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Class Action – Procedural Requirements

Procedural Requirements for a Class Action

Notice to Opt-Out – Once certified, the lead plaintiff must give notice of the litigation to all prospective members of the class who can be found through reasonable efforts. Once identified, the prospective members are then given the option of opting out of the litigation. Opting out means that they will not be included in the class of plaintiffs. In most cases, this reserves the ability of the potential class member to bring her own legal action against the defendant.

Discussion: You may have gotten notice in the mail or via an email that you are a potential class action member. They are common with purchases of electronics, lending practices, and communications or data usage agreements. Do you believe that failing to opt out of such actions is in your best interest? Were you satisfied with the result from the class action suit?

Cost of Litigation – The lead plaintiffs in the class action must generally pay all of the costs associated with bringing the suit. This includes the heavy fee associated with notifying all potential class members. This makes it prohibitively expensive for one individual or a small group of plaintiffs to serve as plaintiffs for the class. Aggregating the claims among a group of lead plaintiffs, however, makes the action more affordable. Further, if the class action is successful, the plaintiffs paying the cost of litigation may recoup those expenses from any judgment rendered.

Discussion: Do you believe that plaintiff’s attorneys should be able to pay the costs of certifying the class? Why or why not?

State or Federal Court – Plaintiffs may be able to bring a class action in state or federal court. State class action suits must demonstrate the court’s subject-matter jurisdiction over the case and personal jurisdiction over the defendants. For the court to have subject-matter jurisdiction over the class action, a cause of action claimed against the defendants (such as fraud) must arise under state law. The court has personal jurisdiction over all defendants when they all have minimum contacts with the state. Issues arise when there are multiple defendants from different states and they have very little contact with the state of litigation. A class action in federal court avoids the issue of personal jurisdiction, but the plaintiffs must still demonstrate that the court has subject-matter jurisdiction. If the parties are not suing the defendant based upon a federal law, then there must be diversity between the plaintiffs and defendants. Generally two federal statutes allow for class actions involving “complete diversity” and “minimum diversity”.

Complete Diversity – This requires that all plaintiffs be from different states than all defendants. This is difficult to achieve when the plaintiff class is very large and some class members are located in the same state as the defendant.

Minimum Diversity – This allows for the diversity action in federal court when only one plaintiff is diverse from one defendant. In both complete and minimum diversity situations, the amount in controversy must be at least $75K. In some situations, all claims can be aggregated to meet the $75K amount. In other situations, a single plaintiff must have a claim of $75K in order to meet the statutory amount in controversy requirement.

Practice Question: Save-Mart is national retailer of consumer products. A large group of female employees seek to bring a class action against Save-Mart for discriminatory practices in the hiring, promotion, compensation, benefits, scheduling, and firing of female employees. Most of these employees received minimum wage during their period of employment, which averaged 6-8 months. Four women from California will serve as the representative plaintiffs. What issues exist here for the plaintiffs in bringing the class action?

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