Civ
Pro 2 Notes
Class actions – 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 – numerosity. The members of
the class must have common questions of law or fact – commonality. The claims of
the representatives of the class must be typical of all members of the class – typicality. The representatives must fairly and
adequately protect the interests of the class – representativeness.
How
many people do you need? It
depends. You’ll never get a class that’s
a problem because it’s 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 isn’t much of a problem because you’ve 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 you’ve met the prerequisites of the class: lots
of and lots of plaintiffs who are too numerous to join.
Here’s
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. Here’s
an example of 23(b)(1)(B): it’s 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 couldn’t 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 can’t be joined. Joinder takes care of 23(b)(1)(A), and
interpleader tends to take care of 23(b)(1)(B).
Then
there’s 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. It’s 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 don’t always go
through the listed elements. They ask: “Are
there small claims such that people don’t have enough money to sue
individually?” Then we have an
efficiency class. “Do we have mass torts?” This would include asbestos, tobacco litigation,
and so on. Wright didn’t 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. That’s 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 isn’t 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 “an early practicable time”. It doesn’t
have to be done first, but it must be done early in the litigation. The problem is discovery: once you qualify as
a class, you’re entitled to get discovery.
If the defendant isn’t certain whether they’ll have to litigate
discovery, they’ll 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 we’re bound to.
We’ll never know until we file an individual lawsuit. But if you’re 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 doesn’t 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. What’s 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? Doesn’t 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.
Let’s
say an out-of-state student files a lawsuit asking for reduced tuition. Say the student files the lawsuit as an
individual. What’s the problem with
filing an individual lawsuit? The
student’s stake is relatively small. The
tuition increase is probably not enough to make it worth an individual
suit. What’s a strategic reason for
pursuing this as a class action? One
problem is that you can drag out the litigation until it’s 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. You’ll 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, you’re a (b)(3)
class, which means you’ve 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 it’s manageable.