Study Of The U.s. Class Action System

This thesis will survey class action, one of the most important and controversialareas of law in the United States of America. In the class action context, one orseveral class representatives and class counsel may file a class action on behalf of allclass members, including the named class representative and unnamed, absent classmembers. The absent class members do not participate in the litigation and are notparties to the litigation. However, if the class representative and class counsel canfairly, and adequately protect interests of the class, the judgment of the court will bebinding on all class members.The thesis consists of nine chapters and will focus on eights aspects of classaction.Chapter One will introduce a brief history of the development of the class actionand impact of American class action on other jurisdictions. The American classaction rooted in English law of equity. The source of American modern class actionis the 1966 amendment of Rule 23 of the Federal Rules of Civil Procedure, which wasamended in 1998 and 2003 respectively. In addition, the US Congress passed theClass Action Fairness Act in 2005. The US class action has transplanted into severaljurisdictions, including Canada, Australia, Sweden and Brazil.Chapter Two analyses the underlying reasons for the development of class actionin the United States from legal cultural, political and economic aspects. Thedevelopment of class action in the United States can be attributed to the following fivereasons: (a) amendment of Rule 23 of the Federal Rule of Civil Procedure in 1966;(b)the enactment of new civil rights acts in the 1960's and 1970's;(c) the special legalfee system prevailing in the United States;(d) the respect of rights and desire ofsolving disputes through civil action;and (e) the special role played by the Americanfederal courts. There are two political theories explained the emergence of the classaction in America: (a) representative theory and (b) private attorney general doctrine.According to representative theory, class representative is a self-appointedrepresentative, he is not elected by the class members. In the class action context,the self-appointed class representative is approved by the class members throughratification by sending notice to class members upon certification of class by the trialcourt. However, any absent class member need not take any affirmative action toexpress his consent to the class action. Mere silence shall be deemed as consent. Ifhe opposes it, any class member has an opportunity to opt out of the class by returningnotice to the court. According to the private attorney general doctrine, the privateattorney can help the government make sure that the law is fully obeyed and thewrongdoers shall be punished. From the economic aspects, economy of litigationcan be achieved by litigating thousands of small claims in one class action. Inaddition, Chapter II summaries the famous research report on this topic by RandInstitute of Civil Justice, Class Action Dilemma: Pursuing Public Goals for PrivateGain, so that people unfamiliar with this law will have a clear picture of this specialarea of law.Chapter Three introduces the class certification requirements, which include threeimplied requirements and four express requirements of Rule 23(a). The threeimplied requirements are: (a) the existence of a definable class;(b) the presence of atleast one representative who is a member of the class;and (c) a claim that is live, notmoot. The four express requirements are numerosity, commonality, typicality andadequacy of representation. In addition, the proposed class action must satisfy atleast one of the three categories of Rule 23(b).Chapter Four discusses about the procedure of the class action, includingcommencement, discovery, certification decision, orders controlling class actionproceedings, trial issues and appeal. The most important step in the litigation iscertification. The proposed class action cannot continue unless it has been certifiedby the court. If the court refuses to certify, the class representative will have towithdraw the proposed class action or drop the class claims from his complaint andcontinue his personal claim. The underlying reasons for certification is that the courtshall protect the interests of the absent class members.Chapter Five discusses the special issues in the class action context. The twocore issues of class action law and practice are: (a) whether class members are entitledto notice that the class has been certified;and (b) whether the class members areentitled to opt out and pursue their own individual actions. Notice and opt-out rightsare closely related to the due process requirements for binding absent class members.Under Rule 23(b)(3), the court must direct to all members the best notice practicableunder the circumstances, including individual notice to all members who can beidentified through reasonable effort. The class members are entitled to opt-out andpursue their own actions. The other two important issues are statutes of limitationand jurisdiction. With respect to the statutes of limitation, the commencement ofclass action tolls the action of limitation of all class members, including those absentclass members. With respect to the diversity jurisdiction of federal courts, the caselaw only requires complete diversity between named class members and defendants, itdoes not require complete diversity between all class members and defendants. Withrespect to the amount-of-controversy requirement for federal diversity jurisdiction, thecase law only requires amount of controversy of one of the named plaintiff satisfy theamount-of-controversy requirement. With respect to the personal jurisdiction offederal courts, the case law stipulates that federal court has jurisdiction over absentclass members even though the absent class members lack minimum contact with thejurisdiction. However, this personal jurisdiction rule only applies to plaintiff classaction. The case law is silent about whether it applies to defendant class action. Inaddition, Chapter Five discusses about res judicata, collateral estoppel, SeventhAmendment and ethical issues.Chapter Six analyses the resolution of class action. Typically, most of classactions are resolved by settlement. However, the settlement must be approved by thecourt. The court will not approve the settlement until it finds the settlement is fair,reasonable and adequate. There exist conflicts of interest between classrepresentative, class counsel and absent class members. The class representative andclass counsel may obtain unfair gain at expense of absent class members. One ofdifficult issues is calculation and distribution of class damages. In practice, the courtallows the parties to aggregate the damages payable by the wrongdoers under certaincircumstances. In addition, the court allows the parties to use cy pres distribution.To encourage people to file class action, the US system permits contingent feeagreement between the class representative and class counsel. Under contingent feeagreement, the class representative is not liable for legal fees until its class claim isupheld by the court. Under common benefit doctrine, all the legal fees are limited tothe damages paid by the defendants. Courts have used two methods to set theamount of fees to be awarded to class counsel: the percentage-of-the-fund method andthe lodestar approach. Representative's award is discussed at the end of the chapter.Chapter Seven introduces about special features of defendant class action,shareholders derivative suits and suits involving unincorporated associations.Chapter Eight gives a brief introduction of the non class aggregation devices,including joinder, impleader, interpleader, intervention, consolidation and otheraggregation and coordination devices in federal practice. These devices help us fullyappreciate emergence and application of class action in American legal system.Chapter Nine is the conclusion of the thesis. First, it analyses the legalrelationship of, and roles played by the various parties in class action, which includingnamed plaintiffs, class counsel, absent class members, defendants and the courts.Secondly, it sets up several recommendations for drafting new class action rules.And finally, it suggests that class action be introduced into China to resolve some ofthe emerging social problems in modern China.