The Federal Class Action Practice Manual

Chapter 1: Historical Development and General Principles

[§1] Introduction

A Class action provides a means whereby large numbers of claimants may have their causes involving common questions of fact or law adjudicated in a unitary proceeding. Prior to certification of a class, the court must find a sufficiently large number of class members exist to make joinder impractical. Therefore, since all claimants cannot be named parties in the lawsuit, the action is by its very nature a representative proceeding. The named class plaintiff representatives in addition to prosecuting their own claims serve on behalf of and pursue claims belonging to the absent class members. Further, the attorneys and named plaintiffs representing the ostensible plaintiff class assume fiduciary responsibilities to protect the interests of the absent class members. Manual for Complex Litigation, Third 30.

Inherent in any class action is the potential for conflicting interests among the class representatives, class counsel, and absent class members. "The interest of lawyer and class may diverge, as may the interests of different members of the class." Plummer v. Chemical Bank, 668 F.2d 654, 658 (2d Cir. 1982) (internal quotation marks omitted). Both class representatives and class counsel have responsibilities to absent members of the class.

The class action procedure represents an exception to the general rule that one cannot be bound to a judgment rendered in a proceeding wherein one was not joined as a party. Hansberry v Lee, 311 U.S. 32, 61 S.Ct 115, 85 L.Ed.2d 22 (1940). Class action practice in federal court involves an understanding and appreciation of the United States Constitution, (as to concepts of due process, notice and jurisdiction), Rule 23 of the Federal Rules of Civil Procedure (as to the procedural mechanism which governs class actions) and applicable local rules of practice. Particular attention must be given to local rules of practice promulgated by the various district courts. Local court requirements for commencing class actions and time limitations for filing certification motions may be governed by local rule. See, e.g., Rule 203, District of Columbia Local Rules of Practice; Rule 212, Middle District of North Carolina Local Rules of Practice; Appendix A, Local Rules of Practice of the Western District of Texas. See also, Nicolas v. Deposit Guaranty National Bank, 182 F.R.D. 226 (D. Miss 1998)(denying motion for extension of time to file a motion for class certification due to failure to comply with filing deadline pursuant to local rule).

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[§2] Historical Development of Class Action Litigation

The class action originated in eighteenth century English equity courts as an exception to the rule that joinder of all interested parties was necessary to obtain complete justice. In the United States, the class action procedure was available only in equity until 1938 when the Federal Rules of Civil Procedure were enacted. Original Rule 23 recognized the "true" class action, which concluded the rights of all class members, whether named in the suit or not; the "hybrid" class action, in which class members made separate claims against a common fund or property; and the "spurious" class action, in which the members of the class made separate claims involving common questions of law or fact. The "true" class action was described by original Rule 23(a) as an action in which "the right to enforcement for . . . the class was . . . joint, or common, or secondary in the sense that the owner of primary right refuses to enforce it." As opposed to judgments in "true" class actions, judgments in "spurious" and "hybrid" class actions did not determine the rights of absent class members. In 1966, Federal Rule 23 was amended, eliminating the three categories of class actions.

While the federal courts were operating under the 1938 version of the federal rules, the Supreme Court in Hansberry v Lee, 311 U.S. 32, 61 S.Ct 115, 85 L.Ed 22 (1940) noted that class action litigation has its historical roots in bills of peace in equity which involved multiple parties. As representative litigation progressed historically, its utility in other contexts became clear and accepted. In Supreme Tribe of Ben Hur v Cauble, 255 U.S. 356, 363, 41 S.Ct 388, 65 L.Ed 673 (1921), class action suits were characterized as follows:

Where the parties interested in the suit are numerous, their rights and liabilities are so subject to change and fluctuation by death or otherwise, that it would not be possible, without great inconvenience, to make them all parties, and would oftentimes prevent the prosecution of the suit to a hearing. For convenience, therefore, and to prevent a failure of justice, a court of equity permits a portion of the parties in interest to represent the entire body, and the decree binds all of them the same as if they were before the court.
The justifications that led to the development of the class action include several components such as:
  • The protection of defendants from inconsistent obligations.
  • The protection of the interests of the absent class members.
  • The provision of a convenient and economical means for disposing of similar lawsuits.
  • A procedure that provides a means to facilitate spreading litigation costs among numerous litigants with similar claims.
United States Parole Comm’n. Geraghty, 445 U.S. 388, 423, 100 S.Ct 1202, 63 L.Ed 2d 479 (1980).

Rule 23, Federal Rules of Civil Procedure, provides the procedural mechanism and requisite elements for class certification in federal courts. The Federal Rules of Civil Procedure are available on-line.

