What is Class Action?

Definition

A class action is a lawsuit where a group of people collectively bring a claim to court against an institution or company to protect their common interests. This type of lawsuit typically involves a large number of plaintiffs and aims to increase litigation efficiency and reduce costs through collective action. Class actions are usually led by a representative or a lead attorney who negotiates or litigates on behalf of all affected individuals.

Origin

The concept of class action originated in 19th-century England but was extensively developed and applied in the United States. The 1966 amendment to Rule 23 of the Federal Rules of Civil Procedure made class actions a significant legal tool, especially in consumer protection and securities fraud cases.

Categories and Features

Class actions can be categorized into several types, including consumer class actions, securities class actions, and employment class actions. Consumer class actions often involve product liability or unfair business practices; securities class actions are typically related to losses suffered by investors due to securities fraud; employment class actions usually involve disputes over wages and working conditions. The main feature of class actions is that one or several representative plaintiffs represent the entire group, saving time and resources.

Case Studies

A notable class action case is the 1998 tobacco litigation, where 46 U.S. states sued tobacco companies, resulting in a $206 billion settlement. This case demonstrated the effectiveness of class actions in addressing large-scale public health issues. Another example is the 2016 Volkswagen emissions scandal, where investors filed a class action against Volkswagen for cheating on emissions tests, leading to a $14.7 billion settlement.

Common Issues

Common issues investors face when participating in class actions include determining whether they are part of the class and how to receive compensation. Typically, the court will notify potential class members, who can choose to join or opt out of the lawsuit. Additionally, the distribution of class action settlements may take a long time, requiring patience from investors.