The class action is a forceful and effective way to combine the resources of many people who have been wronged in one action. The wrongdoer, often times a large corporation with unlimited means, is faced with defending one significant claim rather than multiple small ones. The United States Supreme Court has explained that class actions permit plaintiffs to pool claims which would be uneconomical to litigate individually. There are many situations where a class action is appropriate, but historically they have most often been used in cases involving securities fraud, defective or dangerous products, environmental contamination, employment and pay practices, and various types of consumer fraud or unfair practices related to insurance, banking, credit cards, utilities, healthcare and HMOs, leases, collections, mortgages, and financing.
The class action has been used in the United States since 1842, but its roots can be traced back much further to the Bill of Peace, which was created by the English Court of Chancery. Today, Federal Rule of Civil Procedure 23, which was created in 1938 and amended in 1966, is the basis for class actions in both federal and state courts. Under Rule 23, is must be demonstrated that: (1) the class of persons harmed is so large that it would be impractical to join them as individual plaintiffs; (2) common issues or law or fact exist; (3) the class representative's claims are typical of those of the rest of the class; and (4) the class representative and the class action attorneys' will adequately represent the class. The following discussion elaborates more fully the elements required under Rule 23.
- The General Standards Of Rule 23.
The basic purpose of a class action is to eliminate the need for repetitious filing of many separate lawsuits involving the interests of large numbers of persons and common issues of law or fact by providing a fair and economical method of disposing of a multiplicity of claims in one lawsuit. In making the certification determination, Courts are mindful that certification is conditional and may be altered, expanded, subdivided, or vacated as the case progresses, and therefore the court should err in favor of, and not against, the maintenance of the class action.
The determination that an action is maintainable as a class action is a two-step process. First, it must be determined whether the four prerequisites set forth in Rule 23(a) are present. These are commonly referred to as numerosity, commonality, typicality, and adequacy of representation. Second, it must be determined whether one or more of the criteria set forth in Rule 23(b) have been met (since most class actions are filed under Rule 23(b)(3), this article focuses on the 23(b)(3) elements).
- The Rule 23(a) Requirements.
The first element of Rule 23(a), numerosity, is satisfied if the proposed class is so numerous that joinder of all members is impracticable. There is no set formula to determine if a class is so numerous that it should be certified. Professor Newberg, the leading commentator on class actions, conducted a nationwide survey of court rulings on the numerosity issue concluding that any class consisting of 40 or more members should raise a presumption that joinder is impracticable.
The real inquiry under Rule 23 is not the number of people affected, but whether joinder would be impractical. Under the rule, Plaintiffs need not show that joinder is impossible, but simply that the difficulty or inconvenience of joining all members of the class mitigate in favor of class treatment of their claims. It has been found that repeated litigation of common issues in dozens of individual actions would be grossly inefficient, costly and a waste of judicial resources, and thus it is usually impractical to join 40 or more persons.
The second element of Rule 23(a), commonality, is satisfied if one or more common questions of fact or law affect all or a substantial number of the class members. The provision does not require that all the questions of law and fact raised by the complaint be common. Further, it is not necessary that the underlying legal theories be uniformly applicable to all of the class members. Indeed, there need be only a single issue of fact or law common to all members of the class to satisfy the commonality requirement.
As a general rule, common questions exist where Plaintiffs have asserted a common course of conduct arising out of a "common nucleus of operative facts." That some factual differences will exist, such as the amount of damages, is irrelevant for purposes of the commonality requirement since there are also common questions of law.
The third element of Rule 23(a), typicality, is shown when the claims of the class representatives are typical of the claims of the entire class. As set forth by Professor Newberg:
Typicality exists where a plaintiff's injury arises from or is directly related to a wrong to a class, and that wrong includes the wrong to the plaintiff. Thus, a plaintiff's claim is typical if it arises from the same event or practice or course of conduct that gives rise to the claims of other class members, and if his or her claims are based on the same legal theory. When it is alleged that the same unlawful conduct was directed at or affected both the named plaintiff and the class sought to be represented, the typicality requirement is usually met irrespective of varying fact patterns which underlie individual claims.
The typicality requirement does not require that the class representatives' claims be identical to those of the class members; a representative plaintiff's claims only need be typical of, and not identical to, every possible member of a class. So long as there is a nexus between the class representatives claims or defenses and the common questions of fact or law which unite the class, the typicality requirement is satisfied.
- Adequate Representation.
To determine whether the named plaintiffs adequately represent the interests of the class, two factors are examined: (1) whether the named Plaintiffs' counsel will adequately protect the interests of the class, and (2) whether there exist any conflicts of interest between the representatives and the rest of the class members. The burden is on the defendant(s) to demonstrate that representation will be inadequate. As stated by one federal court:
A person seeking to be a class representative need not have an expert's understanding of his or her case, particularly when the action involves complex areas of law .... It should come as no surprise that a layman, when bringing such a complex action, tends to rely heavily on the experience and expertise of counsel.
Courts have held that the class representatives need not be the best of all representatives, but need only be persons who will pursue a resolution of the controversy in the interests of the class. Accordingly, the assurance of vigorous prosecution is really an inquiry into the qualification of class counsel.
- The Rule 23(b)(3) Requirements.
After establishing that the requirements of Rule 23(a) have been met, plaintiffs seeking to certify a class must also satisfy one of the elements enumerated in Rule 23(b). Most class action lawsuits are brought under Rule 23(b)(3), which provides that:
The questions of law or fact common to the members of the class predominate over any questions affecting only individual members, and that a class action is superior to other available methods for the fair and efficient adjudication of the controversy.
To predominate, common issues must constitute a significant part of individual class members' cases. Some distinctions between the underlying legal claims may be of little significance where the factual issues are common to each claim. The fact that there may be differences in the degree of injury and damages suffered by individual class members does not mean that individual issues predominate or that class certification is inappropriate.
To be superior, it must be shown that a class action is superior to other available methods for the fair and efficient adjudication of the controversy. The question essentially presented is whether the management of the litigation through class treatment is superior to any alternative management technique. In demonstrating superiority, it is often persuasive to show that if a class action is not certified, the result will likely be that defendant will keep its profits and reap the rewards of its misdeeds.