How Do Class Action Lawsuits Work?

Class actions make it practical to pursue claims that are too small to litigate individually, such as hidden fees, data breaches or defective products.

Certification requirements

Under federal Rule 23(a), a class can be certified only if (FRCP 23):

1. Numerosity: the class is so large that joining everyone is impractical
2. Commonality: there are common questions of law or fact
3. Typicality: the representatives' claims are typical of the class
4. Adequacy: the representatives and class counsel will fairly protect the class

For most damages cases, common questions must also predominate, and a class action must be superior to other methods (Rule 23(b)(3)). States have similar rules.

Key roles

• Named (lead) plaintiffs: class representatives, who may receive a service award
• Class counsel: appointed by the court
• Class members: everyone fitting the class definition

Opt-out vs. opt-in

In most damages class actions, members are included unless they opt out, and they are bound by the result. Opting out preserves the right to sue individually. Wage claims under the FLSA use a different "collective action" process where workers must opt in.

Settlements

Courts must approve class settlements as fair, reasonable and adequate after notice to class members, who can object (FRCP 23(e)). Members often must submit a claim form to receive payment. Payouts per person depend on the fund size, number of claims and attorney fees.

Costs to class members

Generally none. Class counsel's fees and expenses are paid from the recovery or by the defendant, subject to court approval (FRCP 23(h)).

How long they take

Often several years, especially when certification is contested or appeals occur.

Arbitration clauses and class waivers

Many consumer and employment contracts require individual arbitration and waive class actions, and courts often enforce them, limiting class actions in some industries.

Federal court

The Class Action Fairness Act allows many large interstate class actions, with more than $5 million in controversy and minimal diversity, to be heard in federal court (28 U.S.C. 1332(d)).

Should you join or opt out?

For small losses, staying in is usually simplest. For large individual losses, such as serious injuries, talk to a lawyer about opting out and suing individually. See also defective product claims.

Sources

1. Cornell Law School LII: Federal Rules of Civil Procedure, Rule 23
2. Cornell Law School LII: Class action
3. Cornell Law School LII: 28 U.S.C. 1332(d), Class action jurisdiction