Class Action Basics: What Every Solo Needs to Know

Vol. 31 No. 5

By

Jocelyn D. Larkin is an experienced class action litigator and the Executive Director of the Impact Fund, which provides strategic leadership and support for litigation to achieve economic and social justice.

Andrew J. McGuinness is a solo operating a complex commercial litigation boutique firm based in Ann Arbor, Michigan, and a faculty member of the ABA’s annual National Institute on Class Actions.

Maybe you became a solo practitioner because you were fed up with Big Law culture. Maybe you wanted to represent individuals and small businesses in your community instead of multinational mega-corporations. Maybe you just wanted to keep the overhead down, come to work in shorts, and leave time for your favorite hobby. Way to go.

So why in the world would you need (or want) to know anything about class actions? Well, because class actions are ubiquitous and they affect you and your clients every day. Your clients rely on you for answers, and you need to have them.

So we’re here to help. If you’re looking for a comprehensive survey of class action rules and case law, this isn’t it. Instead, this primer is what we would tell you if you took us out for coffee to talk class actions. Think latte in a jargon-free zone. Don’t worry if complex civil procedure is a distant memory—we’ll start at the beginning.

What is a class action? It’s a procedural device that allows claims held by a group to be resolved in one proceeding, even though the individual class members do not personally appear in court.

Can I just file a class action complaint and start litigating for the class? No. The court must decide whether to “certify” a class action, which means that you, your clients, and the claims must meet the requirements of the federal (or state) class action rule. Generally, a court decides whether to certify a class based on a motion filed some months (or sometimes a year or more) after the complaint.

How many people do you need for a class action? Generally more than 40, definitely not less than 20.

What else is required? The most important thing is a common legal or factual question that affects all the members of the class and is central to the resolution of the case. It sounds simple, but it can get complicated.

How about my client? Where does he or she fit in? Every class action must have an actual or “named plaintiff” before the court. Also known as a class representative, the plaintiff must have a claim that is “typical” of the rest of the class, and he or she must be willing to represent the interests of the absent class members in the lawsuit. This is a responsibility that some people are willing to assume, others are not. Ideally, there should be more than one class representative to share the burden. The court must approve the representatives and their lawyers as part of the class certification motion. More on the lawyers below.

Are there other requirements? Yes. Other important factors include whether the court believes the case can be managed efficiently despite the size of the class and whether the due process rights of the class members and the defendant are protected.

How can I tell if a case might be a class action? If you are defense counsel, it’s easy: Look at the complaint for “class action” or the telltale phrase: “on his/her own behalf and on behalf of all others similarly situated.”

If you are evaluating your client’s potential class claim, ask yourself whether the potential defendant engaged in conduct that affects a group in a consistent manner. For example, illegal conduct based on a particular wrongful act (e.g., price-fixing) or policy or practice, a written document (such as a form contract), a defective design, or a publicly disseminated misrepresentation often form the basis of a class action. Class actions are most commonly filed in antitrust, publicly held securities, consumer, discrimination, wage and hour, Employee Retirement Income Security Act (ERISA), and analogous areas.

A word to the wise: Try not to elevate your client’s expectations early on. Most cases that a client thinks “would make a good class action” are not good candidates, and most cases that are filed as class actions are dismissed or never certified. The point is: It’s a jungle out there, and you need an expert guide to follow the path to the waterfall . . . or to tell you that there is no path.

Are there any kinds of cases that don’t make good class actions? Yes. A case where liability turns on the subjective state of mind of each class member is not well suited for class treatment. Other examples include personal injury lawsuits and many oral fraud actions, where individual issues such as causation and reliance frequently overwhelm any common issues

Are class actions just about money? No. Many of the most important class action cases have involved claims for injunctive relief—school desegregation, prison reform, voting rights, deinstitutionalization of persons with disabilities, and other civil rights and environmental cases.

