What is a Class Action Lawsuit?
A class action lawsuit is a lawsuit brought by a group of people who have suffered similar harm from similar actions of a particular defendant. A class action is brought by one or more “class representatives” who represent the interests of the entire class. The claims of the class representatives must arise from facts or law common to all class members. If the class action settles, a judge must approve the amount of the settlement and the compensation paid to the lawyers. Individual class members are given the opportunity to accept the benefits of the settlement or to “opt out” of the settlement and pursue their legal claims on their own. If a class action lawsuit results in a favorable verdict, the class members will split the damages awarded by the jury among themselves, typically pursuant to some type of formula.
How does a Class Action Lawsuit Work?
A class action lawsuit begins when an attorney files a lawsuit against a defendant on behalf of a defined class of persons. The lawsuit is brought by one or more individual class representatives for the benefit of the entire class.
Often times, a defendant will respond by immediately seeking to have the lawsuit dismissed. In securities fraud class actions, for example, defendants typically file motions to dismiss, alleging that the plaintiffs have failed to properly allege their claims. If the case survives the defendant’s motion to dismiss, then it may continue.
The next step in a class action lawsuit is when the court is called on to determine whether the case is appropriate to be brought as a class action. This is known as “class certification.” In class certification proceedings, the plaintiffs will ask the court to approve the use of a class action and to define the scope of the class, that is, describe exactly who is included as a class member.
For example, in a securities fraud case, the class might be defined as all persons who bought stock in ABC Company during a certain time period. In response to a motion for class certification, the defendant will argue that the case is not properly brought as a class action. The grant or denial of class action certification is often the first pivotal point in a class action lawsuit, and can often be dispositive of the lawsuit’s outcome.
What Factors are Used to Certify a Class Action Lawsuit?
When deciding whether to certify a class, a court is required to evaluate four specific factors. They are:
- Numerosity: the plaintiffs must show that “the class is so numerous that joinder of all members is impracticable.” While there is no set minimum number of class members, typically courts will require at least 100 members in order to satisfy the numerosity requirement. The plaintiffs must also show that class members must be identifiable through the use of specific criteria or information.
- Commonality: the plaintiffs must show that there are questions of law and fact that are common to the claims of each class member. The commonality requirement is satisfied where the party opposing the class has engaged in some course of conduct that affects a group of persons and gives rise to a cause of action.
- Typicality: the class representatives must show that their individual claims are “typical” of the claims of the various class members. Typicality exists where the representatives’ claims arise from the same event or course of conduct that gives rise to the claims of other class members and the claims are based on the same legal theory.
- Adequacy: the plaintiffs must show that they will fairly and adequately protect the interests of the class. To make such a showing, they must typically demonstrate that they have the willingness and ability to take an active role in and control the litigation in order to protect the interest of the absentee class members and that their attorneys will act with the necessary zeal and competence.
Typically, Plaintiffs are given only minimal discovery prior to class certification. Written questions to the defendant, requests for documents from the defendant and deposition of employees of the defendant are usually limited to facts bearing on the four factors mentioned above. Because the actual merits of the Plaintiffs’ claims are not at issue prior to class certification, discovery about the actual substance of such claims is usually not allowed at this stage. In addition to conducting limited discovery, class action plaintiffs and their attorneys will often hire a host of experts to assist them in this phase of the trial. For example, they might hire experts to show how damages for the class can be calculated. This can often be an expensive proposition.
If the class is not certified, it cannot proceed as a class action. If it is certified, the defendants often have a right to immediately appeal the certification decision to a higher court. Assuming such a challenge is not successful, the case will continue to the next phase of litigation, merits-based discovery.
What Happens After a Class Action Receives Certification?
Merits-based discovery means that the class is allowed to obtain information from the defendants or third parties relating to their claims. This is accomplished through written discovery (interrogatories, requests for production, requests for admissions) and depositions, sworn testimony under oath. Discovery can last for many months and is often one of the most expensive and time-consuming phases of class action litigation.
At some point after adequate discovery has occurred, class action defendants will usually move for summary judgment. In filing such a motion, the defendants allege that the plaintiffs lack the necessary factual basis to proceed or that there is some legal impediment to their claims. Summary judgment motions are determined based on written materials provided to the court by the parties and their attorneys. The decision as to whether to grant or deny the motion is made by a judge, not a jury. Assuming the judge denies such a motion, the case may continue.
Eventually the class action lawsuit will either be settled or tried. If the case is tried to a plaintiffs’ verdict, the defendant will frequently appeal to a higher court, causing delays that can last several years. If the case is settled, the court will be tasked with approving the settlement as well as the fees and expenses of the class’ attorneys. All members of the class will be notified of the proposed settlement and its terms. Class members can either accept their portion of the settlement or “opt out” of the settlement, declining to accept the settlement funds and instead pursuing their individual claims in a separate lawsuit.
A class action will typically last from three to five years unless it settles at some earlier stage. To persevere through such a lengthy process, it takes a law firm willing to make a substantial commitment of time, energy and money.
Heygood, Orr & Pearson Guides its Clients through the Complex World of Class Action Lawsuits
To be successful in a political and legal climate that has become increasingly hostile toward class action lawsuits, class action clients need educated, experienced attorneys like those at Heygood, Orr & Pearson. We have the experience and knowledge to guide our clients through class action litigation from beginning to end. And we have the financial resources to help them stand toe-to-toe with some of the biggest corporations in the world through what is often be a lengthy, complicated and expensive process.
Heygood, Orr & Pearson has represented individuals in class actions involving securities fraud, consumer protection law violations and unfair wage claims. We are currently representing investors in a class-action lawsuit against Life Partners Inc. If you have invested with Life Partners Inc. and think you may be owed money, please contact us to learn more about your legal rights and options.