I INTRODUCTION TO CLASS ACTIONS IN THE UNITED STATES
Class actions are a long-standing part of the American legal landscape, at both the state and federal level. Class actions are routinely used to prosecute a wide variety of substantive claims, including consumer fraud, labour and employment, products liability, antitrust and securities claims.
Class actions are explicitly permitted in both the US federal and state systems.5 This chapter focuses solely on federal class actions, which are provided for by Rule 23 of the Federal Rules of Civil Procedure.
A typical class action under Rule 23 follows a series of distinct procedural steps. First, a class action is initiated by the filing of a complaint by a named plaintiff (or plaintiffs) on behalf of a putative (or proposed) class. If defendant(s) choose to file a motion to dismiss and the case survives, then the court will next determine whether or not a plaintiff class should be ‘certified’ (i.e., confirming whether the case is appropriate for class action treatment, and defining the specific class on behalf of which the case will then be litigated). The court will also appoint class representatives and class counsel, to represent the class. Following certification, notice is typically provided to members of the class – actual notice, where possible, and/or publication notice through newspapers and the internet – and class members are given an opportunity to ‘opt out’ (or express their desire to be excluded from the class). The case is then litigated on the merits by the class representative(s) and class counsel on behalf of the class (excluding the opt outs), until such time as there is either a settlement or a result on the merits (e.g., after a trial). A final judgment from either a trial or settlement will bind all class members who have not affirmatively opted out of the class action. In addition, any settlement must expressly be approved by the court as fair to the class.
II THE YEAR IN REVIEW
Notable decisions in 2017 concerning class actions include the following cases.
In California Public Employees Retirement Systems v. ANZ Securities, Inc,6 the Supreme Court held that the filing of a timely class action does not extend (i.e., ‘toll’) the statutory time period within which a plaintiff class member may file the same claim on an individual basis under Section 11 of the Securities Act of 1933. Section 11 imposes liability for ‘untrue statement[s] of . . . material fact’ or omissions made in registration statements for certain securities offerings, but such actions cannot be asserted ‘more than three years after the security was . . . offered to the public’.7 Prior Supreme Court precedent – American Pipe & Construction Co. v. Utah – provides that, under certain circumstances, the commencement of a class action will suspend ‘the applicable statute of limitations as to all asserted members of the class’.8 The Supreme Court found that the American Pipe rule suspended certain statutes of limitation, but not statutes of repose, which are intended to give ‘complete peace to defendants’.9 The Court held that the three-year time limit applicable to Section 11 claims was a statute of repose and, consequently, that the previously announced ‘tolling’ rule did not apply.10
In Microsoft Corporation v. Baker,11 the Supreme Court held that a named plaintiff cannot force a federal court of appeals to review an adverse class certification decision by voluntarily dismissing its case. Generally, federal courts of appeals do not have jurisdiction to hear appeals from interlocutory orders (i.e., district court orders that are issued prior to the final disposition of a case).12 Because an adverse class certification decision does not actually dispose of the named plaintiff’s case – it simply requires the plaintiff to proceed individually – these decisions may be construed as interlocutory. Federal Rule of Civil Procedure 23(f), however, provides that appellate courts have discretion to entertain appeals from adverse class certification decisions notwithstanding that they may be deemed ‘interlocutory’.13 In Microsoft, the Ninth Circuit denied a Rule 23(f) petition to review an adverse class certification decision. Instead of proceeding individually, the named plaintiffs voluntarily dismissed their claims and appealed, arguing that the voluntary dismissal now constituted an appealable final decision.14 The Ninth Circuit agreed with the named plaintiffs, but the Supreme Court reversed, reasoning that such a holding would ‘impermissibly circumvent Rule 23(f)’ by making review of class certification decisions mandatory rather than discretionary.15
i Commencing proceedings
Like any other lawsuit, a class action is initiated when a ‘named plaintiff’ (or certain ‘named plaintiffs’) files a complaint.16 However, a complaint filed on behalf of a putative class must also contain (1) a definition of the proposed class, (2) pleading as to why class action treatment is appropriate and consistent with the requirements of the Federal Rules of Civil Procedure, and (3) any other pleadings required by statute or case law for the prosecution of a class action in specific contexts (e.g., to comply with the requirements of the Private Securities Litigation Reform Act of 1995 in securities class actions). Otherwise, the complaint in a federal class action is subject to the same requirements as other complaints filed in federal cases – including the requirement that plaintiffs sufficiently allege a claim upon which relief can be granted.
