lunedì, Maggio 27, 2024
Litigation & Arbitration

Class actions in the US: development and open questions

 1. Introduction

Despite historical records showing that the roots of this model date back to the Middle Ages in the UK, with some examples as far as in the 12th century[1], it is commonly accepted that the modern class action device was born in the US in 1966, with the amendment of Rule 23 of the 1938 US Federal Rules of Civil Procedure.[2]

The goals class actions – largely portrayed as a “uniquely American procedural device”[3] – aim to achieve and, consequently, the reasons according to which this procedural device was brought to life with such peculiar features, are mainly two: a private and a public objective.

2. A private goal

As to the private objective, it encompasses a simple yet fundamental issue of access to justice. In today’s society, it is rather common that in different areas of law and everyday life potential claims arise,[4] but they are so small that it wouldn’t be worth pursuing them for a single individual. Especially in consumer law, several examples can be found of claims of just a few hundred dollars which cannot be pursued singularly.[5] Hence, even though substantially one party may have the right to ask for a refund or have its damage repaid, procedurally and practically it’s impossible for them to have legal satisfaction, on one side because their “claims may be so small and unmanageable […] that the cost of enforcing them outruns any promise of benefit”[6] and, on the other side, since the power and resource advantages “repeat litigation players” enjoy over “one-shooters” creates a fundamental power imbalance.[7] Additionally, some authors have noted that in some cases, “single players”, apart from the resources, may even lack the legal knowledge to realise that they have been harmed and are entitled to raise a claim.[8]

Furthermore, from an economic analysis of law standpoint,[9] this entails a major incentive for large corporations to pursue illicit activities or fraud schemes, knowing that they will be shielded by the lack of procedural protection for consumers and that the few hundred dollars saved for every single one of them, if multiplied by hundreds or even thousands, can and do represent significant sums.[10] The consequent risk is the start of an extremely vicious circle, where strong parties get away with their shady business, become stronger, bolster their presence on the market, enhance their lobbying network and, possibly, even gain a dangerous monopoly position, while weak and single parties are left alone with their empty substantial rights and worthless claims.

This applies to consumer law and small claims, but it can be easily transposed to torts law, securities and other fields as well,[11] where, despite having suffered major injuries and losses, individual claimants are incapable of dealing equally or even dealing at all with governments, corporations and other powerful, “deep-pocketed and well-informed” defendants,[12] who manage to swamp and bury any single claimant’s rightful claim under endless discovery, appeals and unsustainable legal fees.[13]

The class action model can therefore set itself up as the necessary instrument to address this problem and finally manage to level the juridical field between weak single parties and otherwise dominant players, reducing all power imbalances[14] and offering a “way of enforcing rights which exist on the books but are meaningless because there is no practical way to protect them”,[15] in a worldwide trend[16] to effectively make the law work.[17]

3. A public goal

As to the second objective of class actions, that is their assumption of a public-almost regulatory role, it has long been stated that litigation can serve as a powerful “governance tool”[18] in any attempt to ensure compliance and enforceability of substantive laws and prevent or discourage dangerous activities causing loss or injury to others.[19] In this case, it has been noted,[20] the class representatives and legal counsels bringing the class action would assume the function of a sort of “private attorney general”.

The premise is that the government administration and “captured or resource-strapped public agencies cannot [always] adequately enforce the substantive law”,[21] but rather, quite often, find themselves unable to control and offer appropriate deterrence to large businesses’ improper activity. If, in addition to this, we count the abovementioned notoriously high costs of individual justice and unbalanced, almost prohibitively, power relationships between weak parties and corporate defendant “repeat players”, it is evident that, without an alternative tool like class actions, “a great deal of substantive law would go under-enforced”,[22] as no one would sue or act to vindicate those claims and impede the unlawful activity.

On the other hand, economies of scale rising from a class action’s joinder of claims enable an independent, well-financed and specifically-prepared “cadre of private attorney generals” to compensate for the inadequacies of government regulators and individual litigants, thus helping “implement a positive program[me] of social or economic reform”[23][24] and making Rule 23 “an evolutionary response to the existence of [otherwise] unremedied injuries.”[25]

 4. Rule 23 and the opt-out mechanism

Despite different critics and causes for concern, which will be analysed further on, because of the abovementioned reasons and with these objectives in mind, the class action device was implemented and found its, at least initial, success.