The Rules Enabling Act authorizing development and use of the Federal Rules of Civil Procedure clearly states that no Rule can be used to "abridge, enlarge or modify any substantive right." 28 U.S.C.A. 2072(b)(1988). See Amchem Prods., Inc. v. Windsor, 117 S.Ct. 2231 (1997); Burlington Northern R. Co. v. Woods, 480 U.S. 1 (1987); Durant v. Husband, 28 F.3d 12 (3d Cir. 1994); Mace v. Van Ru Credit Corp., 109 F.3d 338 (7th Cir. 1997); Johansen v. E.I. DuPont de Nemours & Co., 810 F2d 1337 (5th Cir. 1987). Thus, Rule 23 does not provide an independent basis for jurisdiction, nor does it provide any substantive basis for a cause of action.

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[§3] Service of Process on Absentee Class Members Not Required

A class action is a representative suit filed on behalf of named plaintiffs for themselves and on behalf of a discernible group of people or legal entities similarly situated. Class actions have been characterized as a "nontraditional" form of litigation. United States Parole Comm’n. v Geraghty, 445 U.S. 388, 100 S.Ct 1202, 63 L.Ed 2d 479 (1980). Due to the fact a large number of claimants will not be named parties in a class suit, the named plaintiffs in a class action assume responsibilities and obligations not present in individual litigation because of their duty to adequately represent absent class members. See Manual for Complex Litigation, Third 30.

It is a fundamental principle in the general application of American law is that a person is not bound by a judgment in personam in litigation in which he is not designated as a party or to which he is has not been made a party by service of process. See International Shoe Co. v Washington, 326 U.S. 310, 66 S.Ct 154, 90 L.Ed 95 (1945). A judgment rendered in such circumstances is not entitled to full faith and credit under the Constitution and statutes of the United States. Hansberry v Lee, 311 U.S. 32, 40, 61 S.Ct 115, 85 L.Ed 2d 22 (1940).

It is consistent with due process, however, that when parties are adequately represented in a class action and provided necessary procedural constitutional safeguards, they may be bound by the judgment. Moreover, the class action device was designed as an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only. See Class Action Litigationfano v Yamasaki, 442 U.S. 682, 700-701 99 S.Ct 2545, 61 L.Ed 2d 176 (1979); In re A.H. Robbins Co., Inc., 880 F.2d 709, 727 (4th Cir.), cert. denied, 493 U.S. 959, 110 S.Ct 377 (1989). Class actions specifically allow lawsuits to be conducted through representatives on behalf of absent class members. Gen. Tel Co. of Southwest v Falcon, 457 U.S. 147, 102 S.Ct 2364, 72 L.Ed 2d 740 (1982).

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[§4] Judicial Economy and Resolution of Claims Facilitated by Class Action Procedure

The purpose of class action litigation is to conserve the resources of both the courts and the parties by permitting an issue potentially affecting every class member to be litigated in an economical fashion. See General Telephone Co. of the Southwest v Falcon, 457 U.S. 147, 155, 102 S.Ct 2364, 2369, 72 L.Ed 2d 740 (1982). Class action lawsuits protect defendants from inconsistent obligations that may arise in multiple suits managed individually. By means of a class action, remedies for a group of people may be achieved when otherwise those people might never have a day in court. "Class actions ... permit the plaintiffs to pool claims which would be uneconomical to litigate individually." Phillips Petroleum, Inc. v. Shutts, 472 U.S. 797, 809, 86 L. Ed. 2d 628, 105 S. Ct. 2965 (1985). Judicial economy is achieved by an efficient, uniform and final resolution of multiple claims. See Eisen v Carlisle & Jacquelin, 417 U.S. 156, 94 S.Ct 2140, 40 L.Ed 2d 732 (1974). Class action litigation may also be used to facilitate settlements involving massive numbers of claims among class members spread over a large geographic area.

The class action has been recognized in the mass tort context as the manifest fair and expeditious procedure for disposing of claims. See, e.g., Note, Mass Exposure Torts: An Efficient Solution to a Complex Problem , 54 U Cin L Rev 467 (1985); Wright & Colussi, The Successful Use of the Class Action Device in the Management of the Skywalk Tort Litigation, 52 UMKCL Rev 141 (1984); Comment, Federal Mass Tort Class Actions: A Step toward Equity and Efficiency, 47 Albany L Rev 1180 (1983); Comment, The Use of Class Actions for Mass Tort Accident Litigation, 23 Loy L Rev 383 (1977); Rubin, Mass Torts and Litigation Disasters , 20 Ga L Rev 429 (1986); Panzer & Patton, Utilizing the Class Action Device in Mass Tort Litigation, 21 Tort & Ins LJ 560 (1986). See also In re A.H. Robbins Co., Inc., 880 F.2d 709, 727 (4th Cir), cert. denied, 493 U.S. 959, 110 S.Ct 377 (1989); Jenkins v Raymark Indus., 782 F2d 468 (5th Cir), rehg denied , 785 F2d 1034 (5th Cir 1986). However, claims involving personal injury are subject to special considerations and limitations when resolution by class action procedures is contemplated. cf. Amchem Prods., Inc. v. Windsor, 117 S.Ct. 2231 (1997).

