Class Action Litigation Basics
What is a class action?
A class action is a type of lawsuit in which one or several persons or companies bring an action on behalf of a larger group of persons or companies.
While the subject matter of class action litigation can vary widely, two factors are almost always present in every class action:
1. The issues in dispute are common to all members of the class, and
2. The persons or companies affected are so numerous as to make it impracticable to bring all of their claims separately before the court
Depending upon the type of class action, resolution of the lawsuit binds all members of the class certified by the Court.
Many cases start as the result of complaints by one or a handful of persons or companies to counsel or to governmental bodies.
Others follow upon government investigations and criminal indictments.
What are some examples of class action lawsuits?
Examples of class action lawsuits include claims such as:
Antitrust- Merchants and consumers who allege payment of inflated prices for products caused by the anti-competitive activities of large corporations; and
Securities- investors who allege they are victimized by fraud committed in connection with the purchase or sale of stocks and other securities.
Telephone Consumer Protection Act, 47 U.S.C. § 227- Did you know that it is unlawful to market via use of computer robo-dialing cellular phone numbers, via text message, or by sending unsolicited faxes unless the unsolicited advertisement is from a sender with an established business relationship with the recipient? Federal law provides for a private right of action to recover for actual monetary loss from such a violation, or to receive $500 in damages for each such violation. The court can triple this $500 per occurrence damage award to $1,500 per occurrence in its discretion.
What are public policy reasons that support class action lawsuits?
Class action lawsuits are designed to advance several important public policy goals. A class action is often the sole means of enabling persons, even those with serious injuries, to remedy injustices committed by powerful corporations and institutions. As stated by former United States Supreme Court Justice William O. Douglas, "The class action is one of the few legal remedies the small claimant has against those who command the status quo."
Often, individuals and corporations may have suffered only limited damages and the cost of individual lawsuits would be far greater than the value of each claim. The total damages, however, to the class, could be quite large. The wrongdoer would have the incentive to continue its fraudulent conduct but for having to disgorge unlawfully gained profits returned via a class action.
To learn more about the class action process, contact us today!
Design of Enforcement - Enforcement of federal (and state) antitrust laws is designed to protect purchasers of commodity products or services. The federal government enforces three major federal antitrust laws (and many states also have their own antitrust laws as well). Essentially, these laws prohibit business practices that unreasonably deprive consumers of the benefits of competition, resulting in higher prices for impacted products and services.
The three major federal antitrust laws are:
(1) The Sherman Antitrust Act;
(2) The Clayton Act; and
(3) The Federal Trade Commission Act
The Sherman Antitrust Act - 15 U.S.C. §§ 1-7
"Section 1" - 15 U.S.C. § 1- This Act outlaws all contracts, combinations, and conspiracies that unreasonably restrain interstate and foreign trade. This includes agreements among competitors to fix prices, rig bids, and allocate customers, which are punishable as criminal felonies.
"Section 2" - 15 U.S.C. § 2- The Sherman Act also makes it a crime to monopolize any part of interstate commerce. An unlawful monopoly exists when one firm controls the market for a product or service, and it has obtained that market power, not because its product or service is superior to others, but by suppressing competition with anticompetitive conduct.
The Sherman Act, however, is not violated simply when one firm's vigorous competition and lower prices take sales from its less efficient competitors; in that case, competition is working properly.
Nor is the Sherman Act violated by “conscious parallelism.” Yes, it is fine to follow market pricing.
The Clayton Act - 15 U.S.C. §§ 12-27
The Clayton Act is a civil statute (carrying no criminal penalties) that prohibits mergers or acquisitions that are likely to lessen competition. Under this Act, the Government challenges those mergers that are likely to increase prices to consumers. All persons considering a merger or acquisition above a certain size (presently triggers at a transaction size of $80.8 million) must notify both the Antitrust Division and the Federal Trade Commission. The Act also prohibits other business practices that may harm competition under certain circumstances.
The Clayton Act also has a provision that triples damages for violating antitrust laws.
The Federal Trade Commission Act - 15 U.S.C §§ 41-58
This Act prohibits unfair methods of competition in interstate commerce, but carries no criminal penalties. The FTCA also created the Federal Trade Commission to police violations of the Act. Its principal mission is the promotion of consumer protection and the elimination and prevention of anti-competitive business practices, such as coercive monopoly.
The Department of Justice also often uses other laws to fight illegal activities, including laws that prohibit false statements to federal agencies, perjury, obstruction of justice, conspiracies to defraud the United States and mail and wire fraud. Each of these crimes carries its own fine and imprisonment term, which may be added to the fines and imprisonment terms for antitrust law violations.
How Are Antitrust Laws Enforced?
There are three main ways in which the federal antitrust laws are enforced:
(1) Criminal and civil enforcement actions brought by the Antitrust Division of the Department of Justice.
