Historical Use and Abuse of Class Actions

Public reaction to the use of class actions has varied over time. Following the 1966 amendments to Federal Rule 23, class action lawsuits began to be used frequently. They were viewed as a method of bringing justice to the disadvantaged. Because of this, courts liberally construed the law and, in close cases, erred on the side of the class. This led to some abuse of this litigation device. Courts were not as careful as they should have been in monitoring the cases, settlements often were over broad, and attorney fees were frequently and liberally granted to counsel for the class. As a result of misuse and abuse of the class action device, society developed a bad impression of class action litigation.

The result was a backlash against the use of class action litigation. Defendants began to vigorously oppose all use of the class action device. Teams of defense attorneys specialized in assisting defendants in prolonging the certification process, dragging out pretrial discovery, and generally doing everything possible to make the class action difficult for and unattractive to plaintiffs.

The result was extensive litigation over the structure of the lawsuit, without ever reaching the underlying merits of the case. Courts began closely monitoring requests for class certification, frequently denying the motion to certify a class. Attorney fees were closely scrutinized and often drastically reduced, thus discouraging plaintiffs' attorneys from taking on class action representation.

In the early 1970's, attitudes toward the use of class actions again shifted. Plaintiff attorneys began exercising greater restraint in initiating class actions. Plaintiffs became more realistic in defining the participating class and in selecting the issues for litigation. Plaintiffs also recognized that often there were good reasons to forego the use of class actions and sue individually. The expense of notice requirements and pre-certification litigation caused many plaintiff attorneys to reconsider the desirability of using the class action device. Judges also were more careful in monitoring class action questions. In particular, courts more closely scrutinized requests for certification of a class, more carefully examined settlement proposals for fairness, and paid closer attention to requests for attorney fees. Judges also used procedural tools to more precisely define classes and the issues to be included in the litigation, frequently modifying cases to provide for subclasses or sub-issue litigation. As a result, although most defendants continued to oppose certification, such opposition no longer was automatic. Defendants even acknowledged that the class action device could be beneficial in certain cases. These changes have led to more effective and efficient use of the class action device for both plaintiffs and defendants.

Despite these reforms, class action litigation remains a complex and prolonged process. Businesses may need to invest countless time and financial resources in defending class action claims. In addition to the direct costs of the litigation, class action litigation can bring extensive adverse publicity to the target company or to individual products or procedures. For these reasons, companies should respond quickly when faced with complaints that could give rise to class action litigation. Prompt response to and resolution of individual complaints may foreclose the possibility of class action litigation completely. If faced with a class action lawsuit, a business should act quickly to review the issues with counsel and determine how to proceed. Early response and preparedness are critical when faced with a potentially damaging and costly public trial. Even more important, businesses can prevent the possibility of class actions through frequent review of company practices and procedures and prompt correction of any improper policies or practices. This is one area in which prevention can far outweigh the substantial price of the cure.