A class action lawsuit occurs when a group of people sues another party. Class action lawsuits are mainly a United States phenomenon, but many European countries are allowing class actions now. Class actions started in England around 1200 as groups of people were allowed to sue a single entity. Therefore, guilds, parishes, town and villages started to use class action heavily. In Medieval England, the government allowed the use of class action as a means to enforce the law upon groups, since the entire country could not be managed by imposing any kind of obligation on any particular individual.
Since class action is a representational lawsuit; it can turn a large number of claims into a group claim. Accordingly, the efficiency of a legal process is increased as well as the costs. Since the law process will avoid dealing with the same exhibits, witnesses and issues repeatedly, everything will be better in these kinds of processes. For example, shareholders of a large corporation can use class action to defend their rights in case the parent company does something wrong. Therefore, the group can punish the wrongdoer by imposing some costs.
If the defendant is a member of a specific class, he or she might use class action to change the behavior of this distinct class. For instance, Flood v. Landeros was a class action in which doctors had to report any suspected abuse of children. Therefore, class actions are useful in preventing corporate misbehavior. Simply put, class actions are valuable and important for the legal system of the United States as they permit the efficient and productive resolution of claims filed by numerous parties.
Criticism, Ethics and Mass Action
Some members of the class action might not get any benefit out of it. For instance, an attorney might get tons of money while class members get some coupons and awards of no value. There are many ethical challenges that class action might bring about. As an illustration, any subclass might have different objectives than that of the class as a whole, but the class might be treated as a unit. The plaintiff will look for court approval in order to litigate on behalf of a certain group of people. However, not all plaintiffs will obtain or look for this approval in a class action.
Securities Class Action
If you have bought or sold securities from a company, you can use securities’ class action in case of a problem. For instance, if the firm has violated some laws, you can file a lawsuit called securities class action. In cases that involve omissions or misleading statements, a class period will start when the firm does not render some non-misleading statements or makes some untrue statements about a particular fact. When the public knows the truth, the class period is over. Many law firms specialize in securities’ class action such as Grant and Eisenhofer, and these types of class. Securities class actions can be very lucrative. Examples of large settlements are the case of Enron Corporation at almost $8 billion and WorldCom, Inc. at around $6 billion.