This is starting to sound interesting. If I think that my client’s claim could be a class action, what do I do next? Start by figuring out whether similar cases have been brought against the same defendant or in the same industry. You can do that through traditional legal research databases, online court records, or trolling the Internet. Look to both private litigation and government enforcement actions. The success (or failure) of similar cases may provide you with some quick insight into the viability of your case.

What if my class action idea is new and untested? Won’t I risk someone taking my idea if I seek a second opinion? There are a number of reputable plaintiff’s class action practitioners and firms out there, so work your network. Many of them participate in established CLE programs such as the ABA’s annual National Institute on Class Actions. Also, it is common practice for class action firms to provide a “referral” fee in appropriate circumstances if the case is promising enough to file and your client is included as the named plaintiff. If you don’t have a lawyer you can trust, you could reach out to a law professor, a legal services agency attorney, or another nonprofit expert who is not a likely competitor.

I represent small businesses. How do I prevent my clients from being on the receiving end of a class action complaint? Small businesses are typically not targets for class actions. For medium and large companies, regular and thorough compliance work is the key. Be sure that employment practices, consumer safety, and environmental concerns are addressed before they become a problem.

If your client deals directly with customers or employees who might potentially file a class action, the most effective means of heading off such a case at the pass is to include a mandatory arbitration clause containing a waiver of any right to class or aggregate proceedings. There are defense firms who have spent thousands of hours crafting these. (Look up your cell phone terms and conditions to see the results of their handiwork.)

And one more thing—don’t let your clients send out unsolicited blast faxes to get the word out about their products and services!

If I want to bring a class action for the first time, do I need co-counsel? Yes. One element of the certification process is for the judge to determine whether you are an adequate representative of the class. In other words, should the court entrust to you the prosecution of hundreds or thousands of class members’ rights? The court will want to know about your past class action experience, your knowledge of the relevant case law, your resources, and the work you’ve done to investigate the case. If this is your first tour of duty, you will want an experienced co-counsel.

And another thing: Bring in experienced class co-counsel before you file the complaint. Not doing so would qualify as one of the many ways to prejudice your client (and the class) right from the get-go.

The next time around, you can take the training wheels off.

Can I defend a class action if I’ve never done it before? Possibly, but you are putting your client at risk of an adverse judgment much larger than an individual award. There are numerous strategies and arguments unique to defending class actions that are beyond the scope of this article. Many major law firms—and even several experienced solos—provide this expertise and should be sought out as lead or co-counsel.

What kind of resources will I need? The resources required will depend on the size of the case, the extent of discovery required, and the type and number of experts on both sides. These costs can mount quickly and are another reason to share the risk with co-counsel. This is particularly true because class actions typically take longer than a typical lawsuit to be resolved. Remember also that if the class is certified, the plaintiffs (in actuality, their counsel) initially must bear the costs of notice to the class, which can run into the tens or hundreds of thousands of dollars (or more), depending on the circumstances.

What about e-discovery? E-discovery is now a fact of life in virtually all kinds of litigation, including class actions. Because individuals, businesses, and government agencies create and save information electronically, this is usually where the action is. E-mail can be a treasure trove of evidence about intent, knowledge and, well, cover-up. Search for key phrases such as “let’s discuss off-line” and “delete after reading.”

If I file a class action, will I need to talk to every class member or have staff who can? No. Most communication with class members is in writing. Occasionally, class members will call, particularly if there has been recent press about a development in the case. Setting up a case website isn’t expensive and will answer most of the questions that a class member might have.

Can I file a class action for my client in order to exact a better settlement and then dismiss the class claims? This is not an advisable strategy for a number of reasons, and it may even get you into trouble. First, defendants are not likely to be manipulated so easily, and you will probably only wind up annoying your judge. Second, as class counsel you have a fiduciary duty to absent class members (as well as your individual client) even before a class is certified. Although an amendment to federal class action Rule 23 allows the parties to settle a claim without court approval prior to certification, this is tricky ground. Indeed, your retention agreement should address the unique requirements of class representation explicitly and include the named plaintiff’s acknowledgment of his or her class duties.