One of the key elements which managed to boost this mechanism’s powerforce was the introduction of an “opt-out” system in 1966, by means of Rule 23(b)(3).[26] The “opt-out” approach, opposite to the “opt-in” one, stands on the idea that, at the start of any class action, everyone who would theoretically be entitled to be a part of it – that is everyone who is in a similar position to that of the plaintiff/later on class representative, having suffered from the same defendant’s act or omission and having, therefore, the same rights – is, very simply, a part of it.

Consequently, unless the potential class members decide to exclude themselves from the suit by a certain date (that is to “opt out”), they will be automatically included in it, with no explicit consent needed. Moreover, the judgement, whichever the outcome, will be binding for all of them unless they leave the class themselves. On one side, thus, the class members might even receive compensation without ever appearing in court or being asked to do anything. On the other side, however, they will be precluded in the future to litigate the whole claim or any particular issue relating to it, even if they were absent to all the proceedings.

The introduction of this approach in 1966 and the abandoning of the “opt-in” one, where, instead, all potential class members were required to sign in in order to become part of the suit, set a revolutionary thrust,[27] since it was no longer necessary to hold open “absurdly lengthy opt-in periods to encourage as many [potential] class members as possible”,[28] who perhaps were not even aware of their legal entitlements,[29] to take part into the class or to avail themselves of the judgement. Now, it simply sufficed to raise the claim in order to immediately count with the class’ large numbers and higher power, so that any initial and structural power unbalance with corporate defendants was immediately removed.

5. A promising start

Since their initial development, class actions have been employed in a great number of sectors. From consumer law to civil rights, employment issues, mass torts and environmental damages, anti-trust and securities frauds, as far as human rights’ protection, it is safe to say that almost any potential civil dispute involving collective claims and their redress has been touched by this powerful procedural mechanism.

In all these cases, keeping in mind the initial strong reluctancy of the involved companies to admit their failures and the consequent difficulties and preclusive costs of litigation and discovery for individual claimants, class actions, once again, proved to be a very valuable and, in different circumstances, life-saving mechanism[30] for millions of people, as much as an incredibly useful tool to remove from the market defective products or practices. In short, “through procedure substance became alive”.[31]

6. An uncertain future

Despite the promising start, however, different authors agree nowadays that American class actions with the beginning of the new century are facing an evolving dysfunction, caused by a large variety of factors.[32]

On one side, the “romantic narrative”[33] of the white-knight-in-shining-armour attorney who comes to save the day and rescue multitudes of weak parties harmed by large, dark and greedy corporations is not always correct. There is also another side of the coin: for instance, the numerous concerns regarding the capacity of legal counsels to duly represent the interests of the whole class, not to fall prey to easy and tempting collusions with defendants or, even worse, not to push for “in terrorem” settlements or actions, conducting what have been defined as “fishing expeditions”,[34] but also the often discussed question of bindingness of the decisions on totally unaware absent class members with absolutely no decision-making status or, as some authors have argued,[35] the possible counter-effects of the aimed deterrence, with large corporations starting to view class judgements and settlements as a “cost of doing business”[36] and consequently raising and passing along the costs to the very same consumers.[37]

On the other side, “doctrinal complexity and disarray in class action jurisprudence”[38] has all but helped, with the increasing risk of “endless rounds of reactive pleading”[39] frustrating litigants’ ability to reach the merits of the dispute or Rule 23’s initial purposes.

Moreover, after many years of growth in the use of the class action device, the current trend sees both the U.S. Supreme Court and the Congress acting in order to limit them, in particular by providing courts with a greater power in the scrutiny of settlements and by raising the threshold for certification of the class.

Furthermore, the recent additions of conservative Justices in the Supreme Court’s composition are casting concerns on further limitations in the years to come.[40] An alarming example is the one regarding arbitration clauses and class waivers, by means of which, in certain circumstances and business fields,[41] companies can now prevent class action litigation in general,[42] simply by requiring that consumers or employees agree to arbitration of individual claims. Considering the complete lack of negotiating power consumers and employees have in the field of adhesion contracts, serious concerns about this major loophole have been raised.[43]

7. Conclusions

In sum, all of these elements show how the U.S. class action mechanism, once-envisaged as the perfect sling in David’s hands in order to defend himself from Goliath’s abuses, may still provide collective redress to weak parties, but, at the same time, is all but flawless and requires a substantial restructuring or even rethinking,[44] in order to deliver effective justice to everyone in the most efficient way.


