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Consumer Class Actions: 14.7 The Defendant’s Plea of Poverty

If the defendant is a small company, the defendant’s lawyer will often plead the company’s poverty in negotiations49 and threaten that bankruptcy will be filed if the settlement is not within the company’s ability to pay. In response to such a threat, demand that the defendant demonstrate that it cannot afford the settlement.50 To evaluate the defendant’s financial condition, ask for the company’s tax returns for the past several years and a current certified audit.

Consumer Class Actions: 13.4.2 Claim Forms and Notice

When possible, use of claim forms should be avoided. As NACA Guideline 11 provides:

Class counsel should approach settlement discussion with a presumption against using claim forms, so that claim forms are used only where necessary.

Claim forms should not be used when the identity and location of class members can be determined from the defendant’s records, or when relief provided by the settlement is an account credit in an amount that the defendant can administer based on its records.

Fair Debt Collection: 11.11.3.1 Generally

The FDCPA provides for statutory damages in class actions, in addition to actual damages, as follows:

(a) Except as otherwise provided by this section, any debt collector who fails to comply with any provision of this subchapter with respect to any person is liable to such person in an amount equal to the sum of—

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Consumer Class Actions: 1.9.5 Counsel’s Relationship with the Class Representative

A clear retainer agreement and good communication with the class representative before and during the lawsuit are essential, in order to avoid challenges to adequacy (of both the class representative and class counsel), to make sure the class representative is prepared for depositions and other steps in the litigation, and to satisfy class counsel’s ethical obligation to the class representative as a client.

Consumer Class Actions: 15.1.4 The Timing of Opt-Out and Objection Deadlines

Experienced class counsel differ on how much time should be given to class members to decide whether to opt out or object. Some prefer a shorter amount of time38—for example, forty-five days—after the date notice is given, whereas others prefer up to ninety days or longer.39 Among the relevant considerations are whether the class is comprised of a mobile group, such as low-income consumers, and whether the subject of the lawsuit involves accounts from a number of years ago.

Consumer Class Actions: 14.8.6 Distribution of Benefits

When negotiating a class fund settlement, a few practice pointers are worth keeping in mind. Although most defendants will not fund a settlement until a court has granted final approval of it, try to get payment into an escrow account upon the agreement to settle or upon preliminary approval and an agreement to use some of it for costs of notice and administration.

Consumer Class Actions: 1.3.1 Class Action Litigation Often Requires Large Up-Front Investments

Litigating a consumer class action can be both time consuming and expensive. Because the defendant’s potential exposure in most class cases amounts to a substantial sum and may challenge the core of a defendant’s business, the defendant’s attorney will almost always litigate the case vigorously. Therefore, before filing a class case, plaintiffs’ counsel must determine whether the time and financial resources necessary to represent the class will be available.

Consumer Class Actions: 14.4 Settlements When Related Class Actions Are Pending

Special settlement issues arise if other cases are pending in other forums against the same defendant(s) concerning similar misconduct. Several pending class actions against the same defendant may have different geographic scope or class definitions, making it difficult to sort out which consumers and which claims belong to which class.

Consumer Class Actions: 4.1 Introduction

A class action complaint must include a separate and specific class definition.1 This section of the complaint is critical to both class certification and identification of—and notice to—class members.

Consumer Class Actions: 4.2.1 Overview

It is not always clear whether all persons with the same transactional facts have suffered the same type of injury or if they have suffered any injury at all. The class definition may need to exclude categories of persons who are unprotected by the cause of action being pursued, or are uninjured, or otherwise in a different circumstance from the bulk of the victims.8 However, this is not always necessary. For example, in In re Whirlpool Corp.

Consumer Class Actions: 4.2.2 May a Class Be Certified If the Proposed Definition Covers Individuals Who Have Not Been Injured by the Challenged Practice?

Ideally, the class definition proposed to the court when seeking certification will be comprised only of persons who were exposed to and injured by the practice challenged in the case. However, for a variety of reasons, this sometimes is not possible. The information necessary to craft a perfect definition may not be available to the plaintiffs’ counsel.

Consumer Class Actions: 4.3 Simplicity and Limiting the Class Size

Definitions that require individual factual determinations or that entail individual legal issues should be avoided or kept to an absolute minimum. The more individual issues that arise, the more likely the defendant’s challenge to class certification will succeed.

