What is a class action lawsuit?
UPDATED: February 6, 2012
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A class action is a legal procedure used to efficiently handle a lawsuit in which a large number of people are certified as a potential class of plaintiffs because they have been injured by a common act or factual set of actions.
The Six Types of Class Actions
There are generally six types of class actions: consumer rights, securities, business/antitrust, environmental, mass tort, and civil rights.
Does Every State Allow Class Action Lawsuits?
Almost all states allow class action lawsuits. Because many (but not all) class members may live outside of a single state, many class actions are by their nature federal court suits, and the federal rules specifically allow (Federal Rule 23 of Civil Procedure) for jurisdiction for class actions. This effectively creates the potential for a federal class action claim in every state.
If a class action lawsuit has no federal claim of jurisdiction, and the legal issues are strictly state law issues, the Commonwealth of Virginia is the only state that offers no method for bringing a class action.
Does this mean that every state (except Virginia) allows the same type of class action? No. There are enormous differences from state to state. US Chamber of Commerce data suggests that some states tend to favor class actions as a legal remedy (California, Alabama, Mississippi) and some seem to discourage them (Delaware, North Dakota, Iowa).
Who Benefits From a Class Action?
The purpose is not necessarily to “benefit” either the class of plaintiffs or the defendant. Instead, class actions are designed to make the legal system work more fairly and to avoid multiple litigation. Using the class action model, people who could not otherwise afford to initiate a lawsuit can distribute the cost burden by joining with others.
Do Class Actions Frequently Lead to Abuse?
Critics argue that “only the lawyers make money off a class action.” There is some truth to this, but many companies would avoid responsibility for unfair or damaging practices without the corrective power of a class action.
Politicians have joined this debate. In 2005, Congress passed the Class Action Fairness Act (CAFA). The CAFA recognized the variation of rules between states, which often worked to the detriment of national corporations. CAFA set an eligibility threshold for removal from state to federal courts of aggregate claims totaling $5 million or more.