Class Action Lawsuits Flashcards
Requirements for Class Action Certification in Federal Court
Until a class action lawsuit is “certified”, it is not actually a class action – instead, it is a “putative” class action (sort of a “class action wannabe”).
Passive class members will not be bound by a judgment in the case unless and until the lawsuit is certified; until then, only the active litigants (i.e., the class reps and the class opponents) can be bound by a judgment in the case.
FRCP 23 is designed to provide the procedural safeguards required by Hansberry.
To be certified as a class action in federal court, a case must:
- Conform to the four requirements of FRCP 23(a); and
- Fit into one of the categories in FRCP 23(b); and
- Satisfy two additional common law requirements.
The common law requirements
- Class must be capable of definition – it must describe a group that genuinely exists with enough clarity that the court can objectively determine who is and who is not a member.
- The class representative must be a member of the class. The class can’t “hire” someone outside the class to be the class rep.
Rule 23(a) requirements
- Numerosity: Class membership must be sufficiently large as to render joinder of all members as active parties in the lawsuit impracticable.
- No threshold number provided by the rule – court must use its discretion to determine if this requirement is satisfied.
- A class of 100 or more will meet this test. A class of 25 or less most likely will not. When the number of members falls in between, the probability of meeting this requirement varies from one judicial district to another, and with the case.
- Court will look at other factors, such as the viability of the case in the absence of the class action, and the practical ability of the class members to join together under Rule 20.
- Commonality: Must be common questions of law or fact among the class members the resolution of which will advance the litigation.
- Can be only a SINGLE common issue, but resolution of that issue must be central to the validity of all the claims, such that the success or failure of the class members’ claims depends on the resolution of this issue.
- Common questions need not predominate to satisfy this requirement; there can be individual issues among class members.
- Courts have generally taken a liberal attitude toward this requirement – close questions are resolved in favor of finding common questions.
- You are looking for common QUESTIONS of fact or law here, not merely common FACTS. For example, in a product defect case, this requirement is NOT satisfied by pointing to the FACT that all class members own the product. It WOULD be satisfied by identifying as a common question whether or not the product is defective.
- Typicality: The claims of class reps must be typical of the claims of the class as a whole, and not merely of some portion of the class. You must be able to show that class representative stands, in significant respects, in the same shoes as all the class members.
- The claims of the class need not be factually identical – substantial commonality is sufficient. For example, differences in damages among the class members generally will not defeat typicality, unless the differences are extreme.
- This requirement is not demanding – you must merely show that the class rep’s claim has the same essential characteristics as the claims of the class.
- Adequacy of Representation: Must show two things – that the class rep is adequate to represent the class, and that class counsel is adequate.
- Class rep cannot have antagonistic or conflicting interests with members of the class, and must have sufficient interest in the outcome of the case to ensure vigorous advocacy.
- Class counsel must be competent, experienced, and qualified to litigate the class action.
- FRCP 23(g) provides the court with guidance in assessing adequacy of class counsel.
The court must consider:
- Counsel’s work in identifying or investigating potential claims in the action;
- Counsel’s experience in handling class actions, other complex litigation, and claims asserted in the action.
- Counsel’s knowledge of applicable law. Resources counsel will commit to representing class.
- Any other matter pertinent to counsel’s ability to fairly and adequately represent the class.
FRCP 23(b) Requirements
In addition to satisfying the 23(a) requirements and the two common law requirements, the class action must fit into at least one of the following 23(b) categories.
- Note: The 23(b)(1) and (b)(2) classes are “mandatory” classes, which means that if the class is certified, everyone fitting the class description must be a member of the class – there is no declining or backing out.
- The 23(b)(3) class is an “opt out” class, which means that class members must be given the opportunity to “opt out” of the class, and if they do so, they won’t be a part of the class action lawsuit and won’t be bound by the judgment.
23(b)(1) – The Prejudice Class
The 23(b)(1) class action categories mirror two of the three categories for “required party” under FRCP 19(a).
Focuses on the negative effects (the prejudice) of NOT certifying the class on either the class opponent or the passive class members.
A class action need fit into only one of these categories to be certified under 23(b)(1).
23(b)(1)(A): Risk of Inconsistent Judgments leading to Incompatible Standards of Conduct for Class Opponent
o Court will ask – If the class is not certified and passive class members instead sue individually (so that there is more than one lawsuit and judgment), might the multiple judgments subject the class opponent to incompatible standards of conduct?
o Applies where lawsuit involves complex issues requiring complex injunctive relief.
o Note: A class can fall under 23(b)(1)(A) ONLY if it is seeking equitable (injunctive) relief. A class opponent can’t be subjected to incompatible standards of conduct in a class seeking only money damages.
23(b)(1)(B): Risk of Practical Impairment of Passive Class Members’ Interests
o Certification is permitted here when piecemeal litigation involving individual class members may produce injustice for class members who are not parties to the individual litigation.
o In contrast with (b)(1)(A), the concern here is for the putative class members, and whether failure to certify will create a probability that individual members will be unable to participate in recovery of limited resources in a manner that is fair to all.
- Applies where numerous claimants seek relief from a limited fund and individual lawsuits might deplete the fund before all claimants have a chance to obtain a fair share.
23(b)(2) – Classes Seeking Final Equitable Relief
Limited to cases seeking injunctive or declaratory relief – not money damages.
