class action

noun

Updated on: 26 Jul 2017

Definition of class action

: a legal action undertaken by one or more plaintiffs on behalf of themselves and all other persons having an identical interest in the alleged wrong

See class action defined for English-language learners

First Known Use of class action

1909

Financial Definition of CLASS ACTION

class action

noun

What It Is

Class action is a type of civil lawsuit brought by a group of people who are "similarly situated" -- that is, they have been harmed in a similar way. In the business world, this group is most often shareholders, customers or employees.

How It Works

A class action suit begins as a written complaint that identifies a problem and the class of people involved. The person or entity (usually a law firm) bringing the complaint to the attention of the court on behalf of the class is called the class representative. If the court determines that the complaint and the class meet certain legal requirements, the class is "certified" and anyone meeting the class definition is automatically a member of the class. If the court does not certify the class, plaintiffs are left to pursue their cases individually.

Class members usually have little or no role in the proceedings. If the members don't like the outcome of the suit, they can usually opt out of the class and pursue the defendant on their own (unless the defendant is already bankrupt -- then the court might prohibit this). Not all class action suits seek monetary damages; some seek injunctive relief, whereby a company is instructed to stop an unconstitutional practice.

The class representative is usually paid on a contingency basis, meaning that they are not paid until there is an adequate settlement or judgment. The court approves and awards the compensation to the representative and orders the distribution of the remainder to the members of the class.

Why It Matters

Class action suits are controversial. On one hand, they serve an important legal function by allowing a large group of people to affordably seek justice and share the various legal expenses. This levels the playing field between deep-pocketed defendants and less wealthy claimants. Class actions also save the court system time and money by not having to try each person's case individually.

Critics argue that class action suits foster a litigious society because attorneys often make more from a judgment or settlement than the people they represent. Many times there are tens if not hundreds of millions of dollars at stake, but after the attorney is paid, the remaining amount is distributed among hundreds or thousands of class members. Spreading the proceeds between so many class members may result in token payments.

Source: Investing Answers

CLASS ACTION Defined for English Language Learners

class action

noun

Definition of class action for English Language Learners

law : a lawsuit in which many people join together to sue because they all say they were harmed by the same person or group

Law Dictionary

class action

noun

Legal Definition of class action

: an action in which a representative plaintiff sues or a representative defendant is sued on behalf of a class of plaintiffs or defendants who have the same interests in the litigation as their representative and whose rights or liabilities can be more efficiently determined as a group than in a series of individual suits —called also class action suit, class suit — see also certification — compare consolidate, joinder, test case at case

Additional Notes on class action

Rule 23 of the Federal Rules of Civil Procedure sets out the prerequisites for having an action certified as a class action in federal court. Section (a) permits a class action if “(1) the class is so numerous that joinder of all members is impracticable, (2) there are questions of law or fact common to the class, (3) the claims or defenses of the representative parties are typical of the claims or defenses of the class, and (4) the representative parties will fairly and adequately protect the interests of the class.” If the action satisfies these requirements, it must then fit into one of three categories: (1) where individual litigation would have varying results requiring the opposing party to act inconsistently toward the class members or would affect the interests of class members who are not parties to the individual action; (2) where the opposing party has acted or refused to act on grounds that are applicable to the class members as a whole and therefore injunctive or declaratory relief with respect to the class members as a whole is appropriate; or, (3) where the questions of law or fact common to the class members outweigh questions that apply to only particular individuals so that a class action is the best method to determine respective rights and liabilities. Using these guidelines, the judge will decide if an action should be certified as a class action.