Class Action Lawsuits

Class action law suits are civil claims brought by a large number of plaintiffs against one large defendant. The plaintiffs are not linked necessarily because they all suffered loss in the same event or at the same time, but because their circumstances are similar enough to justify bringing the claim together.

The largest suits will usually be brought in Federal court. However to do this, the claim must be brought under some aspect of federal law, and the claimants must be spread over more than one state. When the plaintiffs are in more than one state however, there are complications due to differences in the civil laws of each state. This will be dealt with either through a device known as multi-district litigation or by handling the claims separately depending on which state the plaintiff is from.

If a suit under federal law is not possible or is not desirable for some other reason, then the second option will be to bring the class action law suit under state law. Since the home jurisdiction of the defendant is used to decide which state has jurisdiction to hear the case, all the plaintiffs will be able to bring their action in this state. This is true no matter which state they live in or even if they live in different countries. In many cases this will be the preferred option as the state in question has rules that help the case. However, if for some reason the defendant is located in a state that has rules prejudicial to the plaintiffs' case, every effort should be made to have the action brought under federal law.

The most important element of preparing the suit is to have a class. It may seem obvious that a class action requires a class but this issue raises many practical and legal challenges. First of all, the suit must be filed with the plaintiffs' names, or if these names are not yet ascertained, with a description of the class. The class must be a group of either individuals or companies that have all suffered the same wrong. Usually this would be that they all suffered identically as a result of a particular business practice of a company, or they all used the same product which proved to be defective. While there are many other examples, these two are probably the most common. The reason this common wrong is necessary is so that all members' cases can be decided in a uniform manner. It is for this reason alone that they are justified in bringing the class action at all, as opposed to each bringing a separate claim. The court will decide whether or not to certify the plaintiffs as a class or not, and only if they are certified, can the suit proceed.

The other issue that might hinder proceedings is if the defendant challenges the law firm that seeks to represent the class. This is because class actions involve certain specific challenges such as notifying and receiving instruction from all the class members, publicly broadcasting the claim to allow other potential class members the chance to be included and that the firm's relationship with the plaintiffs and their ability to fund the litigation is secure.

If all of these challenges are met, the class action suit should be able to proceed. The next step is to win the case, and this is an entirely different challenge.

Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.