Failure to meet these requirements may be grounds for a defendant’s motion to dismiss the class action complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure.17 Such motions are typically decided before the court certifies the class.18
ii Appointment of lead plaintiff and lead counsel
If the complaint survives a motion to dismiss, then in certain cases it may be appropriate for the court to appoint a ‘lead plaintiff’ and ‘lead counsel’, to represent the putative class even before class certification. That typically occurs in securities class action cases, where multiple proposed class actions can be filed by different named plaintiffs. Appointment of a lead plaintiff and lead counsel helps clarify who will then have primary responsibility on behalf of the class for filing an amended complaint (which often occurs following consolidation of multiple cases) and/or seeking certification of the class.
The Private Securities Litigation Reform Act of 1995 (PSLRA) provides specific guidance to courts concerning the appointment of a lead plaintiff and lead counsel in securities class actions. The PSLRA requires the named plaintiff to publish notice of the class action ‘in a widely circulated national business-oriented publication’ no later than 20 days after filing the class action complaint.19 Then, no later than 90 days after that publication, the court must consider ‘any motion made by a purported class member’ even if the individual was not named in the original complaint, and the court must appoint as lead plaintiff the member of the class that the court determines to be ‘most capable of adequately representing the interests of class members’.20
In appointing lead plaintiff, the court is instructed to ‘adopt a presumption’ in favour of plaintiffs with ‘the largest financial interest’ in the class action.21 This presumption can be rebutted by evidence showing that the presumptive lead plaintiff ‘will not fairly and adequately protect the interests of the class’, or ‘is subject to unique defenses that render such plaintiff incapable of adequately representing the class’.22
The court-appointed lead plaintiff is then empowered, ‘subject to the approval of the court’, to ‘retain counsel to represent the class’.23
iii Class certification
Rule 23(c)(1)(A) of the Federal Rules of Civil Procedure requires that ‘[a]t an early practicable time after a person sues or is sued as a class representative, the court must determine by order whether to certify the action as a class action’. This occurs following a motion for class certification filed by the named or lead plaintiff, which typically is opposed by the defendant.
In recent years, the Supreme Court of the United States has issued a series of decisions regarding class certification, in different contexts. The Court has indicated that plaintiffs bear the burden of ‘affirmatively demonstrat[ing] . . . compliance’ with all of the class certification requirements of Rule 23,24 and that motions for class certification should only be granted if the district court is ‘satisfied, after a rigorous analysis, that the prerequisites of [Rule 23] have been satisfied’.25 As a result of those decisions, and a greater focus by litigants on class certification, these motions are typically hotly contested by defendants.
In order to meet the requirements of Rule 23 – and thus demonstrate to a court that class certification is warranted – a plaintiff must satisfy all of the requirements of Rule 23(a) and one of the requirements of Rule 23(b). Those rules are discussed below.
Fed. R. Civ. P. 23(a)
All class actions must satisfy the four requirements of Rule 23(a). Rule 23(a) requires plaintiffs affirmatively to demonstrate that the class action meets four prerequisites, referred to in shorthand form as: (1) ‘numerosity’ (Rule 23(a)(1)), (2) ‘commonality’ (Rule 23(a)(2)), (3) ‘typicality’ (Rule 23(a)(3)), and (4) adequacy of representation (Rule 23(a)(4)).
