Class Action Procedure

Although each court regime in the US (whether federal or state) has their own procedure for resolving Class Action claims, generally, the Lead Plaintiff or Class Representative files a complaint or statement of claim.  It is important to understand that different types of Class Actions in the United States (i.e., Securities, Tort, Product Liability, etc), will attract different pleading standards in a complaint, such that the case will not be defeated on a “summary judgment” type decision. 

The complaint or statement of claim is generally answered by the Defendants. The parties engage in discovery, a process by which each side requests the documents and information in the possession of the other side. At times, the lawyers will file motions with the court to seek to dismiss some or all of the claims, narrow the issues, or in general to resolve procedural disputes. Often the Defendants will seek to have the action dismissed prior to trial, on the grounds that the facts could not possibly support a finding against them.

Class Action Certification

In general, for a lawsuit to proceed as a Class Action, the court must determine whether it is appropriate for the case to be treated as a Class Action. This process is known as “class certification.”  Typically, a Class Action must meet certain threshold requirements before it can be certified as a class action: (1) Numerosity (so many potential class members are involved that it is not practical to name them all in the complaint and have them all actively participate in the litigation); (2) Commonality (some material fact or question of law be common to all potential class members); (3) Typicality (the class representatives’ claims are “typical” (but not necessarily identical) to those of the absent class members); and (4) Adequacy of Representation (the Lead Plaintiff must adequately protect and represent the interest of the class and class members must receive proper legal representation by class counsel).

Representative / Lead Plaintiff: Pros and Cons

The "Representative or Lead Plaintiff" is one whose case will speak for that of the whole class. His or her case would then be tried in a court of law on behalf of the class. Any issues which are resolved favorably to the Representative Plaintiff would benefit all class members, not just the individual plaintiffs. As well, any issues which are found adverse to the Representative Plaintiff would similarly affect the whole class.

For the most part, the Representative Plaintiff has the right to choose their counsel, direct the prosecution of the lawsuit, and participate in important decisions regarding the lawsuit.

Although an award of costs against the Representative Plaintiff or the Plaintiff’s attorneys is possible in the United States, it is less likely than their Canadian counter-part.

Settlement / Trial

Whether a Class Action will ultimately be settled or whether it will go to trial is a question that can only be answered after considering and analyzing the following: potential defenses and their legal sufficiency, remuneration and damages sought by the Class Members, the enormous costs of litigation and the chances of recovering such costs, the potential exposure to huge judgments and the negative publicity associated with high profile cases.

A benefit of settlement is that a settlement which has been approved by the Court binds the entire class (subject to the “Opt-Out” provisions). This means that res judicata can be invoked on future claims. For many corporate defendants, the fear of what may lurk around the corner is greater than what is staring them in the face.