Class Action Lawsuits

A class-action lawsuit is a method by which a wrongdoer can be held responsible for doing a small amount of damage to a lot of people.

The most famous recent example of a class action suit involved the former Blockbuster Video. Blockbuster was accused of improperly charging late fees to its customers. The damages to individual members were small: $1 here, $3 there. It was impractical for each individual Blockbuster member to sue to get their money back. The profit to Blockbuster was huge: some portion of nearly $796 million in late fees. But a class action allows a lawsuit to be brought by a handful of people to represent the interests of everyone involved and to help get everyone’s money back.

There are four elements to every class action suit which must exist: Numerosity, similarity, adequacy, and commonality.

Numerosity means that there are a number of people—it does not need to be a large group of people—who have a similar case against the same defendant.

Similarity (or typicality) means that the claims involve the same or substantially similar legal and factual issues. The claims and circumstances do not need to be identical. But, there must be a certain amount of repetition that makes it practical for one judge and jury to resolve the facts and law.

Adequacy refers to whether the people bringing the suit can fairly and adequately represent the group of people—the class—harmed by the conduct. For instance, the class plaintiffs in the Blockbuster case had to be former members of Blockbuster.

 Commonality refers to the harm. Is there a group of people that suffered the same harm? All four of these elements (numerosity, similarity, adequacy, and commonality) are required before a court will allow a class action (called “certification”) to go forward.

There are four general categories of class action lawsuits:

Employment Class Actions

A group of employees typically brings on these types of lawsuits because of an issue at their workplace. The most common suits are unpaid overtime or the failure to properly calculate the appropriate wage to be paid.

Consumer Class Actions

Consumer class action lawsuits are started by consumers who were hurt by the illegal practices of a company. This can include a deceptive business practice (like Blockbuster’s late fee).

Product Liability Class Actions

Product liability class action lawsuits may arise when a consumer good hurts its intended user or those around them. It may include suits against a company that developed and sold malfunctioning or defective products. Or, it can be a suit against a manufacturer for the risk of use (asbestos, cigarettes, or paraquat as examples) that is known to the manufacturer but not shared with the consumer.

Pharmaceutical Class Actions

Pharmaceutical class actions involve suits against drug or medical device companies. This can include the incorrect use of medications or medical devices – some with serious side effects – that lead to serious injuries and some cases, death.

Except for the governments generally, any entity capable “of causing harm” to a group of people can be sued in a class action. These entities include banks and other financial institutions, insurance companies, automobile dealerships, manufacturers, healthcare providers, telecommunication services, and governmental entities.

These parties can adopt policies, enter into standard form contracts, or otherwise engage in uniform transactions which affect large groups of individuals in the same or similar ways. The uniformity of a defendant’s treatment to the class members gives rise to common issues among them. These common features often render a class action the most efficient means to resolve a dispute.

The general timeline of a class action involves filing the initial complaint and requesting certification. If a class is certified, then the parties define the class. For example, all club members during a range of dates are considered to be part of the class. Class counsel then notifies the members of the class that they have a claim. This can be done by email, regular mail, and newspaper or TV advertisements. Potential class members can bring their own suits or agree to be part of the class. The case is then litigated like a normal case until the end. The court decides how to award the money if any is recovered.