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Class Actions – What Good Are They?

One of the questions I get asked frequently when the discussion of class action lawsuits come up is “What good are they?” Class action lawsuits are a necessary—even essential—part of litigation to hold the powerful accountable.

Everyone has heard of class action lawsuits. Some people may remember getting a dollar or two in the mail when the Blockbuster case settled. There are constant reminders on television with advertising for asbestos claims, talcum powder, etc. There are also a lot of discussions that lawyers “make all of the money” in a class action lawsuit. I heard just such a sentiment expressed on the radio in Columbia a few days ago by a local broadcaster. However, few people understand the importance of class action lawsuits to society.

The first instances of class action cases were known as group litigation and were introduced in England in the 13th century. These cases were usually initiated when some action broke village, town, guild or parish rules and affected several people simultaneously.  The practice of group litigation continued in England until roughly the 18th century when the trend towards individual litigation became more common. Additionally, Parliament enacted a series of laws which made group litigation virtually nonexistent after 1850.

While group litigation died in England, it continued on in America due in large part to U.S. Supreme Court Associate Justice Joseph Story. At the time, Justice Story thought that group litigation was obsolete, which led to the adoption of rules at the federal level to govern the cases. The first rules have since evolved into the modern Federal Rule 23 which governs class action suits in federal court. Many states have adopted Federal Rule 23 into their state rules as well.

Class actions are useful in the circumstance where a group of litigants have all suffered the same harm by the same defendant or group of defendants. First, combining all of the claims into one case can increase the efficiency of the legal process. It also lowers the costs of litigation. In cases with common questions of law and fact, the combination of claims into one single lawsuit also avoid the necessity of repeating  the testimony of the same witnesses, using the same exhibits and deciding the same issues from trial to trial. For instance, the filing fee for litigation ranges from $150 to $300.  The cost of an average deposition is about $1000. A class action lawsuit allows these fees to be spread out of a large group of people instead of every single plaintiff bearing these costs.

Second, a class action overcomes the problem that small recoveries generally do not provide much incentive to any single individual to bring an action by themselves to vindicate his or her rights.  A class action solves this problem by combining the relatively small amounts in dispute into one large one that an attorney (like me) would handle.  A class action ensures that a defendant who engages in widespread damage – but does only a small amount against each individual plaintiff – must compensate those people for their injuries. For example, Blockbuster was accused of charging fraudulent “rewind” fees to its customers even if the customer had rewound the video cassette. It may have only cost a dollar or two for each customer, but the amount charged to all of their customers was claimed to add up to $800 million dollars. Such damages would have never justified a lawsuit by the individual customer.  However, combining the claims together into one suit helped put an end to the practice of wrongfully charging the customers.

Third, combining claims into a class may be the only way to impose the costs of wrongdoing on the wrongdoer. A company forced to make amends to all of its customers at once has the impact of deterring future wrongdoing. For instance,  Landeros v. Flood (1976) was a case decided by the California Supreme Court that found doctors liable for the first time for failing to report suspected child abuse despite mandatory reporting laws. This decision lead to important changes to  mandatory reporter laws requiring doctors, teachers, etc. to report suspected child abuse backed with the threat of damages if the reporting was not done.

Fourth, a class action makes sure that all of the plaintiffs receive at least some compensation if there is only a limited amount of money to pay damages. In a class-action, early-filing plaintiffs cannot “raid the fund” before other plaintiffs may be compensated. A class action in such a situation centralizes all claims into one venue where a court can equitably divide the assets amongst all the plaintiffs if they win the case.

Finally, a class action makes sure there is one single decision that decides avoids the situation where different court rulings could create “incompatible standards” of conduct for the defendant to follow. For example, one court might decide a company’s conduct is proper. Another court may decide the company in the same situation must take specific action to avoid harming a customer.

Class actions are difficult to pursue. They require experienced counsel to pursue. But, the class action has the power to help thousands of people get justice in the right case.

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