Each of these advantages essentially stems from the
fact that a class action aggregates a large number of individualized
claims into one representational lawsuit.
Although aggregation creates the potential for harm,
it also creates potential benefits.
First, aggregation may
increase the efficiency of the legal process. In cases with common
questions of law and fact, aggregation of claims into a class action
may avoid the necessity of repeating "days of the same
witnesses, exhibits and issues from
trial to trial."
Second, a class action overcomes "the problem that
small recoveries do not provide the incentive for any individual to
bring a solo action prosecuting his or her rights.
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"A class action solves this problem by
aggregating the relatively paltry potential recoveries into
something worth someone’s (usually an attorney’s) labor." In other words, a class action ensures that a
defendant who engages in widespread harm - but does so
minimally against each individual plaintiff - must compensate those individuals for their
injuries. For example, thousands of shareholders of a public company
may have losses too small to justify separate lawsuits, but a class
action can be brought efficiently on behalf of all shareholders.
Third, in "limited fund"
cases, a class action ensures that all
plaintiffs receive relief and that early-filing
plaintiffs do not raid the fund (i.e., the defendant) of all
its assets before other plaintiffs may be compensated. |
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A class action in such a situation centralizes
all claims into one venue
where a court can equitably divide the assets amongst all the
plaintiffs if they win the case.
Finally, a class action
avoids the situation where different court rulings could create
"incompatible standards" of conduct for the defendant to follow. For
example, a court might certify a case for class treatment where a
number of individual bond-holders sue to determine whether they may
convert their
bonds to common stock. Refusing to litigate the case in one
trial
could result in different outcomes and inconsistent standards of
conduct for the
defendant corporation. Thus, courts will generally allow a class action in
such a situation.
Criticisms of Class Actions
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There have been many
criticisms of class actions. Some say that many class actions are
brought by lawyers too willing to agree to coupon settlements
for their clients when they can get very substantial legal fees for
their efforts. These coupon settlements (which usually allow the
plaintiffs to receive minimal benefit such as a small check or a
coupon for future services or products with the defendant company)
are also a way that the defendants forstall major liability; if a
large number of people do not litigate their claims separately, then
the business is not adversely affected.
Some conservative critics also attack the institution
of the class action as being a form of taxation upon large business
corporations that prevents them from aggressively pursuing
innovation.
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For example, although primitive
self-driving cars have already been developed, no rational
automobile manufacturer will sell such cars in the open market until
their artificial intelligence is perfect; they are terrified of
being hit with class actions from vehicle owners and pedestrians who
are injured as a result of the slightest bug in the car's software.
This kind of argument is
generally seen among those involved in tort reform.