‘Numerosity’ requires a showing that ‘the class is so numerous that joinder of all members is impracticable’.26 Generally, there is no numerical threshold for determining whether a class is sufficiently numerous. Rather, courts must examine ‘the specific facts of each case’.27
‘Commonality’ requires a demonstration that ‘there are questions of law or fact common to the class’.28 This requirement was addressed in Wal-Mart Stores, Inc v. Dukes.29 There, the Supreme Court found that class certification of a Title VII discrimination case was inappropriate because Wal-Mart had ceded control over employment decisions to regional managers in different geographic locations, so there was insufficient overlap in questions of law and fact among the proposed class.
To satisfy the requirement of ‘typicality’, the plaintiffs must demonstrate that ‘the claims or defenses of the representative parties are typical of the claims or defenses of the class’.30 The commonality and typicality requirements are similar in nature to, but less onerous than, the Rule 23(b)(3) ‘predominance’ inquiry, which is discussed below.
Finally, plaintiffs must show that ‘the representative parties will fairly and adequately protect the interests of the class’.31 Here, the primary inquiry for courts is to ‘uncover conflicts of interest between named parties and the class they seek to represent’.32 Courts also will assess the adequacy of proposed class counsel at this stage.33 In assessing the adequacy of class counsel, courts must conclude that the representative’s counsel is ‘qualified, experienced and capable of handling the litigation’,34 and that class counsel will represent the interests of the class as a whole.35
Fed. R. Civ. P. 23(b)
In addition to fulfilling the requirements under Rule 23(a), ‘parties seeking class certification must show that the action is maintainable’ under Rule 23(b).36 The subsection of Rule 23(b) most commonly invoked as a basis for class certification is Rule 23(b)(3), which provides that a class action may be maintained where the prerequisites of Rule 23(a) are satisfied and the court finds that (1) ‘questions of law or fact common to class members predominate over any questions affecting only individual members’ (known as the ‘predominance’ requirement under Rule 23(b)), and (2) ‘that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy’ (known as the ‘superiority’ requirement).37
The purpose of the predominance inquiry is to test ‘whether proposed classes are sufficiently cohesive to warrant adjudication by representation’.38 ‘An individual question is one where members of a proposed class will need to present evidence that varies from member to member, while a common question is one where the same evidence will suffice for each member to make a prima facie showing [or] the issue is susceptible to generalized, class-wide proof.’39
In determining whether a class action satisfies the superiority requirement of Rule 23(b)(3), courts assess the following non-exhaustive statutory factors listed in Rule 23:
- the class members’ interests in individually controlling the prosecution or defense of separate actions;
- the extent and nature of any litigation concerning the controversy already begun by or against class members;
- the desirability or undesirability of concentrating the litigation of the claims in the particular forum; and
- the likely difficulties in managing a class action.40, 41
The class certification order
If the court finds certification is proper under the requirements of Rules 23(a) and (b), the court will then enter a ‘certification order’ pursuant to Rule 23(c). The certification order is important because it defines the class of individuals that – subject to opt-outs – will be bound by the action as it proceeds. The certification order is also the procedural mechanism for appointing the class representative and class counsel. Such orders may be altered or amended before final judgment.42 For example, in appropriate circumstances, the court may elect to divide a class into subclasses, which ‘are each treated as a class’ under Rule 23.43
Notice of class certification and opting out of the class
Once the class is certified, absent class members – i.e., class members other than the named or lead plaintiff(s) who nonetheless fall within the definition of the certified class – must, in the case of a Rule 23(b)(3) class action, be given notice and provided with the opportunity to ‘request exclusion’ from the class (commonly referred to as ‘opting out’).44 Those individuals that opt out, normally by providing written notice in the manner prescribed by the court, will not be bound by final resolution of the class action, and may bring a separate case against the defendant based on the same underlying claim at some later date (subject to any applicable statute of limitations).45
Affording absent class members the opportunity to exclude themselves from a class action comports with the due process requirements set forth in the Fifth and Fourteenth Amendments to the US Constitution.46 Under US law, an individual typically is not ‘bound by a judgment . . . in a litigation in which he is not designated as a party’, and judicial enforcement of such a decision would violate due process requirements.47 As discussed above, final resolution of a class action will bind absent class members, and preclude future litigation of their claims against that defendant. To comport with due process, this opt-out mechanism ensures that absent class members in a Rule 23(b)(3) class action will not be bound by a final resolution if that class member affirmatively elects to not participate in the case.
