has been filed asserting the same or similar factual allegations against any of the defendants on behalf of the same or other persons; or
(B) two-thirds or more of the members of all proposed plaintiff classes in the aggregate, and the primary defendants, are citizens of the State in which the action was originally filed.
...
(6) In any class action, the claims of the individual class members shall be aggregated to determine whether the matter in controversy exceeds the sum or value of $5,000,000, exclusive of interest and costs.
28 USC 1332(d) (the "Class Action Fairness Act of 2005", Pub.L. 109-2 (2005))

A class action may be removed to a district court of the United States in accordance with section 1446 (except that the 1-year limitation under section 1446(b) shall not apply), without regard to whether any defendant is a citizen of the State in which the action is brought, except that such action may be removed by any defendant without the consent of all defendants.
28 USC 1453(b) (also from the "Class Action Fairness Act of 2005", Pub.L. 109-2 (2005))
Cf 28 USC 1441 for removal of non-class action suits


JURISDICTION OVER CLASS ACTIONS
Determinations of citizenship for the purposes of diversity jurisdiction under the "complete diversity rule" should be based on the citizenship of the named parties only. [Supreme Tribe of Ben-Hur v Cauble]. This rule has been abrogated by the "Class Action Fairness Act of 2005" for class actions seeking >$5M damages.

Separate and distinct claims by different class members may not be aggregated for the purposes of meeting jurisdictional amount-in-controversy requirements. [Snyder v Harris]. Rather, aggregation is permitted where "(1) a single plaintiff seeks to aggregate two or more of his claims against a single defendant and (2) cases in which two or more plaintiffs united to enforce a single title or right in which they have a common or undivided interest." [Snyder v Harris]. Furthermore, in class actions under Fed. R. Civ. P. 23(b)(3), each plaintiff must satisfy jurisdictional amount-in-controversy requirements. [Zahn v Harris].

Note however, that 28 USC 1367's rules on federal supplemental jurisdiction effectively overrides [Zahn v Harris], thus requiring only minimal diversity between the parties in a class action where supplemental jurisdiction is used.
Absent class members need not satisfy the "minimum contacts test" of International Shoe Co v Washington; rather, to exercise personal jurisdiction over an absent class member a court must comply with "minimal procedural due process protection," including adequate representation, notice, an opportunity to be heard, and an opportunity to opt-out.. The "opt-out" procedure commonly used for absent class members satisfies such due process requirements. Phillips Petroleum Co v Shutts. Note that Phillips Petroleum Co v Shutts may only apply to Fed. R. Civ. P. 23(b)(3) actions; for example, 23(b)(1) and 23(b)(2) classes have no opt-out option.

Furthermore, an absent class member can collaterally attack the power of the court (on personal jurisdiction or service of process grounds) to rule on the class dispute. Cf. [Phillips Petroleum v Shutts].
A state must have a "significant contact or aggegation of contacts" to the claims asserted by a plaintiff class in order to apply its own law. Phillips Petroleum Co v Shutts (quoting [Allstate Ins Co v Hague]. Factors to be considered include the state's interes and the expectation of the parties involved. See generally governing law


Cases

[Hansberry v Lee]
Phillips Petroleum Co v Shutts (Amendment XIV restrictions on personal jurisdiction satisfied by 'opt-out' requirement for known potential class members, rather than suggested 'opt-in' method)
[Amchem Products Inc v Windsor]










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