USA Law and Practice Contributed by: Roger Cooper and Lina Bensman, Cleary Gottlieb Steen & Hamilton
Courts frequently permit discovery into issues relevant to certification. Such discovery can be part of overall discovery in the case, but sometimes proceeds in a separate phase before merits discovery takes place. As part of class certification discovery, the parties typ- ically seek discovery of evidence that would establish or rebut that the class meets the requirements of Rule 23 and that the proposed named plaintiff can properly represent the proposed class. It should be noted that most class actions are certi- fied not for litigation, but for settlement. In a settle- ment class, the defendant and would-be class coun- sel negotiate a resolution of class members’ claims before class certification. If negotiations are success- ful, the defendant and would-be class counsel move jointly for class certification and court approval of the settlement. Selection of Lead Plaintiff and Class Counsel A class action might be filed by a law firm that rep- resents a named plaintiff (or a set of named plain- tiffs), but multiple class actions alleging substantially similar claims might be filed by different law firms that represent different plaintiffs. In the latter scenario, the different cases get consolidated and the court must appoint class counsel unless a statute provides oth- erwise. Class counsel must fairly and adequately rep- resent the interests of the class. Rule 23 (g) presents explicit criteria and a procedure for appointing coun- sel to represent the class. The court must also appoint a lead plaintiff who is chosen to act on behalf of the entire class. Under the Private Securities Litigation Reform Act of 1995, which governs federal securities class actions, lead plaintiffs are selected based on objective criteria including the size of their financial interest in the case. Opt-Out Mechanisms In a class action seeking monetary damages and cer- tified under Rule 23 (b)(3) of the Federal Rules of Civil Procedure, class members do not affirmatively “opt in”. Instead, any class members who do not wish to participate in the lawsuit must take affirmative steps to remove themselves from the class upon receiving notice. In other words, they must “opt out” by provid- ing notice to the court that they decline to participate.
Once the deadline to opt out has passed, all class members who have not opted out are considered to be part of the class, and the court can adjudicate their claims despite their absence. Settlement Any settlement, voluntary dismissal or compromise of claims, issues, or defences of a certified class – or a class proposed to be certified for settlement – requires court approval. In most jurisdictions, the court must approve any proposed class action settlement. Whenever there is a proposed settlement in a class action case, Rule 23 requires the court to direct notice “in a reasonable manner” to every member of the class who would be bound by the settlement. Any class member may object to a proposal requiring court approval; the objection must state whether it applies to the objector, a subset or the entire class, and state with specificity the grounds for objection. 3.3 Standing Under federal law, class action standing requirements mirror the standing requirements under Article III of the United States Constitution. Plaintiff(s) must have: • suffered an “injury in fact”, or a concrete, particu- larised harm that is actual or imminent, not conjec- tural or hypothetical, which • is traceable to an action by the defendant(s), and which • can be redressed by a favourable decision from the court. The standing requirement applies both to the named plaintiff(s) and absent class members. The Supreme Court recently confirmed in TransUnion LLC v Ram- irez (2021) that, to recover damages in a class action, every class member must satisfy the standing require- ments of Article III. 3.4 Class Members, Size and Mechanism – Opting In or Out One becomes a member of a class by satisfying the specific criteria defined by the court for the class in the class certification order, which essentially requires
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