In contrast to 23(b)(1)(A), the type of relief sought here is simple injunctive relief not likely to lead to inconsistent obligations on the class opponent in the absence of class certification.
o Applies when the class opponent has acted or refused to act on grounds that are generally applicable to the entire class, making injunctive relief appropriate.
Example: A group of workers claims employer has denied them promotion because of their national origin, in violation of federal law. They seek injunction compelling employer to promote them.
o A plea for monetary relief is NOT PROHIBITED, but it must be secondary to (less important than) the plea for injunctive relief.
SCt said in Wal-Mart that monetary relief is allowed only if it is “merely incidental” to the injunctive relief. Easily calculable, no individualized inquiry, must naturally flow from the granting of injunctive relief.
23(b)(3) – Predominance of Common Legal or Factual Questions
This is the only class action category into which a “pure” money damages class action (i.e., not a limited fund scenario as described in 23(b)(1)(B)) can fall, but the requirements of the category must be satisfied to permit certification.
Two requirements of 23(b)(3) - Predominance of Common Legal or Factual Questions
Common issues among the class must predominate over individual interests of the class members.
- The “predominance” requirement is far more demanding than the commonality requirement of FRCP 23(a). It essentially supersedes that requirement.
o Class adjudication is the “superior means” (i.e., the BEST approach) of adjudicating the controversy.
Court considers four factors in determining this:
- Individual interest in separate actions: Court will evaluate the desire, if any, of individual class members to pursue their own separate actions, rather than to pursue their claims as part of a class.
- Pending litigation already filed by class members: Court will determine whether individual class members have already begun to pursue their own cases; it may be hard to justify certification of a class based on the notion of judicial economy if a substantial part of the class is already pursuing or wants to pursue their own actions.
- Desirability of concentrating the litigation in one forum: For example, if the amount of damages sustained by each class member is very small, then no case may go forward on an individual basis due to the cost of litigation – you may NEED the class action device in order to hold the defendant accountable.
- Difficulties in managing case as a class action: Court can refuse to certify if too many administrative difficulties exist, such as internal disputes among class members, problems of notification of class members, impact of state law variations.
Rule 23(c) - Court must certify the class
Provides that the court must – at an early practicable time – determine by order whether to certify the class.
The class certification decision isn’t necessarily final - it can be revisited by the court during the litigation.
Note: Plaintiff must file the motion for class certification relatively early in the case (for example, three months in). If the court DENIES certification, that does not constitute a dismissal of the case – instead, the case continues with only the class rep(s) and class opponents as parties. Plaintiff may seek certification again at a later time, or the case may be resolved through settlement or voluntary dismissal if it is not financially viable to continue without the class component.
Permits (but does not require) the court to direct that notice be given to class members of the class action in (b)(1) and (b)(2) classes.
Requires that notice be given to class members in a (b)(3) class, and that such notice contain the following information:
- Nature of action and definition of class;
- Class claims, issues or defenses;
- Class member may enter an appearance through counsel, if desired;
- Class member may “opt out” of the class; and
- If no “opt-out”, class judgment will be binding on class members.
Rule 23(e) - Court approval of settlement
Court must approve any settlement or voluntary dismissal of a class action lawsuit.
- Must give notice of the proposed settlement to all class members who would be bound, and give them a chance to make objections.
- If settlement involves a (b)(3) class, the court must offer class members a second opportunity to opt out of the class.
- To prevent objectors from being bought off, objections may not be withdrawn without court approval.
- The court must conduct a “fairness hearing” to ensure that settlement or voluntary dismissal is fair, reasonable, and adequate.
Rule 23(f) - Appellate Review
Provides that a party may seek immediate appellate review of a class certification decision, BUT acceptance of the appeal is discretionary with the appellate court – the appellate court does not have to take it.
Personal Jurisdiction in Class Action Lawsuits
- The court must obtain PJ over the active litigants (class opponents, class reps) the “usual” way.
- Per the Supreme Court, PJ over passive class members in 23(b)(3) actions is acquired through giving of notice and opportunity to opt out, as provided in FRCP 23.
- PJ over passive class members in 23(b)(1) and (b)(2) class actions is presumed.
Subject Matter Jurisdiction in Class Action Lawsuits
- If class action claims are based on federal law, then there is “federal question jurisdiction” under 28 USC 1331.
- If class action claims are based on state law, then there are two possible ways to get into federal court.
Traditional Diversity Jurisdiction: Need complete diversity between class opponents and class reps – don’t consider citizenship of the passive class members. If the class action involves a “plaintiff class” (as most do), then you only need one class member to satisfy the “in excess of $75,000” amount in controversy requirement – the rest of the class members can “piggy-back” on through use of supplemental jurisdiction under 28 USC 1367.
Class Action Fairness Act of 2005: Enacted to curb perceived abuses of the class action vehicle in state courts by making it easier to get state law class actions into federal court. Added subsection (d) to the diversity statute (28 USC 1332) and amended removal rules for state law class actions.
- Provides that a federal court has SMJ over class actions with:
- 100 class members or more,
- where the aggregate (i.e., add up all the class members’ claims) amount in controversy exceeds $5 million, and
- where there is “minimal diversity” (meaning at least one class member and one class opponent are citizens of different states).
o Exceptions –“truly local controversies” must remain in state court.