[1] Yeazell S. C., From Medieval Group Litigation to the Modern Class Action (1987); Sternlight J., supra (2000); Andreotti T., Dispute Resolution in Transnational Securities Transactions, Bloomsbury (2017).

[2] Sherman, E. F (2002). Group Litigation under Foreign Legal Systems: Variations and Alternatives to American Class Actions, 52 DePaul L. Rev. 401; Cappalli R. and Consolo C.; Klonoff R. H. (2013). The Decline of Class Actions, Washington University Law Review, 729, vol. 90 i. 3; Marcus D. (2013). The History of Modern Class Action, Part I: Sturm Und Drang, 1953-1980, 90 Wash. U. L. Rev. 587; Sternlight J. (2000). As Mandatory Binding Arbitration Meets the Class Action, will the Class Action Survive?, William and Mary Law Review, vol. 42, i. 1; Strong. S. I.; Hazard, G. C., Gedid J. L. and Sowie S. (1998). An Historical Analysis of the Binding Nature of Class Suits, Faculty Scholarship, paper 1423.

[3] Sherman E. F, supra; Born G., Salas C. (2012). United States Supreme Court and Class Arbitration: A Tragedy of Errors, The Symposium, Journal of Dispute Resolution, vol. 2012, i. 1, art. 3.

[4] The availability of such a mechanism is of increasing importance in a global economy in which civil wrongs are often committed on a mass scale by large and powerful entities [Murphy B., Cameron C., supra.].

[5] Yan J. (2011). A Lunatic’s Guide to Suing for $30: Class Action Arbitration, the Federal Arbitration Act and Unconscionability After AT&T v. Concepcion, 32 Berkeley I. Emp. & Lab. L. 551; Sternlight J. (2000) supra; “Eisen v. Carlisle & Jacquelin”, 417 U.S. 156 (1974): “A critical fact in this litigation is that petitioner’s individual stake in the damages award he seeks is only $70. No competent attorney would undertake this complex antitrust action to recover so inconsequential an amount. Economic reality dictates that petitioner’s suit proceed as a class action or not at all.”; Phillips PetroleumCo. V. Shutts”, 472 U.S. 797 (1985): “class actions […] may permit the plaintiffs to pull claims which would be uneconomical to litigate individually. For example, this lawsuit involves claims averaging about $100 per plaintiff; most of the plaintiffs would have no realistic day in court if a class action were not available.”.

[6] Galanter M. (1974). Why the ‘Haves’ Come Out Ahead: Speculations on the Limits of Legal Change, 9 Law and Society Review 95-7.

[7] Galanter M.; Cappelletti M.; Murphy B., Cameron C., supra.

[8] Cappelletti M., supra; Resnik J. (2011). Fairness in Numbers: Comment on AT&T v. Concepcion, Wal-Mart v. Dukes, and Turner v. Rogers, Harvard Law Review, 125(1), 78-171.

[9] Posner R. A. (1973). Economic Analysis of Law, Aspen Law and Business.

[10] Cappalli R. (1992),supra..

[11] In torts law, for example product liability, oil spills or asbestos exposition.

[12] “Fostif Pty Ltd v. Campbells Cash & Carry Pty Ltd”, 63 NSWLR 203, 226 (2005), on the issue of litigation funders.

[13] Rosenberg D. (1987). Class Actions for Mass Torts Doing Individual Justice by Collective Means, Indiana Law Journal, vol. 62, i. 3, art. 3. “In mass tort cases involving claims for personal injury, which pose daunting problems of causation and remedy, the price of individual justice is notoriously high. Because they typically involve complex factual and legal questions, mass tort claims are exceedingly, if not prohibitively, expensive to litigate. The questions of whether the defendant’s conduct failed to satisfy the governing standard of liability frequently entail interrelated technological and policy issues that require extensive discovery, expertise, and preparation to present and resolve adequately. Equally demanding are the causation issues in mass tort cases, such as whether the plaintiff’s condition was caused by exposure to the substance in question or to some other source of the same disease risk”.

