What is a class action in the USA?
A class action lawsuit is a collective claim in which the court awards permission to an individual or individuals to bring Class action lawsuit claims of others similarly situated (the class members) in a single case. Rule 23 of the Federal Rules of Civil Procedure prescribes the model for most class actions. Under Rule 23(a), one or more members of a class may sue or be sued as representative parties on behalf of all members if:
- the class is so numerous that joinder of all members is impracticable;
- there are questions of law or fact common to the class;
- the claims or defences of the representative parties are typical of the claims or defences of the class; and
- the representative parties will fairly and adequately protect the interests of the class.
The claims of the class members must be similar to those of the class representative that a trial of the representative’s claim can appropriately decide the outcome for all class members.
Class actions operate on an opt-out regime, whereby an action is pursued on behalf of a defined class of unnamed claimants, who are deemed included in the action and are bound by the outcome unless they “opt out”.
How do people know they are included in group litigation in the USA?
Due to the “opt out” regime in the United States, there is less importance placed upon identifying each and every potential claimant prior to the filing of a class action as parties are included by default. Depending on the type of action and class, notice requirements to give notice to all affected individuals fall in place following the certification of a class action (Rule 23(c)(2)(B)). However, it may sometimes be difficult to identify the individual members of a class, to personally notify them, due to the sheer number of members.
Class members must also be informed if they do not opt out, any judgment will be applicable to them, and they will not be permitted to bring an individual claim at a later stage.
Depending on the nature of the claims and type of class, notice can be provided by mail, email, publication in newspapers and magazines, advertisements on television, radio, and internet websites and by any other method likely to come to the attention of class members. Solicitors may also provide information regarding a class action they are investigating on their firm website.
What sort of cases would be appropriate for Class Actions in the USA?
Class actions are often brought in “David v Goliath” circumstances where an individual does not have the resources to challenge a multinational company i.e. where a bank has charged excessive fees on a certain category of customer accounts. The class may be defined as including all customers who fell victim to the bank’s excessive fees. This could include hundreds, if not thousands of customers, rather than one individual. The downside of the “opt out” regime is that there may be individuals who are not aware they have been overcharged yet are directly affected by the outcome of the action unless they opt out. It is for this reason that individual class members should receive notice of the class action if they can be identified using reasonable effort.
Class actions can lead to large scale pay-outs. In 2016, a $14.7 billion settlement was approved for the Volkswagen emissions scandal, resulting from a scheme by the car company to cheat emissions tests on its diesel cars. It provided funds for vehicle buybacks at market value prior to the scandal plus additional cash payments to approximately 475,000 diesel car owners.
In 2008, a $7.2 billion settlement was approved in relation to the Enron securities fraud, in which it had been claimed that the energy trading company defrauded shareholders prior to bankruptcy. The Claim was brought against Citigroup, JP Morgan Chase and the Canadian Imperial Bank of Commerce, all of which provided 90 percent of the settlement funds. Around 1.5 million parties were expected to receive payments.
Why don’t we have class actions in the United Kingdom?
Class actions do not exist in the United Kingdom per se, although we do have collective forms of litigation available such as “Group Litigation Orders”.
A Group Litigation Order (“GLO”) is an order under Civil Procedure Rule (CPR) 19.22 to provide for the case management of claims which give rise to common or related issues of fact or law (the “GLO issues”).
A GLO allows individuals who have claims (whether issued or not) of a similar nature to have their cases managed together. This has many advantages such as splitting the costs between the group litigants, increasing the availability of similar evidence and the sharing of knowledge and litigation risk.
It is important to note that parties do not have an absolute right to proceed under a GLO and the Court must grant permission to the Applicants to litigate in this manner.
An application for a GLO may be made at any time before or after any relevant claims have been issued and may be made either by a claimant or a defendant. If a successful application is made to the court in accordance with CPR Part 23, the Court can manage all claims covered by the order in a coordinated way. Under CPR 19.22(2), a GLO will establish a group register in which the relevant claims will be entered, specify the GLO issues that will identify the claims to be managed as a group, and specify which court will manage those claims.
Under CPR 19.23(1) All judgments, orders and directions of the court will be binding on all claims within the GLO unless ordered otherwise.
Most recently in the United Kingdom, a number of Group Litigation Orders have been made by the Court against several car companies, including but not limited to, Vauxhall, Volkswagen, BMW and Nissan regarding the installation of so called “defeat devices” inside the affected vehicles, which are devices that interfere with or disable emissions controls under real-world driving conditions, even if the vehicle passes formal emissions testing
If claimants in the UK wish to conduct GLO litigation, there is no straightforward process for finding others who may have similar claims. Further, Claimants in the UK, must “opt in”- i.e. agree to be party to the litigation and make an application to be included. This is in stark contrast to class actions in the US, where the “opt out” procedure is the norm.
How do lawyers in the UK find other claims (issued or otherwise) which are sufficiently similar to apply for a GLO?
There is no definitive procedure in place whereby solicitors and claimants are adequately able to locate others who may have similar claims.
The only guidance the court gives, under PD 19B paragraph 11, is that the GLO should be supplied to the Law society and the High Court division in which the order was made. However, the court usually makes an order under CPR19.22(3)(c) that the solicitors for the group should publicise the GLO.
Claimant litigation firms have used increasingly sophisticated tactics to raise the profile of a GLO and attract potential claimants, including commenting in newspaper articles, issuing press releases, using social media, placing notices on firm websites and/or creating a claimant specific website and holding public meetings. Such publicity must meet the standards set by the solicitors’ code of conduct such as the rule prohibiting the solicitation of clients.
A list of GLO’s is maintained on the government website, which includes details of the lead solicitors and case issues defined by the GLO.
Summary
The advantages of class actions and GLO’s are numerous however both systems suffer comparable difficulties in identifying those individuals whom have similar potential claims against a defendant. In the USA, difficulties arise due to the sheer number of potential claimants included within a class. In the United Kingdom, the difficulties arise as we lack a registration process or other such mechanism by which people adequately describe or enter their existing claims. Considering the advantages of a GLO, perhaps more thought should be given to sharing of such relevant information.
Updated by Ben Siskind, May 2024.
(Original written by Lauren Priest 2017)