The type of notice required to be provided to class members following certification of a Rule 23(b)(3) class action is ‘the best notice that is practicable under the circumstances’, and where individuals can be identified ‘through reasonable effort’, individual (or actual) notice is required.48 Generally, regular mail is the preferred method of providing notice for individual notice. Notice is also often provided via publication (including in well-read newspapers and on the internet).
Notice must be ‘clearly and concisely state[d] in plain, easily understood language’.49 Notice must, at a minimum, state: (1) ‘the nature of the action’, (2) ‘the definition of the class’, (3) ‘the class claims, issues, or defenses’, (4) ‘that a class member may enter an appearance through an attorney if the member so desires’, (5) ‘that the court will exclude from the class any member who requests exclusion’, (6) ‘the time and manner for requesting exclusion’, and (7) ‘the binding effect of a class judgment on members under Rule 23(c)(3)’.50
Rule 23 does not set forth a categorical rule for the amount of time absent class members must be given to respond to this notice. That is usually set at the discretion of the court. Generally, federal courts are advised to provide a minimum of 30 days from when notice is first sent; opt out periods of 60 to 90 days are preferred.51 Where the class is sizeable, or actual notice is not practicable, those time periods can be significantly longer. As explained above, if a party does not affirmatively request exclusion from the class during this opt out period, he or she will be included in the class and – subject to a potential further round of opt outs in the case of a settlement – bound by the final resolution of the claim.
iv Litigation on behalf of the class
After entry of the certification order, provision of notice and the completion of opt outs, the class action is then litigated on the merits by class counsel acting on behalf of the class. As the case proceeds, the class representative and class counsel control the action on behalf of the class. Other class members do not participate in most phases of litigation, even though such class members will be bound by any final judgment in the action unless the individual elected to opt out of the class.
Rule 23 provides the court flexibility in conducting the proceeding. For example, the court may issue orders to ‘determine the course of proceedings’, to ‘impose conditions on the representative parties’ or to ‘require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly’.52
Litigation of class actions is similar to other civil proceedings in federal courts, in that federal procedural and evidentiary rules still apply. This was highlighted in Tyson Foods, Inc v. Bouaphakeo.53 There, the Court considered whether to establish a categorical rule regarding the use of representative evidence to establish class-wide liability (instead of requiring individual proof of liability, which likely would preclude class certification, because individual issues would predominate over common class issues). The Court declined to create such a rule, explaining that the permissibility of representative evidence ‘turns not on the form a proceeding takes – be it a class or individual action – but on the degree to which the evidence is reliable in proving or disproving the elements of the relevant cause of action’ pursuant to Federal Rules of Evidence 401, 403 and 702.54
This section focuses on procedural aspects of a class action settlement, as set forth in Rule 23(e), and the jurisprudence that has evolved around those requirements.
