Class Actions Improvements Act
Class Actions Improvements Act
This Act makes several revisions to the basic class action statute or rule that has been adopted in some form by most states (i.e., Rule 23 of the Federal Rules of Civil Procedure).[i] For the most part, the revisions clarify issues regarding Rule 23 by making more explicit key interpretations of the rule by federal (and some state) courts. The Act also contains several improvements for states to adopt with respect to their class action statutes or court rules:
1. The Act requires appellate review of trial court orders granting or denying class certification.
2. The Act establishes a rule limiting the scope of plaintiff class actions to residents of the state in which the class action is filed, allowing states to focus their resources primarily to resolving the claims of their own citizens. This aspect of the Act would not apply in a mass accident occurring in a state where persons who were injured included non-residents.
3. The Act addresses “no injury” class actions by requiring that each class member suffered the same
type and scope of injury as the named class representatives.
4. The Act prevents conflicts by providing that a court may not certify a class if the class representatives or named plaintiffs are relatives, present or former employees, present or former clients (other than with respect to the class action), or in any contractual relationship (other than with respect to the class action) with class counsel.
5. The Act adopts an explicit “classwide proof” prerequisite for class certification to ensure that the due
process rights of unnamed class members and defendants are protected at trial.
6. The Act adds a “maturity” factor to the class certification prerequisites to ensure that class actions are not employed prematurely.
7. Finally, the Act adds an “administrative process” factor to the class certification prerequisites, recognizing that class actions are unnecessary where the allegations asserted are within the purview of federal or state regulatory agencies.
In addition, the Act (i) eliminates instances in which a plaintiff seeks to sue a class of defendants, (ii) requires trial courts to consider whether the expense and effort required to litigate the case on a class basis is justified by the amount of the recovery that each class member is likely to obtain; (iii) codifies the federal court policy that (b)(2) class actions are unavailable where monetary relief is sought, (iv) makes clear that the timing for trial court consideration of class certification issues varies from case to case, (v) requires trial courts to give a written explanation of a decision to certify (or not to certify) a proposed class, (vi) establishes that class certification may be granted only where there is a full record and where the proponents have proffered clear and convincing evidence that the certification prerequisites have been satisfied, (vii) codifies the federal court view that there should be no presumption in favor of class certification, (viii) establishes a rebuttable presumption against the certification of classes asserting claims about which the class members would have to prove knowledge, reliance, or causation on an individual basis, (ix) provides that class certification does not excuse each
class member’s burden to prove each element of his/her claim; (x) adds specifications concerning the
categories of information that should be included in any notices sent to the unnamed class members;
(xi) clarifies that the proponents of class certification have the exclusive burden of paying for any class notice; (xii) clarifies that the rule does not authorize “issues” class actions (cases in which proponents seek to have out-of-context trials on issues that favor their position, depriving the jury of the
opportunity to judge the “whole story”); (xiii) specifies basic procedures that a trial court should follow in reviewing a proposed class action settlement; and (xiv) confirms that unnamed class members may be subject to court-approved discovery regarding their individual claims.
These provisions may be implemented as a statute or as a change in state rules of civil procedure, as appropriate. If the state has adopted a state court rule governing class actions, the legislature’s ability to change that rule may be limited under the state constitution or rules enabling act-type statute.
The provisions of the Act assume that the state presently has a class action law or rule that is generally based on Fed. R. Civ. P. 23. If the state has adopted another class action rule, some adaptation may be necessary.
[Title, enacting clause, etc.]
Section 1. Title. The following Act shall be known and may be cited as the Class Action Improvements Act.
Section 2. Revisions to Class Action [Statute/Rule]. [Section/Rule of the ] shall be deleted and replaced in its entirety with the following:
(a) Prerequisites to a Class Action. One or more members of a class of [name of state] residents may sue as representative parties on behalf of all members of the class only if:
(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact as to which the court or jury could reasonably reach conclusions or findings applicable to all class members;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class;
(4) each class member suffered the same type and scope of injury as the named class representatives;
(5) the representative parties will fairly and adequately protect the interests of the class;
(6) the class is defined so as to permit the identification of class members before any merits adjudications occur;
(7) the class representatives or named plaintiffs are not relatives, present or former employees, present or former clients (other than with respect to the class action), or in any contractual relationship (other than with respect to the class action) with class counsel; and
(7) non-residents may join in the class in case of a sudden accident or natural event culminating in an accident that results in death or injury incurred at a specific location.
(b) Class Actions Maintainable. An action may be maintained as a class action if the prerequisites of subdivision (a) are satisfied, and in addition:
(1) the prosecution of separate actions by or against individual members of the class would create a risk of:
(A) inconsistent or varying adjudications with respect to individual class members that would establish incompatible standards of conduct for the party opposing the class, or
(B) adjudications with respect to individual class members that, as a practical matter, would be dispositive of the interests of the other members not parties to the individual adjudications or would substantially impair or impede their ability to protect their interests;
(2) the party seeking to maintain the class action does not seek any monetary relief and the party opposing the class has acted or refused to act on grounds that apply generally to the class, so that final injunctive relief or corresponding declaratory relief is appropriate with respect to the class as a whole;
(3) the court finds:
(i) that the questions of law or fact as to which the court or jury could reasonably reach conclusions or findings applicable to all class members predominate over any questions affecting only individual members;
(ii) that the evidence likely to be admitted at trial regarding the elements of the claims for which certification is sought and of the defenses thereto is substantially the same as to all class members; and
(iii) that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy. The matters pertinent to these findings include:
(A) the class members’ interests in individually controlling the prosecution or defense of separate actions;
(B) the extent, nature, and maturity of any litigation concerning the controversy already commenced by or against class members;
(C) whether it is probable that the amount which may be recovered by individual class members will be large enough in relation to the expense and effort of administering the action to justify maintaining the case as a class action;
(D) the desirability or undesirability of concentrating the litigation of the claims in the particular forum;
(E) the likely difficulties in managing a class action; and
(F) the extent to which the allegations at issue are subject to the jurisdiction of federal or state regulatory agencies.