Okay, how does one settle a class action? Unlike ordinary litigation, the court must review and approve a proposed class settlement before a case can be resolved and dismissed. The settlement review process has become increasingly rigorous in recent years, as courts ensure that the rights of class members are protected. The approval process generally goes in three stages. First, the court will give the agreement an initial review and, if it sees no obvious problems, will authorize that notice be sent to the class. After the notice period expires, the court will conduct the final approval hearing, also known as a “fairness” hearing. Class members who don’t like the settlement can appear and make objections to the terms of the settlement. The court will resolve these objections and either accept or reject the settlement.

What about attorney fees? How does that work? The court must independently review and approve any award of attorney fees to the lawyers who represent the class. The fees typically are set either as a percentage of a common fund created for the class or as a calculation of hours times hourly rates, also known as the lodestar method. Again, it can get complicated.

You mentioned class notice. If a client brings me one of those long and indecipherable notices and asks for advice, what do I say? In general, class notice comes in connection with a proposed settlement. An absent class member usually has three choices: Make a claim if he or she is eligible, file an objection with the court to the settlement terms, or opt out (meaning exclude him- or herself from the settlement in order to preserve the right to sue the defendant for the same claim in an individual action). Unless the client has a very large stake in the outcome of the case, they will likely simply be filing a claim form.

I’ve read that the Supreme Court has made class actions harder to bring. Is this going to affect a class action that my client is involved in? Maybe. The Supreme Court has been particularly active in the area of arbitration agreements, allowing corporations to draft contract terms with customers and employees that prohibit class actions. Even if an arbitration agreement is silent on the issue of class actions, it may operate to bar them. In bringing or defending a class action, the existence of an arbitration agreement should be one of the first questions that you ask your client.

Has Congress legislated in the area of class actions? Yes. Congress passed the Class Action Fairness Act (CAFA) in 2005, which allows parties to file or remove many state class actions to federal court. In some areas, such as the fair debt collection arena, they have imposed statutory limits on class awards.

Now you’re getting into the advanced material, and we’ll need another latte for this.

This all seems like an awful lot of work—and risky, too. Why would anyone want to be a class action practitioner? Class actions can be very challenging but also extremely interesting and, occasionally, financially rewarding. They can make a real difference in the world, and for some lawyers, that’s why they went to law school in the first place.

What are the best resources to learn more about class actions? There are a number of helpful class action publications available:

  • Principles of the Law of Aggregate Litigation, Samuel Issacharoff (ALI, 2010): A scholarly synthesis of class action law from some of the top minds.
  • Newberg on Class Actions, William Rubenstein, Alba Conte, and Herbert B. Newberg (Lawyers Cooperative Publishing, 2002–2014): A multi-volume loose-leaf treatise now being very ably updated by Professor Rubenstein.
  • Manual for Complex Litigation (4th ed., Federal Judicial Center, 2004): A slightly dated go-to resource for many federal judges; not expensive.
  • The Class Action Playbook, Brian Anderson and Andrew Trask (LexisNexis/Matthew Bender, 2013): A helpful and refreshingly condensed overview of class action practice.
  • The Class Action Fairness Act: Law and Strategy, edited by Gregory C. Cook (ABA, 2013): A road map to this important federal statute.
  • The Law of Class Action: Fifty-State Survey, 2013–2014 (ABA, 2014): Helpful mostly if you think you can or should file or keep a class action in state court in light of the Class Action Fairness Act (see above).

In addition, we recommend you consult (or join) the ABA Section of Litigation Class Action and Derivative Suits Committee, known as CADS, which has a terrific website full of resources. There are a number of Internet blogs focused on class actions (mostly but not entirely from a defense perspective; see, e.g., classactionblawg.com). Last but not least, the ABA sponsors its National Institute on Class Actions every October, featuring “Class Actions 101,” an introductory course on class actions co-taught by one of the authors (for more, see tinyurl.com/myzqz2j, or Google “ABA National Institute on Class Actions”).

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