The same economies of scale and preservation of judicial assets are applicable when class actions are utilized in contexts other than mass tort actions. Class action lawsuits serve to promote judicial efficiency through the elimination of needless duplication and repetition that may result from hundreds or even thousands of people trying similar claims individually. See Newberg on Class Actions, Third Edition 17.01 n.1 (1992). For in such cases, "the class action device saves the resources of both the courts and the parties by permitting an issue potentially affecting every [class member] to be litigated in an economical fashion under Rule 23." See also General Tel. Co. of Southwest v Falcon, 457 U.S. 147, 161, 102 S.Ct 2364, 72 L.Ed 2d 740 (1982).

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[§5] Defendant Class Action Litigation

Rule 23(a) provides in pertinent part: "One or more members of a class may sue or be sued as representative parties...". Defendant class actions have been certified when there is a need for  a "procedural device that allows one who has a common grievance against a multitude of persons to resolve the . . . dispute by using only a few members of the class.  In re Broadhollow Funding Corp., 66 B.R. 1005, 1007 (Bkrtcy EDNY 1986); Walpen, Defendant Class Actions, 38 Ohio L.J. 459 (1977).  The use of a defendant class avoids costly multiple litigation and the danger of inconsistent adjudication of the same issue. See Class Action Litigationfano v. Yamasaki, 442 U.S. 682, 700 - 01, 99 S.Ct. 2545, 2557-58, 61 L.Ed.2d 176 (1979); General Telephone Co. of Southwest v. Falcon, 457 U.S. 147, 156, 102 S.Ct. 2346, 2369-70, 72 L.Ed.2d 740 (1982).  Rule 23 expressly contemplates the possibility of defendant class actions and requires that the representative parties fairly and adequately protect the interests of the class members.   Kerney v. Fort Griffin Fandangle Ass'n, Inc., 624 F.2d 717, 721 (5th Cir. 1980).  In permitting such a class action to proceed, a district court determines adequacy of representation as a threshold matter. Moreover, the court has the power and the duty to ensure that all defendants be given adequate notice of the action and an opportunity to present individual defenses if desired.  Should the court fail to afford any defendant due process, he would be entitled to have an adverse judgment set aside or reversed on appeal. Id.

[§5.1] Class Actions in Bankruptcy Court

A United States Bankruptcy Court is empowered to certify a class pursuant to Bankruptcy Rule 7023, which states: "Rule 23 Fed.R.Civ.P applies in adversary proceedings." See In re Broadhollow Funding Corp., 66 B.R. 1005, 1007 (EDNY 1986). The standards for class certification applicable to proceedings in bankruptcy courts are the same as in proceedings in district courts.

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[§6] Individual Interests and Rights Must be Protected in Class Action

Individual interests and rights must be protected in class action litigation. Adequacy of the named representatives and their counsel is essential to absent class member protection. Hill v Western Electric Co., 672 F.2d 381, 388 (4th Cir), cert denied, 459 U.S. 981, 103 S.Ct 318 (1982). "The adequacy requirement mandates an inquiry into the zeal and competence of the representative's counsel and the ability of the representative to take an active role in and control the litigation and to protect the interests of the absentees . . . . " Horton v. Goose Creek Independent School District, 677 F.2d 471, 488 (5th Cir. 1982).

An absent class member will not be bound to a judgment wherein he was not adequately represented by the named plaintiffs. Hansberry v Lee, 311 U.S. 32, 61 S.Ct 115, 85 L.Ed 22 (1940). After a class action is filed, the named plaintiffs and their counsel must take into account the interests of the absent class members. A very concise and accurate account of the relationship between a class counsel, the named plaintiffs and the absent class members may be found in the Manual for Complex Litigation, Third 30:

By its nature, litigation in which claims are made by or against a class tends to be complex and require judicial management. Particularly because such litigation imposes unique responsibilities on the court, as well as on counsel, it calls for closer judicial oversight than other types of litigation. The potential for actions, by counsel or parties, that will be deliberately or inadvertently result in prejudice to litigants is great. Once class allegations are made, various otherwise routine decisions - such as whether to dismiss or compromise the action or abandon the class claims - are no longer wholly within litigant's' control. The attorneys and parties seeking to represent the class assume fiduciary responsibilities, and the court bears a residual responsibility to protect the interests of class members, for which Rule 23 (d) gives the court broad administrative powers.

Continue to Chapter 2  

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