What happens when hundreds or even thousands of people are injured by -- or suffer losses because of -- the same defendant's same action (or inaction)? For example, let's say a publicly-held company makes false earnings statements to thousands of investors, or a car company designs and manufactures a vehicle with an unreasonably dangerous component. In situations like these, and when certain procedural qualifications are met, instead of hundreds or thousands of individual lawsuits making it to court over the matter, there may be only one: a class action lawsuit.
What is a Class Action?
It's not enough that there are a large number of people who may have a case against the same defendant. According to the class action rules laid out in the Federal Rules of Civil Procedure (which many states have largely mirrored in drafting their own procedural rules for class actions), in order for a lawsuit to be certified as a class action:
- the class of people affected must be so numerous that joining them all into the lawsuit is "impracticable"
- the same or similar questions of law or fact must be common to the class
- the claims (and claimed losses) of the representative parties must be typical of those of the class, and
- the representative parties must be able to fairly and adequately protect the interests of the class.
Learn more about The Basics of Class Action Lawsuits.
Head of the "Class"
So, who speaks for the "class" in a class action lawsuit? It's the "class representative" or lead plaintiff (sometimes called the "named plaintiff".)
Let's look closer at the third and fourth requirements for class certification laid out above. In order to get a lawsuit certified as a class action, under federal procedural rules, the chosen class representative must be able to "fairly and adequately protect the interests of the class." So, when examining the suitability of the representative parties, it's not enough that the representative's claims (and claimed losses) are the same or similar. The person him or herself must be able and willing to act in the best interests of the class. That means the representative should:
- have interests that are sufficiently intertwined and interrelated with those of the class
- be familiar with the basics of the case
- be willing to devote the necessary time and energy to fair resolution of the class action
- be free of any conflict of interest, and
- not have a history of fraudulent behavior (a criminal record may be okay, but a felony conviction for embezzlement should probably disqualify a class representative)
The Class Representative's Responsibilities
A lead plaintiff has a pretty big job in a class action case. He or she usually works very closely with the attorneys handling the case ("class counsel") and is often there in the courtroom or at the conference table at key points of the litigation, including during formal settlement talks. So, the class representative usually has to make a significant commitment to the case, as opposed to class members, who essentially do nothing while the class action progresses.Despite being in a higher-profile position in relation to the rest of the "class," the lead plaintiff is usually in the same position as all members of the class when it comes to attorney's fees. Class action attorneys take cases under contingency fee agreements and take a representation fee (typically somewhere around 33 percent) only if they win or settle the case. (The "costs" of pursuing the class action lawsuit are also typically absorbed by class counsel, at least if the case doesn't reach a favorable outcome.)
Take the Lead, or Just Join In
In most class actions, you don't have to do anything to join the suit. At the beginning of the case, the attorneys figure out everyone who might have been affected by the defendant's wrongful action (or inaction). For example, class counsel will determine everyone who owns stock in the company that fudged its earnings data, or all people who bought the vehicle that was found to have a dangerous or defective component. Learn more about Notice of a Class Action Lawsuit.
Typically, everyone in the class will get some kind of notice -- usually by a post card in the mail, perhaps followed by an email, depending on the availability of class member information -- about the certification of the class action lawsuit. At that point, class members are given a chance to "opt out" of the suit, too, meaning they're free to file their own lawsuits.