Civ Pro 2 Notes 9/29/04

 

Class actions Ė Rule 23

 

Class action is an area that warrants our study.The more interesting aspects of procedure often relate to class actions.Class actions change the focus of litigation.The system was designed with the single plaintiff and single defendant in mind.When the Rules were created, class actions were not much more than an afterthought.Class actions were rarely used until the amendments of 1966.Now, we have a class of plaintiffs unified against a single defendant.When you have a large number of plaintiffs, the person in control of the litigation changes.Most of the controversy arises out of class actions because of the increased importance of the lawyer running class litigation.It shifts the focus from trying cases to settling cases.Instead of providing a device to efficiently deal with cases that would be filed anyway, the class action is viewed by some as a device that drums up cases that would never be filed but for the device.Class actions are thus a frequent target of tort reform proposals.The Rules themselves were changed in December 2003 to reflect these concerns.

 

Start with the text of Rule 23.There are prerequisites to a class action.If a class action meets the prerequisites, then it must be maintainable.First off, the class must be so numerous that joinder of all members would not be practicable Ė numerosity.The members of the class must have common questions of law or fact Ė commonality.The claims of the representatives of the class must be typical of all members of the class Ė typicality.The representatives must fairly and adequately protect the interests of the class Ė representativeness.

 

How many people do you need?It depends.Youíll never get a class thatís a problem because itís too numerous.The problem is when you have too few members.There is not much action in the numerosity characteristic.Commonality deals with whatever issue is at the heart of the class action.Typically, there isnít much of a problem because youíve thought about what legal issues the class has.Typicality says that if the class as a whole has certain characteristics, the named plaintiff must be like the people in the class.Representativeness has two parts, but tends to hinge on the adequacy of legal counsel.Class litigation is driven largely by the lawyers involved, and they must have the experience and resources to adequately handle the litigation.Before class litigation begins, a court will conduct an analysis as to each of these factors.

 

Next, we ask whether the class can be maintained under Rule 23(b).The drafters of the 1966 amendments had three distinct examples in mind of when they thought classes would be appropriate, and then one catch-all category.The catch-all has caused most of the problems.A 23(b)(1) class is one where separate lawsuits would basically violate Rule 19.Basically all Rule 23(b)(1) is trying to do is use a Rule 19 standard when youíve met the prerequisites of the class: lots of and lots of plaintiffs who are too numerous to join.

 

Hereís an example of 23(b)(1)(A), incompatible standards of conduct.Say a city wants to issue bonds to build a stadium.A group of citizens are opposed to the issuance of the bond, and there is a group in favor of the bond.If one sues to enjoin the issuance of the bond and the other sues to compel them, there is the risk that if one suit goes forward, the city will be under a court order not to issue the bonds but also to issue them, meaning they would be subject to inconsistent obligations.You avoid this by bringing the parties together as a 23(b)(1)(A) class.Hereís an example of 23(b)(1)(B): itís kind of interpleader writ large.There are limited funds.Say there is an insurance policy with lots of claimants who will exceed the value of the policy.If you couldnít use interpleader, you could use 23(b)(1)(B) instead.There is almost no litigation over Rule 23(b)(1) classes.There are rarely parties so numerous that they canít be joined.Joinder takes care of 23(b)(1)(A), and interpleader tends to take care of 23(b)(1)(B).

 

Then thereís a 23(b)(2) class.This is, in essence, a class asking for injunctive relief.They had cases like Martin v. Wilks in mind: civil rights litigation.The firefighters wanted to represent themselves as well as future firefighters who the city might discriminate against.We can call this an injunction class.

 

The 23(b)(3) is the catch-all class.Itís a loose rule that gives a lot of discretion to the district courts.This is where the problems have come in.If the court feels that the class members have enough in common and that a class action is a better way to resolve the controversy than separate suits, then they can allow the class action to be maintained.Courts donít always go through the listed elements.They ask: ďAre there small claims such that people donít have enough money to sue individually?ĒThen we have an efficiency class.ďDo we have mass torts?ĒThis would include asbestos, tobacco litigation, and so on.Wright didnít think this was the right way to do it.In the context of classes, 23(b)(3) is an efficiency class.For the other types, you must fit into the criteria. Rule 23(b)(3) gets special treatment.The class issues must predominate over the individual issues.Thatís not so for Rule 23(b)(1) and (2).The class action must be the superior way to do the trial.Finally, the class action must be manageable, which isnít necessary under the other classes.

 

But there are other requirements now embedded in Rule 23(c).There has always been a requirement in this section to say that the court must hold a hearing on whether to certify the class.Now it says that they must do so at ďan early practicable timeĒ.It doesnít have to be done first, but it must be done early in the litigation.The problem is discovery: once you qualify as a class, youíre entitled to get discovery.If the defendant isnít certain whether theyíll have to litigate discovery, theyíll have to spend a lot of money preparing to do so, which places them under settlement pressure.

 

Rule 23(c)(2)(A) is a new Rule that tells us that the court may direct appropriate notice to the class.There used to be no notice requirement.All of us are probably bound by all sorts of classes that we have no idea weíre bound to.Weíll never know until we file an individual lawsuit.But if youíre a Rule 23(a)(3) class, the court must give the best notice practicable, including individual notice, to everyone who they can.This is a heavy burden!The plaintiff must bear the cost of individual notice.If claims are really small and plaintiffs are really numerous, the cost of providing individual notice may exceed the recover cost.This can effectively insulate defendants from suit.So the notice cost is not to be discounted!The court must exclude from any class any member who requests exclusion.If they request exclusion, then the effect of any class judgment doesnít bind them.This is called an opt-out right.When you get notice, you can choose to opt out of the class.

 

Say a university wants to raise tuition for only out-of-state students.The SBA president, who is an in-state student, wants to file a lawsuit to enjoin the fee increase.Whatís the problem?Will this plaintiff meet the prerequisites of Rule 23?The class is probably numerous enough.It would consist of all out-of-state students who will pay the tuition increase.Would the class have a common issue of law or fact?Sure.They are all worried about the tuition increase.Is the SBA president typical of the members of the class?Nope.Will he be harmed by the out-of-state tuition increase?Doesnít he represent the students as SBA president?Well, how hard is he really going to litigate on behalf of his class when he has no stake in the class?A court would probably say that he is neither typical nor representative.If this were going to be a class action, it would have to be a 23(b)(2) class because this student is looking for an injunction.

 

Letís say an out-of-state student files a lawsuit asking for reduced tuition.Say the student files the lawsuit as an individual.Whatís the problem with filing an individual lawsuit?The studentís stake is relatively small.The tuition increase is probably not enough to make it worth an individual suit.Whatís a strategic reason for pursuing this as a class action?One problem is that you can drag out the litigation until itís moot (the student graduates).Also, you get much more leverage when you bring a class action than when you only bring an individual suit.But if we define a class of both present and former students, then the issue will always be live.Youíll band together for leverage and ask for money damages.What happens to the class?They must be a 23(b)(3) class.When you ask for money, youíre a (b)(3) class, which means youíve brought in all the burdens of (b)(3).You have the burden of individual notice.You must show that this is the best way to do the litigation.You must show that itís manageable.

 

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