The settlement class
Rule 23(c) requires class certification before any entry of final judgment, including when the court enters a judgment approving a settlement.55 If the parties want to settle a case before the court has entered a Rule 23(c) class certification order, then courts may resort to use of a ‘settlement class’ mechanism. This is ‘a device whereby the court postpones the formal certification procedure until the parties have successfully negotiated a settlement, thus allowing a defendant to explore settlement without conceding any of its arguments against certification’.56
Preliminary approval of a settlement
The first step in the class settlement process involves preliminary approval of the proposed settlement by the court, following the filing of a motion by the parties providing details of the settlement, the nature of any compensation to be provided to class members, and any agreements regarding the payment of attorneys’ fees and costs to class counsel. Some relevant factors courts consider in granting preliminary approval of class action settlements are whether settlement negotiations occurred at arm’s length between capable experienced counsel and whether there was sufficient meaningful discovery.57
Following entry of preliminary approval, adequate notice of the settlement must be provided to the class. Settlement notice is governed by Rule 23(e)(1), which requires the court to direct notice in a reasonable manner to ‘all class members who would be bound’ by a proposed settlement, voluntary dismissal or compromise. Failure to give adequate notice of settlement is not only a violation of Rule 23, but also may violate due process protections.58 Settlement notice provides absentee class members the ability to object to the propriety of the settlement, and, in the case of Rule 23(b)(3) class actions, ‘the court may refuse to approve a settlement’ unless it affords class members a ‘new opportunity to request exclusion’ (or ‘opt out’) from the class settlement.59
Once notice of the settlement has been given, the court will hold a ‘fairness hearing’, to determine whether the proposed settlement is ‘fair, reasonable, and adequate’, as required by Rule 23(e)(2). Federal courts apply multi-factor frameworks for considering the fairness, reasonableness and adequacy of a proposed settlement. Relevant factors include:
- the complexity, expense, and likely duration of the litigation;
- the reaction of the class to the settlement;
- the stage of the proceedings and the amount of discovery completed;
- the risks of establishing liability;
- the risks of establishing damages;
- the risks of maintaining the class action through trial;
- the ability of the defendants to withstand greater judgment;
- the range of reasonableness of the settlement fund in light of the best possible recovery; and
- the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of the litigation.60
The objections of any class members to the settlement – which can be presented in writing or orally, at the discretion of the court – will also typically be considered by the court as part of the fairness hearing. Following a fairness hearing, the court may enter a final order and judgment approving the class action settlement, and granting the class plaintiffs’ motion for an award of attorneys’ fees and costs in favour of class counsel (discussed further below).
Settlement claims processing and allocation of settlement funds
Following settlement of a class action, among other requirements, there must be a process for determining how, and to which class members, the settlement funds should be distributed. Most settlements establish a ‘plan of allocation’, setting forth a formula or some other method of distributing settlement proceeds to members of the class.61 In order to determine whether an individual is properly part of the settlement class, absent class members generally must participate in a claims process, which involves executing and submitting documentation demonstrating their entitlement to a share of the settlement funds, and, typically, an individual release of claims against the defendant(s). The processing of these individual class member claims is often handled by private, for-profit companies retained by class counsel.
vi Attorneys’ fees and costs
Rule 23(h) specifically authorises courts to ‘award reasonable attorney’s fees and nontaxable costs’, upon motion under Rule 54 of the Federal Rules of Civil Procedure (which sets forth general procedures for claims for attorneys’ fees). Rule 23(h) also provides that class members, or the party from whom payment is sought, may object to this motion for attorneys’ fees. In both instances, the court must determine the award is reasonable.62
IV CROSS-BORDER ISSUES
In recent years, an important cross-border issue concerning US class actions – particularly in the context of securities class actions – has involved the question of which claims may properly proceed as part of a class action in US courts. In Morrison v. National Australia Bank Ltd, the Supreme Court was asked to ‘decide whether [Section] 10(b) of the Securities Exchange Act of 1934 provides a cause of action to foreign plaintiffs suing foreign and American defendants for misconduct in connection with securities traded on foreign exchanges’.63 In addressing that issue, the Court applied the ‘longstanding principle of American law ‘that legislation of Congress, unless a contrary intent appears, is meant to apply only within the territorial jurisdiction of the United States’’.64 The Court observed that ‘there is no affirmative indication in the Exchange Act that [Section] 10(b) applies extraterritorially’, and ‘therefore conclude[d] that it does not’.65 The Court further held that it was not sufficient that ‘some domestic activity is involved in the case’.66 Rather, ‘it is . . . only transactions in securities listed on domestic exchanges, and domestic transactions in other securities, to which [Section] 10(b) applies’.67 As a result of Morrison, class plaintiffs seeking to bring a valid Section 10(b) claim must allege more than a domestic impact or effect; they must allege ‘a manipulative or deceptive device or contrivance . . . in connection with the purchase or sale of a security listed on an American stock exchange’ or ‘the purchase or sale of any other security in the United States’.68
Morrison is generally credited with restoring the presumption against the extraterritorial application of US statutes, unless they explicitly so specify. That principle can impact the availability of the US class action mechanism, in US courts, to foreign litigants.