[14] Galanter M., supra.

[15] Homburger A. (1974). Private Suits in the Public Interest in the United States of America, 23 Buff. L. Rev 343.

[16] Cappelletti M., supra.

[17] To this regard, it should be stressed that such a need for concrete justice flows in most cases not from a lack of substantive rights, but simply because there is no adequate and effective procedural remedy to enforce them. After all, as it has often been stated [i.e. Uzelac A. (2014). Goals of Civil Justice and Civil Procedure in Contemporary Judicial Systems], substantive and procedural rights are nothing but two sides of the same coin and, as advanced and innovative some rights recognised by the legal system may be, no real value would come from them to society and to the individuals who compose it, unless there is a proper and solid structure to hold them and, at the same time, grant, not only to each citizen, but to each human being and to each legal entity their true and concrete recognition and enforcement.

[18] Hensler D. R. (2001). Revisiting the Monster: New Myths and Realities of Class Actions and Other Large Scale Litigation, 11 Duke Journal of Comparative and International Law 179, 211-2.

[19] Murphy B., Cameron C. (2006); Rosenberg. D. (1987), supra.

[20] Rosenberg D. (1987), supra.

[21] Marcus D. (2013), supra.

[22] Idem.

[23] Idem.

[24] It must be noted that the critics to this “regulatory conception” (in favour of the so called “adjectival conception”, which stresses the importance of the substantive law over the procedural and the necessity to strictly abide by formal procedural rules) claim it “prioritizes regulatory efficacy as a primary rule” [Marcus D., supra], while leaving individual remediation as a secondary goal, if that [Moore, B.C. Jr. (1977). Does it Go Far Enough?, 63 A.B.A.J. 837-42, arguing that “the primary function of the class action is the deterrence of harmful conduct” and “judicial efficiency and compensation of small claimants are merely desirable by-products”].

[25] Burger W., in “Deposit Guar. Nat’l. Bank v. Roper”, 445 U.S. 326, 339 (1980).

[26] This approach, however, regarded only the third type of class actions, while Rule 23(b)(1) and 23(b)(2) were deemed mandatory and did not mandate even individual notice [Sherman E. F.].

[27] Cappalli R., supra.

[28] Marcus D., supra.

[29] Cappelletti C., supra.

[30] For example, by means of all the preventive controls and cures which affected individuals could now afford thanks to the special funds set as a result of the class action.

[31] Cappalli R. supra.

[32] Idem; Marcus D.; Mullenix L. S., supra.

[33] Mullenix L. S., supra (2014).

[34] This expression refers to an attempt to collect incriminating information against large corporations without having real proofs of their wrongdoings, usually by means of extensive discovery (i.e. by having access to the company’s business records). Such a threat is often used by ruthless attorneys in order to leverage settlements.

[35] Drahozal C. (2001). Unfair’ Arbitration Clauses, U. Ill. L. Rev.

[36] Joyce T. (2014). Reining in Crazy Class-Action Lawsuits, National Rev. Online <>.

[37] Sternlight J. (2000). supra.

[38] Mullenix L. S. (2014). supra, who notes how the Wright, Miller & Kane standard treatise on federal practice and procedure dedicates four entire volumes to the class action practice.

[39] Idem.

[40] Kliebard K., Park Chiu M., Rissier J.W., Roelke J. R., Cumming M. A., Nelson H., Suehiro M.A. and Wiese P. J., Class/Collective Actions in the United States: Overview, Morgan, Lewis & Bockius LLP, Class Actions Global Guide, Q&A (2019):

[41] Mostly in consumer law and product liability cases, although also in employment cases, for example (see Lamp Plus v. Varela from 2019).

[42] Thus, both class litigation and class arbitration.

[43] Justice Ginsburg in her dissenting opinion in “Lamp Plus v. Varela” from 2019 wrote: “mandatory individual arbitration continues to thwart ‘effective access to justice’ for those encountering diverse violations of their legal rights. The Court, paradoxically reciting the mantra that ‘[c]onsent is essential’, has facilitated companies’ efforts to deny employees and consumers the ‘important right’ to sue in court, and to do so collectively, by inserting solo-arbitration-only clauses that parties lacking bargaining clout cannot remove.”.

[44] Mullenix L. S. (2014).

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