(c) Determination by Order Whether Class Action to be Maintained; Notice; Judgment.
(1) When practicable after the commencement of an action brought as a class action, the court shall, after hearing, determine by order whether it is to be so maintained. An order under this subsection may be altered, amended, or withdrawn at any time before the decision on the merits.
(2) If the court finds that the action should be maintained as a class action, it shall certify the action accordingly on the basis of a written decision setting forth all reasons why the action may be so maintained and describing all evidence in support of the determination.
(3) A court shall not certify that an action may be maintained as a class action unless, on the basis of a full record on the relevant issues, the proponents proffer clear and convincing evidence that the action complies with all requirements for such certification. Any doubt as to whether this burden has been met shall be resolved in favor of denying class certification. The court shall decertify a class action upon any showing that an action has ceased to satisfy the applicable prerequisites for maintaining the case as a class action.
(4) There shall be a rebuttable presumption against the maintenance of a class action as to claims for which class members would have to prove knowledge, reliance, or causation on an individual basis.
(5) The determination that an action may be maintained as a class action shall not relieve any member of the class from the burden of proving all elements of the member’s cause of action, including individual injury and the amount of damages.
(6) In any class action maintained under subsection (b)(3), the court must direct to class members the best notice that is practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort. The notice may be by United States mail, electronic means, or other appropriate means. The notice shall include:
(i) a general description of the action, including the relief sought, and the names of the representative parties;
(ii) a statement of the right of a member of the class to be excluded from the action by submitting an election to be excluded, including the manner and time for exercising the election;
(iii) a description of possible financial consequences for the class;
(iv) a general description of any counterclaim or notice of intent to assert a counterclaim by or against members of the class, including the relief sought;
(v) a statement that the judgment, whether favorable or not, will bind members of the class who are not excluded from the action;
(vi) a statement that any member of the class may intervene in the action and designate separate counsel;
(vii) the address of counsel to whom members of the proposed class may direct inquiries; and
(viii) other information that the court deems appropriate.
(7) The plaintiff shall bear the expense of the notification required by the foregoing subsection. The court may require other parties to the litigation to cooperate in securing the names and addresses of the persons within the class for the purpose of providing individual notice, but any costs incurred by the party in providing such cooperation shall be paid initially by the party claiming the class action. Upon termination of the action, the court may allow as taxable costs all or part of the expenses incurred by the prevailing party.
(8) The judgment in an action maintained as a class action under subsections (b)(1) or (b)(2), whether or not favorable to the class, shall include and describe those whom the court finds to be members of the class. The judgment in an action maintained as a class action under subdivision (b)(3), whether or not favorable to the class, shall include and specify or describe those to whom the notice provided in
subsection (c)(2) was directed, and who have not requested exclusion, and whom the court finds to be members of the class.
(9) When appropriate, a class may be divided into subclasses and each subclass treated as a class. The provisions of this rule shall then be construed and applied accordingly.
(d) Orders in Conduct of Actions. In conducting an action under this [section/rule], the court may issue orders that:
(1) determine the course of proceedings or prescribe measures to prevent undue repetition or complication in presenting evidence or argument;
(2) require—to protect class members and fairly conduct the action—giving appropriate notice to some or all class members of any step in the action, the proposed extent of the judgment, or the members’ opportunity to signify whether they consider the representation fair and adequate, to intervene and present claims and defenses, or otherwise to come into the action;
(3) impose conditions on the representative parties or on intervenors;
(4) require that the pleadings be amended to eliminate allegations as to representation of absent persons and that the action proceed accordingly; or
(5) deal with similar procedural matters.
(e) Dismissal or Compromise.
(1) A class action shall not be dismissed or compromised without the court’s approval. Notice of the proposed dismissal or compromise shall be given to all class members in such manner as the court directs.
(2) Before approving the dismissal or a compromise of an action that the court has determined may be maintained as a class action, the court shall hold a hearing to determine whether the terms of the proposed dismissal or compromise are fair, reasonable and adequate for the class. At such hearing, all parties to the action, including members of the class, shall be permitted an opportunity to be heard as the court may direct.
(f) Discovery. Representative parties and intervenors are subject to discovery in the same manner as parties in other civil actions. Other class members are subject to discovery in the same manner as persons who are not parties, but may be required by the court to submit to discovery procedures applicable to the representative parties and intervenors.
(g) Appeals. The courts of appeals shall hear appeals from orders of trial courts granting or denying class action certification or denying a motion to decertify a class action under this section if a notice of
appeal is filed within 14 days after the order is entered. While an appeal under this subdivision is pending, all discovery and other proceedings in the trial court shall be stayed.
Section 3. [Severability clause.]
Section 4. [Repealer clause.]
Section 5. [Effective date.]
[i] There is substantial uniformity among the state statutes and state court rules that govern class certification. Forty states have adopted (sometimes with minor modifications) the current (1966) version of Fed. R. Civ. P. 23. Two states, Mississippi and Virginia, have no formal class action statutes or rules.
Approved by ALEC Board of Directors on September 13, 2000.
Reapproved by ALEC Board of Directors on January 28, 2013.