V OUTLOOK AND CONCLUSIONS
The Supreme Court has several interesting cases concerning class actions on its docket for the upcoming year. In China Agritech v. Resh, the Supreme Court will decide whether the American Pipe tolling rule discussed above69 allows a class member to bring a subsequent class action – as opposed to an individual claim – after the applicable limitations period has passed, where the original class action was filed within the limitations period. In Cyan v. Beaver County Employees Retirement Fund, the Supreme Court will decide whether the Securities Litigation Uniform Standards Act of 1998 prohibits state (as opposed to federal) courts from adjudicating certain class actions covered by that Act.70
Additionally, the Supreme Court is currently reviewing several proposed changes to Rule 23 of the Federal Rules of Civil Procedure. If adopted, these changes would, inter alia, establish stricter procedures for submitting class-member objections (requiring that objectors state with specificity the grounds for their objection) and extend the window to file an interlocutory appeal from a class certification decision under Rule 23(f)71 from 14 days to 45 days when the United States is a party.
1 Timothy G Cameron is a partner, and Lauren R Kennedy, Daniel R Cellucci and Alex B Weiss are associates, at Cravath, Swaine & Moore LLP in New York City.
2 Fed. R. Civ. P. 23(a).
3 See, e.g., Haynes v. Planet Automall, Inc., 276 F.R.D. 65, 73 (E.D.N.Y. 2011) (‘The underlying purpose of the class action mechanism is to foster judicial economy and efficiency by adjudicating, to the extent possible, issues that affect many similarly situated persons.’) (internal citation omitted).
4 Fed. R. Civ. P. 23(c)(3); see also Sosna v. Iowa, 419 U.S. 393, 403 (1975). Under US law, the doctrine of res judicata prevents parties from re-litigating claims where (1) a previous action resulted in an adjudication on the merits, (2) that action involved the same adverse parties, and (3) the claims asserted in the subsequent action were already raised in that first action. See, e.g., Marcel Fashions Grp., Inc. v. Lucky Brand Dungarees, Inc., 779 F.3d 102, 107–8 (2d Cir. 2015). This principle applies to judgments in class actions. Cooper v. Fed. Reserve Bank of Richmond, 467 U.S. 867, 874 (1984).
5 Under New York state law, for example, class actions are permitted pursuant to Rule 901 of the New York Civil Practice Law and Rules. State class action requirements often are similar to federal requirements. See Thomson Reuters, 50 State Statutory Surveys: Class Action Requirements (April 2016). The Class Action Fairness Act of 2015 provides for federal court jurisdiction over any class action where the matter in controversy exceeds $5,000,000, and any member of the class can establish diversity of citizenship from any defendant, provided that certain exceptions do not apply. See 28 U.S.C. Section 1332(d).
6 137 S Ct 2042 (2017).
7 15 USC Sections 77k, 77m.
8 414 U.S. 538, 554 (1974).
9 ANZ Securities, Inc., 137 S Ct at 2052.
10 Id. at 2053.
11 137 S Ct 1702 (2017).
12 28 USC Section 1292.