Consumer Class Actions: 4.4.1 The Statute of Limitations and the Starting Date for Class Membership

In most instances, courts require that a class definition include a firm starting date for class membership. The statute of limitations on the legal claims being asserted will often, though not always, provide the applicable starting date. If the alleged activities took place during a discrete period of time that is wholly within all applicable statutes of limitations, a recital in the complaint explaining the time period involved is appropriate, but this recital does not need to become part of the class definition.

Consumer Class Actions: 4.4.2 Other Factors in Setting the Starting Date for Class Membership

Time limitations that are shorter than the applicable statutes of limitations may be necessary or desirable in a class definition for numerous reasons: the defendant’s practices may have begun on a more recent date; the defendant may have been routinely destroying its records after a certain period of time32; or a specific date may constitute an essential element of the claim—for example, when the claim is based on a statute that applies only to transactions after a certain date.

Consumer Class Actions: 4.4.3 The Ending Date and Continuing Classes

The plaintiff must also consider whether to include a closing date in the class definition. This choice will often depend on various factors—for example, the continuing nature and extent of the defendant’s practices, whether the plaintiff wishes to force the defendant to change its practices, whether there is a cap on statutory damages, and the manageability of a continuing class that increases in number as the litigation continues. Another consideration is whether the class should be defined to include future members. Doing so can prevent or help overcome a numerosity challenge.

Consumer Class Actions: 4.5.1 Overview

One of the most problematic questions when choosing a class definition arises from the “multistate class” issue. Many defendants transact business in multiple states, or even nationwide, and the plaintiff’s attorney will have to decide whether to limit the class to only consumers residing in one state, to include those in certain selected states, or perhaps to seek nationwide certification. This is a tactical and practical question that has become even more important in light of the Class Action Fairness Act’s federalization of a large majority of class action lawsuits.

Consumer Class Actions: 4.5.2 Strategic and Tactical Considerations

If the claim at issue in the case arises under a federal statute, then a multistate class does not raise choice-of-law issues. The primary disadvantage of a multistate class would then be the substantial increase in the costs of potential notice and the administrative and practical concerns that can come out of having a far larger class, one that is spread across many states. These concerns may seem remote at the commencement of the case, but, in practical terms, obtaining documents or testimony or communicating with class members in many states can become time consuming and expensive.

Consumer Class Actions: 4.6 Standing: Class Representative Injury Counts, Not Class Member Injury

A federal court may not entertain a case in which Article III standing is lacking.39 In the class action context, the vast majority of decisions make clear that the proper focus of this constitutional inquiry is upon the named plaintiff(s) rather than upon the putative absent class members whom the plaintiff seeks to represent in the action.40 If at least one plaintiff has standing to assert their claims against the defendant(s), then a case or controversy exists and the court may adjudicate the

Consumer Class Actions: 4.7.1 Class Defined by Objective Criteria

Although not mentioned in Rule 23, an often-stated prerequisite for the class definition is that it set forth an “ascertainable” class, meaning that its members can be ascertained by reference to objective criteria.53 Ascertainability is important not only for purposes of notice to the class, but also so that future courts can determine who is and is not bound by the judgment.

Consumer Class Actions: 4.7.2 Identifying Class Members

“In addition to asking whether there are objective criteria by which class membership may be determined, [the First, Third, Fourth, and Sixth Circuits] also require that the class certification proponent demonstrate that the analysis of class membership be ‘administratively feasible,’ while [the Second, Seventh, Eighth, Ninth, and Eleventh Circuits] have explicitly rejected the administrative feasibility inquiry or have a more relaxed approach to it.

Consumer Class Actions: 4.8 Defining the Class Using Subclasses

Rule 23(c)(5) states that, “[w]hen appropriate, a class may be divided into subclasses that are each treated as a class under this rule.” The 1966 Advisory Committee Note to the original version of this provision (formerly Rule 23(c)(4)(B)) reveal that this provision was intended as a mechanism for preventing uncommon issues from making a class action unmanageable on the one hand or preventing certification on the other.103

Consumer Class Actions: 4.9 Motion to Strike Based on Class Definition

Defendants will sometimes move to strike all or portions of a class definition for one reason or another, relying on Federal Rule of Civil Procedure 12(f), which authorizes a motion to strike “from a pleading . . . any . . . immaterial . . . matter.” Generally, courts deny such motions as more appropriately considered at the time class certification is decided.119

Consumer Class Actions: 12.1 Introduction

Appeals of the grant or denial of class certification most typically occur on an interlocutory basis, when permitted by the court of appeals pursuant to Federal Rule of Civil Procedure 23(f).1 On rare occasion, the initial issue may be whether the district court’s order constitutes the grant or denial of class action status.