Class actions serve as an avenue for individuals who have incurred loss or injury to seek legal recourse while mitigating excessive costs that would otherwise pose a considerable burden. Prior to participating in or initiating a class action, it’s crucial to have a sound understanding of the process.
To that end, this article will cover an overview of class actions, their fundamental principles, process and intended outcomes.
What is a class action?
A class action lawsuit is a legal proceeding initiated by a group, or “class”, comprising seven or more individuals, against a targeted party — typically an organisation. The central claim of a class action lawsuit is that the targeted organisation is liable for damages, with the group alleging harm, or loss, resulting from negligence.
Class actions provide a means to mitigate financial and risk-related challenges associated with legal proceedings, by enabling individuals to pool their resources and seek legal action as a group.
This approach not only increases the likelihood of achieving a favourable outcome, but also makes legal recourse more accessible to a larger number of people.
What areas of law are class actions applicable to?
Class actions aren’t specific to one area of law; rather, they encompass a wide range of legal fields, including the following:
- Personal injury law: Individuals who have suffered injury or harm due to the negligence of a third party, such as a medical practitioner, product manufacturer, or property owner, may pursue legal action on behalf of a class. This type of class action is frequently observed in cases involving pharmaceuticals, medical malpractice, or environmental contamination.
- Employment law: Common instances of class actions within the context of employment law include disputes regarding wage and hour, discriminatory practices based on factors such as race, gender, or age and infringements of labour legislation.
- Financial law: Banking and financial institutions may be subject to class action lawsuits for various issues, including but not limited to securities fraud, consumer protection violations, antitrust violations and breach of fiduciary duty.
Other areas of law commonly seen in class action lawsuits include consumer protection law, antitrust law and corporate law, among others.
Class Action parties and their roles
In a class action lawsuit, the plaintiff serves as the representative of a larger group and brings the claim before the court, assuming the primary risk associated with the case. They act as the catalyst for the legal proceeding, initiating the action on behalf of the group.
The term “plaintiff” is frequently used interchangeably with “representative”, “lead plaintiff”, or “representative plaintiff”. Typically, class action lawsuits involve a single plaintiff bringing a case on behalf of a larger group, though it is not unusual for proceedings to encompass multiple plaintiffs. When filing a claim, the plaintiff bears the responsibility of ensuring that the legal proceedings serve the best interests of the group, rather than solely for personal gain.
The group, or class, being represented refers to a set of individuals who have sustained harm or losses due to the defendant’s alleged neglect or malfeasance. These individuals may have shared experiences or similar traits, such as consumers of a specific product or service, residents of a specific geographic region during a defined period, or employees of a specific organisation. They are typically known as “class members” or the “class” in class action lawsuits.
Common examples of Class Actions
Among the 500-plus class actions filed in Australia across the past two decades, certain actions have, and continue to be more common than others — these include:
- Medical negligence: A legal concept that refers to the failure of healthcare providers or organisations to provide care that adheres to recognised standards, resulting in harm or injury to a patient. Medical negligence can take various forms, including misdiagnosis, errors during surgery, medication errors, and the failure to provide appropriate treatment or follow-up care.
- Shareholder class action: A shareholder class action is a legal recourse pursued by a collective of shareholders who assert that they have incurred financial losses due to a company’s alleged misconduct.
- Product liability: A product liability class action is a legal proceeding in which a group of individuals who have suffered harm or damages as a result of a defective or dangerous product join together to bring a lawsuit against the product’s manufacturer, distributor, or vendor.
Other common examples of class action lawsuits in Australia include tenant class actions, securities class actions, and consumer class actions, among others.
Understanding the Class Action legal framework
In order to initiate a class action, there exist three prerequisites:
- Firstly, the class must consist of a minimum of seven individuals who collectively make a claim against a singular individual or organisation.
- Secondly, the class members’ claims must stem from a common or similar cause.
- Lastly, at least one issue of law or fact must be shared amongst the claims.
The court usually regards these prerequisites as relatively easy to meet and does not impose stringent standards for their fulfilment. That said, the legal proceeding itself is a complex process, regardless of the relative simplicity of initiation.
When initiating a class action lawsuit, the plaintiff or plaintiffs must file a legal document with the court. This document should include essential information, such as the identification of the group members involved in the case, a clear and concise statement of the claims being made on behalf of the group members, the desired relief, and the legal or factual issues that are common to the claims of the group members.
Class Actions across jurisdictions
Class action proceedings may be initiated before the courts listed below:
- Supreme Court of Tasmania, as of 2019.
- Supreme Court of New South Wales, as of 2011.
- Supreme Court of Queensland, as of 2016.
- Supreme Court of Victoria, since 2000.
- Federal Court of Australia, since the inception of class action lawsuits in 1992.
Although the state regimes are based on the federal regime, there are slight variations among each jurisdiction.
Opting in or out of class actions
After meeting the required criteria, the group involved in a class action lawsuit is deemed eligible by default. In Australia, class actions operate under an opt-out mechanism whereby a group member may elect not to participate in the class action, and is required to undertake affirmative action to do so — typically by submitting an opt-out notice to the court.
The opt-out system implemented in Australia is intended to ensure the inclusion of all potential class members in the lawsuit unless they explicitly opt out, thereby promoting a more comprehensive representation of the entire group and potentially enhancing the lawsuit’s outcome.
When a class action is initiated, group members may not be notified or aware of their involvement in the proceeding. Once the class and action are clearly defined, the court will require the dissemination of an ‘opt-out notice’ to inform individuals of their right to choose whether or not to participate.
The opt-out notice will contain details about:
- The nature of the claim and the dispute.
- The deadline by which group members can choose to exclude themselves from the class action.
It is crucial for group members to respond to the notice and make a decision, as failing to opt-out may result in them remaining as part of the class action and being subject to any judgement or settlement reached.
Class action compensation
Once the proposed class action settlement agreement is approved by the court, a “settlement distribution scheme” will be put into effect. This scheme provides a framework for disbursing settlement funds to qualifying group members, along with any associated fees and expenses.
Pursuing a class action with expert counsel
Numerous factors may contribute to the failure of a class action, including but not restricted to inadequate evidentiary support for claims, expiration of limitation periods, lack of standing or jurisdiction, settlements reached between parties, and potential conflicts of interest among class members or their legal representatives.
In addition, the intricate nature of both pre-litigation — and the process of class action litigation itself — can present obstacles to attaining a favourable outcome for a class action. For these reasons, expert legal advice is essential for guiding you in the right direction and increasing the likelihood of a favourable outcome.
GMP Law is home to Australia’s foremost class action barristers, and has partnered with leading international class action law firms as a synergy for the benefit of all Class Members. To minimise clients’ exposure to risk, GMP Law follows a no-win, no-fee model. Click here to learn more.