Federal class action reform in the United States: past and future and where next? If the past is prologue, then there will be many proposals, some tinkering, some substantive, some legislative, to change class action practice.

• Author: Cooper, Edward H.

PREDICTING the likely future developments in class action practice in the federal courts of the United States must begin in the past.

THE PAST: OR WHERE WE'RE NOT GOING NEXT

1. The 1966 Class Action

   The beginning point is the complete revision of Rule 23 of the Federal Rules of Civil Procedure that took effect in 1966. This revision instituted the familiar Rule 23(b)(1) and (b)(2) "mandatory" classes and the much more pervasive (b)(3) "opt-out" class. There has been little excitement about the (b)(1) class, apart from the currently unsuccessful attempts to adapt it to "limited fund" mass tort litigation. The (b)(2) class was a central focus of the 1966 revisions, which were designed to entrench the then-growing use of class actions to enforce civil rights through injunctions. Although there is some concern today about efforts to expand (b)(2) class actions to embrace individual damages claims as "incidental" to class-based injunctive relief, there is no general dissatisfaction with it. Broad class-based injunctions, often involving "institutional reform," are widely accepted.

   The opt-out Rule(b)(3) class is a different story. It was invented in a moment of inspiration. Several participants in the process that developed (b)(3) tell us today that they had not the slightest idea what it would become. That may be in part because it has become many things.

   One common description of the variety of (b)(3) class actions focuses on the apparent monetary value of individual class member claims. The "consumer" class action is often described as one needed to ensure enforcement of rights that involve sums too small to support effective enforcement through individual actions. The "mass tort" class action is described as one that brings together large claims that could and often would support individual actions. In between lie "mixed" actions that include in one class both members whose claims would and others whose claims would not support individual litigation.

   Another description of the variety of (b)(3) class actions focuses on the subject matter involved. Antitrust and securities litigation are most frequently mentioned as examples of well-developed class action practice, where this procedural device is working well. Much greater problems are seen in attempts to bring class action procedure to bear on mass torts.

   It did not take long for Rule 23(b)(3) class actions to make an impression. Lawyers and courts worked together to make "class action" a household word. The potentially neutral observation that they had multiplied "like the leaves of the green bay tree" was followed by more darkling observations about "legalized blackmail" and "Frankenstein monsters."

   Some areas of the law were transformed, if not in substantive meaning, then in real-world meaning. Much of the reaction to class actions flowed from this impact. Enthusiasts lauded the opportunity for more effective enforcement of "public interest" legislation. Detractors, perhaps unwilling to voice directly their displeasure with the substantive law, talked instead of the compulsion to settle unfounded class claims. Settlements are coerced, they complain, by at least two major factors. One is the staggering cost of defending class litigation. The second is the risk that even a completely unfounded claim will be sustained in litigation--a risk, they say, that arises not only from the prospect of an occasional aberrant result but also from a subtle pressure exerted by the class action itself. On this view; it is more difficult to say "no" when a claim is advanced on behalf of many people. Together, the cost of defending and even a small risk of a very large loss exert powerful pressure to settle.

   Substantive law objections also were voiced. The most direct expression is that much modern regulatory legislation is drafted in deliberately broad and ambiguous terms. Teams of lawyers may work unceasingly at the task of complying but still guess wrong as to the eventual judicial decision. The consequence is not only an occasional undeserved loss but also routine over-compliance that imposes costs on the persons intended to benefit from the regulation.

2. Reform Efforts: 1970s

   By the early 1970s, calls were made to reform class action practice. The Civil Rules Advisory Committee of the United States Judicial Conference, after flirting with some of the proposals, deliberately put the subject aside. It returned to Rule 23 only in 1991, when the Judicial Conference reacted to the report of an ad hoc committee on asbestos litigation by asking that the rules committees consider the possible adaptation of class action procedure as a means to address the tens of thousands of asbestos claims.

   The first response was the drafting of a complete revision of Rule 23 that collapsed the conceptual distinctions that had divided Rule 23 into the (b)(1), (b)(2) and (b)(3) categories. The formulas that had defined these categories were incorporated into a longer list of factors to be considered in determining whether to certify a class. The court was authorized to permit or instead to prohibit opting out from any class and to impose conditions on opting out. As an alternative, the court could define an "opt-in" class to include only those who affirmatively request inclusion. This bold proposal was at first recommended for publication but then retracted for further consideration.

3. Reform Efforts: 1996

   The next phase considered more modest changes in the criteria for class certification. Some of the proposed changes were put aside. Two deserve mention. One would have retained opt-out classes, but created an opt-in class that might be used as an alternative. Another would have permitted a preliminary evaluation of the merits in deciding whether to certify a class. This proposal, initially supported by some defendant representatives, collapsed when plaintiffs and defendants joined in opposition. Defendants expressed two major concerns--that even a preliminary consideration of the merits would inevitably lead to complete discovery on the merits before a certification decision could be made, and that a certification based on a prediction that the plaintiffs have a good chance of winning would exert irresistible pressure to settle. Many other changes also were considered, including a reconsideration of the conceptual foundations of class litigation.

   The culmination of this second phase came with the publication for comment of several relatively modest proposals that included revisions of the class certification criteria for Rule 23(b)(3). The list of matters pertinent to determining whether a class action is a superior method of fair and efficient adjudication was...