Chapter 7: Class Actions
This chapter discusses a range of issues related to class action practice./1/ Legal aid lawyers historically have used class actions to obtain relief for large groups of clients in a broad range of substantive areas. Since 1996, however, organizations funded by the Legal Services Corporation (LSC) have been barred from bringing or participating in class actions and must explore other approaches for systemic relief, such as declaratory judgment actions./2/ Nonetheless, for those attorneys able to bring class actions, this chapter reviews the strategic considerations underlying the decision whether to bring a class action. It then discusses the class certification requirements set forth in Rule 23 of the Federal Rules of Civil Procedure, including amendments adopted in 2003, /3/ how to define and manage the class action, and settlement issues.
In addition, in February 2005, the Class Action Fairness Act of 2005 (CAFA) was signed into law./4/ CAFA was passed in an effort to limit forum shopping for perceived abuses of the class action mechanism in state courts seen as plaintiff–friendly. The CAFA expands federal jurisdiction over class actions by requiring only minimal diversity in cases in which the amount in controversy, defined as the aggregated claims of individual class members, exceeds $5 million./5/ The broad removal provision allows removal by home state defendants and does not require the consent of all defendants./6/ In addition, the court may decline to exercise jurisdiction over class actions in which over one-third but less than two-thirds of the proposed plaintiff class and the primary defendants are citizens of the state of filing upon consideration of several factors set forth in the statute./7/ Not always consistently, the federal appellate courts are deciding a range of jurisdictional issues arising from the CAFA./8/ If such issues come up in your practice, consult your circuit's most recent decisions on them.
1. Excellent materials are available for more in-depth review of the matters covered in this chapter. See 4 William Rubenstein, Alba Conte & Herbert B. Newberg, Newberg on Class Actions (4th ed. 2002 & Supp. 2012); 7-7B Charles A. Wright et al., Federal Practice and Procedure (3d ed. 2005 & Supp. 2012); 3B James Wm. Moore et al., Moore's Federal Practice (3d ed. 1997 & 2013); National Consumer Law Center, Consumer Class Actions (8th ed. 2013); Federal Judicial Center, Manual for Complex Litigation (Fourth) § 21 (2004).
2. See 42 U.S.C. § 2996e(d)(5); 45 C.F.R. § 1617.3. However, LSC program attorneys may represent individual clients “seeking to withdraw from or opt out of a class or obtain the benefit of relief ordered by the court, or non-adversarial activities, including efforts to remain informed about, or to explain, clarify, educate or advise others about the terms of an order granting relief.” 45 C.F.R. § 1617.2(b)(2). See Chapter 9.3 (declaratory judgments) and Chapter 1.4.C. (impact litigation under the restrictions) of this Manual. See also Ilisabeth Smith Bornstein, From the Viewpoint of the Poor: An Analysis of the Constitutionality of The Restriction on Class Action Involvement By Legal Services Attorneys, 2003 U. Chi. Legal F. 693 (restriction on class actions unconstitutional).
3. These changes addressed four areas: the timing of class certification under Rule 23(c)(1); the notice provisions in Rule 23(c)(2); the settlement-review process in Rule 23(e); and the addition of two new subdivisions regarding the appointment of class counsel (Rule 23(g)) and attorney’s fee awards (Rule 23(h)).
4. Class Action Fairness Act of 2005 (CAFA), Pub. L. No. 109-2, 114 Stat. 4 (primarily codified at 28 U.S.C. § 1332 (diversity) and § 1453 (removal)). See Nan Ellis, Class Action Fairness Act of 2005: The Story Behind the Statute, 35 J. Legis. 76 (2009).
5. 28 U.S.C. § 1332(d)(2), (6). See National Consumers League v. General Mills, Inc., 680 F. Supp. 2d 132 (D.D.C. 2010) (holding nonprofit group action alleging false representation was not “mass action” removable under CAFA because it falls under exception to CAFA for suits brought by general public).
7. 28 U.S.C. § 1332(d)(3). The district court is required to decline jurisdiction over class actions that bear the characteristics listed in 28 U.S.C. § 1332(d)(4). For a useful guide for the management of class actions written for judges after the CAFA, see Barbara J. Rothstein & Thomas E. Willging, Managing Class Action Litigation: A Pocket Guide for Judges, Federal Judicial Center (3rd ed. 2010).
In Dart Cherokee Basin Operating Company v. Owens, 135 S. Ct. 547, 551 (2014), the Supreme Court held in a CAFA case that the defendant's notice of removal need only allege plausibly that the $5 million amount in controversy requirement is met. It need not supplement those allegations with evidence showing the amount in controversy.
In Mississippi ex rel. Hood v. AU Optronics Corporation, 134 S. Ct. 736 (2014), the State of Mississippi sued liquid crystal display manufacturers on state antitrust and consumer protection grounds in state court. The defendants removed the case to federal court on the ground that the case was a "mass action" under 28 U.S.C. § 1332(d)(11)(B)(i). Reversing the Fifth Circuit, the Supreme Court disagreed, holding that a "mass action" requires monetary claims to be brought by 100 or more plaintiffs and, here, there was only one named plaintiff -- the State. The case, therefore, should be remanded to state court.
The CAFA gives federal district courts original jurisdiction over class actions in which the matter in controversy exceeds $5 million in sum or value. 28 U.S.C. §§ 1332(d)(2), (5). In Standard Fire Insurance Company v. Knowles, 133 S. Ct. 1345 (2013), the Supreme Court held that a putative class representative cannot, prior to certification, stipulate that he and the class would seek less than $5 million to avoid removal in a case in which the federal court otherwise determined that the amount in controversy was satisfied.