13 ‘A court of appeals may permit an appeal from an order granting or denying class-action certification under this rule if a petition for permission to appeal is filed with the circuit clerk within 14 days after the order is entered. An appeal does not stay proceedings in the district court unless the district judge or the court of appeals so orders.’ Fed. R. Civ. P. 23(f).
14 Id. at 1711.
16 Fed. R. Civ. P. 3.
17 Rule 12(b)(6) provides that a party may move to dismiss a complaint because the complaint ‘fail[s] to state a claim upon which relief can be granted’. Fed. R. Civ. P. 12(b)(6).
18 Managing Class Action Litigation, Federal Judicial Center, at 9 (2010).
19 15 U.S.C. Section 77z-1(a)(3)(A)(i). 15 U.S.C. Section 77z-1 is part of the Securities Act of 1933. The PSLRA enacted parallel provisions related to appointment of lead plaintiff and lead counsel in the Securities Exchange Act of 1934. See 15 U.S.C. Section 78u-4.
20 15 U.S.C. Section 77z-1(a)(3)(B)(i).
21 15 U.S.C. Section 77z-1(a)(3)(B)(iii)(I)(bb). This plaintiff must also have ‘either filed the complaint or made a motion’ responding to the notice required by 15 U.S.C. Section 77z-1(a)(3)(A)(i).
22 15 U.S.C. Section 77z-1(a)(3)(B)(iii)(II).
23 15 U.S.C. Section 77z-1(a)(3)(B)(v).
24 Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011).
25 Comcast Corp. v. Behrend, 133 S. Ct. 1426, 1432 (2013); see also Halliburton Co. v. Erica P. John Fund, Inc., 134 S. Ct. 2398, 2414–15 (2014) (permitting defendants to offer lack of ‘price impact’ evidence to rebut the ‘fraud on the market’ presumption at the class certification stage).
26 Fed. R. Civ. P. 23(a)(1).
27 Gen. Tel. Co. of the Nw. v. Equal Employment Opportunity Comm’n, 446 U.S. 318, 330 (1980).
28 Fed. R. Civ. P. 23(a)(2).
29 564 U.S. 338 (2011).
30 Fed. R. Civ. P. 23(a)(3).
31 Fed. R. Civ. P. 23(a)(4).
32 Amchem Prod., Inc. v. Windsor, 521 U.S. 591, 625 (1997). In Amchem, for example, the Supreme Court found that plaintiffs with present asbestos-related illnesses had interests that were potentially adverse to class members who were exposed to asbestos but had not yet manifested injury. Id. at 625–28.
33 Rule 23(c) instructs courts to ‘appoint class counsel under Rule 23(g)’. Rule 23(g) explicitly requires courts to ensure that class counsel will ‘fairly and adequately represent the interests of the class’. Fed. R. Civ. P. 23(g)(1)(B). In making this assessment, courts must consider: ‘(i) the work counsel has done in identifying or investigating potential claims in the action; (ii) counsel’s experience in handling class actions, other complex litigation, and the types of claims asserted in the action; (iii) counsel’s knowledge of the applicable law; and (iv) the resources that counsel will commit to representing the class’. Fed. R. Civ. P. 23(g)(1)(A).
34 In re Avon Sec. Litig., 1998 WL 834366, at *9 (S.D.N.Y. Nov. 30, 1998). As noted in Avon, in complicated class actions such as a securities class action, plaintiffs rely heavily on class counsel, and as such, in those cases ‘the qualifications of class counsel are generally more important in determining adequacy than those of the class representatives’. Id.
35 See, e.g., Maywalt v. Parker & Parsley Petroleum Co., 67 F.3d 1072, 1078 (2d Cir. 1995) (stating that the responsibility of ensuring ‘that the interests of class members are not subordinated to the interests of either the class representatives or class counsel rests with the district court’).
