Class Action Lawsuits

November 2, 2015

Class action lawsuits are often maligned, with some good reason. So, what are they, why are the maligned, and are their good reasons for trashing them? The issues come to mind because of the Volkswagen situation, which will bring class action litigation front and center for a while.

Class action lawsuits involve many people claiming damages; however, not every suit which involves many people is a class action lawsuit. Rule 23 of the Federal Rules of Civil Procedure—I believe its corollary exists within every state’s civil procedure rules—requires, for a class of claimants to be certified, that: (1) there are too many people to make all of them individual parties; (2) there are common questions of law and fact; (3) the name/representative parties have claims similar to those of the class members; and (4) the name/representative parties “will fairly and adequately protect the interests of the class.” If these standards are not met, there’s no class action lawsuit.

Class action lawsuits are intended to manage disputes which would be, otherwise, unmanageable. They often involve claims which are small enough to make litigating them individually unfeasible, and where there are a large enough number of claims to make ignoring the problem which gives rise to the claims unwise. Whither the many notices that people who handle stock portfolios receive, along with consumer notices associated with cell phone providers, Amazon, and almost any other large corporation which interfaces with consumers.

Beyond their stated purpose, however, class action matters provide a means for fulfilling one of civil litigation’s two primary purposes, to wit: serving as an adjunct for our regulatory system. (The other purpose? Compensating individuals who have been damaged.) Thus, while some class action notices seem absurd—the company’s notice on page 34 of some statement nobody reads did not properly disclose how late fees will be charged—the process provides a means for ensuring that business enterprises fulfill their obligations.

One reason why class action suits are maligned involves the flow of dollars. In too many cases attorney fees and costs end up driving the case, with most or all of the money going to attorneys and consultants. Another reasons relates to the obscure nature of some of the claims. The problem there, however, may rest more with a regulatory regime that is hyper technical than with class action lawsuits as an enforcement tool.

Volkswagen’s actions—directly and with apparent intent, it violated U.S. air quality regulations and lied about it to the government and its auto purchasers—have generated class action lawsuits. (According to Phase Two of the Volkswagen Scandal: Lawsuits, written by Bourree Lam for The Atlantic on September 29, 34 state and federal class action suits had been filed. I suspect more have been filed since then.) The suits will be the big bonanza for those attorneys who handle class action suits for claimants. (Volkswagen will pay its attorneys plenty, too, but they’ll be working by the hour.) The suits have everything an attorney can wait. Big damages. Clear liability and intentional wrongdoing. Angry claimants who care. And a story which will sell.

In Lawyers Jostle for Lead Position in Volkswagen Diesel Suits, New York Times reporter Barry Meier reports on what amounts to the key battle for the attorneys: who, among many attorneys, gets to partake. When many cases are filed the courts decide who will represent the class, which judge will handle it, etc. Huge sums are spent in connection with making the “choose me” case, and for many it’s an “all or nothing” deal.

Billions of dollars will change hands in the VW cases. Class action litigation will have its day, and the public will see a worthy system in action. Alas, many insignificant cases will still be on dockets everywhere, which will beg the question: why do we have this system? The answer, frankly, is simple: We have systems in place. They apply to all applicable cases, not just the ones that make sense to you, me, or John Q, waving his arms at the television or crumpling up his newspaper.


4 Responses to Class Action Lawsuits

Leave a Reply