Class Actions - Discovery, Notice, and Settlement

From medical devices to automobiles, consumers and corporations increasingly find themselves involved in class action lawsuits. While the procedural and substantive legal issues may seem complex, some basic information about how class action lawsuits work can go a long way in formulating an efficient litigation strategy and achieving a desired result for participants. This article focuses on the discovery phase and outlines some special concerns regarding notice and settlement.

If a class action survives the pleadings phase and proceeds into discovery, litigation costs for all parties can begin to skyrocket. Litigants will want to focus discovery on the essential information at that juncture in the case. Prior to class certification, Plaintiffs may serve interrogatories and document requests in order to help define their class, establish liability, better quantify their damages, and to obtain information useful to proving their case at trial. Defendants may wish to limit discovery to class issues as opposed to the merits of the case.

If the parties cannot agree on the scope of discovery, the dispute may lead to the parties filing motions before a Judge. Plaintiffs may argue that wide-ranging discovery is necessary to certify the class and that bifurcating class and merits discovery will only result in further discovery disputes. Defendants may argue that much of the information sought is proprietary in nature and irrelevant to the threshold issue of class certification and if class certification is not granted, merits discovery will have proven wasteful and burdensome. In the end, the scope of discovery is discretionary with the judge.

If a court certifies a class, the absent class members must be notified of the litigation. Many people are familiar with these notices, which often arrive in the mail in postcard form. Under the federal rules, absent class members must be notified of the action by “the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort.” When a class is being certified such that its members have the option to pursue their claims separately (an “opt out” class), individual notice is required in order to ensure that each class member’s constitutional due process rights are protected. Individual notice to non-opt out class members may be discretionary with the Judge depending on the circumstances.

In addition to protecting the class members’ due process rights, the notice may also serve to bring to the surface any members whose claims may be antagonistic to the representatives’ interests prior to certification.

Given the high stakes in most class actions, litigants often choose to settle prior to judgment. While most settlements in traditional single plaintiff lawsuits need not be approved by the court, class actions require judicial approval to ensure that all class members receive a fair settlement.

Settlement prior to class certification may be tricky. It may not preclude putative class members from bringing future claims against the same defendants. In addition, a Court will scrutinize the settlement to ensure that the parties did not collude such that the absent putative class members were “sold out.” If the Court believes that to be the case, it may require prior notice to the absent class members or reject the settlement.

Settlement after class certification is comparatively simple. It will usually preclude future lawsuits by the class members against the same defendants for the same damages or injuries, and it requires proper notice to all class members. Defendants may agree to class certification to facilitate settlement and bar future similar claims. This is known as a “conditional certification” because the certification is conditioned on the parties reaching a settlement.

Resolving some basic issues concerning the certification process, discovery, notice, and settlement can help a litigant devise a well-planned strategy and achieve its desired result in an efficient manner.

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