36 Amchem Prod, Inc v. Windsor, 521 U.S. 591, 614 (1997).
37 Fed. R. Civ. P. 23(b)(3).
38 Amchem Prod, Inc, 521 U.S. at 623.
39 Tyson Foods, Inc v. Bouaphakeo, 136 S. Ct. 1036, 1045 (2016) (citation omitted).
40 Zinser v. Accufix Research Inst, Inc, 253 F.3d 1180, 1190 (9th Cir. 2001) (‘In determining superiority, courts must consider the four factors of Rule 23(b)(3).’).
41 Fed. R. Civ. P. 23(b)(3).
42 Fed. R. Civ. P. 23(c)(1)(C).
43 Fed. R. Civ. P. 23(c)(5).
44 Fed. R. Civ. P. 23(c)(2)(B)(v).
45 Fed. R. Civ. P. 23(c)(3); see also Amchem Prod, Inc v. Windsor, 521 U.S. 591, 617 (1997). Notice to absent class members, and in some cases, the opportunity to opt out, is required at other stages of a class action litigation as well; most notably, notice must be given to class members who would be bound by any proposed settlement, voluntary dismissal, or compromise. Fed. R. Civ. P. 23(e).
46 See Phillips Petroleum Co v. Shutts, 472 U.S. 797, 812 (1985).
47 See Hansberry v. Lee, 311 U.S. 32, 40-41 (1940).
48 Fed. R. Civ. P. 23(c)(2)(B).
49 Fed. R. Civ. P. 23(c)(2)(B).
50 Fed. R. Civ. P. 23(c)(2)(B).
51 Judges’ Class Action Notice and Claims Process Checklist and Plain Language Guide, Federal Judicial Center, at 4 (2010).
52 Fed. R. Civ. P. 23(d)(1).
53 136 S. Ct. 1036 (2016).
54 Id. at 1046.
55 Fed. R. Civ. P. 23(c)(3).
56 In re Gen Motors Corp Pick-Up Truck Fuel Tank Prod. Liab Litig, 55 F.3d 768, 786 (3d Cir. 1995).
57 See, e.g., Long v. HSBC USA Inc., 2015 WL 5444651, at *3 (S.D.N.Y. Sept. 11, 2015); Danieli v. Int’l Bus. Machines Corp., 2009 WL 6583144, at *4-*5 (S.D.N.Y. Nov. 16, 2009).
58 See Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 113–14 (2d Cir. 2005).
59 Fed. R. Civ. P. 23(e)(4).
60 Pennsylvania Pub. Sch. Emps.’ Ret. Sys. v. Bank of Am. Corp., 318 F.R.D. 19, 24 (S.D.N.Y. 2016).
61 See, e.g., City of Providence v. Aeropostale, Inc, 2014 WL 1883494, at *10 (S.D.N.Y. May 9, 2014) (approving a plan of allocation distributing the settlement fund to class members on a pro rata basis).
62 Fed. R. Civ. P. 23(h).
63 561 U.S. 247, 250-51 (2010). Rule 10b-5, which was promulgated pursuant to Section 10(b) of the Securities Exchange Act of 1934 makes it unlawful ‘(a) [t]o employ any device, scheme, or artifice to defraud, (b) [t]o make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading, or (c) [t]o engage in any act, practice, or course of business which operates . . . as a fraud or deceit upon any person, in connection with the purchase or sale of any security’. 17 C.F.R. Section 240.10b-5. In 2017, almost half of all federal securities class actions filed in the United States – 47 per cent – invoked Rule 10b-5. Cornerstone Research, Securities Class Action Filings, at 9 (2017).
64 Morrison, 561 U.S. at 255.
65 Id. at 265.
66 Id. at 266.
67 Id. at 267.
68 Id. at 273 (emphasis added).
69 See notes 8–9 and accompanying text.
70 The term ‘covered class action’ means, inter alia, ‘any single lawsuit in which . . . damages are sought on behalf of more than 50 persons or prospective class members’. 15 USCA § 77(p).
71 See supra note 13 and accompanying text.