(2) Civil enforcement actions brought by the Federal Trade Commission.
(3) Lawsuits brought by private parties (direct purchasers) asserting claims.
The Department of Justice uses a number of tools in investigating and prosecuting criminal antitrust violations. Department of Justice attorneys often work with agents of the Federal Bureau of Investigation (FBI) or other investigative agencies to obtain evidence. In some cases, the Department may use court authorized searches of businesses and secret recordings by informants of telephone calls and meetings.
Corporate leniency/immunity: The Department of Justice may grant immunity from prosecution to co-conspirators (individuals or corporations) who provide timely information that is needed to prosecute others for antitrust violations, such as bid rigging or price fixing. This immunity is typically granted only to the first conspirator who walks in the door to spill the beans. Leniency is also typically granted based on continuing cooperation with respect to all known conspiracies.
This often results in a cascade of conspiracies being exposed within an industry.
A provision in the Clayton Act also permits private parties injured by an antitrust violation to sue in federal court for three times their actual damages plus court costs and attorneys’ fees. State attorneys general may bring civil suits under the Clayton Act on behalf of injured consumers in their States, and groups of consumers often bring suits on their own. Such civil suits following, and sometimes even in advance of or in place of, criminal enforcement actions can be a very effective additional deterrent to criminal activity.
The Department of justice specifically recognizes private civil enforcement as a needed tool in its arsenal.
Some states also have antitrust laws closely paralleling the federal antitrust laws, the state laws generally apply to violations that occur wholly in one state. These laws typically are enforced through the offices of state attorneys general.
The Penalties for Violating Antitrust Laws
The penalties for violating the antitrust laws are severe.
On the criminal side, violating the antitrust laws can be a felony offense. Individuals involved in some antitrust violations can, and do, go to jail. In addition to imprisonment, criminal prosecutions for antitrust violations can result in severe financial penalties for companies and individuals.
On the civil side, the costs of defending a private antitrust class action can run into the millions of dollars, depending on the size of the case, not to mention the amounts of settlements or trial verdicts, where plaintiffs can seek to recover triple their actual damages as well as their attorneys’ fees.
To learn more about antitrust enforcement, contact us today!
Why be a Class Representative?
Government enforcement of antitrust laws, and resulting criminal fines and penalties, tend to put money back in to the Federal Treasury – but often do not actually compensate direct purchasers impacted by cartel activity. This is where the private sector comes in. In fact, most antitrust suits are brought by businesses and individuals seeking damages for violations of the Sherman or Clayton Act. Private parties can also seek court orders preventing anticompetitive or fraudulent conduct (injunctive relief) or bring suits under state laws. Private parties injured by certain violations can bring claims for up to three times their actual damages plus court costs and attorneys’ fees. These parties are known as Class Representatives.
What is in it for a Class Representative?
Justice. Standing up for all similarly situated, overcharged or defrauded purchasers. Recoupment of your loss. Upon successful resolution of a matter, Class Representatives can receive not only the pro ratapercentage of the loss they incurred, but also often a court awarded cash incentive.
What is a typical percentage of returned overcharge?
It depends on a host of factors including the strength of the case, the strength of counsel, the ability of settling offenders to pay and economic analysis of class-wide impact and damages, among other factors.
What is an incentive award?
An additional cash incentive award determined completely at the discretion of the Court. These awards have run the range from $5,000 to as much as $200,000 and more.
What are the financial costs associated with being a Class Representative?
Generally speaking, nothing. When a class action settles, the prosecuting counsel are typically paid as the court determines, either as a percentage of the common settlement fund created on behalf of all class members, or directly by defendants by means of a settlement agreement that provides for attorneys’ fees separate and apart from what is being paid into the common fund. So, upon successful resolution of a matter, some part or provision of the settlement will be paid to prosecuting counsel. Why not get the benefit of what that money is already paying for? Why not insure that your claims will be filed properly and maximized? Why not seek an incentive award?
What should a would-be Class Representative do at the out-set when anticipating becoming involved in a matter?
Preserve all documents and data pertaining to purchases of the products in question and relating to interactions with sellers of the products, whether they exist electronically or in hard copy. As a Class Representative, or an absent class member, you will need these to make sure that your recovery is maximized. You will need to retain records relevant to the class period in order to do so. If anticipating being involved in litigation, it becomes your duty to preserve these documents. The firm provides data preservation solutions after determining who the custodians of relevant paper and electronic documents are, and we help you make sure this information is properly preserved.
What are the duties of a Class Representative?
To choose good counsel.
To stay abreast of the case by keeping informed via updates from counsel.
To review certain key filings, such as the complaint, prior to filing.
To preserve and produce purchase data and related documents as requested.
To provide testimony as requested, typically regarding your purchases of the price-fixed product, sometimes in the form of a deposition.
To learn more, contact us today!